efficient, and Koch learned how to replicate their methods. Koch bought a stake in a genetic engineering company to breed superyielding corn. Koch Agriculture extended into the milling and flour businesses as well. It experimented with building “micro” mills that would be nimbler than the giant mills operated by Archer Daniels Midland and Cargill. Koch worked with a start-up company that developed a “pixie dust” spray preservative that could be applied to pizza crusts, making crusts that did not need to be refrigerated. It experimented with making ethanol gasoline and corn oil.
There were more abstract initiatives. Koch launched an effort to sell rain insurance to farmers who had no way to offset the risk of heavy rains. To do that, Koch hired a team of PhD statisticians to write formulas that correlated corn harvests with rain events, figuring out what a rain insurance policy should cost. At the same time, Koch’s commodity traders were buying contracts for corn and soybeans, learning more every day about those markets.
Koch Agriculture was growing rapidly, but Charles Koch was distracted by a different matter. He was busy talking with lawyers in Topeka, where his brother Bill was waging a full-scale legal war against him.
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The lawsuit Bill filed in 1985—alleging that Charles Koch underpaid him for his share of the company—had grown into a sprawling legal sinkhole, sucking in dozens of lawyers, judges, clerks, and investigators. The reasons for Bill Koch’s crusade were becoming increasingly hard to decipher. Was it over money? Brotherly competition? The simple desire to avenge his firing?
If the motivations for this fight were shadowy, then the tactics Bill employed were even darker. The New York Times later uncovered documents showing that Bill Koch hired investigators to pose as journalists and dig up incriminating information on Charles Koch.I One investigator was offered a $25,000 bounty if he could persuade a national newspaper to publish damaging information about Koch Industries. Bill hired detectives to collect trash outside the homes of Koch Industries lawyers and he later bragged to Vanity Fair that he’d hired “an Israeli-trained former marine” named Marc Nezer to run security operations and use surveillance devices like bugs and cameras. Bill Koch’s lengthy interview with Vanity Fair included the kind of excruciatingly personal information Charles Koch did not share with close friends. Bill Koch detailed his therapy sessions and the scars of his childhood. The Wall Street Journal published a front-page story under the headline “Blood Feud.” The first paragraph of the article began, “To hear William Koch tell it, his brother Charles is a liar, a cheater, and a racketeer.”
During the late 1990s, Charles Koch found himself consumed by the battle against Bill. His company was under attack, his reputation was under attack, and he faced the prospect of paying millions of dollars or more to his brother if he lost the federal lawsuit in Topeka. As these distractions swallowed Charles Koch’s attention, his company was growing faster than ever.
* * *
There was a secret group inside Koch Industries dedicated to expanding the company. In the late 1990s, Brad Hall was put in charge of it. This was the small team with the anodyne name of “the corporate development group,” or simply “the development group” as most people called it. It was essentially a small brain trust located inside the executive suite. Very few people outside the company knew it existed. The development group was modeled on a new kind of investment machine that was springing up on Wall Street, called a private equity firm. These firms institutionalized a trend that had started in the 1980s, when investors realized there was more money to be made in buying existing companies than in creating new ones. The eighties and nineties were the era of mergers and acquisitions and so-called leveraged buyouts. Private equity firms borrowed large sums of money to buy companies, sometimes stripping them for parts and selling off their assets. Other times, the companies became a playground for business turnaround artists who swept in, cut jobs, cut pensions, closed money-losing divisions, and then sold the resulting company.
The development group that Brad Hall oversaw resembled these private equity firms in some ways. But there was a fundamental difference. Koch’s development group had patience. It thought on a timeline of ten or twenty years, not twelve to eighteen months. And, unlike virtually any other private equity firm, Koch’s group had only two shareholders to answer to: Charles and David Koch.
For these reasons, Koch made acquisitions like nobody else. It