Inside the courtroom, the two sets of brothers avoided eye contact. They chatted quietly among themselves, doing their best to appear impassive. The seating had even been arranged so the warring siblings could avoid each other. Steering clear entirely, however, was impossible. When in the weeks ahead the brothers occasionally passed one another in the narrow corridors of the courthouse, they did so as ghosts, leaving nothing in their wake but a tingling, combustible tension in the air.
The court summoned a pool of sixty potential jurors at the start of the trial. At least as many lawyers and paralegals seemed to be buzzing around the courtroom at times. Led by the esteemed Chicago trial lawyer Fred Bartlit Jr., who a couple of years later would help George W. Bush litigate his way to the Oval Office, the plaintiffs’ legal entourage alone occupied three floors at the Ramada in downtown Topeka (the trial had been moved there from Wichita in order to find jurors untainted by opinions on the Koch brothers). By one estimate, Bill’s legal tab had surpassed $200,000 per week.
Working-class farmers, truck drivers, teachers, and retirees composed the bulk of the jury pool. They were the kind of people who settled family disputes in the living room, not the courtroom. For them, a legal feud of these dimensions was unfathomable, as was the ten-figure sum involved. It would be hard to paint the brothers, especially Bill and Frederick, in any sympathetic light. “There’s no poor people in this case,” Bartlit told one potential juror. “Everybody’s rich. That’s just the way it is.”
As the lawyers weeded them out, they asked jury candidates for their reactions to a particular statement. “Business is war and anything goes.” Agree or disagree?
“Let me take you back and tell you the story of a truly fascinating Kansas family.” A silk handkerchief peaked neatly from the pocket of his tailored suit. Not a gray hair was out of place. His ramrod posture recalled his military training as a West Point cadet and Army Ranger. Surveying the six-man, six-woman jury with an eyebrow cocked, Fred Bartlit looked every inch the power lawyer as he delivered his opening statement in a forceful, booming voice.
“This family was unusual,” he continued, “because they grew up in a very litigious atmosphere. Fred Koch, the patriarch, invented ways of refining very heavy oil, very heavy, thick oil.… The major oil companies took him to court, and he had many, many long years of court fights and he sometimes was on the verge of losing, but he was a fighter. Around the family dinner table, it was unusual, because the talk was of litigation, the talk was of you’ve got to stick up for your rights, and you never, never quit no matter what. That’s what these boys—these men—learned from their dad. They grew up hearing about court fights, and in this family, this unusual family, conflict got to mean going to court.”
Continuing his portrait of a family that gave new meaning to dysfunction, Bartlit told the jury that the case “was about a man’s driving need for total control and total power.” It was about how “Charles Koch went above the law in this country and also how he went above the ordinary rules that we live by in dealing with our own family.
“No verdict is going to fix this family at this point,” the lawyer said. “… Fortunately, your job as jurors is not to fix the family, but to sort out the hard evidence, look at the proof… and that’s much easier than figuring out where a family went wrong.”
Where Bill had flown in a shock troop of legal heavy hitters, Charles stayed the course with his family’s longtime lawyer Bob Howard and the local Wichita law firm of Foulston Siefkin. The contrasts between Howard and Bartlit were hard to miss. A native Kansan, Howard wore a slightly rumpled suit, spoke in nasal tones, and had a mild, folksy manner. Howard’s unassuming appearance belied a masterful legal tactician, and one who knew the Koch clan inside and out. Having represented Charles, David, and their late mother since the 1980s, the sixty-seven-year-old lawyer knew most of the skeletons in the family’s closet.
“The plaintiffs in this case seek to label this a pure business dispute,” Howard told the jury, flipping through his notes. “It isn’t. It’s a dispute that arose of family strife and family conflict.” At its root were “deteriorating… interpersonal relationships” and money-hungry family members who, unlike Charles, did not want to grow Koch Industries but to loot it of its profits.
“That’s what this lawsuit is about,” Howard said, “a continuation of a bitter family fight that should have been settled in 1983 when we paid $1.1 billion for peace that has never come to Kansas.”
David Koch took the stand in mid-April, the first of the four Koch brothers to testify. The fifty-seven-year-old executive vice president of Koch Industries endured three days of questioning. His testimony veered from impenetrable technical matters about the refinery expansion to details about the brothers’ boyhood rivalry: “We were strong-minded, head-strong individuals,” he said at one point. “Of course, yeah, we competed, but I don’t think it was excessive.”
Bill’s lawyer asked him one afternoon about his twin’s firing. Why in the boardroom that day had David abstained from voting to kick his brother out of the company? His face flushed. “Well,” he began. “I have very strong feelings for my brother, and I wanted…” He trailed off, bringing his hand to his forehead. “This is tough to talk about. Boy.”
David tried to fight through the deep well of emotion that had pooled within. “Bill had acted very badly in the company,” he said, his voice breaking. “He’d done some terrible things.” The businessman began to sob, his sorrow amplified throughout the rapt courtroom by the microphone clipped to his tie. Across the room, Charles lifted his glasses to dab a tear. Bill stared down at the table in front of him.
“Mr. Koch, do you want a recess?” the judge asked.
“I think I can get through it here.” David paused to collect himself. “I just didn’t want him to act this way. I wanted him to behave himself, do a good job, and he wouldn’t, and he deceived me, but I wanted to help him out. I wanted to maintain my relationship with him. I just couldn’t vote against him, but I knew he couldn’t work in the company anymore, so it was my desperate desire to try to maintain a relationship with him.”
Frederick took the stand on May 1. Provincial Topeka, surrounded by brothers he had almost nothing in common with, was surely the last place he wanted to be. Give him London, New York, or Monte Carlo—anywhere with a whiff of sophistication and a thriving auction scene. Shorter than his six-foot-plus brothers, with the delicate features of his mother, the sixty-four-year-old had sat quietly through the proceedings, a curiosity to the members of the press covering the trial. “He was so quiet and so almost like a nonfactor, like he didn’t want to be there,” remembered someone who attended the trial.
Frederick had a reputation as a recluse, based largely on his preference for staying out of the media, not sequestering himself at home. He was active with various arts and cultural organizations, including the Metropolitan Opera, the Royal Shakespeare Company, and the Pierpont Morgan Library, and he was a regular at New York galas and fund-raisers. But even some people who had known him for years considered him an enigma. Of all of the Koch brothers, even Charles, he was the most relentlessly private. Frederick made his employees sign strict nondisclosure agreements, vowing that they would not divulge anything about their employer to anyone, and especially the press.
He was hard to read—most in his element when talking about art or literature or theater—and his genteel demeanor could turn frigid without warning. A man of contradictions, he thought little about dropping six figures at Sotheby’s, but could also be bizarrely frugal, growing angry at his staff if they added too much postage to letters and packages. He spared no expense when it came to refurbishing his homes, but he preferred taking the public bus in New York and typically flew commercial.
One associate recalled strolling down East 80th Street with Frederick on a sweltering summer afternoon in the mid-1990s. Crossing Fifth Avenue, Frederick noticed a nickel in the middle of the crosswalk; it had been run over so many times that it w
as embedded in the asphalt. His companion looked on in shock as Frederick stooped down, took out his keys, and began trying to pry the coin loose. The multi-millionaire continued to work as the traffic light changed. Traffic bore down and horns blared, but Frederick kept digging, finally dislodging the nickel. “I got it,” he said, holding the coin up with a beatific expression on his face. “I just was dumbfounded,” his companion recalled. (“I never pick up coins in the street,” Frederick said, “despite this apocryphal account.”)
“Today I’m largely involved in charitable activities,” Frederick told the court. He affected a noticeable British accent from the time he had spent in England overseeing the ten-year renovation of Sutton Place, where Frederick had displayed his collection of nineteenth-century paintings. “The house is now open to the public. It’s one of the most popular attractions within the environments of London. We’re completely sold out two years in advance.”
The eldest Koch brother’s testimony was relatively brief. He knew nothing of the oil business or the inner workings of the family company. In the court drama, Frederick and David were the supporting actors. Charles and Bill were the trial’s star witnesses.
Bill was suffering from a cold when he began the first of seven grueling days of testimony. Bartlit launched his examination of his client with a series of rapid-fire questions designed to dispense with the notion that Bill had staged a boardroom coup with the aim of deposing Charles.
“First, did you ever want your brother, Charles, out of Koch Industries?”
“Never,” Bill replied, his voice slightly hoarse.
“Did you ever want him removed as CEO of Koch?”
“No.”
“Did you have any feelings of jealousy towards your brother Charles?”
“No.”
“Now,” Bartlit said, “let’s talk about the 1980 proposal to expand the board of directors. What was the purpose of that proposal?”
“The purpose,” Bill replied, “was to create a democratic board that represented all of the shareholders proportionally, one man, one vote.”
Bill portrayed his brother as a dictatorial chief executive who didn’t tolerate dissent and whose management practices and antigovernment philosophy had caused Koch Industries to run afoul of regulators. “I didn’t want to see the company go down for legal problems or ethical problems,” he testified.
When Howard’s turn came, the attorney chiseled away at Bill’s testimony.
Wasn’t it true that Bill had voted in 1982, when he still had a seat on Koch’s board, to oust Charles as the company’s CEO?
“Yes.” So he had, in fact, tried to depose his brother, even if this hadn’t been the original goal of his boardroom putsch.
And hadn’t he also voted against David continuing on as an executive officer of the company?
“I may have.”
Question by question, Howard highlighted Bill’s efforts to extract money from Koch Industries at any cost, even if it meant breaking up the company his father had started by selling his holdings to a corporate raider, such as T. Boone Pickens, or Saudi investors.
“You wanted to continue to grow the company, or you wanted to put it up for grabs to corporate raiders and corporate takeover artists to see if you couldn’t get the highest possible dollar to your shares?” Howard probed.
“I had mixed feelings. My feelings were, on the one hand, I wanted to be purely an economic man, get the best economic deal; and on the other hand, I had a lot of emotional attachment to the company.… There came a time when those feelings shifted, however.”
“And in the competition between the two halves of yourself,” Howard asked, “what won out was get the highest price, wasn’t it?”
“Oh, eventually, that’s what won out,” Bill acknowledged.
When Charles testified in late May, Bill looked away from the witness stand. During the proceedings, one trial attendee recalled, Bill “was like a caged animal. He was ready to attack.”
Charles may have been the CEO of a large, multinational company, but he was nevertheless uncomfortable with public speaking. “Work for Koch Industries,” he said quietly when asked to state his profession. It was classic Charles. He didn’t say that he ran Koch Industries, that he was the company’s chairman and chief executive. He just worked there, like thousands of others.
Charles testified haltingly, sometimes fumbling for words, but he ceded little ground. Early on, he upended the notion, advanced by Bartlit, that Fred Koch had taught his sons that “if you can’t work things out around the table… you go to court and you fight and fight and fight.”
“What I recall is the opposite,” Charles said. “My father had gone through a nightmare of litigation from 1929 to 1952, and as part of that, he’d countersued, which lasted a number of years. His saying about that is, ‘That was a mistake, that was a terrible mistake.’ He said, ‘Never sue.’ He said, ‘Out of those lawsuits, I finally settled. I settled for a million and a half dollars. The lawyers got a third, the government got a third, and I got a third, and I ended up with my business destroyed.’ So he said, ‘never sue,’ those were his words.”
Later, as he recounted the family’s last Christmas together in 1979, when Bill had launched into a tirade that had brought their mother to tears, Charles appeared to stare directly at his brother as he spoke: “He accused her of being a bad mother, of not loving him, and that whatever problems he had were largely her fault.”
Bill never looked up from the table in front of him.
Week after week, as the trial slogged on, Charles and David, sometimes accompanied by their wives, flew to Topeka on Sundays, returning home for at best a few days at the end of the week—Charles to Wichita, David to New York. Then they began the whole exhausting ritual all over again.
During the trial, the brothers rented a Topeka mansion that had belonged to a member of the Menninger family, who had founded a famous psychiatric clinic and sanitarium in the city. Charles and David’s daily routine varied little. The brothers convened for breakfast with their lawyers and advisors to prep for trial, then caravanned over to the courthouse in black SUVs. They concluded the day in a similar fashion, debriefing with their lawyers and advisors over dinner.
The long legal battle had taken a noticeable toll on each of the brothers, but perhaps none more so than Charles. The typically energetic CEO wasn’t sleeping well. He looked drawn and haggard. It was not just his company but his values that were under assault.
“No question—that was the hardest period of Charles’ life. Beyond anything I could describe,” said Leslie Rudd, Charles’s close friend.
Gerald O’Shaughnessy, another close friend, observed that he had “never quite seen him so… distracted and preoccupied.”
In the months before the trial, Charles was aloof and withdrawn. Perhaps for the first time since he had gone to work for his father’s company in 1961, he seemed disengaged from the business. “I frankly didn’t think he was that focused on the company then,” said a former Koch executive. “During that period there were a bunch of questionable deals.”
Exhibit A was Koch’s $670 million acquisition of Purina Mills, completed several weeks before Koch v. Koch Industries went to trial. Before year’s end, the feed company filed for Chapter 11, inflicting major losses on Koch Industries. And by April 1999, this and other bad bets on its agriculture businesses forced hundreds of layoffs at the company, as Charles and the company’s management struggled to turn around money-losing divisions or extricate themselves entirely. “The company had a couple of people who are gone now who just shouldn’t have had as much authority as they did,” recalled Tony Woodlief, who went to work as a Koch management consultant in March 1997 and later became a vice president of Charles’s charitable foundation. “They talked a good game and then they made some really stupid decisions.… Charles, you cannot get an ounce of bullshit past him, but at that time he was so checked out.”
Throughout the eleven-week trial, Charles watc
hed the proceedings almost expressionless, even while Liz, his fiercely loyal wife, struggled to stifle her anger as Bill and Frederick’s lawyers painted her husband as a tyrant and a cheat. His wooden demeanor masked the inner tumult of watching his family’s private drama splayed out for the world to see. The litigation, the former Koch executive said, was “crushing” Charles. “You could see a side of Charles that no one had ever seen before and no one will likely ever see again. That trial—destroyed him is not the right word. It was as if he had aged 40 years.”
On Tuesday, June 16, after two-and-a-half months of testimony, Bartlit and Howard delivered their closing arguments. “The only thing that people like this recognize, unfortunately, is money,” Bartlit told the jury, arguing that Koch’s management had displayed the “attitude of somebody who will do it again unless they get more than a slap on the wrist.”
Howard called the case a “modern parable. And the moral is, beware of a brother driven by the need for more money, by greed, and by the desire to rule or ruin, because if you don’t, you’re in for 20 years of corporate warfare.”
Koch Industries had hired Courtroom Sciences Inc., the consulting firm cofounded by “Dr. Phil” McGraw, to advise on the case and empanel a shadow jury, who reported daily on their impressions of the evidence and testimony presented at trial. The shadow jurors were told that their participation was solely for research purposes, but the electronic keypad lock on the room they were interviewed in and the anti-eavesdropping devices affixed to its walls suggested the endeavor was not just academic. Their true purpose was to give Charles and David’s legal team a glimpse into the psyche of the jury and the arguments and evidence they had been swayed by.
Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty Page 21
