Bloomberg 23 Gennaio 2009

Irene Georgakis, a housewife in Queens, New York, thought she’d hit bottom on Valentine’s Day 2007 when she learned her husband of 24 years had a girlfriend, a discovery that led to her filing for divorce.

Then the economy nosedived, and things got worse. Georgakis, 54, said her husband, George, 64, owner of five New-York-based companies, is balking at paying support and using the recession to claim poverty after making millions during their marriage.

“He’s the ultimate stonewaller,” Georgakis said in an interview. “It’s galling.”

The Georgakises are among couples in broken marriages fighting the economy in addition to each other as they try to divvy up assets from homes to artworks that have plunged in value. Couples bent on splitting estates have had to redo the math when asset values proved less than they had counted on to split up.

Some are racing back to court to ask for new divorce-payment terms. Others have chosen to stay in bad marriages rather than lock in losses in asset values, their divorce lawyers said.

George Georgakis didn’t reply to a message left at his office seeking comment. His lawyer, Stuart Berg of Garden City, New York, declined to comment.

Financial-industry downsizing makes it easier for unemployed and underemployed professionals to minimize alimony by claiming their plunge in fortunes isn’t short-lived, said Cynthia Hartwell, a divorce lawyer in Greenwich, Connecticut.

Good Time

“If the breadwinner or your employer has been affected by the downturn, it is a good time to get divorced,” Hartwell said. “They can come to court with a compelling argument that they can no longer earn what they used to earn. The court is not going to impose an order on someone whose job situation has changed dramatically.”

George Zahringer, a former managing director at Bear Stearns Cos., urged a judge Jan. 12 at a hearing in Stamford, Connecticut, to cancel an order increasing alimony to his ex- wife, Celia, from $25,000 a month to $87,000 including retroactive payments.

“He has lost his job,” his attorney Richard Albrecht said. “He has lost his fortune. He lost all his equity in Bear Stearns. He cannot pay $87,000 and support his present family in any way. He is not making a million a year.”

The ex-wife’s lawyer, Gary Cohen, said Zahringer, now a Deutsche Bank Private Wealth Management officer in New York, can afford the payments. “The gentleman is still making money,” Cohen told the judge.

The judge hasn’t ruled yet. George and Celia Zahringer declined to comment.

Spouses Both Unemployed

Setting support levels is particularly difficult when both spouses are unemployed or work in an industry with widespread cuts in jobs and pay.

“I represent a mortgage broker whose husband was a banker,” said Steve Eisman, a Lake Success, New York, divorce lawyer who declined to name his clients. “The broker has no income right now, and the banker got laid off. Now they’ve gone to zero income. When you’re talking about support, how do you compute that?”

A spouse with title to assets, such a business, now wants to write a check for the other spouse’s share “when they’ll be valued at their lowest,” said Suzanne Bracker, who has represented New York City divorcees for 20 years, including Irene Georgakis.

“A lot of my male clients are loving it,” she said. “They’re handing me the check and saying, ‘Hurry this up. Let’s get this over with.’”

Rug Yanked

The year-old recession yanked the rug from under the value of investments, homes and art. The Standard & Poor’s 500 Index has fallen 39 percent in 12 months; the housing market is in free fall; partnership distributions and bonuses have withered; and the art market has dropped.

Resulting disparities in asset valuations make outcomes unpredictable, New York matrimonial attorney Raoul Felder said.

“A divorce case is a combination of buying futures and betting on a crystal ball,” said Felder, whose clients have included ex-New York Mayor Rudolph Giuliani.

Putting a value on real estate can be almost impossible in a market in which sales have nosedived, divorce lawyers said.

New York attorney Robert S. Cohen, whose clients have included Christie Brinkley and James Gandolfini, cites one of his cases that involved “a very expensive Fifth Avenue co-op.”

‘Could Be Over’

“We had it valued, and the appraiser said it’s important now to sell it,” he said, declining to identify the couple. “This financial mess could be over in three months, and the co- op could be worth a lot more. On the other hand, it could be worse.”

In Houston, a horse-breeder and his Web-designer wife decided to end their marriage early in 2008, according to Marshall Davis Brown, the breeder’s lawyer, who declined to identify his client.

They agreed in August on a property split, Brown said. The wife was to get $100,000 of a $300,000 investment account. The husband would get the rest, Brown said.

“Then the bottom falls out of the market,” said Brown, who has also represented Neil Bush’s ex-wife and actress Hillary Duff’s mother. “The wife’s lawyer sends over a nasty letter saying they want their $100,000. Well, they’re not getting it because there’s been a decrease in the gross value of the account.”

Falling Home Prices

Falling home prices are also sending some panicky ex-spouses in search of revised court orders, Houston divorce lawyer Wendy Burgower said.

“A lot of women are wanting to retrade,” Burgower said. “But you’ve got to have something to offer” that the husband wants, like a favorite sports car or painting. “If you’ve got absolutely nothing to offer, you’re asking for a gift.”

When the value of a business is involved, the outcome may depend on whether a judge decides to give the owner a break because of the economy, said Martin Randisi, a St. James, New York-based valuation expert with 25 years’ divorce-case experience.

Randisi offers as an example a hypothetical business that was worth $70 million to $100 million last year.

“The judge may say, ‘In today’s market, who’s going to want to buy such a company?’ and instead put a value on the company at just $30 million,” he said.

Judges Differ

Another judge might have a different outlook, as in the case of Rick Morton, a principal of closely held Ashley Capital LLC, a New York-based real estate company. He and his wife, Marsha, decided to divorce in 2007 after 23 years.

A judge in Westchester County, New York, ruled in October that Morton’s business should be appraised at its March 2007 value instead of what it was worth last year. Morton estimates some of Ashley’s properties, including those in Detroit whose tenants include Ford Motor Co. and General Motors Corp., have fallen at least 30 percent since March 2007.

“She’s gotten a potential windfall,” Morton said of his wife, who he said used hindsight to push for “the sweetest date” for the valuation.

“It’s a bit like betting on a football game after the game is over and you know the score,” he said. The decision has been appealed, said his lawyer, Caroline Krauss-Browne of the New York law firm Blank Rome LLP.

Jennifer Lombardo, a lawyer for Marsha Morton, didn’t reply to messages seeking comment.

The fall in art prices has ensnared divorcing collectors, said Charles T. Rosoff, an appraiser and co-author of “Valuation Strategies in Divorce.”

‘Impossible’

“Before October, it was easy to describe the art market in generalities, but now it’s impossible,” said Rosoff, president of New York-based Appraisal Service Associates.

A recent appraisal of one client’s modern and Impressionist collection drew estimates of only 15 percent to 25 percent of the works’ insured replacement value, Rosoff said. Twenty percent of his business comes from clients liquidating collections in a divorce, he said.

Some couples are putting off ending marriages because of the financial crisis, the lawyers say.

“They ask, ‘Shall I stall? Shall we move forward?’” said Eleanor Alter of New York, who has represented actors Ethan Hawke and Mia Farrow. “People want to get divorced, but nobody knows what the house is worth.”

New York City saw a 9.4 percent drop in uncontested-divorce filings through the first 10 months of 2008 compared with the same period in 2007. Divorces last year fell 5.2 percent in Chicago’s Cook County, Illinois, and 9.4 percent in Miami-Dade County, Florida.

Still, hard times push some marriages over the edge, the lawyers say.

Money can “paper over a lot of dissension” for a time, Alter, the New York lawyer, said. “The wife would say, ‘He’s a son of a bitch, but at least he buys me what I want.’”

When the money goes, Alter said, the sentiment becomes “No, I want out.”

By Patricia Hurtado and Laurel Brubaker Calkins

Source > Bloomberg | Jan. 23