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JULY 12, 2000

Some members of the Osage Nation who receive royalty payments from oil leases on tribal land in Oklahoma were among many pleased last year when a federal jury returned a judgment against Koch Industries.

Koch, the second-largest privately held company in the United States, was accused of under-reporting the amount and quality of oil it took from federal and Indian lands. The jury issued a $553,504 judgment against the company in December 1999.

US Chief District Judge Terry Kern for the Northern District of Oklahoma upheld the award and on Friday, July 7, denied a lack of evidence motion initiated by the company before the case went before the jury.

The jury's award could turn into much more once Kern issues his final ruling on the lawsuit. The lawsuit was filed against Koch under the federal False Claims Act, a whistle blower law which could allow Kern to triple the amount of the jury award, plus issue other penalties for the 24,587 false claims made by the company from 1985 to 1989.

The whistle blower in the case is Bill Koch, son of the company's founder and younger brother of CEO Charles Koch. The brothers have disputed each other in court before and a similar division was also displayed among members of the Osage Nation.

Leases on Osage tribal land represent about 43 percent of the claims against the company. Tribal Chairman Charles Tillman supported the elder Koch brother and the company throughout the lawsuit.

"With all due respect to the jury, I think Koch Industries should appeal this verdict," Tillman said in a statement after the conclusion of the trial. "When you get to the root of this trial, you discover it is nothing more than a sad family matter with one brother, Bill, determined to hurt his brothers Charles and David."

Tillman said he opened the tribe's records to investigators for the younger Koch brother and the Bureau of Indian Affairs and claimed neither found evidence of wrongdoing. The council adminsters the oil leases for the tribe.

However, other Osage believe Tillman has a conflict of interest because he once held a line of credit with the company. Tillman did not deny he had a business relationship with the company but he said there was no conflict since the deal occurred in the past.

About 20 members of the Osage Nation gathered at the trial last year in opposition to the company and Tillman's stance. Among them was Paula Cider, who has received oil royalty payments for 57 years.

"This is the sole income for many elders," said Cider. "Indians are so trusting, that's why we're in the mess that we're in."

Whether or not the tribe or tribal members are in a sticky situation may depend on how the federal government intends to compensate them, if at all, for the false claims. The False Claims Act returns the majority of any settlement to the federal government.

The law also awards money to the whistle blower. For his efforts, Bill Koch can receive anywhere from 15 to 30 percent of final award.

A company spokesperson said Koch Industries plans to appeal the case, no matter how it unfolds.

Relevant Links:
Koch Industries - www.kochind.com
The False Claims Act - www.taf.org/taf/docs/quitam.html
The Qui Tam (False Claims) Online Network - www.quitamonline.com