Kohl v Kohl (2004 NY Slip Op 51759(U))

Kohl v Kohl

2004 NY Slip Op 51759(U)

Decided on October 20, 2004

Supreme Court, New York County

Drager, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

Plaintiff (the "Wife") commenced this divorce action on November 24, 2000. At issue are equitable distribution of the assets and liabilities of the marriage, maintenance and counsel fees. In addition, pursuant to a pre-trial motion, defendant (the "Husband") asks this court to hold the wife in contempt for violation of various pre-trial orders. The court conducted a trial on March 3, 4, 5, 6, 11, 12; June 11, 23, 24, 25, 26; August 4, 5, 6, 7, 11, 12 and 13, 2003. Each party submitted post-trial briefs. By agreement, the parties addressed the issue of counsel fees in written submissions. During the trial, without opposition by the husband, the wife was granted a divorce on the grounds of cruel and inhuman treatment. (DRL § 170 (1); Tr. Mar. 3, 9-13 ).^[FN1]

The parties married on May 8, 1979. This was a second marriage for each party and they each have two children from their prior marriages. All of the children are emancipated. There are no children of this marriage. As of the date of trial, the husband was 61 and the wife 60 years old. The husband still pays maintenance to his first wife. (Tr. June 23, 962-3; Aug 11, 9-10; Exs. 99, B).

The wife was a homemaker at the time of this marriage. She did not work outside the home during the marriage, except for a two year period in the 1980s when she engaged in freelance photography work. (Tr. June 23, 987, 990; June 25 1337-46). She remained an avid amateur photographer and took many photography courses over the years of the marriage. (Tr. June 23, 1000; June 24, 1172; June 25, 1333-4).

The husband's father and uncle owned an interior construction business, Herbert Construction Company ("Herbert"). From the age of ten, the husband worked part-time for Herbert. Upon graduation from college in 1964 with a degree in civil engineering, the husband [*2]immediately began to work full-time for Herbert. During the years right after college, the husband gained experience in all facets of the business, working as a laborer, project manager, estimator and superintendent. By 1968, under his father's tutelage, the husband began to focus on the sales end of the business. (Tr. Aug. 11, 4-8). He excelled in this work and sales became his principal contribution to the business. Sales in the construction industry continues to be his principal employment activity. (Tr. Mar. 3, 65-6; Aug. 11, 3-8).

In 1985, Herbert was sold to an affiliate of the American Express Company. Shortly before the sale, the husband was brought into the business as a partner. As a result of the sale of the business, the husband received one-third of the $5,000,000 sales price. (Mar. 3, 67-9; Aug. 11, 43). After the sale, he continued to work as the president of Herbert. (Tr. Mar. 3, 69). In 1990, the husband bought Herbert back from the American Express Company for $10,000,000. Ultimately, however, the husband paid only $7,000,000. The reduction in cost resulted from some work performed by Herbert for the American Express Company, as well as the forgiveness of some loans extended by the husband to another company. (Tr. Mar. 3, 72-5; Mar. 4, 123-38).

The parties maintained a luxurious standard of living. They acquired two apartments in Manhattan and a large home in Southampton. They traveled frequently and amassed extensive art and jewelry collections. They regularly dined out at expensive restaurants and attended cultural events, including theater, opera and ballet. They maintained expensive cars. The wife received a substantial monthly allowance and unlimited use of credit cards. (Tr. June 23, 966, 971, 979-80,1015-6; 1110; June 24, 1533-5).

In 1995, the husband became the target of a criminal investigation for alleged larceny, money laundering and tax evasion. The case proceeded to trial in 1997, but during jury selection, the husband pled guilty as a result of an offer extended by the New York County District Attorney's office. The guilty plea resulted in a sentence in 2001 of probation with a fine in the amount of $2,750,000. Legal fees incurred as a result of the prosecution were approximately $1,300,000. In addition, the husband's holding company, DPL Interiors, Inc., was required to pay taxes and penalties in the amount of $316,127 to New York city (this payment covered taxes owed by this company and the husband and wife as individuals). In conjunction with the criminal prosecution, the district attorney's office filed a civil forfeiture proceeding against both the husband and wife. For the better part of one year, the parties' assets were frozen. (Tr. Mar. 3 24-45, 51-2, 141-3;Aug. 4, 116-9, 133-4, Exs. 2, 4, 5, 13). As a result of the criminal prosecution and attendant publicity, Herbert lost its clientele. Although Herbert still exists, it is listed as an inactive corporation with the New York Department of State. (Mar. 3, 99; 102-8; Ex. 107, p. 19).

During the pendency of the criminal prosecution, the husband was able to arrange through his attorneys to have many of the parties' assets transferred to the wife. Had the husband not reached a settlement with the District Attorney, these transfers may have protected the assets from loss in the forfeiture proceeding. (Tr. June 24, 1266-73; Tr. Aug. 11, 62-3). [*3]

As Herbert's business declined, some of its employees decided to create a new construction company. IDI Construction Company, Inc. ("IDI") was formed by J.S., Herbert's executive vice president, and E.B., Herbert's bookkeeper. The husband began to work for IDI shortly after its creation and became its primary salesperson. In 2000, the husband earned $1,360,000 from his work for IDI. (Tr. Mar. 3, 110-2; 117-8; Mar. 5, 432; Mar. 12, 762-3; Ex. 107).

MARITAL ASSETS AND LIABILITIES

The parties entered into two stipulations prior to trial in which they agreed to the value of certain assets (Stipulation, February 28, 2003; Stipulation, March 3, 2003). The parties each acknowledged that these items are marital assets (Pl. Statement of Proposed Disposition; Def. Statement of Proposed Disposition), with the exception of the "Metal Box Building" (see, infra.). These assets and their respective values are as follows:

Marital residences:

210 Meadow Lane, Southampton, New York ("Southampton residence")$15,000,000 ^[FN2]

Apartment 8E, 425 East 58th Street, New York, NY ("Marital residence")$1,960,000

Apartment 37F, 425 East 58th Street, New York, NY ("Second apartment")$ 780,000

Nynex House, Gardner Road, Portslade, West Sussex, London

("Metal Box Building")ś2,850,000 ^[FN3]

Artwork $2,211,467 ^[FN4]

Wine collection$ 23,335 [*4]

Wife's clothing$ 184,005

Husband's jewelry$ 44,575

Wife's jewelry$ 45,550

Decorative arts and furnishings$ 40,720

At issue is whether the husband has an ownership interest in IDI or, if not, does the sales and consulting work he performs for IDI constitute a business and an asset subject to distribution.

The wife seemingly contends that the husband has an ownership interest in IDI. She bases her claim on a conversation she recalls having with him in the fall of 1995 in which he said he was starting a new company with J.S. and E.B.. These individuals would front for the husband until the criminal action was resolved at which time he would take back the company. The wife did not recall hearing the name of the company during this conversation. Subsequently, she claimed that the husband told her many times he would be taking over IDI, but she gave no specifics of those conversations. (Tr. June 23, 1045-6; June 24, 1289-90).

Mr. J.S. and Ms. E.B. were the original owners of IDI, but the evidence reveals that the husband always had very close ties to the company. Mr. J.S. had worked many years for the husband at Herbert. Ms. E.B. had been Herbert's bookkeeper and had worked for many years for the company with the husband's father. The evidence revealed that she played a bigger part in overseeing the finances of the business than the title of bookkeeper might suggest. Moreover, she had been like a mother to the husband. Ms. E.B. died of cancer in 1998. (Tr. Mar. 3., 312-5; Mar. 5, 433-4).

Mr. J.S. and Ms. E.B. formed IDI with minimal capital investment (Tr. 453-4). The husband helped steer business to IDI in its early days and began to bring business to the company as a salesperson shortly after its creation. The husband was instrumental in obtaining office space for IDI and he began to work out of that space shortly after the company moved in. The evidence revealed that the husband brought in anywhere from 65-80% of IDI's business (Tr. Mar. 4, 225; Mar. 5, 482-3).

Although his tax returns indicate that he was self-employed (Exs. 41, 79), the husband received benefits from IDI not usually provided to a person with a separate business. He [*5]received office space, secretarial services and other support services from IDI without paying rent or business expenses. He received significant perquisites from IDI, including three cars (one for his wife), cell phones, garage space and a gas credit card. These benefits were greater than those received by any of the officers of the company. (Tr. Mar. 4, 193-4; Mar. 11 632-7; Aug. 6 , 337-8). In addition, his earnings were higher than any of IDI's officers (Tr. Mar. 11, 680). Moreover, the husband received several loans without any signs of formality (such as a promissory note, charging of interest, or set repayment schedule) from IDI and its officers, suggesting an unusually close relationship between a salesperson and a company (Tr. Mar. 4, 294-6, 304; Ex. 107, pp. 3, 27-9).

The wife's expert accountant valuator, John Johnson, of BST Valuation and Litigation Advisors, LLC ^[FN5] posited that all of these indicia suggest that the husband's relationship with IDI may not be at arm's-length and that there may exist a financial understanding between the husband and the owners of IDI "that transcends a customary independent consultancy relationship." (Pl. Ex. 107A, p. 2). The wife contends that the defendant possesses a "phantom ownership interest" in IDI. Mr. Johnson defined this term to mean that an individual possesses rights and entitlement of ownership without necessarily being an owner (Tr. Aug. 5, 214-5).

However, the wife offered no evidence regarding the value of IDI or the value of the husband's alleged phantom ownership interest in IDI. Indeed, the wife's own expert found he had insufficient information about IDI to formulate any opinion as to the value of the husband's alleged ownership interest. (Tr. Aug. 5, 178). Thus, notwithstanding the fact that plaintiff devoted a significant amount of time at trial to eliciting evidence about IDI, she does not claim IDI or the husband's "phantom ownership interest" in IDI as a marital asset and the court finds neither to be a marital asset.^[FN6] Rather, the wife claims that the husband's sales and consultancy business is a marital asset subject to distribution.

Mr. Johnson pointed to a number of indicia that he claims establishes the husband's independent contractor status. The husband claims he is an independent contractor on his tax returns. IDI provides him with a 1099 form for tax purposes and Mr. J.S. testified that the husband is an independent contractor (Tr. Aug. 5, 181-3 ). The husband also claims to be self-employed in his two net worth statements filed in this action (Exs. A, B). Defendant entered into [*6]a consulting contract with IDI on January 10, 2000 defining the terms of his services as a consultant for IDI, covering the period January 1, 1998 through December 31, 2002. This contract contains a non-exclusivity clause enabling the husband to "pursue other engagements or employment during the term of the Agreement." Pursuant to the contract, the husband receives as compensation a fee between 1% and 2% of the total sales generated by him. The actual fee is subject to negotiation on a job by job basis, but the husband's fee is not premised on the profitability of the project. However, the officers of IDI, not the husband, decide whether to accept a job brought in by the husband. The husband agreed in this contract to indemnify IDI for any losses it might sustain because of his services. He is responsible for his own taxes and carries his own insurance. (Tr. Aug. 5, p. 181; Ex. 15).

Defendant countered this evidence with the testimony of his own expert witness, Richard Freedman of Richard Freedman Associates, CPA PC. He contended that the husband does not operate a business. Rather, notwithstanding the consulting contract, the husband's association with IDI is more in the nature of an employee-employer relationship and the fees and commissions he receives are, in actuality, wages. (Ex. V).

According to Mr. Friedman, the consulting agreement requires the husband to perform services for IDI well beyond those normally expected of an independent contractor. Among other obligations, the husband must monitor all departments, report to management on a daily basis, motivate managers, and aid in staff development. Mr. Friedman expressed particular concern that the husband was obligated by the consulting agreement to secure bonding for projects. According to Mr. Friedman, independent contractors are typically retained to perform only one or two specific, short-term tasks, and then leave. The husband's responsibilities for IDI are ongoing, suggesting a more traditional, long term, employer-employee relationship. In addition, Mr. Friedman noted that IDI provides the husband with office space, services and "perks", all suggestive of an employee-employer relationship. Finally, the husband has no ability to bind the company; rather, the company must approve any project brought to it by the husband. (Tr. Aug. 6, 337-9).

From all of the evidence presented, the court concludes that the husband is an independent contractor and that his sales and consultancy business is an asset subject to distribution. The court finds the opinion expressed by Mr. Johnson persuasive. Notably, the husband holds himself out as being self-employed both in this action and to tax authorities. He has never received benefits from IDI that an employee would be eligible to receive (e.g. medical insurance, etc.). Moreover, the consulting contract he entered into with IDI is further evidence of his remove from the company. Finally, his business skill has enabled him to become an exceptional earner generating substantial good will that has enabled his business to continue to thrive.

The law in this state is well settled that marital property is to be broadly defined and may encompass things not otherwise considered assets at common law. O'Brien v. O'Brien, 66 NY2d 576 (1985); DeJesus v. DeJesus, 90 NY2d 643 (1997). The business of an independent [*7]contractor is subject to distribution as a marital asset. Moschetti v. Moschetti, 277 AD2d 838 (3d Dept 2000); Griffin v. Griffin, 115 AD2d 587 (2d Dept 1985). An independent contractor's business is no different than other proprietorships, such as a legal or medical practice, found to be subject to distribution as marital assets. Arvantides v. Arvantides, 64 Ny2d 1033 (1985); Litman v. Litman, 93 AD2d 695, affd, 71 NY2d 918 (1984). Moreover, where a person's business acumen has enabled him to become an exceptional wage earner, the court will consider if that person's "good will" is a thing of value subject to distribution. Moll v. Moll, 187 Misc 2d 770 (Sup Ct Monroe County 2001); Golub v. Golub, 139 Misc 2d 440 (Sup Ct New York County 1988).

Turning then to the issue of the value of this asset, both parties concur that the excess earnings approach is the appropriate valuation methodology for this business.^[FN7] Under this approach, the valuator must first determine the earnings received by the husband from his business. The wife offered two scenarios. In "Scenario I" she claims that the husband's earnings consisted of the commissions he received from IDI. In "Scenario II" she adds to those commissions the various loans the husband received from Ms. E.B., Mr. J.S., and K.S., another IDI shareholder, claiming that these "loans" were, in fact, additional unreported income received from IDI. (Ex. 107).

Mr. Johnson testified that in 1998, the husband received from Ms. E.B., $25,000 roughly each month, paid with IDI checks, for a total of $250,000. This money was intended to defray the parties' expenses arising from the criminal prosecution. The husband also received from Mr. J.S. $150,000 for a partial payment towards the penalties assessed against the husband resulting from the criminal prosecution and $165,000 to pay income taxes. In addition, Mr. K.S., loaned the husband $600,000 towards the payment of the fine owed from the criminal prosecution. Mr. K.S. had himself borrowed money from IDI. This loan was satisfied by subtracting the remaining balance owed to him by the husband. The informality of each of these loans, including the lack of any promissory notes, repayment schedules or terms, raised in Mr. Johnson's opinion "professional skepticism" and the possibility that the husband "is enjoying the benefit of additional 'earnings' under the guise of 'loan' transactions." (Ex. 107A, p. 29; Tr. Aug. 5, 196-204).

However, the court finds there was insufficient evidence to support the view that these loans were additional earnings. Indeed, Mr. Johnson conceded that he would need more facts to determine if the loan activity he saw was in fact indicia of ownership. (Tr. 8/5, p. 295). He acknowledged that the personal relationships between the husband and those who lent him money might affect whether the loans should be considered earnings from IDI. For instance, he testified that he was unaware that Ms. E.B. was like a mother to the husband. Knowing that fact, Mr Johnson acknowledged that he could not assess whether the funds she gave the husband were [*8]loans, gifts or earnings from IDI. (Tr. Aug. 5, 324, 327).

The evidence revealed that the husband also had close personal ties to both Mr. J.S. and Mr. K.S. developed over years of working together. Mr. K.S., a real estate developer, testified that he had borrowed money from Herbert in 1995 when he needed to close a deal and the husband was the only person he could turn to for help. In lending the husband money Mr. K.S. felt he was returning the favor (Tr. 3/12 795-6). Plainly, Mr. J.S. owed his career to the husband. (Tr. Mar. 5, 433). In addition to doing business together, they are friends. When the divorce action began, Mr. J.S. helped the husband pack his belongings to move out of the marital apartment. (Tr. Mar. 11, 640-43). Although the court finds that portions of Mr. J.S.'s testimony with respect to the loans lacked clarity and even credibility, the court cannot conclude from the evidence that the funds Mr. J.S. gave to the husband were anything but loans. (Tr. Mar. 11 694-715). In sum, the court rejects the wife's "Scenario II" valuation.^[FN8]

The court, however, accepts the wife's "Scenario I" as an appropriate model for valuation. Under this scenario, the husband's earnings are limited to the commissions he received from IDI. These amounts are not subject to speculation. Moreover, the husband agrees that, if the court finds there is a business subject to valuation, the commissions he received from IDI are the appropriate earnings stream to use for valuation. Both parties agree that the husband's weighted average normalized earnings before taking a reasonable compensation allowance is $1,132,067. (Ex. 107A, p. 35; Ex. V, p. 9, Tr. Aug. 6, 348).

However, the parties arrive at two significantly different values for the business. The husband contends that the theoretical value of the sales and consultancy business is $315,622; the wife contends its value is $1,600,000. These disparate conclusions result from two major valuation differences. First, the parties disagree on the amount of reasonable compensation that should be deducted before determining the value of the business component of the husband's earnings. Only earnings over and above reasonable compensation can form the basis for the valuation of the ownership interest under the capitalization of earnings methodology. The wife argues that a reasonable compensation figure is $400,000 while the husband contends it is $750,000. (Ex. 107B, pp. 10-12; Ex. V, 2). The court finds $400,000 to be the reasonable compensation figure. Both expert witnesses conceded that no direct, statistical source exists for persons holding comparable positions to that held by the husband. However, the court finds that [*9]the wife's expert presented cogent arguments to support his assessment of reasonable compensation. Mr. Johnson considered the compensation received by the IDI officers, related, statistical sources for corroborative comparison, and the husband's historical earnings. (Tr. Aug. 5, 211-13; 267-275). In contrast, Mr. Friedman gave little justification for how he arrived at his $750,000 figure other than from his own experience in auditing and valuing businesses. Moreover, he gave few specifics to justify his conclusion (Tr. 8/6 351-6; 396-8; 435-8; 448-9; 489-90; 500; 568-72). In sum, the court found Mr. Johnson's assessment of the husband's reasonable compensation more credible.

The second significant dispute in the valuation concerned what capitalization rate should be applied based on an assessment of the risk factors of the business. In the capitalization of earnings valuation method, after deduction of reasonable compensation, a capitalization rate must be applied to the remaining earnings to determine the value of the business. Both parties agree that the capitalization rate here should be determined using the "build-up method". This approach adds to a risk free investment rate all relevant risk factors, including for the overall market, the particular industry, and the specific business being valued, to ultimately determine the risk a hypothetical buyer of the business would have to assume. From this number, the valuator can calculate the rate of return a buyer would want to receive to assume that risk, thereby arriving at the fair market value of the business. The wife's expert concluded that a 25% capitalization rate (capitalization multiple of 4) was appropriate; the husband's expert proffered a capitalization rate of 44.3% (capitalization multiple of 2.25). (Ex. 107A, p. 35-6; Ex. V, p. 6-9).

In performing the build up of the risk factors, the experts were in general agreement through assessing the historical risk premium (the risk factors from a risk free investment through a small capitalized corporation).^[FN9] The major discrepancies arose in determining the risk factors for the specific business being valued. Both experts conceded that the determination of those risk factors is largely subjective (Tr. Aug. 5 237-8). The court concludes that the assessment by Mr. Johnson is more credible and supported by the evidence.

The main difference arises from Mr. Friedman's assignment of a 32% risk factor for dependence upon a key person, that being the husband. The court finds that the assignment of such a high risk factor is not reflected in the reality of the business during the period subject to valuation. For instance, Mr. Friedman assigned as a high risk factor the stability of the business's earnings. He contended that the earnings of the business are entirely dependent on the husband and the real estate industry. ( Tr. Aug. 6, 375-6). While this is true, during the period subject to valuation, the husband's earnings increased each year lending weight to the conclusion that the business has stable earnings. Similarly, Mr. Friedman included as a high risk factor the fact that there is no continuity of customer base. In point of fact, the husband often had repeat customers (Ex. 29) and, both historically and through the valuation period, was able to obtain new jobs without any evidence of difficulty. In addition, although Mr. Friedman noted that the growth [*10]potential of the company might be a risk factor, he conceded that the husband's earnings had increased during the period under valuation. Thus, not only was this not a risk factor (Mr. Friedman subtracted 5% from his risk assessment because of the business's growth), but lent support to the conclusion that Mr. Friedman overstated the other risk factors. (Tr. Aug. 6, 385).

Mr. Johnson acknowledged that certain risk factors exist (e.g. key-person, size premium, customer concentration, etc.) as well as lack of marketability. However, the court finds Mr. Johnson's assessment that a hypothetical buyer would seek to recapture the purchase price in 4 years reasonable not only with respect to the accounting methodology he employed, but also as supported by the evidence of the success of the business. (Tr. Aug. 5, 205-206).

Finally, the court finds no basis to consider the husband's criminal conviction or pending sentence as of the date of valuation as having any relevance in the valuation of the business. Plainly, the conviction did not stand in the way of the husband acquiring many jobs for IDI. He was able to quickly rebuild his career after the conviction, enabling him to again become an exceptional wage earner. Similarly, the fact that the husband was awaiting sentence had little effect on his earnings. As the husband himself acknowledged, he accepted the plea offer to avoid the possibility of a prison sentence if convicted after trial. (Tr. Aug. 11, 44). It is disingenuous of the husband to now argue that at the time of valuation that he was still facing the genuine risk of imprisonment.

In sum, the court concludes that the husband has a sales and consultancy business, that this business is a marital asset, and that its value is $1,600,000.

In addition to the stipulated jewelry (see, supra.), the parties agree that the wife had in her possession at the time this action commenced additional jewelry and a porsche automobile purchased during the marriage with marital funds and which she claims she no longer possesses.

The wife testified that in May 2001, she sold an eleven carat diamond ring in a Bulgari setting, for $187,000 because she needed cash. The wife claimed that she got the purchaser's name by calling Christie's auction house, Sotheby auction house, and the jeweler, Harry Winston. The wife knew that the auction houses have appraisal departments, but she did not have the ring appraised before selling it. Although the buyer was a jeweler, the wife had never sold any jewelry to this company before and had never previously sold a piece of jewelry of this magnitude. She did not seek a second opinion with respect to the price offered. The sales receipt offered into evidence was handwritten and contained little information about the ring or how the purchase price was determined (ex. 94). The husband did not learn of the sale until August 2001when his accountant got from the wife her preliminary tax return which listed the sale (Tr., June 23, 1107-08; June 25, 1351-2; 1354; 1371). The wife further testified that before she sold the ring, she learned from the husband that he bought the stone for $300,000 (although he had also told her that it was worth $400,000). She also testified that the Bulgari setting cost $30,000. (Tr. June 25, [*11]1357-9).

In January 2002, the wife sold thirteen pieces of jewelry for $100,000. The wife testified that she was, again, desperate for cash and while discussing her need at her hair salon, an unknown woman said that she had a friend who could help the wife. A few weeks later, an unknown man called the wife at home. He agreed to purchase the thirteen pieces of jewelry for $100,000 in cash. The wife testified that she met the man in the Sutton Place park. She brought with her the jewelry in a shopping bag and he brought with him $100,000 in $100 bills in a shopping bag. In the park, the wife counted the bills while the man checked the jewelry and the exchange was made. The wife returned home with the shopping bag full of cash. She spent the money over the next year. The wife did not tell the husband that she was selling the jewelry, she did not have any of the items appraised and she did not take pictures of the jewelry before the sale. She knew the jewelry was marital property and that it would have to be appraised as part of the divorce action. The wife claimed she sold the jewelry because she was in need of cash, although at the time of the sale she had over $460,000 in her accounts, was receiving $24,000 each month in tax-free maintenance, and owed her lawyer only $83,000. (Tr. June 23, 1107-8; June 25, 1372-89).

The items sold included three pairs of Van Cleef and Arpel earrings (which the wife, herself, claimed were worth $30-35,000); one pair of Cartier earrings; a Bulgari gold watch; a Bulgari necklace with pearls and stones; a Bulgari gold and diamond necklace with matching earrings; a gold bracelet; a Harry Winston gold watch; a Harry Winston gold and diamond wedding band; a Tiffany gold wedding band; and a David Webb wedding band. (Tr. June 25, 1380-3).

The husband testified with respect to his recollection of the purchase price for most of these items:

ItemPurchase yearPrice

Van Cleef and Arpel earrings1996$4,900

Van Cleef and Arpel earrings1995$34,000

Van Cleef and Arpel earrings1998$28,000

Cartier earrings1999$26,000

Bulgari necklace with matching

and stonesNo testimony$105,000

Harry Winston gold watchNo testimony$64,000

Harry Winston gold and diamond

wedding band2000$13,500 [*12]

The husband did not recall the Bulgari watch, the Tiffany wedding band or the David Webb wedding band (Tr. Aug. 11, 77-84).

In September 2002, the wife sold the husband's Porsche, purchased in 1988, without telling him in advance. She sold the car for $52,000. The husband testified that he purchased the car for $40,000. (Tr. June 23, 1107-08; 116-17; Aug. 11, 93-4).

On December 8, 2000, Justice Diamond restrained both parties from selling or transferring any marital assets. (Order, December 8, 2000).

The wife's actions with respect to all of this marital property was in direct violation of the court's order. Prior to the sale of these items, she failed to have them appraised or to photograph them so that it might be possible to determine their value. As a result, the husband is entitled to an adverse inference against the wife with respect to the value of these significant assets. Moreover, the court finds the wife's testimony with respect to the sales incredible. On the other hand, the court finds the husband's testimony with respect to the purchase price of these items credible and unchallenged by the wife. It is also worth noting that, like artwork, these items likely increased in value during the marriage. Thus, the court finds it appropriate to use the husband's testimony as to the purchase price of these items as the value of these marital assets. The court accepts the price received by the wife for the porsche as the appropriate value since this amount was higher than what the parties paid for it. Since she failed to offer any paperwork to support her claim that some of the money received for the sale of the car went for a commission, the full sales price shall be assessed.^[FN10] Thus, these assets are marital and valued as follows:

Eleven carat diamond ring$330,000

Jewelry allegedly sold on

The husband testified that in addition to the jewelry the wife allegedly sold on the street and the jewelry in the stipulation, she possessed other jewelry that had been purchased during the marriage but was now missing. These items, according to the husband, totaled in value $76,738 (Tr. Aug. 11, 119-29). However, the court finds that the husband's knowledge of these items and their value to be vague. For instance, he could not say if some of these items were purchased to be given as gifts to other people. (Tr. 8/11 133-165) Moreover, he did not question the wife at [*13]trial with respect to these items.

The husband also claimed that during the marriage he had purchased 200 Kruggerands at the purchase price of $250 each. He claimed he kept them in a safe deposit box until he was indicted at which time he gave them to the wife for safekeeping. The husband says he never saw them again. The wife claims that she never received them from the husband. (Tr. Aug 11, 74-5; 8/13, 370).

The court concludes that there was insufficient evidence to establish that either party possessed these items at the time this action commenced. They are excluded from consideration.

The parties had a variety of bank, money market and brokerage accounts. Both parties agree that these funds are marital (notwithstanding the listed titleholder). (Pl. Post-Trial Mem., pp. 53-4; Def. Post-Trial Mem., Ex. C). The parties also agree to the value of these accounts as of the date of commencement of this action (Pl. Statement of Proposed Disposition; Def. Post-Trial Mem., Ex C):

The court finds the date of commencement to be the appropriate valuation date, notwithstanding expenditures by either party from these funds during the pendency of this action. Moreover, although the wife contends that the Schwab accounts began from her pre-marital savings, the accounts grew in large part as a result of the husband's earnings and contributions from the sale of Planet Hollywood Stock. (Tr. Aug. 11, 47).

Although listed in her statement of proposed disposition, the wife no longer claims as an asset a Bear Stearns account (no. 040-055432-126). It appears her original claim was based on a misreading of the husband's January 31, 2001 net worth statement. (Pl. Post-Trial Mem,53-55; Def. Post-Trial Mem, Ex. C).

In addition to the accounts listed above, at the time of commencement of this action, the wife had a Merrill Lynch account (No. 50016374) worth $15,701. (Ex. 98, p. 9). The husband claims this is marital property. The wife contends that the funds in this account are separate property, derived from a $10,000 gift from her mother. The wife failed to provide any [*15]documentary evidence to substantiate that claim. The court concludes that this account is marital property and values it at $15,701.

The wife also had at the commencement of this action a Safra Bank Certificate of Deposit (No. 220226) held in trust for her children but for which she was the titleholder. This CD was listed as worth $118,795 on the wife's initial net worth statement (Ex. 98, p. 12). The CD matured on May 25, 2001. The wife did not thereafter account for these funds. This is a marital asset and the court values it at $118,795.

As of the commencement date, the parties had a variety of retirement accounts. Both parties agree that these funds are marital (notwithstanding the listed titleholder) and further largely agree as to the value of these accounts (Pl. Post-Trial Mem., pp. 54; Def. Post-Trial Mem., Ex. C). To the extent the parties, disagree, the court accepts the wife's valuation noting that the differences are de minimis::

The court finds all of these funds to be marital assets. To the extent that either party spent any of these funds since the commencement of this action, that party is liable for the portion he or she spent.

In her statement of proposed disposition, the wife listed certain additional retirement funds as marital property. However, she did not offer proof at trial as to the existence of these items and no longer claims them as assets in her post-trial submission. They include: a Lehman Brothers Retirement Plan for which no value was given and which is not listed on either party's net worth statement; a Herbert Profit Sharing Plan, Annuity Contract 54327663 which allegedly had a balance of $177,896 on September 30, 1995; and funds from a Fidelity IRA account in the amount of $252,685 reflected as a rollover on the parties' 1998 tax returns (Pl. Post-Trial Mem., 53-5; Def. Post-Trial Mem, Ex. C).

Life Insurance

The parties agree that as of the commencement date of this action, the husband maintained New York Life Insurance Company policy number 30 272 080 which has a cash value of $4,980. (Pl. Post-Trial Mem, 53-55; Def. Post Trial Mem, Ex. C). This is a marital asset.

The wife listed in her Statement of Proposed Disposition a Kohl Family Trust apparently consisting of a life insurance policy for the benefit of the husband's two children from his prior marriage. The wife offered no proof of the continued existence of this alleged asset and no longer claims it as an asset in her post-trial submission. [*17]

Apart from his Sales and Consultancy business, the parties agree that the husband has other business interests created during the marriage.

The husband owns a 42% interest in the limited partnership, TLH-BI, LP. In addition, he owns 100% of Kohl Development Industries which, in turn, owns a 1% interest in TLH-B1, LP (this 1 % ownership interest appears to be the only value of this asset). The partnership owns the Metal Box Building in England, purchased in 1990, which had been a dairy barn. The partnership converted the space and now rents it out as a factory, warehouse and transfer station for a British cable and wireless company. The partnership holds a 25 year lease (although the evidence did not indicate when the lease ends). The rental income from the building is distributed to the husband and his partners in their proportionate shares. (Tr. Aug. 11, pp. 58-9). The husband claims that he presently receives $200,000 each year as his share of the rental income. However, in his net worth statement, the husband indicated that in 2002 he received $165,000 Ex. B, p.15).

The parties stipulated that the husband's interest in the Metal Box Building is a marital asset and that the total value of the husband's interest in this asset is $1,889,463. (see, supra, stipulation regarding the Metal Box Building; Plaintiff's Post-Trial Reply Mem., p. 13). Notwithstanding this stipulation, the husband claims that the wife offered no evidence as to the value of the business itself. However, the husband offered no testimony that the business had any value other than the value of the real estate and it is reasonable that the wife should have relied on the stipulated value of the building to prove the value of the business. (Tr. Aug. 11, p. 60). If the husband believed, as he now claims, that the value of his interest in the business should be discounted because he holds only a minority interest, he should have presented evidence at trial to support his position. Thus, the court finds that these two assets are marital and have a combined value of $1,889,463.

The husband has a 4.31% interest in this limited partnership. The business consists of a storage building in Florida. The husband claims that he was urged to invest in the business by his accountant. He provided no information regarding this asset other than his testimony that he invested $100,000 into this business. (Tr. Mar. 5, p. 430). In his net worth statement of March 3, 2003, the husband listed limited information for the business for 2001 and 2002 ((IV) (D) (1.1)), but noted that the business operated at a loss. The wife offered no evidence regarding the value of the business other than the husband's initial investment. Even if, as she claims, the husband provided no information as to the value of the business, she could have had the underlying asset of the business, a storage facility, appraised. She did not. Since no evidence of the value of this asset was presented, the court finds that it has no value and is not subject to distribution.

The husband owns 100% of this business. It has been inactive for a number of years having ceased doing business in 1995 (Tr. Mar. 5, 339; June 11, 879-82). No evidence was offered that this business has any remaining value. Thus, it is not subject to distribution.

The husband owns a 1.25% interest in this partnership for which he received $1.00 in income in 2001. (Ex. B, p. 15). No evidence was offered that the husband's interest in this partnership has any value. Thus, it is not subject to distribution.

The husband owns a 0.107% interest in this partnership. There was no proof that this business has any value, except the husband offered evidence that the business has a negative capital account (Ex. B., p. 16). Since there is no evidence of value, this asset is not subject to distribution.^[FN12]

As a result of the criminal prosecution and civil forfeiture proceedings in 1995, the parties' assets were frozen and the husband's business declined. To meet the parties' living expenses, the husband testified that he borrowed money. After the criminal matter was resolved, in addition to using marital funds under his control, the husband borrowed money to pay the fines and penalties owed to the District Attorney, as well as legal fees owed for the criminal prosecution against him and the civil forfeiture proceeding against both him and the wife. (Tr. Mar. 3, 37, 42-3, 51-2).

The husband offered evidence with respect to these loans:

1) The husband borrowed $600,000 from Mr. K.S. on May 26, 1997 to help pay the cost of the fine resulting from the criminal prosecution. As of the commencement of this action, the loan had been reduced to $224,588. There is no loan agreement, but both Mr. K.S. and the husband testified to the existence of the loan. In addition, the check purporting to represent the loan and evidence of the partial repayment were submitted. (Exs. A, p. 27; 33; 67; Tr. Mar. 4, 289-91; Mar. 12, 795-96).

[*19]2) The husband borrowed $600,000 from IDI on October 27, 2000. He testified that these funds went to repay money he borrowed from a DPL Retirement Trust account (during the criminal litigation) as well as to pay some taxes. It may also be that some of these funds were used to pay expenses arising from this litigation. This loan is supported by a promissory note and was due March 15, 2001. (Ex. A, p. 28; Tr. Aug. 11, 254-57; Ex. W1-W3).

3) The husband borrowed $150,000 from Mr. J.S. on June 6, 2000 to pay part of the fine owed from the criminal prosecution. He also borrowed $150,000 from Mr. J.S. on December, 2000, immediately after commencement of this action, to pay the parties' estimated New York State income taxes then due. There is no written documentation of these loans, but both the husband and Mr. J.S. testified to their existence. (Ex. A, p. 30; Tr. Mar. 4, 294-5. 304, Tr. Mar. 11, 694-703; Ex. 27).^[FN13]

4) During the pendency of the criminal action, when the parties' assets were frozen, the husband borrowed $200,000 from Ms. E,B. to pay for the parties' living expenses. In addition to the husband's testimony, the checks for these payments were offered into evidence (Exs. 23;25; Tr. June 23, 1087-90). As of the commencement of this action, the husband owed Ms. E.B.'s estate $175,000 on these loans. (Tr. Mar. 4, 274-89).

5) The husband borrowed $80,000 in April 2000 from Mr. J.L.., a client and friend. The husband obtained the loan to pay living expenses. This loan was evidenced by the testimony of Mr. J.L. and the husband, as well as the check given by Mr. J.L.. Mr. J.L. testified that he has often given loans to close friends without loan agreements. (Ex. AAA, p. 13-14; Tr. Aug. 12, 343-4).

The wife argues that, with the exception of the money owed to IDI, none of the loans are supported by sufficient documentation. Moreover, the terms of the loans are vague. (Pl. Post-Trial Mem, pp. 23-9). These concerns are fair. However, the wife was well aware that the husband received financial assistance from outside sources. The wife knew that Ms. E.B. provided assistance to the parties during the criminal prosecution. Indeed, the wife often received and deposited checks on the B. account.^[FN14] (Tr. June 12, 1088-97; Ex. 90). Although the wife claimed she did not know the details, she was aware that the husband had to pay a big fine as a result of the criminal prosecution and was aware that lawyers had been hired for her husband and herself. She also knew that the husband needed cash since he asked the wife to allow him to use part of the $1.4 million of marital funds held in her name to defray some of these expenses. The wife refused his request (Tr. June 23, 1014, 1024-6; 6/26 1512-6, 1527-8; [*20]Aug. 4, 129-30; Aug. 13, 394-5). Moreover, the court finds the husband's testimony regarding these loans credible and corroborated by the lenders (with the exception of Ms. E.B. who is deceased). Thus, these loans are marital liabilities valued at the above-stated amounts.

The husband also seeks to have a loan he obtained from Bank Leumi in 1998 considered a marital debt. Although listed as an outstanding liability on the husband's net worth statement in the amount of $49,000 (Ex. A, p. 31), this debt was repaid before this action began. The husband claimed this loan was obtained to pay business obligations due to settle Herbert obligations. The husband offered no documentation for this bank loan. (Def. Post-trial Mem, p. 71). Since this debt was fully repaid before the commencement date it is not an outstanding liability. Moreover, the husband offered insufficient evidence regarding the details of this debt. The court finds the evidence insufficient to support a determination that this loan is a remaining marital debt.

The husband claims that a loan he received from his father in the amount of $200,000 during the criminal litigation should be counted as marital debt. (Ex. A, p. 30). The court concludes that the husband mischaracterized these funds as debt. The husband's father gave these funds to his son in his time of need, but deducted the amount from the husband's inheritance. (Tr. Aug. 11, 115-7). Thus, these funds are more appropriately considered separate property that the husband chose to use to support his family and are not now subject to distribution.

Mortgages

The parties agree that there is an outstanding mortgage on the Southampton residence. (Respective Statements of Proposed Disposition). As of the date of trial, the outstanding mortgage was $1,685,347 (Ex. B, p. 33) This is a marital liability.

At the time this action commenced, there was an outstanding mortgage on the marital apartment in the amount of $52,536. (Pl. Post-Trial Mem, p.58; Def. Post-Trial Mem., Ex. C). During the course of this action, the wife obtained a $500,000 line of credit on the apartment and used a portion of those funds to pay off the first mortgage. She concedes that the new line of credit is her responsibility. The $52,536 debt is, however, marital debt.

The husband is a joint mortgagee with his grown son from his first marriage. This debt of approximately $200,000 is for the son's apartment. The husband seeks to have this loan deemed a marital debt. (Ex. B, p. 33; Def. Post-Trial Mem., p. 68). There is no evidence that the wife agreed to this mortgage and the mortgage is not for the benefit of the parties. This debt is excluded from consideration as a marital liability.

At the time of the commencement of this action, the husband claimed to have credit card debt in the amount of $220,831. (Ex. A, pp. 22-7). The wife does not challenge the amount of [*21]the credit card debt, but contends that the husband was vague in his testimony regarding what expenses this debt covered. He offered into evidence no documentation of the credit card debt. She pointed out that he charged $18,000 on his credit card for a gift for a female friend during the marriage. (Tr. Aug. 12, 330-1). However, the wife conceded that during the marriage she had free access to use of the husband's credit card. On average, she charged $10,000 a month on his American Express card. She further acknowledged that the husband complained of her excessive spending. (Tr. June 23, p. 1015-6, 1019; 1110). The court therefore concludes that $170,000 of this debt is marital.

As of the date of commencement of this action, the husband owed $500,000 towards the settlement of the criminal action and civil forfeiture proceedings. (Tr. Mar. 3, 37). This is a marital obligation.

Attorney fees for civil forfeiture proceedings

The parties owe an amount to be determined to the law firm Ross & Cohen arising from the civil forfeiture and criminal proceeding (The amount of this fee is being contested. The law firm is suing the parties for $350,000. Ex. EE). In contesting the fees charged by Ross & Cohen, the parties were represented by the law firm Edwards & Angell. As of the date of trial in this action, the husband had paid $78,594.54 of the fee owed to Edwards & Angell and owed an additional $6,000. (Ex. FF). The fees owed to both law firms are marital obligations.

Taxes

At the time this action commenced, the parties owed payment on their estimated income taxes of $645,670. This is a marital debt. The wife contends that this debt is actually $773,714. However, the additional amount claimed by the wife is not marital debt. This court ordered the wife to release funds from the two Charles Schwab accounts held in her name (account numbers 5173-5607 and 5173-5608) to pay this tax obligation. The court believed at that time and finds now that these accounts contained marital funds and that the taxes owed were a marital debt. It was thus reasonable to use these available funds to pay the taxes. (Order, April 4, 2001). The difference in the amount of taxes actually paid arose because the wife requested of this court time to pay the taxes, hoping that the stock market would reverse its downward trend. The husband vehemently opposed this application. The court granted the wife's request, but held that any penalty arising from the delay in paying the estimated taxes would be the wife's responsibility. (Order, August 14, 2001). Thus, the difference of $128,044 is the wife's separate liability.

ANALYSIS

Marital property must be distributed equitably between the parties upon consideration of the circumstances of the case and the respective parties. DRL § 236 (B) (5) (c). This court has [*22]considered each of the factors set forth in DRL §236 (B) (5) (d) to the extent applicable in reaching its conclusion. In addition, the court may award maintenance where justice requires, having regard for the standard of living established during the marriage, the lack of sufficient income and property to provide for the reasonable needs of the recipient, and the ability to pay by the other party, as well as the circumstances of the case and respective parties. DRL § 236B (6) (a). This court has considered each of the factors set forth in DRL § 236B (6) (a) to the extent applicable in reaching its conclusion.

This was a long term marriage of twenty years duration. Although the parties are in good health, they are both over 60 years old. It is unrealistic to expect the wife to start a career at this time in her life. The wife appears to be an avid amateur photographer, but neither side presented evidence of what her present earning potential might be if she could work as a photographer today or if any jobs are available for which she is qualified. She did not work outside the home prior to the marriage, and the husband never seriously expected her to do so during the marriage. The husband presented evidence that early in the marriage the wife had the opportunity to develop a career in photography. However, the wife did not pursue this opportunity and the husband did not object. On the other hand, although the husband presently works and there is no evidence that his career has slowed down, he is nearing retirement age. (DRL §§ 236 B (5) (d) (2) (8); (6) ((a) (2), (3), (4), (5)).

There were no children of this marriage and the children of each party from their respective prior marriages are emancipated. There is no need to maintain the marital residence for the benefit of any children (DRL §§ 236 B (5) (d) (3); (6) (a) (6).

Over the course of the marriage the parties accumulated significant assets, including three residences, a significant art collection, jewelry, and cash and stock accounts. In addition, the parties accumulated substantial retirement funds a portion of which will be available for the wife. Given the husband's age, the wife will receive a portion of most of the retirement funds the husband could reasonably expect to acquire during his work life. Moreover, in light of the distribution resulting from this case, the wife will not suffer significantly from a loss of her inheritance rights. An additional asset of the marriage is the husband's business. (DRL §§ 236 (B) (5) (b) (1), (4)).

The court must consider the direct and indirect contributions made by the non-titled spouse to the acquisition of marital assets. (DRL §§ 236 B (5) (d) (6); (6) (a) (8)). In this case, irrespective of who holds title, there is no question that all of the assets are derived from the husband's earnings.^[FN15] As previously noted, some assets were transferred to the wife's name, but [*23]this was done during the criminal prosecution to protect the assets. Although the wife did not work outside the home, she contributed to the marriage by maintaining the marital residences. She also shopped for the husband, both for food and clothing, and planned vacations. She also played a significant part in developing the parties' jewelry and art collections, although the husband also participated in making selections for their collections (Tr. June 23, 979-80, 985-9; 1005; June 24, 1166-7; Aug. 11, 68-9).

The parties differ as to how much assistance the wife provided to the husband's career. The husband claimed that the wife became an embarrassment to him, frequently making it uncomfortable for him to have business associates meet with him in social settings. (Tr. Aug. 11, 95-100). However, a client of the husband, Mr. K.L., testified that he considered both the wife and husband to be their friends. (Ex. AAA, pp. 13-14). Thus, the court does not find that the wife significantly interfered with the husband's business. On the other hand, there is little evidence that the wife contributed greatly to the husband's business. It appears that she attended some charity events with him and took souvenir photographs, but she did not herself work for any charities thereby expanding their social contacts as a means of bringing in new clients. The wife claims she participated in some entertainment of clients, but the evidence of such efforts was sparse and it appears the such entertainment was limited. (Tr. June 23, 990-1005). There appears to be little other assistance provided by the wife to the husband's business. Moreover, since there were no offspring of the marriage, her contribution to the matrimonial partnership did not consist of raising the parties' children. Indeed, if anything, the evidence revealed that the husband extraordinarily enhanced the financial circumstances of the wife's children of her prior marriage. On the other hand, the wife did little to enhance, and may have hindered, the husband's relationship with his own children.^[FN16] (Tr. June 24, 1245-51; Aug. 11, 13-5, 17-22, 30-2; Aug. 12, 273-86; Aug. 13, 375).

It must also be noted that the husband developed his business skills well before the marriage. He was an accomplished salesperson in the construction industry prior to meeting his wife. Herbert, the husband's first business, was built by the husband's father and uncle. Both parties benefitted from the efforts of these two men when they chose to include the husband as an owner of the business immediately prior to its sale to a subsidiary of the American Express Company in 1985. (Tr. Mar. 3, 65-9; Aug. 11, 3-8).

The parties dispute how much the wife assisted the husband after he was indicted. The wife claims she remained at his side during those difficult days. She contends that he was largely uncommunicative and angry. She believed that although he took his anger out on her, she tried to be understanding. (Tr. June 23, 1008, 1012-3; June 26, 1525-6). On the other hand, the [*24]husband claimed that the wife was largely unsupportive. She refused to cut her spending, notwithstanding the difficulties of the parties' financial circumstances. She behaved badly towards the husband's criminal defense attorney and the court at the time the husband entered his guilty plea. The husband claimed that to the extent he became uncommunicative it was because his wife constantly yelled at him. In light of her bad behavior towards others, this may have been the case. (Tr. Aug. 11, 47-50; Aug. 12, 262-72). But, the court recognizes, that this period was a difficult time in the lives of both parties and concludes it would be inappropriate to penalize the wife for her behavior during the pendency of the criminal action.

More troubling to the court was the lack of assistance provided by the wife to the husband as he sought to rebuild his career. The wife refused to make available to the husband marital funds held in her name, with the result that he had to borrow money to support their lifestyle. (Tr. Aug. 11, 47, 54). The wife correctly notes that the husband may not have needed these funds since he quickly came to earn a high income and was able to provide ample support for his first wife and grown children. It also appears that, notwithstanding his claims of needing money, the husband continued to spend money for luxuries during the period. (Tr. Aug. 11, 77-9, 111-2, 119-21; Aug. 12, 288-9, 297, 331-3). However, as the wife herself noted, the husband had always been generous with his money, not only for his prior family but for the benefit of the wife and her children. (Tr. June 24, 1245-51). She did not respond with comparable generosity at a time when the husband needed financial assistance. Thus, the wife contributed little to the development of the husband's new sales and consultancy business.

The court must consider whether there has been a wasteful dissipation of marital assets. (DRL §§ 236 B (5) (d) (11); (6) (a) (9)). The wife argues that the husband's criminal conduct resulted in a dissipation of Herbert, a marital asset. This asset was purchased by the husband from the American Express Company in 1990 for $10,000,000 (although the actual outlay of cash by the husband was $7,000,000). During the late 1980s and early 1990s, the business produced annual gross revenues of $350,000,000.^[FN17] In the year before he was indicted, the husband's income from his business was $2,426,764 (Pl. Ex. 9). The upshot of the husband's conviction in 1996 for money laundering and tax evasion, was the destruction of Herbert as a business entity. The wife contends that she is entitled to a greater portion of the marital estate to compensate for the loss she suffered from the waste of this asset.

The court finds that the husband did not dissipate this asset. There is no evidence that the husband's criminal action was directed against or in any way related to the wife. Andrea v. Andrea, 152 Misc 2d 100 (Sup Ct., Nassau Co 1991). As in that case, the husband's intent in committing the criminal act here was totally unrelated to the marriage and was not intended to deprive the wife of any asset. The criminal act itself did not cause the loss of the business; rather, the publicity surrounding the indictment and trial resulted in the ultimate destruction of Herbert. Clearly, the husband did not profit from the criminal act as might a spouse who secreted [*25]marital assets.

Most important, the husband did not fail to support his family as a result of the criminal act. Indeed, the husband made a valiant, and largely successful effort to protect the parties' assets from potential loss through a possible civil forfeiture proceeding by causing title to most of the parties' assets to be transferred to the wife. He successfully borrowed money from friends and business acquaintances to support his family until he could again earn money. His acceptance of a plea bargain also left his career, if not his business, intact. Indeed, within a few years after the indictment his income was similar to what he had earned prior to the criminal action. Moreover, the wife presented no evidence that the parties' financial standard of living suffered as a result of the criminal action.

Finally, the court finds that any tax consequences in the distribution of the assets here to be inconsequential. (DRL § 236 B (5) (d) (10)). To the extent there are tax consequences, they can be shared by the parties in the same proportion as the distribution. There are no tax consequences with respect to the distribution of the husband's sales and consultancy business since the asset is not being sold. Waldman v. Waldman, 196 AD2d 650 (2d Dep't 1993); Atwal v. Atwal, 270 AD2d 799 (4th Dep't 2000).

DISTRIBUTION

The court awards fifty percent of the following assets to each party. In this long term marriage, each party made direct and indirect contributions leading to the acquisition or accumulation of these assets. Under all of the circumstances as more fully set forth above, an equal distribution of these assets is justified by the evidence and principles of equity.

1) The Southampton residence. This asset shall be sold and the parties shall each be responsible for 50% of the outstanding marital mortgage and any costs or taxes resulting from the sale.^[FN18] This asset is presently in contract to be sold for $15,000,000.

2) The following cash and security accounts: Merrill Lynch (500-16353); Merrill Lynch (500-07050); Merrill Lynch (500-16374);Chase Checking (150-0536417-65); Chase Money Market (150-001626-70); Chase Savings (150-6017403-01); Chase Checking (150-001626-65); North Fork Bank (142632 990 0); Barclays Bank (50338478); Chase Checking (674-0014396-65); Credit Commercial (00503688730); Credit Commercial (00506373010); and Safra CD (220226) The total value of these assets is $301,378. Thus each party shall receive $150,689, plus or minus any accretion or reduction in these accounts due to market forces as of the date of [*26]entry of this decision, from these assets. If a party has expended assets from an account held in his or her name, that party shall make up the difference from other available assets.

3) The following retirement accounts: Chase IRA (EBJ-001015); Chase IRA (EBJ-000990); Chase IRA (CL5-425044); DPL Retirement Trust CD (114-627851); DPL Retirement Trust (CL6-425567); DPL Retirement Trust (CL6-425575); DPL Retirement Trust (CL6-425583); DPL Retirement Trust Merrill Lynch (852-05T83); DPL Retirement Trust (150-6046968-70); Charles Schwab IRA (5173-5603). The total value of these assets is $1,428,333. Thus each party shall receive $714,166.50, plus or minus any accretion or reduction in these accounts due to market forces as of the date of entry of this decision, from these assets. If a party has expended assets from an account held in his or her name, that party shall make up the difference from other available assets.

4) The cash value of a New York Life Insurance policy (30 272 080), totaling $4,980. Thus, each party shall receive $2,490.

5) The artwork included in the stipulation with a total value of $2,211,467. This art shall be sold and the parties shall each receive a 50% share of the proceeds, less each party's 50% share of any costs or taxes resulting from the sale. Specifically excluded from this distribution are four pieces, including two Niki de Saint Phalle statutes entitled "Tree" and "Les Danseurs," a Ritter piece entitled "Nude on Stomach," and a Dubuffet painting. The court finds that these pieces are the wife's separate property. They were either pre-marital gifts to the wife or purchased by the wife before the marriage. Although the husband may have contributed to the purchases, they are titled in the wife's name. (Tr. June 24, 1172-7; Aug. 13, 361-3, Ex. 127).

6) The court awards to the wife 50% of the value of the husband's interest in TLH-BI, LLP and Kohl Development Industries. Thus, the wife shall receive $944,731.50, derived from ½ of the value of the husband's interest in the Metal Box Building ($1,889,463). The court finds an award of 50% to each party of this asset appropriate due to the length of the marriage and the direct and indirect contribution of each party to the marriage, as well as all of the other factors previously discussed. Moreover, with respect to this particular asset, the wife was the titleholder for a substantial period of time as a result of the criminal action. Her availability to serve in this capacity benefitted both parties by conserving this asset from potential seizure. (Tr. June 24, 1270-73).

7) The court awards to each party 50% of the value of the marital residence. In addition to all other factors previously set forth, the evidence revealed that the wife was able to purchase this apartment only with the financial support of the husband and that he paid all expenses for this apartment after it was purchased. The total value of this asset is $1,960.000. Thus, each party is entitled to $930,000. The wife has indicated her desire to retain this asset as her residence. The court authorizes her to do so, provided she relinquishes her interest in TLH-BI, LLP and Kohl Development Industries. The husband will then be obligated to pay to the wife only the remaining difference in value ( $14,731.50). [*27]

The wife seeks to have the husband pay half of the remaining mortgage owed on the marital residence at the time of the commencement of this action. During the pendency of this action, the wife paid off that mortgage from a line of credit she obtained on the apartment. Because the wife has had exclusive occupancy of the marital residence through most of the pendency of this action and unilaterally decided to pay off the original mortgage, she shall bear 100% of this debt. If the wife elects to sell the marital residence, the parties shall share equally in the profit of the sale of this asset.

8) The court awards to each party 50% of the value of the second apartment. The value of this asset is $780,000. Thus, each party is entitled to $340,000. The husband has indicated his desire to retain this asset as his residence. The court authorizes him to do so, provided he pays to the wife her share of the value of this asset. Otherwise, the asset shall be sold and the parties shall divide equally the profit from the sale.

The court awards to the wife 100% of the value of the two Charles Schwab accounts (5173-5607 and 5173-5608) remaining after payment of the parties' 2000 estimated income taxes of $645,670. The court finds it was appropriate to use a portion of these marital funds to pay these taxes. All of the parties' other taxes since this action commenced were ordered to be paid by the husband.

Thus, the court awards to the wife $760,296. In the decision denying the wife's application for pendente lite counsel fees, the court specifically noted that the wife had available to her these funds to use for that purpose. Since the court also awarded the wife $24,000 each month in non-taxable pendente lite maintenance and ordered the husband to pay a significant portion of the parties' expenses (e.g. almost all of the costs associated with maintaining the Southampton residence, storage of and insurance for the art work, most taxes), this court found that the Schwab account funds would be available to the wife for attorney fees. (Court Order, April 4, 2001, Motion Seq. 3). To now award a portion of these funds to the husband would defeat the court's intent in its pendente lite decision. However, the court will take into account this distribution to the wife in deciding her application for counsel fees (see, infra.).^[FN19]

The court awards to the wife 35% of the value of the husband's sales and consultancy business. Throughout the marriage, the wife provided indirect contributions to the business as a [*28]homemaker. She also stood by the husband during the time of the criminal prosecution. However, the husband's business skills were developed during an approximately 20 year period prior to the marriage. He held summer jobs with Herbert while in school, received a degree in civil engineering during college and worked for the company honing his skills in all facets of the business, including sales, well before he met the wife. Moreover, after the criminal prosecution, the evidence reveals that the wife contributed little to the creation of the husband's new business. For instance, the wife refused to free assets she held during the early days of the creation of this business to assist in paying family expenses. It also appears that the marriage was undergoing serious strains during much of the time that this new business was being developed. Balancing all of these factors, equity dictates a distribution to the wife of 35% of this asset, or $530,000.

The court awards 50% of the value of the sold jewelry and the porsche to each party. These assets were all purchased with marital funds earned by the husband. The wife was under a court order not to dispose of these assets. Notwithstanding the wife's claim that she needed to sell assets during the action because of her reduced circumstances, she failed to provide any evidence that she was unable to meet her needs with the $24,000 tax free maintenance she received each month. Indeed, she could not establish that her monthly expenses required even that amount of money. Her final net worth statement did not indicate her actual expenses, nor did she offer evidence of how the listed expenses reflected her marital lifestyle costs. (Tr. June 24, 1148-9; June 25, 1430-1476). As a result, the husband shall receive a credit of $378,700 towards to money he owes to the wife from the distribution he owes to her from the value of his business. Thus, the husband shall pay to the wife $151,300 as the value of his business less the sold jewelry and Porsche. The husband's motion for contempt and the imposition of sanctions against the wife for selling marital assets in violation of the court's order is denied in light of this distribution.

The court awards to the wife 100% of her stipulated clothing (in the form of the clothing) and awards to the husband 100% of the wine collection (in the form of the collection). The court awards to the husband 100% of the stipulated husband's jewelry and to the wife 100% of the stipulated wife's jewelry. The court awards 50% of the value of the stipulated decorative arts and furnishings to each party. The parties can elect to divide this property between themselves or sell it dividing the proceeds equally. The court awards to the wife 100% of her photography equipment.^[FN20] [*29]

With respect to the remaining debts owed by the parties, the court finds that the parties had high spending habits. Even during and after the criminal prosecution, both parties continued to spend excessively. The wife felt no need to limit her spending on luxury items. The husband continued to support his and his wife's children notwithstanding the fact that they had long been emancipated. He contributed more to his first wife than he was obligated to by law. While his efforts to help his family is noble, it raises questions with the court of the husband's expression of financial need during this time. It is also true, that the husband paid for luxury items for his own benefit. (Tr. Aug. 12, 186-8; 331-3). The court is aware that the husband will leave the marriage with his earning potential intact, although he is of an age where is earning power may well decrease over the next few years. In light of these factors, as well as all of the factors previously set forth, the court distributes the remaining marital liabilities as follows:

1) The wife shall be responsible for 35% of the $170,000 (or $59,500) credit card debt that this court found to be marital debt. The husband shall be responsible for the remaining credit card debt.

2) The wife shall be responsible for 35% of the $175,000 of the debt owed to Ms. E.B.'s estate. The evidence revealed that the wife was well aware that the parties received money during from Ms. E.B. during the pendency of the criminal prosecution. The husband shall be responsible for the balance of this debt.

3) The husband shall be responsible for 100% of all remaining marital loans (including the money owed to Mr. K.S., Mr. J.S., Mr. K.L., and IDI). The husband asserts that he needed to resort to loans to pay marital expenses after the criminal prosecution began and because the wife would not allow him to use assets she held in her own name. However, the husband did not decrease his own spending habits. For instance, he continued to provide funds to his first wife in excess of what he was required to do by court order and he continued to provide for his emancipated children. Moreover, almost as soon as he began to work for IDI, his income exceeded one million dollars. Although the parties had high living expenses, he offered no evidence of any steps he himself took to reduce those expenses. Indeed, as previously noted notwithstanding outstanding loans, the husband continued to buy luxury items.

In addition, the terms of the loans he took are vague. Although it may have been the practice among his associates to loan each other money on merely a handshake, that lack of specificity becomes problematic in a divorce action. Moreover, it is important to note that the need for any of these loans arose not from the wife's spending habits, but from the criminal prosecution against the husband. Finally, the husband will continue to have earning power after this action and can better absorb the cost of repaying the loans.

4) The husband shall also be 100% responsible for the money owed to the Manhattan District attorney (whether previously paid or still outstanding). [*30]

5) The attorney fees previously paid or still owed to the two law firms arising from the civil forfeiture proceedings shall be paid 65% by the husband and 35% by the wife. The wife was a named party in the civil proceedings and made full use of her attorneys, seeking their advice during the proceedings. (Tr. June 26, 1531-2; Aug. 4, 129-30). The parties shall hold in escrow sufficient funds from the money received from the sale of the Southampton residence in their respective proportions to satisfy these obligations.

MAINTENANCE

The wife seeks maintenance in the amount of $60,000 per month.(Pl. Post Trial Brief, p. 101). However, the court has already accepted the wife's analysis that only $400,000 of the husband's stream of income constitutes reasonable compensation. The remainder of his income was distributed as the asset of his sales and consultancy business. Thus, only $400,000 per year is available for possible maintenance. Grunfeld v. Grunfeld, 94 NY2d 696 (2000).

Although an exact figure cannot be determined, the court is aware that from the distribution of assets, the wife will ultimately receive at least $8,000,000 (excluding the marital residence), and probably substantially more. Much of this distribution will be in cash or securities (DRL § 236 B (6) (a) (1)). By statute, the court must consider the marital standard of living in awarding maintenance (DRL § 236 B (6) (a); Hartog v. Hartog, 85 NY2d 35 (1995)). However, a pre-separation high standard of living does not require an award of lifetime maintenance. Chalif v. Chalif, 298 AD2d 348 (2d Dep't. 2002). In point of fact, the wife will have her own assets from which she can draw funds to support herself in a manner similar to the marital lifestyle. Cf., J.C v. S.C., NYLJ, 10/31/03, p. 20 (col 1).

During the pendency of this action, the court had awarded to the wife temporary maintenance, tax free, in the amount of $24,000 per month. However, at trial the wife was unable to account for how she spent that money. She conceded that her net worth statement was not a reflection of her actual expenses, but, rather, of what she believes her expenses would be to match the marital lifestyle. However, the wife offered no evidence of the expenses of that lifestyle in the form of credit card receipts or bank statements; nor did she offer any documentation to support her present living expenses. (Tr. June 24, 1136-57; June 25, 1430-76; 1499-1502).

Moreover, notwithstanding her complaints of a reduced standard of living, the wife enjoyed significant luxuries during the pendency of this action. She traveled to Burma, Peru and Paris two times. She bought herself expensive jewelry. (Tr June 24, 1156; June 26, 1499-1502). The only luxury she did not have, caused by her own actions, was access to a country home. However, should the wife wish to have a second home, the distribution of assets will provide her ample resources to purchase one, yet still leave her significant assets from which she can draw money for her living expenses.

The court is also aware that the husband continues to owe maintenance to his first wife. [*31](Tr. Aug. 12. 286-87). However, the court also knows that the husband is a significant wage earner and that the wife cannot, at this stage of her life, be expected to begin a career.

For all of these reasons, as well as the ones previously discussed, the court awards to the wife maintenance as follows:

1) Effective November 1, 2004 through October 1, 2005, the court awards $12,000 per month in maintenance, taxable to the wife. This award will provide the wife sufficient funds until the assets are fully distributed.^[FN21]

2) Effective November 1, 2005 until the husband turns 70 years old, the court awards to the wife $7,000 per month in maintenance, taxable to the wife.

The court finds that these maintenance payments, combined with the distribution of the assets to the wife will enable her to substantially maintain the marital standard of living.

The wife's request for life insurance to protect the award of maintenance is granted to the extent that the husband shall continue any already existing life insurance policy that already names the wife as beneficiary (not including the policy that has been distributed), not to exceed a $500,000 death benefit, to be reduced to $250,000 when the husband turns 65 years old, and terminated when he turns 70 years old. He is not required to obtain a new policy in light of his age. (DRL § 236B (8) (a)). However, the court finds no reason to require the husband to maintain health insurance or long term care insurance for the wife. She will have substantial assets of her own, and maintenance, enabling her to pay for her own insurance needs. The husband shall cooperate with the wife to enable her to take advantage of any opportunities to minimize her insurance costs through COBRA.

COUNSEL FEES

In a matrimonial case, the court is authorized to award counsel fees. (DRL §237(a); DeCabrera v. DeCabrera, 70 NY2d 879 (1987). An award of counsel fees is controlled by the equities of the case. The fact that a spouse receives a substantial distributive award does not preclude an award of counsel fees.

The court initially notes that it has distributed to the wife $380,148 from the Schwab accounts that would otherwise have been distributed to the husband, with the intent that these funds be used for attorney fees. The court also notes that the wife incurred extraordinary counsel expenses not justified by the case. For instance, she had three attorneys at counsel's table throughout the trial. She insisted on continuing to explore the husband's ownership interest in IDI through her new counsel, even though her qualified first counsel could find no such interest [*32]after extensive discovery. (Ex. E). Her own inappropriate conduct, including repeat removal and sale of marital assets, in direct violation of court orders, necessitated substantial motion practice and extended the length of the trial. (Def. Post-Trial Reply Mem., Ex. F). On the other hand, the court is aware that the husband shall continue to have significant earning potential after the divorce.

In consideration of all of these factors, the court awards to the wife an additional $120,000 in attorney fees to be paid by the husband directly to the wife's trial counsel. These fees are to be paid within four months from the date of this decision and order.

This opinion constitutes the decision and order of this court.

Dated: October 20, 2004