By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
Simplot spokesman Zerza says his boss was interested in the Box company purely as a private investment unrelated to the potato and vegetable business. "This was a personal matter for Mr. Simplot," Zerza says.
(Simplot, who at age 85 turned over control of his company to his children last year, could not be reached for comment.)
As is typical of limited partnerships, OKC had a general partner who ran the show--Cloyce Box, who maintained day-to-day control of the company. Box got the company involved in a play that remains the company's greatest success, an oil and natural gas field in the Gulf of Mexico known as the South Pass.
The company continues to own a partial stake in leases comprising more than 13,000 acres in the Gulf, about 35 miles off the coast of southeastern Louisiana. Box is the smallest player in a consortium of four companies--including Marathon Oil, Amerada Hess, and Louisiana Land and Exploration--that owns rights to the field, which by some estimates could yield up to 300 million barrels.
In 1985, court records show, OKC, under Cloyce Box, jumped a little further into the South Pass play, buying a one-quarter share in a pipeline serving the field.
Shortly thereafter, OKC investors would argue successfully in court, Box scammed the limited partnership by selling the pipeline investment to another company he controlled, CKB & Associates. In effect, the resulting lawsuit would argue, Box sold the pipeline to himself at a bargain price, shutting out other OKC investors from any future profits.
Simplot, like several other OKC investors, was not amused.
The Potato King descended on Texas in a flurry, trying to secure enough votes from other investors to have Box thrown out as general partner, a move allowed under the partnership's articles. At one point, Simplot and his confederates convened a meeting at the LBJ Hilton in Dallas seeking supporters for their cause.
Box would not go lightly, court records show. He convened a meeting of the company's officers--all appointed by him--and changed the partnership articles, making it harder for investors to dethrone the general partner, meaning Box.
Simplot and others responded, in late 1987, by filing a federal lawsuit. "He got together all the people who thought they were being screwed," says one attorney who was involved in the case.
Simplot and his allies tried to convince the court that they had mustered enough votes to get rid of Box and take over the company. They lost that argument.
But they also asked for damages from Cloyce Box personally and from the family's company to compensate them for the loss of the pipeline deal, a charge that would not be resolved for years.
Box countersued, charging Simplot and the others with engaging in an untoward "scheme" to usurp control of the company, and convinced the court to let him remain in charge.
The lawsuit whipped up a legal froth that has yet to settle.
In the ensuing years, legions of attorneys from some of the state's most prominent law firms--among them Fulbright & Jaworski, Vinson & Elkins, and Hughes & Luce--have tromped through court representing one side or the other in the protracted litigation. The court file containing the best legal arguments money can buy now fills three shelves--long ones--at the U.S. District Clerk's office.
Years of legal sparring and posturing followed, but the two sides were unable to resolve their differences, and the case was scheduled for trial before a jury.
In April 1992, before the lawsuit went to trial, OKC Limited Partnership was transformed into Box Energy Corp. It was a perfectly legal move, and probably made sense given changes in federal tax laws that eliminated some of the tax advantages of partnership arrangements. The company name changed, and investors who were once partners became stockholders, but the switch had no effect on the pending litigation.
After hearing evidence for two months, the jury decided Simplot and his allies had indeed been wronged when Box sold the pipeline to his own company. The jury awarded Simplot and the other investors more than $28 million. It found not just against Cloyce Box's companies, but against Cloyce himself. That meant that the aging football star would be personally responsible for helping pay the huge judgment.
Analysts at the time said Box would be hard-pressed to come up with the cash to pay the judgment if forced to do so. But the verdict was hardly the end of the fight.
After a jury reaches a verdict, it must be formally approved--or entered--by the presiding judge before it becomes official. In this case, more than a year would pass before that happened.
The case was tricky, because technically Simplot and the others were suing as investors in Box Energy, meaning one faction of the company was battling another. After the verdict, the interests of both Box Energy and the investors who sued Cloyce Box had to be considered.
The judge gave the two sides time to hash out their arguments following the verdict, to see if they could fashion a compromise that worked in the best interests of all the stockholders. That, of course, never happened.
Simplot's group asked that an independent board be appointed to figure out a fair way for Box Energy investors, and the company itself, to be compensated for their losses. But after a board was appointed, Simplot and the other investors charged it was anything but "independent," since it was packed with Box's business and personal cronies.