The Other Koch Brother
Two mansions, two miles apart, spark intrigue in Palm Beach, Florida. The first, on the northern end of the oceanfront street nicknamed Billionaire's Row, is 30,000 square feet of arched windows and red, Spanish-tile roof, a villa that includes a ballroom where flappers danced and sipped moonshine in the 1920s.
This is David Koch's vacation home. The billionaire oil baron, along with his brother Charles, has gained recent notoriety as the sugar daddy of the Tea Party. In 1979, David Koch ran for vice president on the Libertarian Party ticket, and he and Charles have since given more than $100 million to right-wing causes and organizations, according to a 2010 New Yorker profile that exposed their tremendous influence in politics. David lives in New York City and winters in Palm Beach.
The second mansion is a short drive south on Billionaire's Row, a narrow strip of asphalt that buffers colossal wealth from the ocean. With an open driveway and a generous front lawn, this house bears little resemblance to its neighbor up the road. The original historic villa was leveled, replaced by a 42,000-square-foot mansion built in efficient Colonial style, with square windows, gray peaked roofs, and columns framing the front door. The pool is a long rectangle, and the backyard stretches all the way west to the Intracoastal Waterway. Inside, prized artwork graces the walls, and millions of dollars worth of wine cools in the cellar.
For two decades, the owner of this $25.9 million mansion didn't speak to the owner of the first. He is David Koch's twin brother, William "Bill" Koch. A feud over the family business kept the brothers warring in court for years. Bill, 71, a rumpled and white-haired chemical engineer, was labeled in the press as the black sheep of the family. One of the Forbes 400 richest people in the world and the second-richest man in Florida, he made headlines for his salacious romantic affairs and his penchant for suing his enemies, and for burning cash on historic wine bottles and a $2 million photo of Billy the Kid.
He also earned the wrath of environmentalists. A mine owned by his energy company, Oxbow, was the site of two of the three coal-mining deaths in Colorado in the past 11 years. Bill Koch poured millions of dollars into fighting America's first offshore wind farm in Massachusetts, and is now angling to take over 1,800 acres of federal land in Colorado for his private ranch.
But now that Charles and David are alternately reviled and admired for their Tea Party ties, "Wild Bill" Koch has been cast in a peculiar new role: the good brother.
He donates tens of thousands of dollars to mainstream Republican candidates such as John McCain and Mitt Romney, but doesn't publicize his opposition to Barack Obama. Rather than fund Tea Party groups, he gives money to impoverished kids in Palm Beach County and to hospitals and schools in Colorado, where he has another home. In September, he will open a private high school in West Palm Beach, Oxbridge Academy. "Bill Koch isn't Charles Koch and he isn't David Koch," says his spokesman, Brad Goldstein. "He's not his brother's keeper."
Even as a child, Bill Koch lived in his brothers' shadow. Of the four Koch boys—David, Bill, Charles, and the eldest, Frederick—Bill was the "family nerd," he once told the New York Times Magazine, which profiled the family after their legal battle in 1986. Growing up in Wichita, Kansas, Bill wasn't as skilled at basketball as Charles and David. Although he's six foot four, he was smaller than them. They would play together, but exclude him.
By the time Bill was six, he was so resentful of Charles that his mom said they had to send the 11-year-old Charles to boarding school. "We had to get Charles away because of the terrible jealousy that was consuming Billy," Mary Koch told the Times. "Billy had always been too emotional."
Emotionalism was not prized in the Koch family. The boys' father, Fred C. Koch, was a hard-nosed "monarch," a family friend told Fortune magazine. Not wanting his sons to become pampered rich kids, he put them to work on the family cattle ranches in the summers. He was a self-made man. His dad—Bill's grandfather—ran a small-town newspaper in Texas. When Fred wanted to study chemical engineering, a local businessman helped pay his tuition at the Massachusetts Institute of Technology, Goldstein says—a gift that would later inspire Bill's own school philanthropy.
In the 1920s, Fred Koch launched an engineering company in Wichita, and invented a refining process that increased the amount of gasoline produced from crude oil. When competing oil companies sued him for patent infringement, he moved to the Soviet Union to build oil refineries under Stalin. Watching colleagues be killed in the dictator's purges, Koch was horrified. By the time he returned to Kansas to expand his business and started a family, he was staunchly anti-Communist. Fred Koch became a founding member of the hard-right John Birch Society and imbued all of his sons with a strong distaste for government.
Bill attended high school at Culver Military Academy in Indiana, then joined Charles and David at M.I.T., dutifully following in their dad's footsteps. Bill eventually earned a Ph.D. in chemical engineering. Frederick Koch studied English and drama at Harvard and Yale and grew up to become a reclusive art collector who buys European castles, including estates in Monaco and London.
After their father died, in 1967, Charles took over the family business, and the strain between him and Bill increased. Bill came to work for Koch Industries as a consultant in the early '70s, but Charles wasn't happy with his job performance. "He never seemed to get any self-respect out of what he was doing, and always wanted to be doing something else," Charles told the Times. (Through a spokesperson, Charles and David Koch declined to be interviewed for this article.)
Bill was angry that company money was spent on his brothers' political causes. "Why should I donate all my money to the Libertarian Party?" he said. "Pretty soon we would get the reputation that the company and the Kochs were crazy."
But under Charles Koch's leadership, Koch Industries became the second-largest privately held company in America. In addition to its oil refineries, it owns Brawny paper towels, Lycra, and Georgia-Pacific lumber.
In 1979, the Koch brothers celebrated their last Christmas together. The next year, Bill tried unsuccessfully to seize control of the board of Koch Industries. An epic legal battle followed. Bill sued Charles and David for corporate mismanagement. They fired back with a libel suit. In 1983, Bill and Frederick Koch sold their shares of the company to Charles and David, and Bill walked away with $470 million. But two years later, after his bankers crunched the numbers, Bill decided he'd gotten a raw deal. He sued again, demanding more money. For nearly two decades, his lawsuits against his brothers piled up. Things got ugly. At one point, Bill subpoenaed his elderly mother to testify a few months after she had a stroke. He also filed a whistle-blower suit accusing Koch Industries of stealing crude oil from Native American lands; it would drag on for years.
Bill stopped speaking to Charles and David. "I don't want to see my brothers in jail," Bill told Fortune in 1997. "But I'm at war."
Through all these spats and scandals, Bill Koch's more prosperous brothers retained a low public profile. Unless they were suing one another, the press had little interest in the oil, coal, and gas barons from Kansas.
Until last August. As the Tea Party movement gained steam, gearing up to send a wave of right-wing, anti-government candidates to Congress, a few muckraking reporters finally noticed the Kochs. The New Yorker published a scathing exposé calling Charles and David "the billionaire brothers who are waging a war against Obama." They founded the libertarian think tank the Cato Institute and the Americans for Prosperity Foundation, which educates and trains Tea Party activists. In Washington, D.C., their support of conservative causes is so widespread that their web of influence is known as the "Kochtopus."
Charles and David Koch were vilified by Democrats as the Big Oil moneybags behind the Tea Party. By contrast, Bill Koch's business and political activities seemed tame.
When Barack Obama was running for president in 2008, Bill Koch bundled at least $100,000 in campaign contributions for John McCain, according to the nonpartisan Center for Responsive Politics. Since last year, with Republicans preparing for big wins in Congress, Koch has personally given at least $165,400 to GOP candidates throughout the country. The largest chunks of cash—$126,200—went to the National Republican Senatorial Committee and the National Republican Congressional Committee. Koch is now on the Florida fundraising team for GOP presidential candidate Mitt Romney.
"He does not agree with the president's economic policies," Goldstein says of his boss. "This administration has made it extremely difficult for businesses to operate."
Specifically, Koch doesn't appreciate the way Obama officials treat coal mining, and calls the Environmental Protection Agency "hyper-aggressive."
"It's far easier to get permits to mine for natural resources outside the United States than inside," Goldstein says. Not surprisingly, Goldstein adds, "He thinks Mitt Romney would be much more pro-business than Barack Obama."
Men arrived at the Four Seasons hotel in Palm Beach wearing tuxedos, the women in long, shimmering dresses. This was not just another corporate Christmas party. Plates were piled high with filet mignon, and at least 200 guests gleefully descended on an open bar. "This was hands-down the greatest company event that I've ever been to in my life," recalls employee Ron Brosh. "You thought you'd won an award."
It was the late '90s, and Bill Koch's company could afford to lavish such extravagance on its employees. In 1983, he used the initial millions he got from selling his shares of Koch Industries to start his own energy company, Oxbow Corp. He founded the company in Massachusetts, but after battling the state over taxes on a stock purchase, he got fed up and moved Oxbow to West Palm Beach in 1989. Oxbow, like individuals and many other large corporations in Florida, does not have to pay state income taxes. "That's the reason I came here—it's tax-friendly," he told the St. Petersburg Times in 2003.
Initially, Oxbow made its mark as a more environmentally friendly energy company than Koch Industries. Oxbow built and financed geothermal power plants in the U.S., Costa Rica, and the Philippines in the '90s, when the federal government was providing subsidies for green power.
"He [Koch] embraced the whole green concept," says Paula Zagrecki, who was the finance director for international renewable-energy projects at Oxbow from 1995 to 2000.
Zagrecki remembers Koch as a detail-oriented boss, who was a "really personable, smart guy." He hired intelligent people, paid them well, relocated them to Florida, and rewarded them with bonuses. "He's really the opposite of what you expect from a billionaire," she says.
Brosh, an actor who was a financial analyst for Oxbow in the late '90s, is even more effusive. He says Koch's generosity to his employees changed the way Brosh viewed wealthy people. "With Bill Koch, I always felt that I got better than I gave," he says. "For me, that was a real life lesson."
Koch attended happy hours on Clematis Street, dancing with his underlings and listening to them sing on his birthday. Once, the billionaire hosted a work barbecue at his newly built mansion. Brosh gaped at the valuable Western art collection on the walls, the "piles and piles of the best steak," the two swimming pools, and the way Koch welcomed hundreds of guests into his home. "He was opening up his world that much to us," Brosh says.
At Oxbow, Koch installed a state-of-the-art gym and made his personal trainers available to employees for free. Several times, Zagrecki says, she'd find herself huffing and puffing on the StairMaster next to the boss. "He was kind of very normal," she says.
Yet the boss set a high standard. Koch's car would be first in the office parking lot by 7 a.m., Brosh says. If Zagrecki had to meet with him, she knew to be prepared. "There was definitely an expectation that you better have all the ducks lined up in a row," she says, "because he would definitely question you."
Sometimes, he would lose his temper. "It's his company. If he wanted to yell at you because you screwed up a $100 million investment, I think that's his right," Zagrecki says.
Meanwhile, his personal life had a habit of upstaging his professional accomplishments. In 1992, he won the nation's most prestigious sailing competition, the America's Cup. He spent $68 million to assemble the best team and build a faster boat, and sailed with the crew as a novice. Later, he would credit his "T3 philosophy for success—talent, teamwork, and technology." However, he was criticized in the press for the tax breaks he received for contributing to the foundation that funded his win.
Then, in 1994, as his legal battle with his brothers raged on, Vanity Fair wrote a profile labeling him "Wild Bill," the black sheep of the family. The insults may have come from his brothers, but Bill didn't help his own cause. "I could be a really nasty shit," he said in the article. "I would go up to my secretary [and say], 'You dumb shit, why'd you make that mistake?' I was that kind of guy."
A wine lover, he started a collection of 40,000 bottles worth more than $12 million, keeping them in a climate-controlled cellar with a computer system designed to locate every vintage. He also collected fine art and Western memorabilia—Renoir, Rodin, Jesse James's gun, General Custer's rifle.
His appetite for women was easily as voracious as his love of wine. In 1995—a year after he got married—he tried to evict his mistress, an elegant, blond former model named Catherine de Castelbajac, from a condo he owned at the Four Seasons Hotel in Boston. Castelbajac refused to leave, and filed a palimony suit, claiming Koch had promised to support her financially for the rest of her life. Soon, the embarrassing details of the geeky billionaire's love life emerged in a Boston courtroom. Jurors learned that Bill was seeing three other women aside from Castelbajac (including his first wife, Joan Granlund, and a girlfriend, Marie Beard, with whom he would have a daughter). Koch and Castelbajac exchanged lurid love notes via fax, such as one Castelbajac signed, "Hot Love from Your X-rated Protestant Princess." When jurors finally ordered Castelbajac to leave the apartment, they didn't sympathize with either party. "Neither of them is a prize," mechanic William Tracia Jr. told the Boston Globe.
In 1996, Koch, then 56, married his second wife, Angela, who was nearly 18 years younger than him. That was a stormy relationship, too.
One evening in July 2000, police were called to the Kochs' summer home in Cape Cod. Angela alleged that Bill had punched her in the stomach while she held their one-year-old daughter. The cops issued a restraining order against him, and for a few months he was banished to their beach house—a cottage that's separate from their main mansion on Palm Beach.
In the divorce fight that followed, Angela and Bill accused each other, according to court documents, of having drinking problems. She complained that he fired her favorite chef and the nanny. He hired private detectives to trail her in Palm Beach.
Eventually, they reached a settlement that gave Angela a lump sum of $16 million, in addition to child support payments. The deal, outlined in Palm Beach Circuit Court documents, was to be "null and void" unless the domestic violence case against Bill in Massachusetts was dismissed. As the lawyers finalized the terms of the deal in December 2000, Angela refused to testify in the case, and the prosecutor dropped the criminal assault and battery charge against Koch.
Goldstein, the spokesman for Bill Koch, denies that the settlement was arranged to get Angela to drop the charges. Throughout the divorce proceedings, Koch maintained that he never hit his wife. "An absolute fiction of her imagination. Never happened," Goldstein says. (Angela, who is remarried and lives in West Palm Beach, did not respond to requests for comment.)
As his romantic roller-coaster ride continued, Bill Koch lost most of his lawsuits against his brothers. "He was devastated," Angela Koch told the New York Post. "It was something he could not get over—it just ate him up." Meanwhile, his business goals began to shift.
Around 2000, Oxbow sold its geothermal power plants. Goldstein says the corporate execs sensed that the federal subsidies were going to disappear, and that the industry would no longer be stable. So the company that once prided itself on producing green energy switched its focus to fossil fuels—mining natural gas and coal, and becoming the world's largest marketer of petroleum coke, a by-product of oil refining that emits high levels of sulfur and carbon dioxide when burned.
Oxbow bought the Elk Creek Mine in Gunnison County, Colorado, west of Aspen. It soon hired more than 300 people, most of whom climb under the earth every day, breathing in soot and methane gas, to retrieve black chunks of fuel.
Oxbow provides healthy paychecks in a rural mountain region where job options are limited. Goldstein says the company has donated money to the local hospitals, high school, Little League fields, and the library. In return, the residents tolerate the inherent perils of working for a coal company.
In the past 11 years, two of the three coal-mining deaths in Colorado occurred at Oxbow's mine. In one incident, a wire screen fell on a 26-year-old worker, pinning him to a machine. In another, a high-pressure hydraulic hose broke and went flying, hitting a 37-year-old in the head. In the past year, federal records indicate, the Elk Creek mine has been cited 66 times for "significant and substantial" safety violations—the kind that can reasonably result in serious injury or death.
Goldstein calls the deaths "a tragedy" but says the mine's safety record is "quite good" and contends that the accident rate is "lower than the national average."
This May, Oxbow announced it was expanding its coal exploration efforts in neighboring Delta County. "Coal is never gonna go away," Goldstein says. "It's not in fashion these days. [But] the majority of our energy in the states comes from coal."
In July, an Oxbow subsidiary received permission to build water pits to support its gas operations in Gunnison County, despite worries from environmentalists that the wells could leak and pollute the water supply.
Koch has also angered some nearby residents by trying to gain control of a large swath of federal land that provides access to a national forest. The 1,800 contested acres sit between Koch's two ranches, and he wants to connect them. He's tired of people trespassing, parking near his ranch, and poaching the elk that roam there, Goldstein says.
Last year, Koch tried to arrange a deal, through federal legislation, that would allow him to take over the land in exchange for giving the government roughly 1,000 acres near other federal parks. U.S. Representative John Salazar, a Colorado Democrat, sponsored the land-swap legislation in Congress. But after the press revealed that Oxbow was Salazar's biggest campaign donor, and the public protested the deal, the bill stalled and Salazar lost his seat in Congress. Goldstein says Koch is currently working to revise the plan, addressing concerns about access to the forestland.
But Ed Marston, a former newspaper publisher in the area who was a vocal opponent of the land swap, says the deal demonstrates how selfish Koch can be. "This is for the benefit of one man, and it locks out, at present, hundreds of users," says Marston.
Goldstein contends that Marston has been butting heads with Oxbow for 11 years and says the forest road he is trying to protect "gets very little use."
As his business in Colorado prospered, Koch took on a different energy battle in Massachusetts. In 2001, in Cape Cod, where Koch has a summer mansion, a private developer proposed building the nation's first offshore wind farm. One hundred and thirty wind turbines, 440 feet high, would rise in Nantucket Sound. The developer claimed this clean energy source would produce 75 percent of the energy needed to power the Cape and nearby islands.
But Koch, the award-winning sailor, was loath to let windmills sully his view. Plus, he didn't think the project was financially viable. Goldstein says higher energy costs would be passed on to consumers and calls the farm "a boondoggle." Koch joined other high-profile opponents such as Ted Kennedy and Mitt Romney in a contentious battle that stretched on for nine years. He spent $1.5 million funding an opposition group, the Alliance to Protect Nantucket Sound, for which he also served as chairman of the board.
Last year, Cape Wind finally got the federal approvals needed to move forward with the project. Mark Rodgers, the project spokesman, says Koch's vigorous opposition was tied to his pocketbook—namely, his business interests in coal and oil.
"I think he has made a fortune in some of the dirtiest types of energy we use," says Rodgers. "I suppose it galls him that somebody makes money with clean-energy wind turbines that he might even see occasionally from his oceanfront mansion."
In 2001, Bill Koch finally won a victory against his brothers. Koch Industries paid $25 million to the federal government in a settlement deal; in return, the feds dismissed charges that the company stole oil from Native American and federal lands. Bill Koch and his co-plaintiff shared $7.4 million, according to the Center for Public Integrity.
That year, Bill, David, and Charles also signed an undisclosed settlement that ended the legal battles among them and helped repair their relationship. In 2005, when Bill married his third wife, Bridget Rooney—her grandfather, Art Rooney, founded the Pittsburgh Steelers, and she had had a son with Kevin Costner—David was the best man at the wedding.
Bill Koch continued his legal antics, but they shifted to his hobbies. In 2006, he sued the wine broker who sold him bottles of wine that purportedly belonged to Thomas Jefferson. After hiring his own investigators and speaking to Jefferson's foundation at Monticello, Koch discovered the wine was fake. "I've bought so much art, so many guns, so many other things, that if somebody's out to cheat me, I want the son of a bitch to pay for it," Koch told the New Yorker.
The mystery of the expensive wine's origins sparked a nonfiction book, and Koch and Goldstein saw themselves as crusading heroes in a made-for-Hollywood story. "This is National Treasure," Goldstein told writer Benjamin Wallace, author of The Billionaire's Vinegar.
Koch eventually won a default judgment against the wine broker, although a judge dismissed a separate case against Christie's Auction House. Last year, Koch made headlines again for suing an interior designer who didn't follow his request to decorate his Colorado ranch in appropriate Western style. He and the designer settled their dispute before the case went to trial.
Meanwhile, Koch moved on to his next project: a private high school in West Palm Beach.
It's early June. As the academic chief of the Oxbridge Academy, it's Neen Hunt's job to convince the parents at this open house that a new high school, built on the grounds of a former Jewish Community Center, is worth $15,000 in annual tuition.
Hunt's voice is weathered, and she has the severe, lined faced of a veteran Upper West Side New Yorker. Short, with curly brown hair and a floral print dress, she stands at a podium speaking gravely to the audience of roughly 65 parents and preteens sitting on folding chairs.
"We're looking for deep understanding, not just broad coverage of the issues," she says. "Think deeply. Probe. Don't be afraid to take risks."
Behind Hunt is an elevated stage and an enormous projector screen for PowerPoint presentations. The auditorium at the former JCC in West Palm Beach is carpeted in a sedate blue. Outside this room are empty, echoing hallways and linoleum floors. There's an outdoor pool, six tennis courts, a large indoor basketball court, a dance studio, and spacious playing fields.
According to 2009 tax documents, the Oxbridge Academy Foundation's board is composed entirely of high-ranking employees from Oxbow. Bill Koch is the school's founder and provider of $50 million in start-up funds.
In 2008, Charles Koch gave $1.5 million to the Florida State University economics program—but it came with major strings attached. In exchange for the money, Koch got the power to screen and approve all faculty hired. FSU faced a storm of criticism for accepting that deal.
Goldstein insists things are different at Oxbridge. He says his boss's political allegiances are "hard to pin down"—he has given money to Al Gore, as well as to Democrats in Colorado. And politics, Goldstein says, has nothing to do with Oxbridge. The school has hired accomplished teachers with a variety of political views—including Dennis Yuzenas, a social studies teacher who was punished elsewhere for wearing a pro-Obama T-shirt to school.
"There was no political litmus test given to any of them. We wanted the best," Goldstein says. "We're not out to start a revolution."
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