Forbes Magazine
June 12, 2000

I Want Half
By Mary Beth Grover

The silver lining: a booming stock market, with lots of money floating around. The cloud: messy divorces.

THANK YOU, GOD," THOUGHT SELCUK SAHIN, when she learned in January 1999 that Lucent Technologies was going to buy her ex-husband's software firm for $1.5 billion.

Three years earlier a divorce court judge in Dedham, Mass. had valued the software company, Kenan Systems, at a mere $4.9 million, and awarded Sahin 30%, to be paid out over five years. Now Sahin has launched a legal battle to reopen the divorce case, delighted over the prospect of getting a piece of that much bigger pie.

It will be a tough case, if the judge even allows it to be reopened. She will have to show that her ex-husband, Kenan Sahin, intentionally undervalued his company during their divorce trial. But she isn't deterred. Nor are lots of ex-spouses these days.

The booming economy has made getting a divorce more complicated -- and expensive -- than ever by enlarging the potential pot of riches. Spouses now routinely seek big chunks of their ex's retirement plans, stock options and companies, all inflated by the good times. They're even trying to put a value on a spouse's future career and staking a claim to part of it. Indeed, these days you need a "valuation expert" as much as you need a divorce lawyer.

The bad news for the spouse with the money is that judges are buying it. "The trend clearly is that the courts are making the pot bigger, and it's costing more money," says New York City lawyer Robert S. Cohen, who has represented such Wall Street luminaries as Henry Kravis.

Some of this started with the Lorna Wendt case a couple of years ago. She's the ex-wife of the former head of General Electric Capital Services who got a $20 million divorce judgment -- and became a feminist symbol in the process. She had sought half of not only "hard" assets, like cars and home, but "soft" assets like Gary Wendt's pension benefits and even unvested stock options.

The judge granted her a portion of those (she's appealing for more) and went even further by placing a high value on her nonmonetary contribution as homemaker and career supporter. That was a departure from the typical practice, where judges award the nonworking spouse only an amount that's required to maintain the lifestyle she (nowadays, on occasion, a "he") enjoyed during marriage. The breadwinner typically got the rest, usually far more than half.

The Wendt case triggered a scramble by many spouses, and their lawyers, for their exes' assets. The timing couldn't have been better. The Internet economy was producing plenty of swollen, asset-rich targets for aggrieved spouses, and things got real complicated.

Take Selcuk (Sally) Sahin. She will try to prove that her ex's software company was undervalued by at least $185 million at the time of their divorce settlement. If she succeeds, she could easily pull in another $60 million.

The Sahin tale began in June 1994 when Sally, now 59, filed for divorce from Kenan, also 59, after 29 years of marriage. The main asset to be divided was Kenan Systems, a purveyor of billing software Kenan Sahin had founded in 1982.

The pair hired his-and-her valuation experts. His came up with $4.2 million, hers with $15 million. Two months after their divorce trial in February 1996 the judge settled on a value of $4.9 million and awarded Sally $1.5 million. Not quite three years later her ex sold the firm to Lucent and was being described in the Istanbul press as the "Bill Gates of Turkey." He announced a gift of $100 million to the Massachusetts Institute of Technology and proposed to his girlfriend at Lucent's year-end party.

Meanwhile Sally was busy with her lawyer, having settled on one known not so much for divorces as for business valuation, Edward Leibensperger of Boston. "This is in the divorce courts, but it's really a corporate fraud case," he declares. He claims he'll show that Kenan withheld key financial information during their 1995 divorce trial.

Kenan Sahin says the allegations of fraud are absolutely without merit. He stands by the valuation previously set by the court, and says he has nothing to hide. "All the records were made available to my ex-wife's lawyers during litigation," he says.

Sally Sahin, who gets $120,000 a year in alimony, isn't exactly destitute. But, as a survivor of breast cancer, she worries about her medical bills. She was a nursing professor before; she said she quit to do administrative work at Kenan Systems. Now she vows, "I'm approaching this like a research project. I'm not giving up, and I'm going all the way." If it's a good time to be a business valuation consultant, it's terrific to be a retirement plan actuary. What's a retirement package worth? Or even, as is now being litigated in Louisiana, when is a payment a retirement plan, and when is it something else? Mary Jane Lupberger, 63, and Edwin Lupberger, 64, former chief executive of Entergy, were married for eight years. Their accumulations included a Mercedes-Benz, a Jaguar, three homes, $185,000 in art and antiques, and an Entergy retirement plan. Their divorce decree was handed down in May 1998. Four months later Edwin got a $9.5 million lump-sum payment from Entergy.

Courts generally view retirement plans as part of marital property, often giving ex-spouses a share based on the amount accumulated over the course of the marriage. In the Lupberger case that would be 50%, because Louisiana is one of five community property states (the others: Texas, Florida, Michigan and California) in which assets are split down the middle.

But Edwin contends that the $9.5-million payment doesn't represent his retirement at all. Rather, it is part of a severance package he began negotiating for himself when he was fired in the spring of 1998, amid a sagging stock price and criticisms of his extravagant corporate lifestyle (he had the company buy a $24 million private jet). Since the severance negotiations were completed after the divorce became final, he says, his wife is not entitled to a penny of that payment.

Mary Jane's lawyer, New Orleans-based Peter Butler, says Edwin cleverly shifted the money between different retirement plans and then took the lump-sum payment without telling Mary Jane. He says that he only found out about it when he subpoenaed documents from Entergy. Butler also fumes that Edwin Lupberger is building a $1.4 million house on property the pair owned together in Crested Butte, Colo. In all he says his client deserves $2.5 million of the lump-sum payment and at least $600,000 for the Colorado property.

Confronted on the witness stand about the property in the Rockies, Edwin Lupberger cried. He complains that he has it much worse than GE Capital's Gary Wendt. "My case is different. They'd been married 30-odd years. She helped him build his career. This woman didn't do anything. I was CEO when she married me." He dismisses his ex's allegations that she contributed to his career by quitting her decorator's job in order to travel with him and entertain: "She had a good time, she had a great ride. She got on the rocket right after it took off, and she got off right before it crashed into the ground. She got the best of it." A judge's decision is expected in early August.

In New York State the courts are tapping another pot of money -- the value of careers. With the economy strong, says Martin Randisi, a valuation expert in St. James, N.Y., "husbands say, 'Let me have a good time and party. I've got plenty of money to pay my wife off, let me get out of it.'" Divorcing lawyers and doctors have long been subject to having their licenses and practices valued. Awards have been made to wives, for instance, who worked to put their husband through law or medical school. The value calculation, deemed "enhanced earnings capacity", (see table), involves looking at how the moneyed spouse's earnings grew over the course of the marriage and then projecting a future value to it. That value is then divvied up based on the nonworking spouse's contribution to the working spouse's career. A common award is 20% or so of the value of the license as well as a share of the professional practice.

These days, however, New York State courts allow the careers of investment bankers and other Wall Street types to be valued. And exes typically demand 50% of future earnings.

This could get expensive. What if you get divorced twice? What if each ex claims half your paycheck? That hasn't happened (as far as we know), but the haggling gets really complicated when dual careers are involved. One case in New York reveals the valuation maneuverings of a trader and his stockbroker wife. Each had worked for five or so years before they got married. Seven years later they decided to get a divorce. His earnings grew from $300,000 a year at the time of the marriage to $2 million at the end; hers grew from $400,000 to $2.5 million.

Sounds roughly equal, right? Except the husband is claiming he helped build his wife's career. He's demanding his wife pay him half of her "enhanced earnings capacity," on the theory that the stock tips he passed along were behind the phenomenal growth in her clientele. The case has kept three valuation experts busy -- his, hers and a neutral one for the court. A decision is expected in a few months.

Hey, look at the bright side. A decade ago your crummy stock-option plan wouldn't have been worth fighting over.