Fit to be fried

When Cloyce Box was alive, three things seemed destined to come his way: money, notoriety, and lawsuits.

Box may have left behind his millions--and his reputation as a freewheeling businessman--when he died in 1993. But the lawsuits just keep on coming.

The former football star's estate is on the hook for a $28 million judgment won by investors who say Box cheated them on a pipeline deal. That case is being appealed.

And in early March, the same investors sued Box's four sons and the family oil company for somewhere between $50 million and $100 million, saying the Boxes--including Cloyce, before he died--tried to shuffle assets to avoid paying the judgment.

Now, to top it all off, the four Box brothers--Don, Gary, Doug, and Tom--are suing each other for control of the company left them by their father.

Cloyce Box, who played with legends Doak Walker and Bobby Layne on two championship Detroit Lions football teams in the early 1950s, went on to become a storied Dallas oilman before dying at age 70. He was known, among other things, for not letting the law get in the way of a lucrative deal.

It is taking legions of lawyers to untangle the old man's legacy.
Hanging in the balance is the future of Box Energy Corp.--a modest but successful oil and gas company that still brings in respectable amounts of money--and the personal aims of the four Box sons and all of the company's shareholders.

Looming over all of the legal wrangles, however, is one man, an opponent who is proving to be Cloyce Box's nemesis in death as well as life. The newest lawsuits are merely the latest chapters in a tenacious battle between Box and J.R. Simplot, a man known as the Potato King of Idaho.

Box and Simplot, two stubborn, self-made millionaires, got crossways nearly a decade ago, and their fight has been going ever since. Simplot leads the group of irate investors who contend that Cloyce Box gypped them out of millions of dollars. They have pursued Box, his sons, and various family-controlled companies in court for more than seven years.

The Box family has fought back with equal vigor--matching Simplot attorney for attorney--and has so far avoided paying Simplot and his allies a nickel. So heated is the battle that, if the charges contained in the newest lawsuit prove true, Box took steps to ensure that his estate would continue to thwart Simplot even after Box died.

Box and Simplot are alike in many ways, two men raised in rural poverty who amassed fortunes through wit and sweat. Both built sizable legacies to pass along to their children. And neither would walk away from a fight.

Cloyce Box was born a Texan, and knew how to feud like one. But J.R. Simplot has tangled pretty well himself for an Idaho boy.

Cloyce Box earned his riches and fame through hard work. He and his twin brother, Boyce, were raised poor as foster children in West Texas. Box and his brother enrolled in West Texas State College in Canyon in 1942, but Cloyce left college to serve in the Marines during World War II.

After returning to college, he played basketball and football, the latter well enough to be drafted by the Washington Redskins as a quarterback after graduation in 1949.

The Redskins promptly traded Box to the Detroit Lions, where he was converted into a receiver to take advantage of his height and speed. Before his pro career could get started, Box was again called for military service in Korea. He rejoined the Lions in 1952, playing on one of the sport's most fabled teams.

Box joined SMU great Doak Walker and former University of Texas quarterback Bobby Layne on a team that won consecutive NFL championships in 1952 and 1953. The team lost the 1954 championship game to Cleveland.

Box played in two Pro Bowl games, and still holds team records for the most touchdown catches in a season with 15, the most receiving yards in a game with 302, and the most touchdown catches in a game with 4.

But Box injured his leg, and in 1954 hung up his spikes and set out in the world of business, armed with a law degree he earned from Baylor University in between football seasons.

He would carry with him the knack for fast moves and wily thinking that made him such a threat on the football field. During his business career, he earned a reputation for his freewheeling style--which periodically landed him in court facing the government or one-time business partners.

Box started in the concrete business but eventually drifted into oil and gas--the true calling of any ambitious Texas entrepreneur. He rode the curve of the Texas oil and gas industry, and by the 1980s had made himself a bona fide millionaire. His various companies and partnerships were by no means the largest in a state chock-full of high rollers, but they were successful, in part, because Box fought as hard in business as he once did in sports.  

In the early 1980s, for instance, Box signed a lucrative long-term contract to provide natural gas to a Houston pipeline company at a time when gas prices were astronomically high. Several unlucky gas companies were locked into such contracts--some with terms lasting for decades--thinking they were protecting themselves against certain increases in natural gas prices.

Instead, gas prices fell dramatically, and most suppliers reluctantly agreed to renegotiate contracts at lower prices. Not Box. He insisted that his company's contract remain in force, and had to battle in court to enforce it.

Box won, and into the next century Box Energy stands to reap tens of millions of dollars from the locked-in contract price. The company gets about $9 for 1,000 cubic feet of its natural gas--while the going market price is less than $2.

But Box's business career had its lows as well. In the early 1970s, his Oklahoma Cement Company was the target of several lawsuits and an investigation by the federal Securities and Exchange Commission. The SEC, according to news accounts from the time, accused Box of self-dealing as chairman and chief executive of the company, allegedly manipulating securities deals through friendly brokers to make money for himself.

After more than two years of costly lawsuits, the company and SEC finally settled their differences in 1980. Box and the company did not admit wrongdoing, but paid $4.8 million in fines and promised to abide by federal securities laws in the future.

"In effect, we said 'We didn't do it, and we won't do it again,'" a company spokesman said at the time.

While the securities charges were pending, Box also pleaded guilty to 23 misdemeanor counts for violating pricing guidelines set by the Department of Energy in an unrelated case.

In the 1980s, Box also wound up in a legal tangle with developer Trammell Crow. The two men were partners in a state-of-the-art concrete plant near Midlothian that wound up in bankruptcy.

Crow sued Box over the deal, and Box sued one of the banks that helped finance the concrete plant project. All the suits were eventually settled after the cement plant was sold to foreign investors.

Box seemed ever on the brink of another big deal--and more legal trouble--as he made himself a wealthy man. He bought a ranch near Frisco, donated $1 million to a fund for aging football players, and threw legendary parties that often included a who's who of former sports and entertainment stars. When Box died, football buddy and broadcaster Frank Gifford delivered a eulogy at his funeral.

Box and his first wife had four sons, but they divorced in 1986 after 38 years of marriage, and Box remarried a friend of former Miss America Phyllis George.

By the late 1980s, Box found himself facing the most formidable challenge of his rocky business career. It came in the form of J.R. Simplot, Boise's potato king.

Like Cloyce Box, J.R. Simplot is a self-made millionaire. But Simplot's fortune came from potatoes--frozen french fries, mostly--and his business success makes Box's pale in comparison.

Now 86 years old, Simplot is chairman emeritus of the J.R. Simplot Company, which he has turned over to his children to run. The company, privately held by the family, sells about $2 billion a year in frozen potatoes and vegetables, according to company spokesman Fred Zerza. One of its major customers is McDonald's, which buys most of its french fries from Simplot.

(Box Energy Corp., by comparison, sells about $60 million a year in oil and natural gas.)

Simplot, according to Zerza, dropped out of school at 14, raised livestock, and then went into the potato business. He opened the company's first processing plant in 1941, and by the time Cloyce Box was playing professional football, J.R. Simplot was established as a major player in the growing markets for dehydrated food.

According to Zerza, just before World War II the Simplot company developed a process for dehydrating vegetables and landed a major contract providing them to the military.

After the war, the Simplot company developed methods of freezing and thawing french fries, a product ideally suited to the emerging fast-food industry. In the 1960s, Zerza says, Simplot struck a deal with Ray Kroc to provide frozen fries for the McDonald's chain. "He essentially pioneered the frozen french fry business," Zerza says. (McDonald's insisted on using two types of potatoes for its fries that grow well in the Northwest, serendipity that aided Simplot's thriving company.)  

Simplot got in early on the public's growing demand for convenient, quickly prepared foods and managed to build an empire off his early success.

These days, the company has 10,000 employees and several processing plants. It manufactures and packages frozen vegetables for the Pillsbury Company's Green Giant brand, and is making inroads into grocery stores with microwaveable hamburgers and vegetables of its own.

The company even owns the world's only known custom-made french fry boat, a refrigerated barge that carries containers of frozen french fries down the Columbia River from an inland Oregon processing plant to Portland. The barge, named the Esther L. after Simplot's wife, is unloaded in Portland, and the fries are shipped by freighter to Japan to supply the McDonald's franchises there.

Simplot, simply put, is no small fry. When he felt he had been crossed by a Texas oilman, the Potato King proved a formidable match.

In the mid 1980s, J.R. Simplot began buying shares in Cloyce Box's company, which was then a publicly traded limited partnership called OKC Limited Partnership. (Box would later reconfigure the company as a corporation and rename it Box Energy Corp.)

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.

The "independent" board, appointed by Box Energy, included Doak Walker, former Dallas Cowboy Roger Staubach, and former congressman Kent Hance, says an attorney involved in the negotiations.

The stiffed shareholders never accepted the board's purported objectivity, the attorney says, and "they were not successful in reaching a resolution of the matter." At one point, Box offered to resolve the suit by transferring a huge chunk of his personal stock back to Box Energy, but Simplot and the others steadfastly rejected that suggestion.

Box took his settlement offer before a federal judge, but it didn't fly, and a final judgment was ultimately entered in the case.

While the suit and negotiations after the verdict were dragging on, Simplot and his allies say, Cloyce Box used the time to shuffle his assets, making it harder for the investors to recover the money they are owed.

In their latest suit, the Simplot group contends that Box pulled another trick similar to the pipeline deal--effectively transferring valuable stock that he owned to his four sons in an effort to put it beyond the reach of investors.

The stage was set, they argue, by the time Cloyce Box died in October 1993. The suit accuses the four Box sons--Tom, Don, Doug, and Gary, as well as past and present members of Box Energy's board of directors--of then continuing the effort started by their father. The sons, the suit alleges, took good care of their own financial interests while shutting out investors seeking their just due.

(Through a spokesman, Tom Box, 39, the president of Box Energy, who assumed control of the family's enterprises after his father's death, declined to comment on the charges. Doug and Gary Box also declined to discuss the allegations. William J. Burnett, Box Energy's general counsel, did not return phone calls from the Observer.)

Cloyce Box's alleged subterfuge was accomplished, the lawsuit argues, by exploiting various interlocking companies that are all controlled by the Box sons, principally Tom Box.

Key to the shuffle, the suit contends, is the Box Brothers Holding Company, a family-controlled entity.

According to the suit, before he died, Cloyce Box pledged his stock in Box Energy to Box Brothers Holding Company as security for about $16 million that Cloyce Box supposedly owed the holding company. After the elder Box died, son Doug declared his dead father's estate in default on the loans. Tom Box and Don Box, acting as executors of their father's estate, did not take steps to pay off the alleged default.

So, in early 1994, the Box Brothers Holding Company--controlled by the sons--declared the estate of Cloyce Box--also controlled by the sons--in default, and foreclosed on the notes.  

That meant that stock worth about $43 million was transferred from Cloyce Box's estate to the holding company to satisfy an alleged outstanding $16 million debt.

Since Cloyce Box would be personally liable for the $28 million verdict, plus interest that had grown substantial by that time, the move helped shield money that could have been used to pay the judgment.

Then, last year, the Box Brothers Holding Company filed for bankruptcy protection in Delaware, gumming up its assets while the bankruptcy action was pending. The holding company emerged from bankruptcy protection just two weeks ago.

The sons, on behalf of Cloyce Box's estate, are also continuing to fight the initial $28 million verdict, and have an appeal pending before the U.S. Fifth Circuit Court of Appeals in New Orleans.

When all was done, Box Brothers Holding Company wound up with 57 percent of the shares in Box Energy, meaning the family still effectively controls Box Energy. Tom Box, who had been groomed by his father to take over the family business, ended up in control of the holding company.

And though they'd gained a $28 million judgment, the investors wound up with nothing but another fight on their hands.

J.R. Simplot, true to form, did not shrink from the challenge.
Simplot's latest suit levels scathing charges not just at Cloyce Box, but at his sons, arguing that they have carried on the old man's nefarious ways. It accuses the Boxes of "intentional, wanton and extreme deviation from reasonable standards of conduct."

Tom Box and Don Box, as officers of Box Energy, are also accused of "numerous acts of malfeasance, misconduct, negligence, self-dealing and engaging in conflicting transactions."

The Box brothers are not the only ones targeted by the suit, which also names numerous past and present company directors. Among those named is Doak Walker, the Detroit Lions teammate of Cloyce Box. Walker, from his home in Steamboat Springs, said he hasn't seen a copy of the latest suit, but still casts a vote of confidence for his late friend.

"They [the Boxes] owned those companies and they could do anything that they wanted," Walker says. "It was [Cloyce's] business and he could do pretty well what he wanted to do. Knowing Cloyce in the past, I know he did everything right."

Former Miss America and television personality Phyllis George is also named in the suit, although she left the board of directors shortly after Cloyce Box died.

Also named is Kent Hance, former congressman from West Texas, unsuccessful U.S. Senate candidate, and former member of the Texas Railroad Commission, which regulates the state's oil and gas industries. Hance, who is prone to drop the names of football greats like Doak Walker in conversation, did not return repeated calls to his law office in Austin.

Although the jury's verdict is still on appeal, J.R. Simplot has not flagged in his efforts to exact his due. In addition to the latest lawsuit, Simplot also is continuing his efforts to simply buy the company outright.

As late as last week, Simplot was offering to buy up shares of Box Energy for between $11 and $14 a share, but only if he could purchase a majority of the company. Since Box Brothers Holding Company owns 57 percent of Box Energy, Simplot's offer is only good if the brothers agree to sell some of their stake.

But the offer, and protracted litigation, has opened a breach within the Box brothers that is prompting a whole new spate of lawsuits.

The four Box sons tend toward the tall side, like their father. The three youngest--Gary, Doug, and Tom--are lean and hale. Don, the oldest son, looks it.

After Cloyce Box died, the brothers had to sort out the various family businesses and protect their father's estate from numerous creditors, including Simplot.

Each son holds an equal share of Box Brothers Holding Company, which in turn owns the majority of Box Energy. But only one son, youngster Tom, effectively ended up with any real heft in the family business.

Under an arrangement now at the heart of two new lawsuits, Tom Box owns the only share of Box Brothers Holding Company that comes with a vote. Brothers Don, Gary, and Doug have no real say in how the holding company is run.

Gary Box says the other brothers deferred to Tom after their father's death because "Tommy was the family lawyer, and still is the family lawyer. He was my father's right-hand man the last five years of his life."

The arrangement wasn't a problem--until the brothers began disagreeing about the best way to deal with J.R. Simplot's continuing efforts to buy Box Energy.  

Doug Box thinks selling to Simplot would be the easiest way out of their legal wrangles, and that each brother could make some money off the deal. Gary Box thinks Simplot's offer is at least worth considering.

Don Box has been silent on the issues. But Tom Box, the one brother who actually holds a vote, is steadfastly opposed.

In April, the brotherly disagreement erupted into a feud of its own. Don, Doug, and Gary, acting as the board of directors of the holding company, called a meeting and awarded themselves voting shares in the company.

Tom Box vigorously objected, and responded by firing Doug from the board of directors.

Tom Box also filed suit in Delaware, asking a court to validate his control of the holding company. Doug and Gary Box, along with their uncle Boyce Box and two cousins, filed their own suit in Dallas County District Court. The suit asks the court to validate their voting rights in the holding company.

The latest legal salvos made for lively discussion when the Box Energy shareholders held their annual meeting in a ballroom at the Grand Kempinski Hotel last Thursday.

Several dozen stockholders arrived for the show, during which Tom Box and Don Box sat at the dais, while Doug Box and Gary Box sat in the audience.

"We're talking, but we're not real happy with each other," Gary Box said after the meeting.

Just minutes into the agenda, the meeting's very legality was challenged by Allen Mann, an attorney representing a small group of Box Energy shareholders.

Mann questioned the presence of a required quorum since it was unclear who among the Box brothers had the power to vote the family's majority share. William J. Burnett, the company lawyer, fumbled his way through a series of vague explanations, the upshot being that the meeting would go forward.

The company's board of directors--sanctioned by Tom Box's majority vote--was elected, and Tom Box and other officials proceeded with a slide show extolling the company's success. The unmistakable undercurrent of the official presentations was that Box Energy can make a lot of money if it doesn't cave in to Simplot.

But the Box stockholders were clearly an unhappy bunch. Some raised questions of who was "bilking" whom, and one shareholder asked why Tom Box gets to be the "dictator" of Box Energy.

One after another, shareholders asked why the Boxes are suing each other--and why the company shouldn't be sold to Simplot if it will fetch a good enough price.

Although they kept control of the annual meeting, it was clear afterward that the Box brothers--particularly Tom Box--are sitting atop a volcano of seething stockholders.

"We feel the conduct in this meeting is just another example of the inconsideration shown to the stockholders of the company," attorney Mann said after the meeting. "We're concerned about the company being managed properly for the interests of all stockholders, not just the interests of Tom Box."

Ron Bensh, an affable man recently installed as Box Energy's director of investor relations, found himself fielding a slew of hostile questions after the meeting. Characterizing the continuing litigation spree as an "inconvenience," Bensh maintains the company is still vibrant and profitable. "We have excellent cash flow and an excellent balance sheet," he says.

By standard measures, Box Energy should be a successful company, what with its still lucrative natural gas contract and its share of the South Pass Field. Last year, the company reported profits of almost $10 million, despite several drilling projects in the United States that came up dry.

But until the Box brothers make peace with the Potato King--either voluntarily or when their court appeals are exhausted--a legal pall hangs over the company.

That, says one lawyer, befits the late Cloyce Box, who "didn't go to bed at night very often without a lawsuit hanging over his head."

"Cloyce," another lawyer involved with the case chuckled. "God rest his soul.

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