Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty by Daniel Schulman Page B
Authors: Daniel Schulman
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Though they owned an equal share of their father’s company, Charles, David, and Bill were not equals in the family business. Fred anointed Charles as his professional heir. He had control of the company, and he could run it as he pleased. After Fred’s death, a number of the industrialist’s friends counseled Charles to sell his father’s corporate assets, believing there was a good market for them. At the time Fred’s holdings included four ranches; a crude oil gathering and refining business; some minor oil exploration interests; and Koch Engineering Company, the outfit Charles had turned around in the early 1960s, which sold equipment to international oil industry customers.
Charles politely refused those who advised him to sell. “Charles told me that he wasn’t going to do that,” Sterling Varner recalled, “that he’d seen a lot of companies in the second generation disappear. They would either go broke or sell out.… So he set his mind to make this company grow and prosper, and he told me that he was going to devote his life to it.”
Charles remembered: “I was scared, but I also thought we had a lot of opportunities.” He planned to “take the foundation we had, particularly the spirit, the attitude, and the values, and compete with major oil companies—compete with all the major… companies that were in the businesses that we were in.”
Charles had inherited not just the reins of the company, but also his father’s reticent, press-shy nature. The beauty of running a private company, Charles often pointed out, was that you didn’t have to bare your soul to the public and financial regulators, tipping off your competition to your strengths and weaknesses in the process. (“We don’t typically want to broadcast what we’re doing,” he once explained.) But on June 27, 1968, Charles did something that seemed unthinkable: He convened New York City’s financial media for a press conference, where he announced that he planned to consolidate Fred Koch’s business empire and rename the company Koch Industries in his father’s honor. In another first, Charles also unveiled the company’s impressive size. With $250 million in annual sales (roughly $1.7 billion in today’s dollars), it ranked among the largest privately owned companies in America. And it was aggressively growing.
“Our change of corporate identity, and the corporate realignment accompanying this change, symbolize the new thrusts of activity within all divisions and subsidiaries of Koch Industries Inc., which will add at least $30 million in gross sales in 1968,” the executive said.
The following year, Charles engineered one of the most important deals in the company’s history, an acquisition that powered the businessman’s expansion plans for years to come. A decade earlier in 1959, when a 35 percent interest in the Great Northern Oil Company had come on the market, Charles’s father had plunked down nearly $5 million without hesitation. It was a wise investment. The company owned a lucrative 40,000-barrels-per-day refinery, known as Pine Bend, near the Twin Cities. It had easyaccess to a steady supply of Canadian crude and little in the way of competition in the upper Midwestern market.
Fred’s investment would ultimately lead to a longstanding relationship between the Koch family and one of its most important business allies, the Marshall clan. J. Howard Marshall II was an oilman and attorney who had cofounded Great Northern in 1954. Fred had gotten to know him during World War II, when Marshall served as chief counsel to the Petroleum Administration for War. (Marshall today is better remembered for his marriage, at age eighty-nine, to
Playboy
playmate and stripper Anna Nicole Smith.) Marshall, whose friendship with Fred solidified when the Wichita businessman bought into Great Northern, owned 16 percent of the company.
In the late 1960s, Union Oil Company of California, owner of a 49 percent stake in
Though they owned an equal share of their father’s company, Charles, David, and Bill were not equals in the family business. Fred anointed Charles as his professional heir. He had control of the company, and he could run it as he pleased. After Fred’s death, a number of the industrialist’s friends counseled Charles to sell his father’s corporate assets, believing there was a good market for them. At the time Fred’s holdings included four ranches; a crude oil gathering and refining business; some minor oil exploration interests; and Koch Engineering Company, the outfit Charles had turned around in the early 1960s, which sold equipment to international oil industry customers.
Charles politely refused those who advised him to sell. “Charles told me that he wasn’t going to do that,” Sterling Varner recalled, “that he’d seen a lot of companies in the second generation disappear. They would either go broke or sell out.… So he set his mind to make this company grow and prosper, and he told me that he was going to devote his life to it.”
Charles remembered: “I was scared, but I also thought we had a lot of opportunities.” He planned to “take the foundation we had, particularly the spirit, the attitude, and the values, and compete with major oil companies—compete with all the major… companies that were in the businesses that we were in.”
Charles had inherited not just the reins of the company, but also his father’s reticent, press-shy nature. The beauty of running a private company, Charles often pointed out, was that you didn’t have to bare your soul to the public and financial regulators, tipping off your competition to your strengths and weaknesses in the process. (“We don’t typically want to broadcast what we’re doing,” he once explained.) But on June 27, 1968, Charles did something that seemed unthinkable: He convened New York City’s financial media for a press conference, where he announced that he planned to consolidate Fred Koch’s business empire and rename the company Koch Industries in his father’s honor. In another first, Charles also unveiled the company’s impressive size. With $250 million in annual sales (roughly $1.7 billion in today’s dollars), it ranked among the largest privately owned companies in America. And it was aggressively growing.
“Our change of corporate identity, and the corporate realignment accompanying this change, symbolize the new thrusts of activity within all divisions and subsidiaries of Koch Industries Inc., which will add at least $30 million in gross sales in 1968,” the executive said.
The following year, Charles engineered one of the most important deals in the company’s history, an acquisition that powered the businessman’s expansion plans for years to come. A decade earlier in 1959, when a 35 percent interest in the Great Northern Oil Company had come on the market, Charles’s father had plunked down nearly $5 million without hesitation. It was a wise investment. The company owned a lucrative 40,000-barrels-per-day refinery, known as Pine Bend, near the Twin Cities. It had easyaccess to a steady supply of Canadian crude and little in the way of competition in the upper Midwestern market.
Fred’s investment would ultimately lead to a longstanding relationship between the Koch family and one of its most important business allies, the Marshall clan. J. Howard Marshall II was an oilman and attorney who had cofounded Great Northern in 1954. Fred had gotten to know him during World War II, when Marshall served as chief counsel to the Petroleum Administration for War. (Marshall today is better remembered for his marriage, at age eighty-nine, to
Playboy
playmate and stripper Anna Nicole Smith.) Marshall, whose friendship with Fred solidified when the Wichita businessman bought into Great Northern, owned 16 percent of the company.
In the late 1960s, Union Oil Company of California, owner of a 49 percent stake in
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