Photographer: Chip Chipman/Bloomberg
markets

Koch Accuses Crestview Partners of ‘Greenmail’ in Oxbow Sale

  • Billionaire says turncoat Oxbow officials plotted to oust him
  • Email: ‘Take his plane, his job’ and ‘let’s drink his wine’

Billionaire William Koch says Crestview Partners LP engaged in “greenmail’’ as part of an unsuccessful bid to force the quick sale of Koch’s Oxbow Carbon energy company.

Crestview, a New York-based private equity firm, conspired with turncoat Oxbow executives to oust Koch as chief executive officer of the producer of a key ingredient in aluminum to force a sale and cash out its investment, Koch testified Wednesday in Delaware Chancery Court.

“They took a lot of shots at me’’ in hopes of forcing the 77-year-old billionaire to sell a majority interest in Oxbow, Koch told Chancery Judge Travis Laster. “It was a form of greenmail, really.’’

The testimony is the latest salvo in a two-year corporate wrestling match over Oxbow, one of the world’s biggest producers of petroleum coke used in aluminum production and one of the U.S.’s largest privately held companies.

Investment Agreement

Crestview contends it can force Koch to sell the company under its investment agreement to cash out its $150 million stake. The billionaire counters the private equity fund is unfairly seeking to put the company up for auction in a down market and that doing so is detrimental to other Oxbow investors.

Crestview has targeted what it says is Koch’s mismanagement of Oxbow, pointing to his demands that the company cover the costs of his personal Dassault Falcon jet and his children’s private-school tuition.

Koch, who reimbursed the company $5.3 million over the jet in 2015, said the payment wasn’t an acknowledgment of wrongdoing and denies charging the company for his children’s fees to attend Oxbridge Academy in West Palm Beach, Florida. Koch founded the school in 2011. He is the brother of conservative billionaire political donors David Koch and Charles Koch. He is worth an estimated $3.8 billion, according to data compiled by Bloomberg.

Greenmail is a tactic that involves buying a stake in a company and then threatening a takeover or some other attempt to wrest majority control. 

The target company is then forced to buy back the shares at an inflated price to retain control. By invoking its right to cash out of its investment and then demanding Koch pay $190-a-share or sell the company, Crestview engaged in a form of greenmail, Koch contends.

The billionaire also alleges Eric Johnson, Oxbow’s former president, and Christina Wing O’Donnell, a former Oxbow board member who oversaw his family’s investments, conspired with Crestview officials to force Koch out as CEO, replace him with Johnson, and then ram through a sale of a majority stake in the energy firm.

Plane, Job, Wine

In court filings, Koch points to a January 2016 email in which O’Donnell tells Johnson “Let’s take his company from him quickly, not a day of relief, put him through the hell he put us through.’’ The investment manager added the pair should “take his plane, his job, and when it’s over let’s drink his wine.”

Koch is a famed wine collector who persuaded a New York jury in 2013 to award him $12 million in damages from a dealer who sold the billionaire 24 bottles of counterfeit Bordeaux.

Koch fired Johnson and O’Donnell in 2016 after learning about their efforts to oust him. He later sued them in his suit against Crestview over the effort to force a sale. On Wednesday, he tentatively agreed to settle his claims against them, Ken Nachbar, one of Koch’s lawyers, told Laster. Koch also agreed to drop breach of fiduciary duty claims against Crestview officials serving on Oxbow’s board.

Terms of the settlement weren’t disclosed, but Johnson was seeking millions of dollars in damages over his firing and Koch’s refusal to pay him for Oxbow shares he got as part of a $6 million compensation package in 2015, according to court filings.

Rusty Hardin, a Houston-based lawyer for the ex-Oxbow executive, didn’t immediately return a call for comment on Johnson’s settlement. Michael Angelini, O’Donnell’s Boston-based lawyer, also didn’t return a call for comment on the settlement.

The case is In Re Oxbow Carbon LLC Unitholder Litigation, CA12447, Delaware Chancery Court (Wilmington).

(Updates with Oxbow email exchange in 11th paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE