How divorce destroys (and creates) fortunes
Friday, July 18, 2008/
Nothing shrinks a fortune like divorce. Money may not buy love, but unhappiness is definitely expensive. By JAMES THOMSON
By James Thomson*
Nothing shrinks a fortune like divorce. Money may not buy love, but unhappiness is definitely expensive.
When editing the BRW Rich 200, you get used to wealthy entrepreneurs attempting to underplay the size of their fortune.
There are many reasons for the rich to talk themselves down. Some hope to steer clear of the public glare associated with being on the list, while others want to make themselves a smaller target for the tax office or for charities. Some – though not many – are genuinely modest.
Occasionally there’s an excuse from left field. “Look mate, can we just knock a few million off this year?” one Queensland entrepreneur pleaded. “I’m in the process of getting a divorce and the ex-wife’s lawyer will be all over me.”
Greg Norman probably wishes he had been able to bump a few zeros off his bank balance before going through his messy divorce from Laura Andrassy last year. Documents filed last week in a Florida court last week reveal that Norman’s divorce cost him a whopping $US103 million.
Andrassy received a first payment as part of the settlement in September last year; a cheque for $US50 million, her half of an investment fund. Andrassy is scheduled to receive another $US30.2 million over 15 years as well as $US17.5 million from the sale of the former couple’s beachfront home; a $US4 million home in Palm Beach; $US466,000 from a retirement account; $US500,000 worth of jewellery; a $US250,000 investment in an interior design company; and the family Christmas decorations.
The size of the settlement would make Andrassy one of the 20 wealthiest women in Australia. That group contains a number of divorcees, including Iris Lustig, who remains jointly listed on the Rich 200 with her ex-husband Max Moar. The pair’s combined fortune is $379 million and they continue to operate a property development company together called Lustig & Moar.
While Nicole Kidman commands up to $15 million for a movie role and owns an extensive property portfolio, a large part of her $289 million fortune comes from her divorce from actor Tom Cruise in 2001. The settlement was reportedly around $US109 million.
Another wealthy divorcee is Lynette Harvey, the first wife of Gerry Harvey. Though the couple split in 1982, Lynette retains a large stake in retail giant Harvey Norman, worth around $155 million at the current (deflated) share price.
Gerry took a very dignified approach to divorce. “Certainly the man [if that is the person who created the wealth] should ensure the wife and children are still living in the same sort of lifestyle as they were when he was there,” he told the Sydney Morning Herald a few years ago. “I get jack of these blokes skiting in the pubs about how they’ve given the missus nothing.”
But not every wealthy individual shares Harvey’s philosophy. Many are prepared to fight to the bitter end in divorce courts – often a great financial and reputational cost.
Paul McCartney’s divorce from Heather Mills cost the former Beatle $52 million. But the court battle that led to the payout exacted a huge price in terms of his privacy and reputation, with wild accusations about the behaviour of both parties. The judge’s decision in the case – which mercilessly bagged Mills as giving evidence that “was not just inconsistent and inaccurate but also less than candid” – laid bare the precise details of McCartney’s $790 million fortune, including the value of every property he owns, his art collection and even his bank account.
According to Forbes, the biggest divorce settlement on record was paid by US mobile phone industry pioneer Craig McCaw, who sold a group of mobile phone assets to AT&T in 1994 for $US11.5 billion. Less than a year later, Craig and his wife Wendy split. In the bitter divorce battle that followed, everyone from Craig’s elderly mother to Bill Gates was called to give evidence. Eventually, Wendy walked away with $US460 million in shares in telco Nextel. Unfortunately for her, those shares later tanked during the tech wreck of 2001.
With the economy starting to slow, it seems some of the world’s wealthy are bracing for a jump in matrimonial splits.
According to an article in The Times this week, divorce lawyers in New York are reporting an increase in the number of divorce cases as a result of the credit crunch.
Raoul Felder, a divorce lawyer to the extremely wealthy, told the newspaper that his company’s caseload had soared from 250 to 300 in the past year, the biggest jump since 1980, when New York state law was changed to add four new grounds for divorce to the then sole existing one, adultery.
Apparently Wall Street bankers and property magnates are struggling to tell their spouses about the big falls in their fortunes. When spouses do find out, it is apparently putting big strains on some relationships.
Let’s hope the husbands and wives of those Australian investors whose portfolios are taking a hammering can be a bit more understanding.
* James Thomson is the editor of SmartCompany.com.au. Most recently James was a senior editor at news and commentary website Business Spectator. Prior to that, James was editor of BRW’s Rich 200, Young Rich and Executive Rich editions.
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