As I covered in my last post David Koch recently retired from Koch Industries. It was mentioned that his effective retirement date is July 1, 2018. Also a number of months ago Preston Marshall who is in his mid forties has been alleged to have committed spousal abuse. Preston's is the grandson of J. Howard Marshall III and the son of E. Pierce Marshall. Family matters in the family haven't gone well. Preston in 2015 filed a lawsuit against his mother (Elaine Marshall) regarding the payout of the trusts that were established. The Marshall family own 14.6% of Koch Industries stock. A spokesperson for the Marshall family said that "Mrs. Marshall does not own any Koch Industries stock in her name"-this is true as the stock is owned by trusts. Charles and David Koch own 84% of Koch Industries stock. Preston also sits on the board of directors for the libertarian think tank the CATO Institute. Bob Levy who is chairman of the CATO Institute has said that if Marshall is found guilty of the allegations he will be removed from the CATO Institute Board. It is alleged that Preston Marshall is the largest shareholder of Koch Industries outside Charles and David Koch. The question would be if Preston is found guilty of spousal abuse would Charles Koch force him out as a shareholder?
On May 12, 2017, Preston went to the Petroleum Club in Houston and became intoxicated and physically assaulted his wife (he ended up headbutting her). Preston in his testimony would assert his fifth amendment right. As a result of this his wife Anastasia has started the proceedings to file for divorce. This is important because the Marshall family is a shareholder of Koch Industries stock and if Marshall is found guilty this could have other implications as well given he is a shareholder of Koch Industries stock too. I couldn't imagine Charles Koch having a shareholder who was found guilty of spousal abuse (but then again J Howard Marshall III use to visit strip clubs and pay women thousands of dollars per month in "consulting fees"). Although let's also be clear this is perfectly legal.
Preston is a graduate of Baylor University and in his earlier years worked as a management consultant for Ernst and Young. Also he was a managing director of CarTech Systems. Preston was quite engaged member of many social organizations. In 2015 he became a trustee of the elite Houston Kincaid School. In the summer of 2015 he was named as a Trustee for the school. He and his wife Anastasia currently have two daughters in Kincaid (three children total). His children are between the ages of 7-12. Preston was also part of the Petroleum Club's Capital Campaign Committee in 2015 and was on the board of directors from 2015 to 2016. Property records shows that Preston and his wife own a condo in Houston that is only 1 bedroom. Preston married Anastasia McCarthy in January 2008 (the marriage certificate can be seen here) by a justice of the peace. Preston started to work for MarOpCo in the late 1990's (the family office of the Marshall family) and became President of MarOpCo (the family office for the Marshall family) after his father would pass. As part of his duties he would handle the tax return preparation and facilitating trust distributions In June 2015, Preston would be not only fired; but locked outside his office with all his records and books removed from the office. Marshall recently resigned as a trustee from the elite private Kincaid School due to personal reasons.
The brother of Preston Marshall, E. Pierce Marshall Jr. appears to be a contrast from his brother Preston. E. Pierce Jr graduated from Tulane with a finance degree and then graduated from Yale Law school (J Howard Marshall III also went to Yale as well). He is the President and CEO of Elevage Capital Management.
As part of his will father E. Pierce Marshall (son of J Howard Marshall III) set up a grantor retained annuity trust (GRAT) that transferred to the EPM Martial Income trust (this trust would benefit Elaine Marshall). What is quite interesting is Pierce established the martial trust 6 weeks before he passed away. Also before he passed E. Pierce set up both the Irrevocable Harrier Trust and The Falcon Trust were established in May 2006. Elaine Marshall would serve a trustee for both trusts. Elaine then hired a Louisiana law firm to hire five people as co-trustees that she had never met or knew (a lawsuit would arise from this). According to a court case the Marshall family owns Koch Industries Inc. and Koch Holdings LLC through various trusts (EPM Martial Trust, Harrier Trust, and Grandchildren's #2 Trust). In order to manage all these various different trusts the Marshall family has had a history of different holding companies to manage all these entities and trusts. The first entity that was established was MPI (Marshall Petroleum Industries) by J Howard Marshall III. Then Trof Inc. was established on February 26, 1985. Inside the Trof Inc. company is a grantor retained annuity trust (GRAT) known as the 2006 Grantor Retained Annuity Trust (GRAT). Inside the GRAT are Ribsome L.P. units which are actually family limited partnership units that actually holds Koch Industries stock. The idea setting up GRAT's is to get assets out of the estate that people believe will highly appreciate. Typically wealthy families will use family limited partnerships to transfer ownership from the older generation to the younger generation to avoid estate taxes. Often times families that set up an FLP will receive a discount for estate taxes on the valuation of the assets they give away allowing them to get it out of those assets estate. According to his testimony Preston says that Koch Industries shares can't be sold directly to Koch without the consent of other shareholders.
An expert valuation stated from the time that J. Howard Marshall III ownership of Koch Industries stock in 1994 the stock was worth $741 million and by 1999 the Koch Industries stock was worth $1.6 billion. Texas Commerce Bank would say at the end of 1995 the stock was worth $780 million. During 1994-1995 J Howard Marshall III would earn $7-$8 million in dividends from Koch Industries stock. This would say that he would receive less than a 1% dividend yield on his total net worth of Koch Industries stock. Marshall would even use 59% of his Koch Industries stock as collateral for the bank! In more recent times the income Elaine Marshall would receive through all her trusts was roughly $120 million for a 14.6% interest. The $120 million income amount would represent the last figure Preston Marshall remembers from June 2015.Charles Koch has a philosophy of investing 90% of the earnings of Koch Industries back into the company and providing a dividend for remaining shareholders to live comfortably.
The growth of Koch Industries over the last 50 years has significantly increased the net value of the Marshall family and allowed them to have ample income due the dividends of Koch Industries. Although the dividends of Koch Industries is low on a percentage basis the growth of Koch Industries has dramatically grown the dividends as well. Also it appears the family has done sophisticated estate planning to try to get Koch Industries out of the estate of Elaine Marshall. Given that Koch Industries has grown substantially over the years the GRAT and FLP were good vehicles to get this out of the estate of the Marshall family. However, I am sure the IRS will have some questions on the valuation of Koch Industries stock once Elaine Marshall passes. Most likely the stock would pass (if it hasn't done so already) to Preston Marshall and E. Pierce Marshall Jr. Then after that it would pass to any children of the Marshall family. However, it will be interesting to see if Preston Marshall is found guilty on charges of spousal abuse will he be able to sell his shares back to the Koch Industries? Will Charles be able to buy out both the shares of Preston and brother David? Time will tell and most likely Charles Koch has plenty on his plate right now with his long time partner and brother David Koch retiring.
No comments:
Post a Comment