Big Money Didn't Buy Them Love
Megabuck divorces spawn a booming new industry. Wealthy
soon-to-be exes are enlisting such experts as forensic accountants and
separate lawyers for the kids.
Grooms for the
ponies, cosmetic dentistry and separate psychiatrists for all three kids:
Life can be tough, trying to scrape by on $40,000, $50,000 a month.
"That's what I spend keeping my expenses
low," said Barbara, 46. "You think a judge is going to be sensitive to
that? Some guy who makes maybe a hundred grand a year? The judge thinks
I'm out of my mind."
Five years ago,
after her marriage to a New York investment titan collapsed, Barbara and
her three kids moved to a fashionable suburb of Palm Beach, Fla. Her old
hometown of Greenwich, Conn., became unbearable, Barbara said, after her
ex got the country club memberships.
he didn't get everything. Barbara got millions and millions. Yet as often
happens when so many zeros are involved, the money fight goes on. At least
once a year, Barbara and her former husband are in court, dueling over
support payments that even she admits sound surreal: "The fact that I
spend $50,000 a month on just nothing--some people would love to be
earning that in a year. We kind of lose our perspective as to what is
Just what is normal when a
marriage is worth hundreds of millions of dollars--or nowadays,
billions--such as the pending $11-billion divorce of Viacom chief Sumner
Redstone and his wife, Phyllis, or the billions that surely will be at
stake if the trial separation of Jane Fonda and Ted Turner turns into a
divorce? For a new and expanding class of Americans made wealthy by the
giddiest economy in U.S. history, the answer is: divorce planning that
sometimes begins before the wedding rings go on; messy, drawn-out disputes
conducted outside the glare of public courtrooms; and settlements, along
with matching legal fees, that rival a small country's gross domestic
Often, the new riches
themselves are at the heart of the once-happy couple's unhappiness. And
big-ticket divorces sorely test the cookie-cutter concept of divorce laws
that aim in theory to ensure equitable distribution of marital assets and
a reasonable standard of living for both parties.
High-end divorces are "an entirely
different game," said attorney Gary Skoloff of Livingston, N.J., "much
more enjoyable for lawyers."
Seattle divorce lawyer Mary Wechsler could fill her whole caseload with
nothing but high-stakes, high-tech divorces. Beverly Hills attorney Daniel
Jaffe, who seldom touches a case worth less than $250 million, could
regale a large dinner party with anecdotes about divorce habits of the
rich and often-famous. Among his favorites is the aspiring ex-wife whose
monthly mandatory expense list included a $500 haircut--for her
The staggering sums make
megabuck divorces more like corporate breakups than tearful farewells to a
lifetime of togetherness. Deconstructing these marriages has spawned a
booming new industry. Pre-divorce planning--preparing for the split years
before it happens--begins of course with a prenuptial agreement. Marrying
without one in this era of big-buck breakups, said New York's Jay
Goldberg, the principal divorce attorney for corporate raider Carl Icahn,
But prenups are under
attack in many jurisdictions--such as California, where a Supreme Court
decision is expected soon on a challenge by the ex-wife of San Francisco
Giant center fielder and multimillionaire Barry Bonds. She claims, echoing
the claims of many spouses, that she was coerced into signing their
Steven Spielberg Split
argument helped actress Amy Irving garner a $100-million settlement from
director Steven Spielberg. The pair had signed a prenup, but when
Spielberg left her for actress Kate Capshaw, Irving successfully
maintained that she wasn't represented by a lawyer at the signing.
With the validity of prenups in
question, along comes the postnup, the latest twist in pre-divorce
planning. Postnuptial agreements often are drafted to modify prenups, said
Santa Barbara divorce lawyer Paul Roberts, but more often, "because of the
success of the economy." Thanks to the roaring economy and stock market,
Roberts explained, many marriages that started out merely as well-to-do
are now super-affluent, and the terms of the prenup are out-of-date.
Postnups can supersede some aspects of
state divorce laws. For example, in California, where the law calls for a
50-50 division of marital assets, a husband or wife might bargain away
their community property interest.
Wealthy people generally have several
residences, so couples with big fortunes frequently move from state to
state, seeking out the best divorce deal. After six years of litigation in
New York, Icahn's estranged wife, Liba, moved to Connecticut and started
divorce proceedings there. In megabuck divorce parlance, this practice is
known as "forum shopping."
wealthy couples can avail themselves of an array of expensive resources,
from forensic accountants to highly specialized mediators to separate
lawyers (and of course psychologists) for their kids. These parades of
highly paid experts make big-money divorces "so different from the average
divorce that it's incredible," said attorney Sandra Morgan Little of
Albuquerque. "At times, it's almost like you're watching a movie. These
are very rich people whose lifestyles are so different from the rest of
In her 1997 divorce from
cellular phone pioneer Craig McCaw, for example, Wendy McCaw of Santa
Barbara had six attorneys and eight accountants working on the case. In
arriving at what is believed to be a $1.5-billion settlement, this retinue
of experts sifted through 5,000 boxes of documents, including the records
of 30 personal (not corporate) bank accounts.
There is no evidence that very rich
people divorce more frequently than the general population. But
psychologists who study divorce such as Santa Monica's Connie Ahrons say
that in some cases, big money itself may bring domestic demise. Couples
who married each other as computer programmers, only to wake up one day as
software magnates, may find that managing a fortune trounces the
tenderness that once united them. Wildly divergent spending habits also
can suffocate romance, Ahrons said, even when there's plenty of money to
Divorces Can Be Legal Gold
When there is enough cash to
fight to the last dime, divorces can be a gold mine for lawyers and a
nightmare for the participants.
of Palm Beach, who did not want her real name used, said her experience
has taught her that "it's not smart to be greedy. Pick a number that will
allow you some dignity, and don't go for the lion's share. You have to
understand, it's not a fair world, and when there's that much money,
you're not going to get half, even when you deserve it."
Phooey, is what Lorna Wendt said to that
kind of thinking. Married to GE Capital Chief Executive Officer Gary Wendt
for 32 years, Wendt was raised in a home where the word "divorce" was
never mentioned, much like some vile social disease.
When her husband said he wanted out and
offered her $10 million, Lorna Wendt said: "You must be kidding." It was a
lot of money, she acknowledged, plenty to live on. But for all the years
the Wendts were married, Lorna paid the bills and kept the books. She knew
it was nowhere close to half.
the money," she said in an interview in her office in Stamford, Conn. "It
was that I knew how much we were worth, what we earned together."
Their 1996 settlement rewrote the rules
for executive divorce when the court agreed that her role as corporate
spouse helped Gary Wendt to prosper and should be valued accordingly.
Lorna Wendt, 56, got $20 million, and with it, a cause. Her Institute for
Equality in Marriage counsels spouses, mostly women, on how to "create and
maintain a partnership of equals." Said Wendt: "I've got this new life.
Thank you, Gary."
Among her goals is
formal education about marriage and divorce. "People go into marriage
without even thinking about it," she said. "You don't have your house
painted without a contract. Yet you have the biggest social contract of
your life, marriage, and you haven't talked about it."
Marriages Seen as Valuable
Wendt's hope is that spouses
in big-ticket unions will see the marriage as an asset, as valuable as any
of their investments. None of this, she insisted, removes the romance
quotient. "Marriage should be about love," Wendt said, "not money."
But cash, not Cupid, is what complicates
these cases. With so much money coming from start-ups, initial public
offerings and entrepreneurial acumen, big-buck divorces can present major
valuation problems. If a spouse is a principal in a closely held company,
it's in his or her interest to place a low price tag on the business, said
Miami attorney Maurice Kutner. Cut that figure in half, he said, and
you're in the ballpark of what the other spouse can expect to get in a
divorce. But when a company is highly leveraged, a business owner may have
trouble coming up with the cash.
like this are so complex, said attorney Jaffe of Beverly Hills, that
"generally the entrepreneur knows far more about the business than the
nonemployee spouse's lawyer [or accountants] ever will. They are insiders,
they know where the company is going. I've been in on meetings with these
forensic accountants where I thought the numbers were off. I start to open
my mouth to object to an evaluation, and my [entrepreneur] client kicks me
under the table."
Unlike personal injury
attorneys, divorce lawyers do not earn percentages of their clients'
settlements. Their rates may soar to $500 an hour. Most will not consider
a case without a hefty deposit.
lawyers who are accustomed to dealing with gigantic sums get nervous
around so many zeros, said Jaffe: "We don't carry enough malpractice
insurance. If you blink, you might miss $50 million."
California has strict rules about
disclosure of assets in divorce. As a woman who failed to tell her husband
that she had shared a million-dollar lottery prize recently discovered,
concealing assets can be worse than splitting them in half. (That woman
lost her entire lottery pot when her ex-husband sued, and a judge sided
But California is also
unusual in the way the state makes it easy for super-rich couples to do
their divorcing in private. First, the parties agree to a gag order. Then
they arrange to conduct the proceedings in a makeshift courtroom, such as
a luxury hotel suite. Next, they hire a rent-a-judge, someone retired from
the bench who, for $350 to $500 per hour, is happy to throw on a robe and
preside. By agreement, this judge's ruling is binding. Provided that all
parties keep their mouths shut and pay up on schedule, the actual
agreements, and sordid financial details, never see the light of day.
When media mogul Rupert Murdoch and his
ex-wife, Anna, ended their 32-year marriage in Los Angeles last June, the
public portion of their settlement was marked "amicably agreed." Just how
Murdoch's $5.6-billion fortune was split up remains confidential.
California's private judge system long
has been a part of the state's civil code. But only in the last 20 years
or so, as fortunes have grown, has it come into wide use in divorce cases.
The system allows parties to start and stop when they want, and to
continue, regardless of a clogged official court schedule. Some private
courtrooms feature morning croissants and cappuccino along with opening
arguments. In the afternoon, in come the chocolate chip cookies and more
"You gain about 10 pounds
with each one of these," said Jaffe, Anna Murdoch's lawyer, adding that
costs for such divorces run about $5,000 per day. "But in the judgments
we're talking about, no one cares."
Former Los Angeles County Superior Court
Judge Eli Chernow is now a full-time private judge, mainly in divorces
involving hundreds of millions of dollars. One case, his largest, hovered
around "the low nine figures." His track record is so good that one
wealthy couple wrote a clause in their prenuptial agreement stating that
if they were ever to split, Chernow would preside. When the time came,
that's what happened.
Some cases stretch
eight to 12 weeks, an unimaginable luxury in the traditional court system.
As Chernow observed, "There's no question that the legal system works
better for people who have substantial resources."
Of course, it is also true that "if
there is a lot of money and the parties are vindictive and bitter, and
really want to hurt each other, they have the resources to inflict all the
pain that the legal system is capable of inflicting," Chernow said.
"Ordinary middle-class people just don't have that kind of money. They may
hate each other, but they've got to find some cheaper way of expressing
Albuquerque lawyer Little said more
and more of the very rich are preparing early for the fact that one day,
they might hate each other. "We see a lot of people planning for divorce
years before it happens," she said. "That is especially true for the
moneyed spouse, planning how to make investments, how to take
compensation, what kind of contracts to sign for compensation and perks."
Just 20 years ago, Little said, no one
had heard of pre-divorce planning or post-nuptial agreements. Now, she
said, "many people plan for divorce because they know it has such an
economic impact that they'd better get ready for it beforehand. We also
see extended family members, parents, brothers and sisters, helping with
divorce planning. I think that really is a change."
Little said wealthy clients even
investigate whether "it would be more advantageous to be in New Mexico
than, say, California." They learn that it's a tough call, because in one
state, alimony may be lower, while child support is higher.
Courts in some states also may struggle
with high-asset divorces. "Our state is so poor, and the discrepancy is
hard for the courts," said Little. "You've got someone who can't afford to
pay the minimum for child care--and then the next case walks in and
they're arguing over whether their lifestyle includes gardeners and cooks
and chauffeurs. This frankly is more than the courts can deal with."
On the other hand, regardless of who
gets the gardener, the cook or the chauffeur, Little said, "everyone in
those cases is going to go home that night and eat."
This is another universal characteristic
of high-end divorces. With so much money to go around, agreed Jaffe, "in
some ways, these cases are easier to settle, because everyone is going to
be well taken care of." Divide up a billion dollars, and whether you get
$500 million or $480 million, Jaffe said, "you're still going to get to
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