Archive for Sunday, June 7, 1998


June 7, 1998


Even as they enter the courthouse -- through separate entrances -- the discord among the brothers is evident.

Associated Press Writer

Topeka -- If their family had been poor, the Koch brothers might have settled their differences in a fistfight out in the back yard.

But each of the four men is worth hundreds of millions of dollars. Settling their dispute requires more than two dozen lawyers, a sometimes exasperated federal judge and a 12-member jury that includes two teachers, a farmer, a nurse and an electrician.

The Koch brothers' father founded Koch Industries, a conglomerate that operates oil refineries, asphalt plants, cattle ranches, feedlots and grain elevators. It reported $30 billion in sales in 1997, making it the nation's second-largest privately held corporation.

Two of the Koch brothers are suing the other two, claiming they were cheated out of more than $1 billion when they sold their stake in Koch Industries back in 1983.

The trial in the 13-year-old case has gone on for nearly two months now.

U.S. District Judge Sam Crow wrote in a pretrial order that the fight reminded him ``of a childhood tussle on the school playground followed by the inevitable volley of finger-pointing accompanied by a chorus of participants shouting the defensive retort of `He started it' as the teacher approaches to break up the fray.''

The Koch brothers' father, Fred C. Koch, (pronounced Coke), guessed early -- before two of his boys were out of diapers and before two were even born -- that wealth might split his family apart.

``It will be yours to do with what you will,'' the father wrote in a 1936 letter to his two oldest sons. ``It may be either a blessing or a curse.''

What caused Frederick and Bill Koch, each worth about $600 million, to join forces against Charles and David, each worth $2.2 billion?

Bill contends it is Charles' megalomania as chairman and chief executive of Koch Industries. Charles suggests it was Bill's greed.

Bill and Charles Koch are the main antagonists and very different figures.

Charles is quiet, and a little stiff when speaking in public. He is fond of philosophy books and often eats lunch in the Koch Industries' employee cafeteria. He still lives in Wichita.

Bill resides in Palm Beach, Fla. Three years ago, he was forced to sue to evict a former lover from a $2.5 million Boston condominium, and steamy details of his affair became public in court.

Bill is also litigious. He unsuccessfully sued his mother, Mary, over how a family foundation was distributing its money to charity. After his mother's death in 1990, Bill unsuccessfully contested her will because it said he would get nothing if he was fighting his brothers.

According to Charles, Bill ruined a 1979 Christmas dinner by telling his mother that she never loved him enough and that all his problems were her fault.

The case will be decided by a workingman's jury of six men and six women, and the chasm between their world and the Kochs' is vast. Some of the jurors wear jeans every day, and none of the men has worn a tie during the trial. One day recently, one juror even came to court in a tank top.

During jury selection, attorneys for both sides asked potential jurors how they felt about rich people. One man who was not selected said he would have a hard time understanding why the brothers couldn't solve their problems at the kitchen table, as he and his sister did.

Robert Thompson, a law professor at Washington University in St. Louis and an authority on family business disputes, said what makes the Koch case so unusual is that it actually went to trial, for a jury of ordinary people to decide. Most disputes do not, because minority stockholders in family companies often do not have the money to sustain litigation, he said.

As a result, sibling rivalries and long-buried resentments have become public.

``This part of the law is soap opera law,'' Thompson said. ``You've got to understand the soap opera to be a good lawyer.''

The oldest brother, Frederick, 64, never has been active in Koch Industries, preferring the arts and restoring European castles.

Charles, 62, was picked by his father to run the family business. He became chairman and chief executive in 1967, the year his father died.

David and Bill are 57-year-old twins. David was the Libertarian Party's 1980 candidate for vice president. Bill won the America's Cup yachting race in 1992.

Charles, Bill and David were close years ago. They attended the Massachusetts Institute of Technology and pledged the same fraternity.

But Bill fell out in 1980. He criticized Charles' management of the company and, with Frederick's support, tried to gain control of the Koch Industries board of directors. The takeover attempt failed, and the board fired Bill as an executive in 1980.

Bill, Frederick and other dissident stockholders responded by selling their interests for $1.1 billion. In 1985, however, they sued, claiming the company withheld crucial information that would have led to a higher sale price.

Six years ago, a private investigator hired by Bill was caught trying to bribe trash collectors to get the garbage of Charles and his attorneys. Bill said he wanted to know how the other side was getting his corporate documents.

Each day, each pair of brothers enters the Frank Carlson Federal Building through separate entrances. They do not acknowledge each other.

The Koch family patriarch might have understood how bitter a legal battle could become. The elder Koch perfected a way to refine heavy crude oil and spent years in litigation with large oil companies.

Bill insisted on the stand that his father talked about lawsuits constantly and saw litigation as a way to protect his rights. But Charles testified that his father thought going to court was a nightmare, adding, ``He said never sue.''

Either way, the elder Koch left his sons with some advice they did not follow. In his 1936 letter, he told his two oldest boys: ``Be kind and generous to one another.''

Commenting has been disabled for this item.