The Story Of How Anna Nicole Smith Thought She Deserved To Inherit 8% Of Koch Industries

By on August 23, 2020 in ArticlesBillionaire News

What do you remember about Anna Nicole Smith? You might remember her as the star of one of the "Naked Gun" movies. You might remember her as a Playboy playmate and a model for Guess? Jeans. Or maybe you remember her awkward reality television show. You probably remember she experienced several tragedies towards the end of her life, including her own death in 2007 at the age of 39 from an accidental drug overdose.

Or… perhaps you also recall that she was married to a 90-year-old billionaire at one point and was involved in a legal battle seeking hundreds of millions of dollars? That's what we're going to focus on in this article.

When I asked a few people about that case, some remember her as winning and others remember her losing… it was fuzzy for me as well. Upon doing the research for this article, I was shocked to learn of all the insane twists and turns, ups and downs. But most of all, I was shocked to learn that the fortune Anna Nicole Smith was fighting for could have been an 8% stake in Koch Industries. The same Koch Industries that is one of the largest privately-held companies in the world. The Koch Industries that today makes Charles Koch and his brother's widow Julia Flesher Koch, among the 20 richest people in the world with fortunes of roughly $56 billion a piece. This story is just as insane as it is tragic and fascinating.

Where do we even start?

Let's start with some basics, because there are a lot of important names and characters to keep track here. And some of them have very similar names to each other. Here's our cast of characters:

Anna Nicole Smith – Busty 1990s pinup model, actress and widow of J. Howard Marshall II.

J. Howard Marshall II – A billionaire oil investor who died in 1995 at the age of 90 while legally married to Anna.

Fred Koch – Founder of Koch Industries who died in 1967 – father of Charles, David, Bill and Fred Jr.

Charles, David, Bill and Fred Jr – The four sons of Fred Koch. Charles is currently the 18th richest person in the world with a net worth of $56 billion. David's widow Julia Flesher Koch is the 19th-richest person on the planet and the fourth richest woman in the world. Fred Jr. died in February 2020. He was not a billionaire at the time of his death. Bill Koch is alive, and he is "only" worth $2 billion, for reasons we'll get to later.

J. Howard Marshall III – One of J. Howard's two sons (his only children).

E. Pierce Marshall – J. Howard II's other son.

Elaine Marshall – E. Pierce's wife.

Howard K. Stern – Anna's lawyer.

Daniel Wayne Smith – Anna's son who was born in 1986.

Dannielynn Birkhead – Anna's daughter who was born in 2006.

Larry Birkhead – Dannielynn's father.

Got all that? There will be a test.

Also, to prevent this from being a 10,000 word article, can I just assume everyone knows the basics of Anna Nicole Smith? Born Vickie Lynn Hogan in 1967. Raised dirt poor in Texas, dropped out of high school during her sophomore year. Worked as a stripper before making a splash in the 1992 issue of Playboy (then credited as Vickie Smith). A year later she was Playboy's Playmate of the Year (now going by the name Anna Nicole). She achieved a modicum of fame in the mid-to-late-1990s with a bunch of film, television and modeling appearances.

Here's Anna in a 1994 publicity portrait of her role from the film "Naked Gun 33 1/3", arguably the peak of her career and image:

(Photo by Paramount/Getty Images)

Let's get into it.

J. Howard Marshall II

James Howard Marshall II was born in Germantown, Pennsylvania on January 24, 1905. He attended Haverford College then Yale Law School where he graduated magna cum laude in 1931 before becoming an Assistant Dean at the school for several years. In 1935, J. Howard was hired as special counsel to the President of Standard Oil of California, which today is known as Chevron.

While working at Standard Oil he learned everything about the petroleum business. During World War II he was called to Washington D.C. to run the country's wartime Petroleum Administration. In this position he managed America's energy policy around the globe, a crucial job for ensuring Allied victory against Germany and Japan.

After the war J. Howard returned to the private sector, with stints as a Vice President at the Ashland Oil and and Refining Company, Executive Vice President at Signal Oil & Gas, President of Union Texas Petroleum and Executive Vice President of Allied Signal (which is today's Honeywell). He made his first significant fortune thanks to that position of President of Union Texas Petroleum. Union Texas was bought by Allied Signal and eventually merged with BP. By the late 1960s he was rich enough to go into semi-retirement.

He was a popular character in the Texas oil business, constantly turning friendships into successful business endeavors. One of his friends from this time period was named Fred Koch.

J. Howard Marshall II (Photo by Liaison)

Fred Koch

Fred Koch founded what eventually was re-named Koch Industries in 1940. The company's original name was Wood River Oil. He launched the company after developing an innovative way of refining oil that was significantly more efficient at turning crude oil into gasoline.

In 1959, Fred acquired a 35% ownership stake in the Great Northern Oil Company, which was co-founded by his good buddy, J. Howard Marshall II.

Fred died in 1967, at which point his 32-year-old son Charles took over and re-named the company in his father's honor.

In 1968, Charles approached Union Oil of California with an offer to buyout their share of the Great Northern Oil Company. Union asked for a HUGE buyout number, which Charles declined. Union then went behind Charles' back and attempted to overthrow his majority stake in Great Northern by partnering with new investors and telling those new potential investors that they could be successful in taking over the whole company if they won favor with J. Howard Marshall.

When J. Howard found out what was going on, he was disgusted and instead got fully behind Charles. Together, Charles and J. Howard took majority control of Great Northern.

In the end, J. Howard Marshall II exchanged his shares in Great Northern for a 16% stake in Koch Industries.

The Koch Sibling War

In 1983, Fred Jr. and brother Bill agreed to sell their stakes in the family business to their brothers Charles and David for a combined total of $800 million (around $2 billion in today's dollars).

After the sale was completed, Bill became convinced that Charles and David had short-changed them and/or drastically under-valued the business to get a cheap deal. Bill subsequently launched a legal battle suing for a larger payout. Fred Jr. joined the lawsuit which dragged on for 15 years. In the end a jury agreed that some assets were undervalued, but not in a meaningful-enough way to justify any additional payout to Fred and Bill. When it was all said and done, Bill and Fred spent far more on lawyers than what they ultimately received. The lawsuit also caused a rift that severed the family to the point that when Fred would see twin brother David at charity events decades later, they would barely say hello.

During the battle, J. Howard Marshall's eldest son, J. Howard Marshall III sided with Bill and Fred. J. Howard II's younger son E. Pierce sided with his father, who was on the side of Charles and David Koch.

J. Howard II was extremely disappointed in his eldest son for siding with Bill and Fred. So much so that he wrote his son out of his will, making E. Pierce his main beneficiary.

The Billionaire Meets The Stripper

J. Howard Marshall II was married to Eleanor Pierce from 1931 to 1961. This marriage produced the two sons J. Howard III and E. Pierce. He was then married to Bettye Bohannon from 1961 until her death in 1991. Bettye died on September 12, 1991 but she had suffered from Alzheimer's since the early 1980s which devastated Marshall. To distract himself, one day he popped into a strip club where he met a 42-year-old dancer named Jewell Dianne Walker – aka "Lady" – who was performing a routine on stage WITH HER 18 YEAR OLD DAUGHTER.

Marshall was intoxicated both by alcohol and arousal. He begged her to be his mistress. She agreed. He proceeded to procure Lady with an annual salary, lavish jewelry and a collection of Rolls-Royces. Lady would match her daily outfit with a different color Rolls. They were a relatively happy and normal couple for several years until Lady tragically died during a plastic surgery procedure in July 1991 (it was a face-lift, in case you were wondering).

Then, as we mentioned, Bettye, died just three months later in September.

The deaths of his wife and his longtime girlfriend left Marshall in despair. He was so upset that his staff was worried he might be suicidal.

In an attempt to brighten his spirits, in October of 1991 (one month after Bettye's death), an 86-year-old wheelchair-bound J. Howard was rolled into a Houston strip club by his limo driver. Soon a 24-year-old dancer named Vickie took the stage.

(Photo by Amanda Edwards/Getty Images)

Cupid must have been working overtime that night because believe-it-or-not, Anna and J. Howard SOMEHOW fell in love and began dating.

They dated all throughout Anna's rise to fame on the pages of Playboy. During their courtship, J. Howard lavished Anna with gifts and begged her to marry him. He bought Anna millions of dollars worth of jewelry, a lipstick-red Mercedes and a Rolls Royce. On one shopping visit alone he bought her $2 million worth of jewelry. Anna was also put on the Marshall Petroleum payroll and health plan.

For a time, Anna was very present in Howard's life. They went to his country club together. They ate frequently at his favorite restaurant, Red Lobster, where she was formerly a waitress (not necessarily at the same location). And they were periodically intimate. Court testimony years later would describe how Anna would rub herself all over him, and use her mouth and other body parts as much as he was… capable. (Don't act like you weren't wondering!)

As Anna became famous, J. Howard was extremely proud of his girlfriend. He rented her an apartment in LA and later bought Anna a home in Brentwood and an apartment in New York City.

Anna wasn't exclusive to J. Howard. She had several multiple other sexual partners at the time, both male and female, but Howard did not mind as long as he… came first. (Sorry).

On June 27, 1994, 26-year-old Anna Nicole Smith married the 89-year-old James Howard Marshall II in front of 11 guests at Houston's White Dove wedding chapel. "The bride wore cleavage" was how People Magazine summed Anna's appearance. An attendee described Anna's satin gown as "very, very, very, very low-cut."

Anna's 8-year-old son Daniel, whom she had with ex-husband Billy Smith – a co-worker from her days working at a fried chicken fast food restaurant – was the ring bearer.

Immediately after the ceremony and reception Anna told her new husband that she had to jet off to Greece for a photo shoot. She reportedly left J. Howard crying in his wheelchair. Court testimony years later would illuminate the fact that Anna had sex with her bodyguard that very night in a nearby hotel room.

And that's how it was for the next 14 months. Howard seemed to truly love Anna. He called her dozens of times a day. He told everyone how much he loved his young wife. Anna certainly had some affection for J. Howard and appreciated him pulling her out of poverty, but she also seemed to truly love his wallet. In court testimony years later it would be revealed that Anna was spending north of six figures each month on her various expenses.

The Death Of A Billionaire

About halfway through their marriage, J. Howard began to experience severe health problems mostly connected to a stomach cancer diagnosis. But there were other problems as well. For example, one night in January 1995, Anna decided to feed Howard soup through a spoon. Seems innocent enough, right? Well, doctors had ordered that he only be fed through a tube because spoon feeding could cause him to choke. He choked, passed out and had to be revived in the emergency room. Infuriated, J. Howard's son Pierce used the incident to win guardianship over his father.

On August 4, 1995, James Howard Marshall II died at the age of 90. At the time of his death, his net worth was in the range of $1.6 billion and had been married to Anna Nicole Smith for 14 months.

According to Anna, while they were together J. Howard promised to leave her half of his estate upon his death. Even if that was a lofty promise, she at least expected to be taken care of in some way by his will.

She was left nothing.

The Legal Battles

Anna moved quickly to file a lawsuit contesting the will in Harris County probate court. Pierce's older brother, J. Howard III, joined Anna with the lawsuit.

Pierce's argument was simple: J. Howard created a will and an extremely clear estate plan more than a dozen years before he died. That plan left all of his estate to Pierce and some charities.

Anna and J. Howard III argued that Pierce prevented their father from following through on his intentions to include them in his trust by isolating and controlling the old man.

While this was all going on, Anna was sued by a woman who previously worked as a nanny for her son Daniel. In a lawsuit seeking $2 million, the nanny claimed that Anna forced her to take drugs and engage in unwanted sexual acts. Anna claimed the sex and drugs were both consensual. The nanny won a default $800,000 judgment after Anna failed to show up for any of the legal hearings.

This $800,000 judgment could not come at a worse time. Anna was forced to file for personal bankruptcy. She chose to file in California, her primary state of residence, listing $9 million worth of debts.

Amazingly, that California bankruptcy court ultimately awarded Smith $450 million E. Pierce's estate PLUS $25 million in punitive damages, for a total of $475 million. This is key. A California bankruptcy court basically stepped into a Texas probate court battle.

Back in Texas, their original probate court battle was finally getting started. After a five-month jury trial the Texas probate court ruled that J. Howard Marshall II's will was valid and Anna was entitled to nothing.

In the meantime Pierce also appealed the bankruptcy judgment in California. While Anna claimed she was a California resident in her bankruptcy, her marriage to J. Howard II was a Texas marriage and she signed several documents claiming she was a Texas resident well after the marriage – which she acknowledged multiple times on the stand in the Texas Probate Case. He appealed all the way to the California Supreme Court, claiming that California did not have jurisdiction over a Texas probate case (probate – will/estate). The California Supreme Court disagreed with Pierce's argument but did ultimately chose to reduce the $475 million award to $88 million.

***A representative of the Marshall family asked that we make it clear that had Anna prevailed in her claims against Pierce, she never would have received Koch stock. Pierce would have sold stock, or would have borrowed against the stock to generate the roughly $475 million judgment. They point out that Pierce was an astute and successful business executive with expert legal advisors. He never would have given up a valuable appreciating asset to settle the judgement.***

Pierce appealed that decision up to the Ninth Circuit Appellate Court.

In 2005 The Ninth Circuit ruled in Pierce's favor, agreeing that a Federal bankruptcy court (in California no less) did not have jurisdiction over a Texas probate matter.

Anna wanted to appeal, but the only option above the Ninth Circuit was… The United States Supreme Court.

Incredibly, even President George W. Bush (a Houston oil-man btw) got involved. Looking to curb Federal meddling in state matters, Bush requested that his Solicitor General submit a brief on the case on Anna's side.

And guess what? The Supreme Court ACCEPTED.

(JIM RUYMEN/AFP via Getty Images)

Mrs. Smith Goes To Washington

Arguments were made in the case of "Marshall v. Marshall" to the US Supreme Court on February 28, 2006. On May 1, 2006 the Supreme Court ruled unanimously for ANNA NICOLE SMITH. Their decision held that federal courts "have jurisdiction to entertain suits to determine the rights of creditors, legatees, heirs, and other claimants relating to an estate, so long as the federal court does not probate a will, administer an estate, take control of assets being administered by the probate court or interfere with the probate proceedings."

That last chunk in bold is the key. That line says Federal courts are free to do whatever they want as long as the case does not involve probate (a will).

The ruling didn't give Anna a cut of her husband's estate, it merely paved the way for her to continue arguing for her share in court.

(Photo by Win McNamee/Getty Images)

Tragedies Strike

Less than two months later, on June 20, 2006 Anna's nemesis E. Pierce Marshall died at the age of 67.

Throughout this period Anna had become addicted to drugs and generally very self-destructive. She also began a relationship with a photographer named Larry Birkhead. She became pregnant and chose to live in the Bahamas for the birth.

Anna gave birth to a baby girl on September 7, 2006. That night, Anna's son Daniel flew in from California and joined his mother, his newborn baby sister and Howard K. Stern at the hospital. Howard slept in a chair, the baby was in a bassinet, Anna and Daniel slept in her bed. At 9am the following morning Anna awoke to a frightening realization. Daniel's skin was cold and he appeared to not be breathing or have a pulse.

Daniel Wayne Smith was declared dead that day in the hospital room at the age of 20. He died from an accidental overdose. Larry Birkhead would later claim that Daniel took one of his mother's doses of methadone. He also had Zoloft and Lexapro in his system.

Anna was unimaginably distraught. She had to be sedated at his funeral.

In February 2007, Anna and Howard flew to Hollywood, Florida to inspect a boat that they purchased. On the morning of Thursday February 8, 2007 – 153 days after the death of her son Daniel – Anna Nicole Smith died in her room at the Hard Rock Hotel and Casino. She was 39 years old. Her death was also ruled a drug overdose.

Her death caused a legal wrinkle when it was revealed that her will left her estate to Daniel. She simply didn't have the time or the headspace to update it to include Dannielynn. Several men came forward claiming to by Dannielynn's biological father. Each man in theory thought they might be in line to benefit from a $450 million estate which could ultimately be heading to Dannielynn.

Larry Birkhead was proven to be the biological father.

The Conclusion

Anna's case against Pierce's estate continued on behalf of her baby daughter Dannielynn – named in honor of her older half-brother. The previous Supreme Court decision remanded the case back to the Ninth Circuit Court of Appeals which again re-affirmed its vacating of the U.S. District Court's judgment.

Their only option from here was once again to appeal to The United States Supreme Court… which, incredibly, ACCEPTED AGAIN.

So, once again the Supreme Court of the United States was set to determine the case of what was then called Stern v. Marshall. On June 23, 2011 the Supreme Court ruled against Smith's estate, asserting once-and-for-all that the Texas Probate court was the first to rule and under the principal of res judicata (a matter that has been adjudicated by a competent court and may not be pursued further by the same parties in another court) took precedence over the federal courts later rulings.

The absolute conclusion of the case would take three more years. In August 2014 a Federal judge in Orange County, California rejected Smith's final legal effort against the estate of E. Pierce Marshall. By this point Anna had been dead for seven years. Pierce had been dead for 8 years. J. Howard Marshall II had been dead for 19 years.

Anna went from winning a $475 million judgment against Pierce's estate… to $88 million to having all awards ultimately reduced to ZERO.

That wasn't the end of the battle over J. Howard's estate. Back in Texas, heirs unrelated to Anna Nicole continued fighting Elaine Marshall for a variety of reasons. Finally, in December 2016 a Texas probate judge named Mike Wood put the embattled estate to bed once-and-for-all, permanently ending the case in Elaine's favor. By this point J. Howard Marshall had been dead for 22 years. In his decision, an exhausted and exasperated Judge Wood made the following declaration:

"I am tired of this case… I don't want to deal with you people anymore. This is ridiculous… I am not going to spend a lot of time cutting at nits and gnats for people that are fighting over $20 billion, $10 billion that they didn't earn. They didn't create this wealth. It was created by a third party, and they're just fighting over it. They can't agree on anything. They can pay lots of lawyers. They can pay lawyers until hell freezes over. But they don't want to agree to anything. They just want to pay lawyers."

What Could Have Been

As if this case wasn't insane enough as it actually unfolded, we also have to imagine what could have been. It's not unimaginable that if Anna had been a bit more successful in getting "half" of J. Howard II's estate, as she thought she was promised, she could have owned what would have amounted to 8% of Koch Industries. Had she been successful and stayed alive, today she would be a 53-year-old multi-billionaire.

That 16% stake in Koch Industries that gave J. Howard Marshall II a net worth of $1.6 billion in 1995 is worth north of $20 billion today without even including dividends and interest paid over the decades.

This is why 78-year-old Elaine Marshall and her family reportedly own 15% of Koch Industries today. A stake that is worth $20 BILLION which, if true, would make her the 68th-richest on the planet.

It's difficult to peg the value of a private company, but Forbes estimates a 15% stake in Koch Industries as being worth $9 billion, whereas Bloomberg estimates it at $20 billion. Furthermore:

*** In a statement provided to CNW, a representative of the Marshall family says "Elaine Marshall did not inherit E. Pierce Marshall's entire estate, does not own 15% of Koch Industries and is not the 68th richest person on the planet***

Speaking totally hypothetically – Had Anna Nicole Smith been successful in receiving half of J. Howard Marshall's estate AND had she never cashed-out her stake, there's a not-so-crazy scenario where today Anna Nicole Smith would have a net worth of at least $10 billion. She'd be roughly the 180th richest person in the world. She'd be richer than Twitter CEO Jack Dorsey ($9.9b), LA Lakers owner Dr. Patrick Soon-Shiong ($9.7b), Fortnight developer Tim Sweeney ($9.5b), Charles Schwab ($7.5b) and George Lucas ($7.6b) among many other notable billionaires.

I don't know about you, but I would have LOVED to have seen what Anna Nicole Smith would have been like with $10 billion.

***After publishing our article we received several points of feedback from a representative of the Marshall family. We made some of the changes they requested and added statements as you can see above in two italicized paragraphs. We also agreed to post the following statement:***

A Statement from the Marshall Family

Early in the case some members of the media incorrectly reported that Anna could obtain stock in Koch Industries if she prevailed in her lawsuit. Those stories were inaccurate and often based on attorneys opinions who were not familiar with Texas probate law, nor did they have any understanding how J. Howard had structured his estate plan decades earlier.

Most of J. Howard's assets were in separate property trusts established long before he met Anna. Under Texas law, Anna was not entitled to assets in separate property trusts. Ownership of the Koch Industries stock was never at issue in any of the litigation. Anna would have been financially secure had she properly managed the more than $6 million

J. Howard provided her during their relationship or pursued the business J. Howard was trying to help her start.

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