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Nation’s No. 2 Privately Held Company Is Focus Of Apparent Family Feud

May 10, 1989

WICHITA, Kan. (AP) _ Allegations that Koch Industries cheated Indian tribes out of millions of dollars in oil royalties may be just the latest round in a long-running Koch family feud.

William Koch, the younger brother of Koch Industries Chairman Charles Koch, hired an investigator to monitor the company’s oil measuring practices.

Investigator Chris Tucker testified Tuesday before the Senate Select Committee on Indian Affairs that Koch Industries was stealing oil by deliberately mismeasuring it.

The committee is investigating theft of oil from and underpayment of oil royalties to Indians.

A Koch spokesman said mismeasurements are common and that the company’s errors were well within the range commonly found in the industry.

Wichita-based Koch Industries has interests in energy, real estate, manufacturing and cattle. It is one of the nation’s largest privately held corporations with annual revenues estimated at $16 billion to $18 billion.

William Koch has made several attempts to wrest control of the company from Charles and has filed several lawsuits against his brother, the company and other family members.

Charles Koch, 52, of Wichita, and his brother, David, 47, an executive vice president who heads the company’s chemical operations from New York City, are billionaires, according to Forbes magazine.

William Koch, David’s twin, has a fortune estimated at $600 million and heads a suburban Boston energy company, Oxbow Corp.

Eldest brother Frederick, 53, who has residences in Monaco and New York City and shares in company profits through a trust fund despite being disinherited by his father, is worth an estimated $450 million.

The differences that led William and Frederick to become allies against Charles and David never have been discussed publicly.

″There is a lot of deep hatred involved here,″ Don Cordes, Koch Industries vice president for legal and corporate affairs and a close friend of Charles Koch, once said.

William Koch has denied he is pursuing a personal vendetta. He once characterized his disagreements with Charles and David as business disputes and said he has ″a great deal of respect″ for his brothers.

The brothers’ mother, Mary, 81, said Charles always appeared destined to follow in the footsteps of his father, Fred C. Koch, who founded the company as Rock Island Oil and Refining Co.

Charles became chairman after his father died in 1967. He turned the company into a thriving, diversified conglomerate at a time when other independent oil companies were faltering. The number of employees has grown from 650 to more than 7,000.

In 1980, William Koch led dissident stockholders in an unsuccessful attempt to wrest control from Charles. William Koch was fired as an executive of the company in December 1980.

In a 1982 lawsuit, William Koch sought control of the company and accused Charles Koch and others of misappropriating funds. The lawsuit was settled out of court in June 1983 when Koch Industries bought the stakes owned by William, Frederick and other dissidents for an estimated $1.5 billion.

Since then, William Koch has filed two unsuccessful lawsuits claiming the settlement undervalued company assets.

William and Frederick also are suing their brothers and mother, claiming they have been cut out of decisions on what non-profit groups get donations from the Koch Foundation, which distributes about $300,000 a year.

A Sedgwick County District Court judge will hear closing arguments in two weeks.

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