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John Garrity
April 20, 1992
Bill Koch and his America� syndicate hope that money and technology will prevail over pure helmsmanship in defending the America's Cup
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April 20, 1992

Captain America�

Bill Koch and his America� syndicate hope that money and technology will prevail over pure helmsmanship in defending the America's Cup

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By all accounts, the Koch boys loved and respected their father, but his standards were hard to live up to. Freddy decided he preferred the pursuit of culture to the pursuit of big game and was disinherited by his disappointed father when he was 33. (Freddy's wealth derives from a childhood trust and another distribution that gave him 14% of the family business.) That opened the door for Charles to succeed his father.

"Charles is by far the most astute and capable of the Koch boys," says one Koch Industries insider. "David and Bill are both capable, but Charles is a superstar." Charles became head of the company in 1967, the year his father died. Since then the annual revenues of Koch Industries have grown from $250 million to $16 billion. His father's son, Charles contributes to conservative causes and persuaded David to run for vice-president on the 1980 Libertarian party ticket headed by Ed Clark.

While Charles was cementing his position in Wichita in the early '60s, the Koch twins were off at MIT, where David captained the basketball team and Bill warmed the bench. Bill's critics point to this to support their belief that his lawsuits are a product of sibling rivalry and jealousy.

David, in fact, worked for various other companies after earning his master's in chemical engineering from MIT in 1963. When David joined Koch Industries in 1970, Bill was still at MIT, completing his doctorate. And when Bill finally came aboard, "he didn't like details, or the grind," according to Varner. "Billy doesn't like to look in one window too long," Varner once said. "He's a lot better at ideas than at getting the job done."

Bill was no happier with Charles and David than they were with him. Among his grievances were Charles's "autocratic" management style, the brothers' use of company funds for right-wing political activities (Bill describes himself as a political independent) and the company's paltry dividend payment of 7% of annual earnings. "I had to borrow money to buy a house," Bill complained, "and I'm one of the wealthiest men in America."

Getting nowhere with the strong-willed Charles. Bill led the equally disgruntled Freddy and a group of minority shareholders in a 1980 proxy fight to seize control of the company. Charles caught on and fired Bill. Three years later, after heated litigation. Bill and Fred sold their Koch shares back to the company for an estimated total of $800 million.

That should have ended the feud, but things just got nastier. Questions arose about the value of the shares the outcast brothers had sold. "It's a simple thing," says Bill. "I sold my stock back to them at a cheap price. They didn't disclose certain assets to me. I asked them to pay me what the true value was, and they told me to jump in the lake. So I said, 'Fine. I'll sue you." "

David, as bright and congenial as his twin, shakes his head over that version of events. "I don't buy what Billy says about it being a business dispute," he says. "It's personal. It's more a question of principle, of honesty among brothers, of treating our mother with kindness, respect and sympathy."

This last remark is a reference to Mary Koch, who died in 1990 at age 83. A Wellesley graduate with roots in Kansas City's upper crust, the Koch matriarch watched helplessly in her declining years as her sons squabbled. In 1987 Bill and Freddy sued her, Charles and David over their management of the charitable Fred C. Koch Foundation, claiming that the three had broken an oral agreement stipulating that shareholders in the foundation would determine where its donations went in proportion to the shareholders' stock ownership. Bill charged that Mary, Charles and David had agreed among themselves that the foundation's five-member board, on which they held a majority, would decide on all donations. Since the supposed oral agreement was unenforceable, the case was dismissed. Upon Mary's death, Bill and Fred contested a provision of her will that denied a share of her $10 million legacy to any son with an active suit against a family member. Bill and Freddy lost the case and are appealing; Bill has offered to give up his share of his mother's money if his brothers will agree to give estate proceeds to apolitical charities.

In a separate action, Bill and Freddy accused their brothers of scheming to steal oil from oil producers. The case was dismissed, but in the meantime, Charles and David sued Bill over the disposition of the family homestead in Wichita, which covers more than 150 acres, and their father's gold coin collection. In the end, Bill sold Charles and David his interest in the homestead, and they sold him their interest in the coins.

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