When A Billionaire Marries A Stripper

Hello! This is Deep Pockets #19.

Texas oil tycoon J. Howard Marshall II experienced two devastating tragedies in 1991.

First, in July 1991, his longtime mistress (a buxom exotic dancer named “Lady” who was three decades his junior) died on the operating table during a facelift.

Then, in September, his wife Bettye died.

I know what you’re thinking… what a dirtbag… but there’s more to the story.

YES, J. Howard and Bettye had been married since 1961 and were still very much married when he took on a mistress. But he only began dating Lady after his wife developed a severe case of Alzheimer’s.

And to his credit, J. Howard tried to be as respectful of Bettye as he could. He did not bring his girlfriend to society events. They strictly met for lunch. They never once had dinner together. And they only met on weekdays.

J. Howard was genuinely in love with Lady. He planned to marry her someday, but only after Bettye died and only after a respectful amount of time had passed. In the meantime, he showered her with $15 million worth of gifts. He often brought a jeweler to their lunch dates so she could select new pieces. He bought her cars, clothes, vacations, and a collection of Rolls Royces in different colors, so her outfit and car of the day could match.

It was obviously an unorthodox situation, but without question, the unexpected dual deaths left J. Howard Marshall II extremely depressed.

To brighten his spirits, one afternoon in October 1991, just a few weeks after Bettye died, J. Howard’s limo driver pushed the wheelchair-bound 86-year-old into a Houston strip club. One of the dancers that afternoon was a 24-year-old named Vickie Lynn.

Even if you know where this story is going, I guarantee some of the twists will blow your mind.

DEEP DIVE: When a Billionaire Marries a Stripper

James Howard Marshall II was born in Germantown, Pennsylvania, in January 1905. After graduating cum laude from Yale Law School, he got a job as special counsel to the President of Standard Oil of California (SOCAL). SOCAL was originally one of the subsidiary companies in John D. Rockefeller’s Standard Oil conglomerate. SOCAL became an independent company after Standard was broken up in 1911. In 1984, SOCAL changed its name to Chevron.

While working at SOCAL, J. Howard basically got a master’s degree in 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 took a number of highly paid executive positions at various oil companies. He quickly learned that making a salary is nice, but if you want to get REALLY rich in business, you need equity. Or better yet, you have to create something yourself. And that’s what he decided to do.

Up to this point, most of the oil that had been found in North America was in Texas and Oklahoma. In 1947, a massive discovery was made in Alberta, Canada. More Canadian oil discoveries would soon follow. But there was a major problem. None of the refineries that existed at the time could process the heavy, sour crude oil that was spewing out of the ground in Canada.

Sensing an opportunity, in 1952, J. Howard founded Great Northern Oil. In 1955, Great Northern completed construction on a refinery in Rosemount, Minnesota, the first on the continent that could turn heavy, sour Canadian crude into practical gasoline.

In 1959, a company called Wood River acquired 35% of Great Northern for $5 million (around $55 million in today’s dollars). Wood River’s founder/CEO was a chemical engineer named…

Fred Koch

Fred Koch earned his fortune very much in the “picks & shovels” way. During the Texas and Oklahoma oil booms of the 1920s, he did not rush out and buy a plot of land and a bunch of drills. Instead, Fred used his chemical engineering degree to invent a better way of refining crude oil into gasoline. He had to defend his invention and patents in court for 15 years. After defeating more than 40 lawsuits, in 1940, Fred was clear to start his own company: Wood River Oil and Refining Company.

Great Northern and Wood River were the perfect corporate pair. Business was great.

Unfortunately, Fred died in 1967. His four sons inherited his empire in equal parts. Those four sons are:

• Fred Jr. (born 1933)

• Charles (born 1935)

• David (twin, born 1940)

• Bill (twin, born 1940)

After Fred Sr.’s death, second-born son Charles Koch was named president and chairman of Wood River. In 1968, Charles renamed the company:

Koch Industries

During this period, a company called Union Oil quietly acquired a significant stake in Great Northern. In 1969, Charles and J. Howard approached Union and asked what it would take to buy back its shares. Union requested an outrageous amount. Charles and J. Howard politely declined.

Union executives then went around to the oil investment community to raise money to make a run at buying out the Koch stake. In its pitch to investors, Union falsely claimed to have the backing of J. Howard. When word got back to J. Howard, he was incensed and doubled down on his support of Charles and Koch Industries. In the end, the Kochs and J. Howard ended up buying Union out at a discounted price.

As a reward for his loyalty and because the two sides clearly had the same business mentality, in 1969, Charles orchestrated a deal where J. Howard exchanged his shares in Great Northern for a 16% stake in Koch Industries. This deal made J. Howard the only equity holder in Koch Industries who was not a member of the Koch family.

Family Wars

As a reminder, there were four Koch brothers: Fred Jr., Charles, and twins David and Bill.

J. Howard had two sons:

• James Howard Marshall III (born 1936)

• Everett Pierce Marshall (born 1939)

As was apparently family tradition, the sons went by the abbreviated initials of their first names: J. Howard and E. Pierce.

At some point in the late 1970s, Bill Koch became disgruntled with how Charles was managing Koch Industries. Charles wanted to keep the family private and reinvest all profits into the operation. Bill wanted the company to go public and/or pay larger and more frequent dividends. Sides were taken. Charles and David coalesced on one side, Bill and Fred Jr. on the other. Note that twin brothers Bill and David were on opposite sides.

In 1980, Bill attempted a coup against Charles. And, as the old saying goes, “If you come for the king, you best not miss.” He missed. In the aftermath, Bill was permanently ousted from Koch Industries. But he and Fred Jr. still owned 21% stakes in the company.

In 1983, Bill and Fred agreed to sell their shares to Charles and David for $1.1 billion. Even though that was unquestionably a huge fortune, equal to more than $4 billion in today’s dollars, Bill soon became convinced he had been short-changed. Two years after the sale, he filed a lawsuit seeking a larger payout. That lawsuit dragged on for 15 YEARS and ripped the family apart. In the end, a jury agreed that some assets were undervalued but not in a meaningful enough way to justify any additional payout. Bill and Fred spent far more on lawyers than what they ultimately received.

The fighting was so intense that, even decades later, when twin brothers Bill and David saw each other at society events, they would barely say hello.

The Koch family war also caused a major rift in the Marshall family. For estate planning purposes, J. Howard had given each of his sons 4% stakes in Koch. Mathematically, if both sons picked the same side, there would be a 50/50 equity deadlock. But that’s not what happened.

J. Howard II and his younger son E. Pierce sided with Charles and David. His eldest son and namesake, J. Howard III, sided with Bill and Fred.

J. Howard II was so angry at his eldest son’s betrayal that he forced him to sell back his 4% stake for $8 million and wrote him out of his will. That left youngest son, E. Pierce Marshall, as the eventual sole beneficiary of a 16% stake in Koch Industries.

Unless his father married again…

Vickie Lynn

She was born Vickie Lynn Hogan in Houston in 1967. When she was 16, she married a local boy from their small town of Mexia named Billy Wayne Smith. When she was 19 and he was 20, they welcomed a son. The young family moved to Houston to seek a better life, but after seeing her take-home pay from a brief job waitressing at a Red Lobster, Vickie hung up her apron and auditioned for a nearby strip club called Rick’s.

In Houston in the 1980s and early 1990s, skinny blondes with fake breasts were the dancers of choice for the high-paying evening shifts at gentleman’s clubs. Vickie’s natural curves deemed her only worthy for the day shift. That may have been disappointing at first, but this demotion would soon prove to be the lucky break of a lifetime.

As you’ll recall, on a fateful afternoon in October 1991, J. Howard Marshall II was wheeled into Rick’s. The 86-year-old oil tycoon and the 24-year-old dancer began “dating” almost immediately after that first encounter. That mainly meant he started sending her gifts while begging her to marry him. Meanwhile, no one could have predicted the rocketship to fame Vickie was about to ride.

In late 1991, “Vickie Smith” submitted some Polaroids to Playboy. The magazine’s editors were so impressed that they flew her straight to LA for a professional shoot. She was chosen as the cover girl for the magazine’s March 1992 cover. She was then named Playmate of the Month for May 1992 under the header, “Lone Star Stunner.”

Vickie’s Playboy spreads made her a superstar overnight. Dozens of professional modeling offers rolled in. The biggest opportunity came from Guess jeans. But before the campaign launched, Guess co-founder Paul Marciano had a suggestion. Paul thought the names “Vickie Lynn” and “Vickie Smith” sounded too “provincial.” That was a polite way of saying her name made her sound like she was a Texas hick (which she was).

Paul suggested she pick a name that had more global appeal. Vickie chose a first name that she had always liked. Paul chose the middle name. She kept her legal last name from her marriage to Billy. The result was:

.

.

.

.

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Anna Nicole Smith

Anna Nicole Smith’s fame exploded, perhaps unlike anyone else in history. From a Houston strip club to superstardom in about a year. She even landed major acting roles. Her first film credit was as “Za-Za” in the 1994 Tim Robbins movie “The Hudsucker Proxy.”

That same Anna year starred opposite Leslie Neilson, Priscilla Presley, and O.J. Simpson in “Naked Gun 33 1/3” The Final Insult.”

Here’s a photo of Anna at the “Naked Gun” premiere with her son Daniel:

As an unrelated side note, here’s another photo from the premiere:

The premiere took place on March 16, 1994. Nicole Brown Simpson was murdered at her Brentwood townhouse 88 days later, on June 12, 1994.

Coincidentally, Anna was also a resident of Brentwood at this time. She was living in a mansion paid for by J. Howard Marshall. He also bought her a home in Houston and rented her an apartment in NYC. He gave her a lipstick-red Mercedes, a Rolls Royce (obviously), and $2 million worth of jewelry.

“The Bride Wore Cleavage”

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 up Anna's appearance.

Before the reception ended, Anna told her new husband that she had to jet off to Greece for a photo shoot. She left J. Howard at the reception crying in his wheelchair. Court testimony years later would reveal that Anna did not jet off to Greece right away. She went from the reception to a hotel with her bodyguard, where they proceeded to consummate her marriage.

The marriage of J. Howard Marshall and Anna Nicole Smith lasted 14 months. Not long after they married, J. Howard began to experience severe health problems mostly connected to a stomach cancer diagnosis.

One night in January 1995, Anna decided to feed Howard soup with 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, thanks to his 16% stake in Koch Industries, was in the range of $1.6 billion.

According to Anna, J. Howard promised to leave her half of his estate. Theoretically, this would have been around $800 million. So you can imagine her shock when the will was read, and she was actually left with NOTHING.

The Legal Battles

Anna quickly filed a lawsuit contesting the will in Harris County probate court. Ostracized son, J. Howard III joined her in the suit.

E. Pierce's argument was simple: His father had created a will and an extremely clear estate plan more than a dozen years earlier. That plan left all of his estate to Pierce and some charities.

Anna and J. Howard III argued that Pierce isolated J. Howard II in his final months to prevent him from following through on his intentions to include them in the estate.

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. The nanny won a default $800,000 judgment because Anna failed to show up for any of the legal hearings.

This $800,000 judgment could not come at a worse time. She had no money and was forced to file for personal bankruptcy. She chose to file in California, her primary state of residence.

In a stunning move, the California bankruptcy court ordered E. Pierce to pay Anna $450 million PLUS $25 million in punitive damages, for a total of:

$475 million

Back in Texas, the probate court battle was just 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.

That left two rulings with two different outcomes in two different states. One was a state probate court decision in Texas, and the other was a federal bankruptcy decision in California.

Pierce appealed the bankruptcy judgment in California, claiming that Anna was not actually a California resident. She married J. Howard in Texas. She signed several documents during and after their marriage stating she was a resident of Texas.

He appealed all the way to the California Supreme Court. That court disagreed with Pierce's argument but ultimately chose to reduce the $475 million award to $88 million.

Unsatisfied, Pierce appealed that decision to the Ninth Circuit Appellate Court.

In 2005, the Ninth Circuit ruled in Pierce's favor, agreeing that a Federal bankruptcy court in California 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

The US Supreme Court is asked to review around 7,000 cases a year on average. It typically accepts 100-150 of those cases. In other words, after years of exhausting every lower court in the country, if the Supreme Court is your final option, you still only have a 1.5% chance of being accepted.

Anna’s case was accepted.

Arguments were made in the case of "Marshall v. Marshall" on February 28, 2006. On May 1, 2006, the Supreme Court ruled unanimously for ANNA NICOLE SMITH.

That didn’t mean she was entitled to $475 million or even $88 million. It meant she could continue battling in lower courts.

More Tragedies

Two months after the Supreme Court’s ruling and 11 years after his father died, E. Pierce Marshall died.

Three months later, Anna gave birth to a baby girl at an LA hospital. Her son Daniel spent the night in a chair next to her bed. When Anna woke up the next morning, Daniel was unresponsive. Daniel Wayne Smith died from an accidental drug overdose. He was 20.

Anna named her newborn baby girl Dannielynn in his memory.

Six months later, on the morning of Thursday, February 8, 2007 – 153 days after Daniel’s death – Anna Nicole Smith died in a hotel room in Florida. She was 39. Her death was also ruled a drug overdose.

The Conclusion

With Anna’s death, five-month-old Dannielynn became the primary litigant in a half-billion-dollar probate fight.

The Supreme Court’s decision sent the case back to the Ninth Circuit Court of Appeals, which once again sided against Anna’s estate.

The only option at this point was once again to appeal up to the United States Supreme Court. And that’s what Anna’s estate did. Incredibly, the Supreme Court ACCEPTED AGAIN!

This time, though, the Supreme Court ruled against Anna’s estate.

The absolute conclusion of the case would take three more years as appeals continued to be filed in Texas and California.

Finally, in August 2014, a Federal judge in Orange County, California, rejected the final, final, final legal effort against the estate of E. Pierce Marshall. By this point, Anna had been dead for seven years, E. Pierce had been dead for eight years, and J. Howard Marshall II had been dead for 19 years.

Hypotheticals

Let’s say Anna wasn’t lying and J. Howard really wanted her to inherit half his estate.

Today, Koch Industries generates more than $125 billion per year in revenue. It is the second-largest privately-held business in America. For perspective, J. Howard’s old company generated $200 billion in revenue last year.

David Koch died in August 2019 at the age of 79. At the time of his death, David was worth $58 billion. He was one of the ten richest people in America and one of the 30 richest people in the world. Today, his widow, Julia Flesher Koch, is worth $63 billion. That makes her the third richest woman on the planet.

Charles Koch is still the chairman and CEO of Koch Industries. As I type this story, his $70 billion net worth makes him the 24th richest person in the world.

Fred Koch Jr., the eldest of the Koch boys, died in February 2020 at the age of 86. It’s not clear that Fred was a billionaire when he died. He was certainly a multi-hundred-millionaire.

Bill Koch is still alive. He’s worth $2 billion.

After E. Pierce Marshall’s death in 2006, his widow, Elaine Marshall, inherited that hard-fought 16% stake in Koch Industries. Today, CelebrityNetWorth estimates Elaine’s net worth at $24 billion. Forbes estimates her net worth at $28 billion. Bloomberg estimates it at $26 billion. Using the average of those numbers, $26 billion, Elaine is roughly the 70th richest person in the world.

Had Anna Nicole Smith inherited half of that 16% Koch stake, never sold out, and was still alive, today she would be worth $13 billion 😀 

FINAL WORD

On the next edition of “Deep Pockets,” we’ll tell another unbelievable story that unbelievably also involves a Houston-based energy company, a huge fortune, and a stripper!

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