COURTROOM BATTLE TIES UP BILLIONAIRE'S BEQUEST TO UC.

Byline: Associated Press

He was among the world's most successful tycoons: a reclusive entrepreneur who built a $3 billion empire on an idea that came to him one evening in a supermarket.

His death, in the crash of an ancient seaplane near his tropical island retreat, was to have brought $1 billion to the University of California, his alma mater and chief beneficiary of his 13-year-old will.

But now an alleged sexual obsession of the late Larry Hillblom, driving force behind the Redwood City-based DHL Worldwide Express, has become the flash point in a legal fight that has threatened one of the biggest bequests in UC's history and buffeted DHL, the world's largest air courier service, the San Francisco Examiner reported today.

In a U.S. courtroom on the Pacific island of Saipan, the university and an inner circle of DHL executives have squared off against the impoverished children of three young women who claim Hillblom impregnated them during an obsessive pursuit of teen-age virgins, according to the paper.

Lawyers for the children of these women say that under U.S. law applicable to Saipan, the Pacific tax haven where Hillblom had relocated, his entire estate rightfully belongs to the kids.

Their claims are contested by the California Attorney General and DHL insiders named in Hillblom's will.

And a powerful Saipan politician is lobbying the island legislature for a bill that would disinherit every illegitimate child in the Marianas, the Examiner states.

In the United States, DHL boasts rapid, door-to-door freight delivery in 219 countries, a fleet of 137 aircraft, 9,700 trucks, 35,000 workers and revenues of $3.1 billion in 1994.

Private and closely held, the conglomerate includes a U.S. company, DHL Airways and Belgium-based DHL International.

The business was built and shaped by Hillblom, who was born in the Central Valley town of Kingsburg. He graduated from Fresno State in 1964, then worked his way through the University of California Berkeley's Boalt Hall Law School with a job at a shipping firm.

According to company lore, his leap toward riches began when Hillblom ran into Adrian Dalsey, a co-worker in the shipping business, outside a supermarket in the summer of 1969.

Hillblom suggested charging shippers a premium to have their paperwork flown between ports, slashing turnaround time because the paperwork could be finished even before the ships arrived.

DHL was born - named after Dalsey, Hillblom and investor Robert Lynn. At first, DHL couriers simply hand-carried packets of documents on commercial flights between San Francisco and Honolulu.

Lynn eventually quit and Dalsey took a back seat to Hillblom, who plotted the company's ambitious expansion into international delivery of packages and mail.

All three children named in the suits were the products of casual dates made in bars, according to the Examiner.

Kaekani Kinney, 28, said that in 1983, when she was 16, two local politicians introduced her to Hillblom in a bar on her home island, Palau. They spent three days together in a resort hotel, and she became pregnant.

Julie Cuartero, 16, said that at age 14, she went to work as a dancer in a Manila club. There, in the summer of 1994, she met Hillblom. She said that on half a dozen occasions the tycoon took her to his luxury condo on Roxas Boulevard, where they had sex.

Recently, a 15-year-old dancer claimed in a Manila probate court that her infant daughter also was fathered by Hillblom.

The will gives $300,000 to Hillblom's two brothers, but nothing to his mother. It orders the bulk of the estate transferred to a charitable trust, with the trustees instructed to ``show particular attention'' to medical research at UC.

But it doesn't contain the legal boilerplate that attorneys say any knowledgeable probate lawyer would have inserted - language that either acknowledges out-of-wedlock kids and provides for them, or denies their existence and disowns them.

Lawyers for the children believe the case will ultimately turn on the question of paternity.

If it comes to that, the future of the huge estate may be decided by tests on a bit of human skin preserved in a ball of paraffin since 1993, when Hillblom had a mole removed from his face.

That skin contains the only remaining sample of the tycoon's DNA, and there may be enough to settle whether he fathered the kids.

If that's the case, and if the kids' lawyers are correctly reading the law, then the children would wind up paying about half the estate in inheritance taxes and keeping the rest.