the head with a polo mallet, leaving a permanent scar just behind David’s eye. Later, Bill stabbed David Koch in the back with an African sword from their father’s collection at the family compound, leaving another scar. David forgave his twin brother for both attacks. David Koch affectionately called his twin brother Billy, and when young Billy flew into rages as a child, David would act as a peacemaker between Billy and Charles. Now, David was put in a position where he would have to choose between them.
There was a board meeting on December 5, at which Bill Koch’s failed coup attempt would be dealt with. Sterling Varner asked Bill Koch to resign from the company, and Bill Koch refused.
During the meeting, a motion was put forward to fire Bill Koch. When the votes were counted, the motion carried. Bill Koch’s career at the family company was finished. David Koch abstained from the vote.
* * *
Although Bill Koch was terminated as an employee, he was still a major shareholder. He continued to use that leverage over Charles, agitating for the company to go public or be sold. During 1981 and 1982, Charles Koch was challenged on multiple fronts to choose one of the two options.
But going public would destroy the machine that Charles Koch had built. It would also mean that Charles Koch would lose control. Shareholders would have a vote. A new board of directors might have the power to fire him. Koch’s business strategy revolved around rapid decision-making: managers brought a plan to Charles Koch and Sterling Varner, and they had the authority to approve it on the spot. Publicly traded firms had to take their shareholders into account, leading to the proliferation of the kinds of committees and review groups that Charles despised.
Charles pressed his case to the board and to the small group of shareholders, and his case was a convincing one. When Charles joined his father’s company in 1961, the company had three hundred employees. It earned a profit of $3.5 million a year, and paid annual dividends of roughly $150,000. Twenty years later, Koch Industries earned $300 million in profits and had seven thousand employees. Even though dividends were a small share of profits, Koch still paid out $27.5 million in annual dividends because the profits were so high. That was a ninety-one-fold increase over the level paid when Fred Koch died. The company overall was worth $1.5 billion in 1982. It had been worth just 3 percent of that amount in 1967.
Charles Koch made the case to his directors and shareholders that if they stayed at his side, if they believed in his vision, the future would be just as strong.
* * *
Bill and Freddie Koch finally came to a resolution with Charles and David. Koch Industries would buy out Bill’s and Fred’s ownership stakes for more than $1 billion. This would finally sever the business ties between the bothers. Koch Industries borrowed $1.1 billion to finance the buyout. The massive loan cut against Charles Koch’s distaste for debt, but it was an emergency measure necessary to expel Bill and regain control.
When it came time to close the deal, Charles Koch turned for help to Brad Hall, the young finance whiz who had helped Bill Koch manage the Koch Carbon division. Hall had since made it clear whom he’d rather be working for, and he was just beginning a career under Charles Koch that would last more than twenty years.
In 1983, Hall accompanied a Koch Industries lawyer on a flight to New York, where they met Bill Koch and his team of lawyers to close the settlement deal to buy out Bill’s ownership. There was a festive atmosphere as the papers were signed. Bill Koch, after all, had just earned something in the neighborhood of $470 million. “They were having a big party and everything, and [Bill] wanted to have his picture taken with me,” Hall recalled with a sad grin, shaking his head at the memory. “He told me to tell his brother that he still loved him.”
About one year earlier, Bill had been fighting Charles for a deal that would have paid out $25 million if he stayed at the company. Now he had several times that amount. Bill was about to embark on a spending spree, describing himself as feeling like a child again. He bought opulent houses in the most exclusive beachfront communities. He bought a helicopter, fine art, and the world’s finest wines.
Like his younger brother, Charles Koch