TO PLAN FOR IT MAY RUIN YOUR MARRIAGE NOT TO PLAN FOR IT MAY DESTROY YOUR COMPANY
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.
But what if that cash settlement is so large that the entrepreneur can't afford it? Many company owners fear that a judge would force them to sell, to take on a partner, to go public -- perhaps even declare a bankruptcy or liquidate -- just to come up with the funds. Again, such outcomes have been reported in nearly every state, but lawyers say the moves often prove to have been less a court-ordered remedy than a strategic decision made more timely by the entrepreneur's pending divorce settlement. Where a cash solution represents a hardship, an amenable judge, dealing with an amiable entrepreneur, is usually more than willing to work out a payment schedule that avoids draconian measures.No divorce court has an interest in harming the goose that lays the golden egg.
Still, entrepreneurs are dead right in being wary of divorce, particularly if theirs is among the estimated 3% to 5% of all filings that escalate to the level of litigation. The sheer cost of the ordeal, both emotional and financial, can be crippling to the company and its chief executive officer alike. Entrepreneurial decision making is impaired, and strategic planning is hamstrung for the duration of the proceedings. Partnerships are strained by the pressure of document-production subpoenas and depositions.
And that's not the worst of it.
If the case becomes such a pitched battle that word of the divorce leaks out into the industry grapevine or the newspapers, the company may begin to appear unstable to customers, lenders, and investors.More than a few divorce spats have been known to spawn spin-off lawsuits and even criminal prosecution. But the saddest stories are those of entrepreneurs who sabotage everything they have worked for by letting their egos -- and their deeply ingrained need to control not only their companies, but the divorce itself -- prevent them from doing what's best for business.
In Chicago, for example, there is a pending divorce case that may kill not one, but two companies, and perhaps send some people to prison before the final decree is issued. Norman Karel's $8.5-million printing company accounted for more than 80% of Joan Karel's million-dollar courier business -- that is, until their divorce heated up and he took his shipping elsewhere. She had begun subpoenaing his company's customers, in a move that he says cost him a large percentage of his business. Throughout the case, there have been allegations and counterallegations of spying. There has been violence, both actual and threatened. Eventually, the clamor caught the attention of the FBI, which stepped in -- complete with confidential informants wearing concealed microphones -- to investigate allegations that Norman Karel's company was paying kickbacks on several large printing contracts. His company, Earl Lee Co., was sold last fall; hers, Evergreen Air Express Co., is floundering; and their former customers and business associates are reading all about it in Crain's Chicago Business. Three years after the first petition was filed, neither side seems inclined to settle.
ENTREPRENEURIAL divorce statistics are hard to come by, but it's only half in jest that some company founders say they build longer and stronger relationships with their accountants -- or with their divorce lawyers -- than with their spouses. To many, marital discord is just another occupational hazard. If the physical and financial drain of getting a new company into the black doesn't cause problems at home, the strain of keeping it there will.
"Everybody's been through it at least once," signs a California manufacturer who has been granted his divorce, but has been haggling for two years over a property settlement that will make it all final. "I had lunch recently with four guys, and we counted 11 marriages around the table."
At one time, the conversation in such a group would have been jokingly fraternal, one trying to top another with tales of private-eye spying and alimony demands. Now the talk is technical, and deadly serious -- all about business valuators, restrictive stock agreements, and cryptic references to "damage control," a euphemism for hiding money from one's spouse. To entrepreneurs, divorce has become "just plain had for business," explains the founder of an investment banking firm who has been through the ordeal. "Worse than seeing your market dry up, worse than having your bank call in your loans, even worse than losing most of your key employees."
On some level, the typical business owner lives for the challenge of periodic business traumas. But this one is different. In a divorce, the entrepreneur is forced to stand by, frustrated, as a series of paid gladiators fight over the company's fate. Divorce lawyers (who call themselves matrimonial attorneys with the same logic that allows President Reagan to call MX missiles Peacekeepers) demand volumes' worth of documents and days of negotiation or deposition time. Business valuators -- one for each side -- paw through closely guarded business records, investments, and perks with as much glee as if they were dumping underwear drawers on the sidewalk. To some extent, the entrepreneur's greatest fear is already realized: the business is no longer completely under his or her control.
"An then some judge, whose knowledge of business probably stops at how to balance a checkbook, is going to tell me how much my company is worth?" The California manufacturer's voice quavers with a combination of anger and anxiety. By placing a value on his company, one that may differ from his own, the court is substituting its judgment on how to run a business for his.
"If the guy looks at an offer I got in 1984, when I was thinking of selling the company, he'll see somebody was willing to pay $1 million. But that included a noncompete for me, and I had no intention of retiring. I say the business is worth $600,000 today. If the judge goes with the million-dollar figure, though, I'll owe my wife $500,000, not $300,000." For him, there's more than the principle at stake. "Not only do I not have that amount of money, I can't sell for that amount, and the company can't carry that amount in debt.You see why I'm a little worried?"
The subjective nature of the valuation process is what makes it so fearsome to entrepreneurs facing divorce. Unlike larger, publicly traded companies, which can be valued with little more than a calculator and the stock tables from the local newspaper, there are no handy benchmarks for appraising small, individualized businesses. Those who have thought ahead rely on pre- and postnuptial agreements, or such estate-planning devices as restrictive stock-transfer agreements. But the entrepreneur who has knuckled down to such a degree of planning is an anomaly -- and in the opinion of some, probably too fastidious to have a spouse to divorce.
Let's face it: even the most hard-nosed of CEOs, the ones who get everything in writing, become trusting souls when approaching the altar. It just isn't very romantic to proffer a prenuptial agreement with the marriage proposal. So, unless there is inherited wealth, any discussion of who owns what, and who gets what in the event of a split, is usually avoided. Similarly, postnuptual agreements are shunned for their potential to become self-fulfilling prophecies. Who, being of sound mind and relative marital bliss, goes to a spouse and says, "Honey, let's talk about what would happen if we got divorced"?
Of these estate-planning devices, the most common is the buy-sell agreement, which aids an appraiser by setting out at what price company stock can be purchased. Still, such a document can be worse than useless to an entrepreneur facing divorce if it contains vague formulas or outdated figures. That's why many attorneys and accountants are recommending the inclusion of a sunset clause on any such agreement, reasoning that it's better to have no buy-sell than to be governed by one that is out of date.
Some experts also recommend that the buy-sell, which was designed to deal with probate issues, be worded to address divorce directly. One variation would have the entrepreneur (or other stockholder) facing a divorce sell all shares to his or her partner immediately, at a set price.It would appear that such a technique, while not defeating a spouse's claim to the economic value of the equity, would keep the company from becoming the battle-ground on which the divorce is fought. Then again, such a technique would require entrepreneurs to do precisely what they don't want to do: sell out.
Absent any strategic or financial benchmarks to guide the process, it's up to the appraisers to determine exactly how the company should be valued. While appraisers would have you believe their profession is more of an exact science than an arcane art, even the terminology is subjective. "Weighted averages" and "multipliers" sometimes turn out to be the result of the appraiser's conversations with nonspecified "experts in the field." Such buzzwords as "going concern value" (the inherent value of a business when all tangible assets and people necessary to operate the company are in place) and "goodwill" (usually defined as the company's name recognition, along with its perception in the communicty as an entity capable of delivering quality goods or services) are catchall headings that can be made to cover whatever the appraiser and the divorce attorney want them to.
However, it is probably better to try to make the best use of all this imprecision than to rely too much on overly rigid methods. There are horror stories of entrepreneurs whose businesses have been "appraised" with only a balance sheet and an income statement as guides. Others have seen supposedly knowledgeable appraisers cop out and value their companies according to Internal Revenue Service criteria, which require closely held companies to be compared with publicly traded entities in the same industry -- a method that makes guesswork look scientific.
Perhaps most exasperating of all, appraisers don't look at the company through the founder's eyes.They value the business as a buyer would, maximizing profit potential, minimizing management expense, and paying no attention to tax rates that encourage entrepreneurs to do the opposite. "If I see a CEO taking compensation worth $500,000 a year, I may add the perks and some of the salary back into the company and, based on market rates for managers in that industry, show compensation worth only $150,000," explains Neal Fisher, a Chicago CPA at Miller, Cooper & Co., whose specialty is appraisal. That's good news for a CEO interested in holding alimony payments down by showing less income. For those whose main concern is the disposition of the company and the size of the cash settlement, the news can be very bad. That's $350,000 more to add to the company's operating income, which, when looked at by an appraiser, says Fisher, can result in an increase in the value of the company that could be several million dollars.
TEN THOUSAND BUCKS A MONTH in support? Just petty cash to you, huh, fella?"
Joe DuCanto, a Chicago divorce lawyer and tax expert, it teasing one of his carriage-trade clients on the telephone. His firm, Schiller DuCanto & Fleck Ltd., represents many business owners, and the planning advice he gives his clients is unfailingly tough, traditional, and proentrepreneur: stay away from joint tenancy, in which marriage partners are also legal business partners. Joint tenancy automatically makes the company divisible marital property. And if divorce is in the offing, do the utmost within the law to "protect the flagship" and to "shield your interests from possible fragmentation."
But don't ask DuCanto's pity for the poor entrepreneur. "I represent both sides, and it's the wife, the nonoperating spouse, who really takes it in the chops. He [the entrepreneur] has an election of remedies that she doesn't." Partner Donald C. Schiller, chairman of the American Bar Association's Family Law Section, agrees. "He has the resources. He knows what is -- and isn't -- in the books. He also knows that, no matter how much he's bragged about skimming or unreported income in pillow talk, she either won't go after it or won't find it."
Won't go after it, Schiller says, because she doesn't want to go to jail: she may have either participated in her husband's scams, or by signing joint tax returns, could be shown to have had actual knowledge of his hijinks. Won't find it, DuCanto adds, because only the most vindictive -- and independently wealthy -- wives will dig deeply enough to prove their suspicions. Schiller DuCanto & Fleck stands ready to track down "every last 50? piece." Their appraisers have been known to confirm the unreported income of a pizza parlor and the falsified sales records of a bar by counting cardboard rounds and swizzle sticks. But that sort of financial spadework is expensive and still may not unearth what the entrepreneur has buried. "Many of these guys have been getting ready for divorce for years," says DuCanto.
Just as a CEO inflates the value of a company to attract a buyer by accelerating income and deferring expenses, it is an accepted fact among attorneys that an entrepreneur facing divorce will deflate the company's presettlement value by doing the exact opposite. One business consultant in a Chicago suburb, anticipating the breakup of his marriage, considered such tactics as entering into separate bank accounts, establishing new trusts, investing in side ventures, prepaying his taxes, and indulging himself in bigger but less obvious perks -- all of which are divorce shelters that are unlikely to be traced by a valuator. In the end, he decided it wasn't worth the energy to be so furtive. His strategy, rather, was to convince his wife that the business was more stagnant than prosperous.
"It was pretty simple," the consultant recalls. "First of all, you keep your mouth shut. You say nothing at home -- nothing positive, anyway. Even if you land a big contract, you say things are only OK at work, because you don't want that stuff thrown back in your face in court. Then, at the end of each quarter, you put everything in the worst light possible, and you tell your accountant you expect him to do the same. It was tiring, it was stressful, and I don't know that I'd do it again, but it worked."
Consider, as well, the California manufacturer who is still awaiting his property settlement. His company, which, by state law, won't be valued until his property-distribution case goes to court this spring, has had an abrupt falloff in business since he and his wife separated. Traditionally a better performer than its average competitor, the company's revenue this year is down by the same 28% the rest of the industry is reporting. Earnings are down as well. "It's partly the condition of the industry, and partly that I've had to reinvest -- spend a lot of money on executive-compensation packages for my top people, stock plans, and things like that. You have to address the long-term issues of the company periodically." But in describing his bad fortune, he does sound suspiciously gleeful.
Divorce-court judges will tolerate a little shading of the financial truth and a few fortuitous business setbacks. They'll even ignore a bit of tax fraud -- in fact, more than a few have glanced at bank-loan applications and other telltale documents produced by opposing lawyers, and hissed from the bench that they "don't want to hear about it," according to Los Angeles divorce lawyer Jan C. Gabrielson. "They don't want to know how much cash has been coming home," he says, "because it puts them in a difficult position." As one judge who participated in a seminar with Gabrielson put it to the audience, "Do I expose one or both parties to criminal tax fraud charges, or do I settle the divorce litigation on the basis of reported income?"
Judges are, however, disinclined to swallow blatant book-cooking, the kind obviously intended to boil dry the marital-property or alimony rights of the spouse. Sudden changes in business condition or status are nearly always scrutinized. The courts are also paying more attention to such defensive tactics as predivorce shifts of income or stock to sympathetic bystanders, including partners or family members.
One Miami-based clothier, for example, cut his salary from $120,000 a year to $70,000 when his wife filed for divorce. Interestingly enough, his brother, who was a partner in the business, got a $50,000 raise at about the same time. If there was a plan for the CEO to recoup that money, it never came out in court. The judge in this particular case opted not to explore the apparent income shift, because "he didn't want to spend the time," says opposing attorney Melvyn B. Frumkes of Frumkes & Greene. However, there have been similar but less successful ruses in other states. In some of them, the obliging partner was found to have paid the taxes on the additional income before returning his windfall under the table to the soon-to-be-divorced entrepreneur.
A more elegant twist to this sort of predivorce planning involved a Chicago entrepreneur and his partner-father, who entered into a stock-redemption agreement about 18 months before the entrepreneur filed for divorce. Almost immediately after the planning document was inked, the corporation began to redeem the father's stock at a grossly inflated price, draining the company of most of its profits. At the same time, the entrepreneur slashed his salary from $100,000 to $25,000. Under Illinois law, he might have used the business to shield his company and his income from a divorce decree. But he chose not to risk it, and settled with his wife out of court.
A New York state legislator, seeking to quell such abuses, has introduced a bill that would instruct judges to look at any property transferred within three years of the start of divorce proceedings to determine whether it had been done "in comtemplation of a marital action."
Some entrepreneurs don't stop with the mere juggling of dollars and cents. The founder of J&L Oil Co., an Illinois gas-and-oil distributor with stations in about 100 locations around the United States, simply dissolved the company's joint tenancy by signing his wife's name on the necessary documents. The trial court upheld Lester Wright's right to transfer company stock to a trust owned by him. But on appeal, Josie Wright prevailed -- the interest still belonged to her, and she was allowed to sell her stock.
The most brazen and desperate of damage-control tactics, of course, is to pull the plug on the business and shift the assets to some new -- and presumably, nonmarital -- property. Note the case of the California meat packer who stood up in the middle of his 1984 divorce trial to introduce his bankruptcy lawyer. In Pennsylvania, a woman who had started a company with her husband locked him out when the marriage failed, liquidated the assets, and transferred the proceeds to a second company. The court-appointed receiver stepped in just as a second liquidation was about to begin.
Even after a property settlement is negotiated or decreed, the judicial action can continue. There was the case of the Ohio watertreatment company, for example, which was valued by the entrepreneur's appraiser at about $1.7 million, by his wife's at about $5.5 million. The judge went a few months with the lower estimate. But after the final decree, it was learned that the entrepreneur had sold the business for $5.5 million. Upon the wife's motion, the Ohio Supreme Court sent the case back for some new arithmetic.
ALL THIS TALK OF financial maneuverings and their legal ramifications shouldn't obscure the obvious: divorce is, first and foremost, an intensely emotional experience. The entrepreneurs who hide money, devalue their companies, and otherwise pull out all the usual ethical stops when the adversary is a divorcing spouse, may appear to be contemptible human beings. Psychologists, however, say it's more likely that these people are responding, however inappropriately, to what they perceive as an almost life-threatening blow to their psyche. Is that blow any worse than any nonentrepreneur feels in similar circumstances? Emphatically, yes.
"There's a reason a guy calls his company 'my baby," explains Chicago business psychologists Bernard Liebowitz. "The threat of losing it is like losing a huge child-custody battle, or maybe worse. In one of those, at least you can still visit the kid when it's all over. Losing a company is different."
Such a loss, or the threat of one, is often referred to by psychologists as a "narcissistic injury." People who create companies invest "more than time and money," explains Carol Munschauer, a Buffalo clinical psychologist who has treated patients in both entrepreneurial and nonentrepreneurial divorces. "They really invest themselves, in the hope of achieving some sort of deep personal meaning. Maybe it's self-esteem they're after, or security, or power, or maybe even the approval of a parent. Whatever the business means to them, that's what's seen to be in jeopardy in a divorce. Even if there's no chance that the spouse will actually take the business, the entrepreneur often feels that he or she will be diminished somehow -- that he or she will not be regarded by the world in the same way. There's a loss of perspective, and, often, extremely exaggerated reactions."
When this narcissistic injury is combined with other character traits common to entrepreneurs, the result can be a long and messy divorce, says Liebowitz. "Some of these people, particularly the men, are often what I call bad controllers. While most good controllers understand that control is a give-and-take situation, these guys basically do not share what they perceive to be theirs.They are used to getting their way -- with employees, but particularly with a wife. By fighting for what's hers in a divorce, these guys often seen her as violating the basic rules between the sexes. They want to punish her. And because they see most situations in terms of winning or losing, they will keep fighting to win -- even if it means losing. Unlike a bad business deal, they won't give up."
There are others, however, whose reaction is not to fight at all. One New England builder's divorce, a decade ago, "so deteriorated him that he let the business cave in on him," recalls attorney Paul D. Pearson, of Boston's Hill & Barlow. "He wound up going through a forced liquidation, moving away from his family, and some time later, he was found dead of exposure on a Florida beach. Granted, the man probably had other problems. But the divorce was the visible beginning of the tailspin."
With that case behind him, Pearson now flatly advises his entrepreneurial clients to consider themselves emotionally disabled for the duration of their divorce proceedings, and he almost always suggests psychological therapy. Rare is the business, he counsels, that is not adversely affected by the founder's broken marriage. "I warn them that no matter how competent they've been, divorce will almost always, make them less so. They should expect distraction and a reduced capacity to concentrate. Having to shut the door once a day and cry shouldn't be considered uncommon."
Ellen V. B. Lapham, a Silicon Valley entrepreneur, traces the failure of her company to a series of difficulties that stemmed from the psychological stress of her split with her husband and co-founder. Syntauri Corp., whose key products were a piece of software and components for computerized music-synthesizers, was liquidated in 1984, at the age of four. It wasn't the divorce itself that was to blame; Lapham and her husband, software developer Scott Gibbs, reached an amicable divorce settlement -- one that called for them to go their separate business ways. The problems developed during the transition phase.
"It's a terrible feeling to have to admit that you're not the superperson you thought you were," says Lapham, who was Syntauri's president and CEO and is now part of an all-woman team attempting an assault on Mt. Everest. "But I found from the beginning that it was very difficult to devote the attention the business required." In addition, there were communication problems. "Whatever he said to an employee or customer, I'd say something different, and vice versa. Because the two of us weren't talking, there was a lot of distortion and side-taking." The confusion, combined with the exodus of two-thirds of Syntauri's employees, contributed to a backed-up product ion line. "We just weren't performing, and our dealers were being affected.
"Eventually, I went to my board of directors and said, 'Guys, I just don't have the stomach for this,' and asked them to bring in a manager." The assistance Lapham requested arrived in the person of Allan Fedor, a California turnaround specialist who says Syntauri's last chances to remain a viable company were "virtually shot by the divoce." The company died for lack of reinvestment money.
"I needed a new infusion of capital to build a new and better management team," explains Fedor, "but I was absolutely thwarted in raising money. Everbody I talked to was interested in the company, positive about its products and its potential in the market, but as soon as I disclosed that 60% of the company's stock was tied up in a divorce settlement, the bankers and the venture capitalists backed off. They just don't need stuff like that. To them, that's dealing with predictable irrationality."
Bankers, Syntauri's lender included, deny that a pending divorce, by itself, has ever stood between them and a good loan. As a suburban Boston commercial lender put it, "If it comes down to it, the nonoperating spouse will always be second in line to be paid, right behind the bank." Not so with venture capitalists, many of whom say their lack of similar legal protection is only part of the reason they steer clear of companies in the throes of divorce.
"What we like to see is a cohesive shareholder group, and divorce creates friction in such a group," explains a leading San Francisco venture capitalist who was at close range when the marital shooting started in several companies. At Vector Graphic Inc., where founder and CEO Lore Harp divorced her employee-husband, Bob, "there was such a division between those who were for her and those who were for him -- it created a stalemate that took two years to resolve." Based on that experience and others, is he concerned enough about divorce and its effect on companies to require pre- or postnuptial agreements in his deals? "I never have, but you're giving me ideas."
Chicago lawyer Charles Fleck, who left a judgeship at Cook County's Domestic Relations Court to join Schiller and DuCanto's divorce practice, says the real losers in a messy divorce will always be the innocent bystanders -- the employees, partners, and other family members. He marvels at how oblivious entrepreneurs can be to the need to protect these people as much as possible.
"I've got a case now, a management company in the East, that has been rendered absolutely ineffective by a divorce," says the former judge. "The guy in charge iw worthless -- too emotionally upset to make decisions. His partner left, clearly because he was tired of having his life dragged into the divorce for years on end. Thanks to all the talk in the hallways, what was a 300-employee operation is now down to 50. And still it drags on."
At times, the aggrieved strike back. From Beverly Hills, lawyer Daniel Jaffe tells the story of the founder of an electronic-parts business who is suing his recently divorced business partner, alleging that the partner ran the 19-year-old company into the ground. According to the court complaint, it took only five months, after the divorce petition was filed, to siphon off all of the company's working capital and shut the place down. The company is now, in lawyer Jaffe's words, "in a paper box at the bank." The company founder and the wife are trying to recover their losses from the personal assets of a man they both wished they'd never met.
ADVICE? FEW ENTREPRENEURS WHO have lived through a divorce would dispute the recommendation of the business consultant in the Chicago suburb -- the one who spent four years prior to the divorce trying to make his wife think the company was stagnant: "Settle -- aggressively, but settle. Get over it. Then get on with it -- business, life, whatever.
"It all gets so anti-entrepreneurial," he continues, sounding fatigued just thinking of the effort that went into the subterfuge. "You work and work to build something that you and everyone around you can be proud of, and then, because a personal relationship has failed, you find yourself in this totally negative situation, doing devious, ridiculous, negative things. And doing negative things isn't something you -- or the company -- recover from overnight. It really goes against your grain. But, somehow, you get caught up in it, y'know?"
Duane Meulners knows. As he told the court that convicted him of trying to end his divorce with the help of a hit man, his plan to kill Kathleen was a fantasy -- one that he says he never would have carried out. Oh yes, he planned and he schemed -- but nobody sounds more confounded by his actions than Meulners himself. "Somehow I was unable to stop the process I seemed to have started."
Meulners was, however, able to put an end to the divorce -- and with it, his fears of losing control of Dymek Corp. After his trial, he and his wife left the courtroom hand in hand. As he puts it, they are now back "on conciliatory terms."