Divorce;

TO PLAN FOR IT MAY RUIN YOUR MARRIAGE NOT TO PLAN FOR IT MAY DESTROY YOUR COMPANY

Tweet

THE DIVORCE ITSELF WASN'T WHAT was bothering Duane Meulners -- he had been through the experience twice before. Nor was it the money. The Silicon Valley entrepreneur had already offered to pay his estranged wife $4,000 a month in support. What really shook him up was the possibility of losing control of Dymek Corp., his $10-million manufacturing firm.

Meulners was all too mindful of a friend, a company founder in Los Angeles, whose ex-wife had received a chunk of the business through California's community-property law. The woman had then used her new power to team up with a vice-president and vote her ex-husband out of a job. What if Kathleen Meulners was awarded enough stock in Dymek to oust Duane?Divorce was not a "sustainable risk." He was having problems with his wife, he told the hit man, "problems" that needed to be "eliminated." But, in the autumn of 1984, before the deed could be done, Meulners was arrested by the supposed contract killer, who was actually a San Jose undercover cop.

Under interrogation, Meulners denied any intent to kill his wife, and pleaded for leniency. There were, after all, his 50 employees and Dymek's worldwide customers to consider. "I'm the 90% stockholder in that company. If I go down the tubes, that whole company, the whole business, the whole lot of jobs, a whole lot of people holding stock, hoping that that's gonna be worth something one day -- [that is] all going down that goddamned tube."

Meulners eventually pleaded guilty to the charge of solicitation of murder. His sentence was a year on a work furlough, five years probation, and a $5,000 fine.

Things did not turn out so well for Hawaii dairyman Robert V. Toledo, who was shot and killed by the woman he was trying to divorce, a former island beauty queen named Gertrude Kapiolani Miller Toledo. The jury found that Mrs. Toledo acted in self-defense when, during an argument over the distribution of their millions of dollars in marital property, her husband came at her with a knife.

As in the Meulners case, money was not the issue that drove Toledo to violence: here, too, there was a settlement on the table. But, while Kathleen Meulners had made no demands on her husband's business interests, Mrs. Toledo had declared she would accept nothing less than half of the dairying operation her husband had inherited and built into Oahu's largest. Toledo was enraged. A friend, testifying at the mid-1984 trial, recalled hearing the man threaten his wife at knifepoint two months before the shooting, saying, "I'll see you dead before I give you one square inch of the dairy."

Even a decade ago, such fears that a divorce might pry a company out of an entrepreneur's grasp would have been deemed both legally and socially preposterous. Why would a housewife want, much less deserve, equity in her husband's company? Gradually, gender and job description have been removed from the criteria of who gets what in a divorce. Today, laws generally presume that both parties to a marriage make contributions -- financial or otherwise -- to any and all "marital assets." And that includes the company.

A recent study of divorces in Los Angeles County found that the number of divorce settlements in which a business was involved doubled, from 5% to 11%, in the decade from 1968 to 1978. Lawyers around the country report similar increases with the generally west-to-east spread of divorce reform. Nowadays, if one or both spouses own an interest in a business that was started, acquired, or gained value during the marriage, it can be expected to be part of the divorce property distribution -- along with the house, the boat, and so on. The only question from state to state is how each piece of this marital property will be divided -- whether it will be close to a 50-50 split of the assets of the marriage, as in the nine community-property states, or, as is the case in the rest of the nation, an "equitable" distribution of the whole list of assets.

Many business owners, like Meulners and Toledo, hear "company" and "marital property" in the same sentence and jump to the conclusion that the courts are out to put their exwives into executive offices. Not really. While every state's casebooks show decisions in which a woman wins controlling interest of a business that had been financed or managed by an ex-husband (he provided the capital for the hair salon, but she had the hair-dresser's license, for example) most legal observers consider them flukes. In fact, it is rare to see any stock change hands at all -- and when it does, neither the judge nor the spouse is much happier with the arrangement that the entrepreneur. For the spouse, it's a practical matter: nobody with a more attractive alternative wants to be a powerless, dividendless, minority shareholder. The courts, meanwhile, view the goal of divorce as severing ties, not keeping a couple bound by a shared investment. That is why most settlements attempt to pay the nonoperating spouse his or her share of the company's equity not in stock, but in cash or other nonbusiness assets.

 1 | 2 | 3 | 4 | 5 | 6 | 7  NEXT