Law News

A Wall Street Icon's Divorce War

Carl Icahn's estranged wife attempts hostile takeover

by Scott Brede
The Connecticut Law Tribune
May 3, 1999

Greenwich divorce-meister Samuel V. Schoonmaker III is certainly no stranger to high-asset break-ups.

After all, he didn't get his membership card to the so-called "Dirty 30" -- a nationwide fraternity of highly prominent divorce lawyers -- by representing just ordinary, middle-class spouses duking it out in court.

As Schoonmaker tells it, his high-asset cases can fall into the neighborhood of $100 million or more.

But, as unflappable as he may be, even Schoonmaker seems floored by the sheer wealth of his richest divorce client to date: billionaire Carl Icahn, the corporate raider who helped define the bustling, often savage, boom years of the 1980s.

Icahn's wife of 20 years, Liba, it seems, is intent on doing a little raiding of her own. She filed for divorce in 1993 in Westchester County, New York, and challenged the couple's prenuptial agreement.

Now, Icahn's estranged wife is attempting to move the heavily litigated slugfest with her husband to Connecticut in hopes of invalidating the couple's 13-page prenuptial agreement.

The provisions of that agreement leave veteran matrimonial lawyer Elaine T. Silver, who is representing Liba Icahn, aghast. The deal calls for Silver's 50-year-old client to receive "absolutely nothing" in terms of property distribution or alimony from her husband upon their impending divorce, Silver says.

The prenupt, asserts Silver, of Stamford's Silver, Golub & Teitell, was signed by Liba Icahn under duress on her March 21, 1979, wedding day; she was pregnant with the couple's first child.

GREED WAS GOOD?

Despite six years of litigation in New York, where the Icahns wed and lived together in a luxury befitting the Wall Street mogul's stature, the decades-old pact has yet to be found "unconscionable," the legal standard to which prenuptial agreements are held.

Icahn's wife first filed for divorce and challenged the couple's prenuptial deal in 1993 in Westchester County, N.Y. Now-deceased Judge Gordon W. Burrows dismissed her challenge, holding it came several years too late under New York's six-year statute of limitations governing general contractual obligations.

Warring spouses in Connecticut, however, face no such time restrictions, Silver contends. In this state, an unconscionable determination can be made from the time a couple enters into a prenuptial agreement until the time that arrangement is sought to be enforced, she says.

And, Liba Icahn, it just so happens, moved to Stamford last year, according to her lawyer.

In November, Icahn's estranged wife brought Icahn v. Icahn, a new divorce action, in Stamford Superior Court.

Ever-confident, Schoonmaker, of Schoonmaker, George & Colin, discredits the new complaint filed by his client's wife as "forum shopping" at its worst.

"She's just looking around for a court that is willing to do what she wants," he protests. "All the issues she wishes to have decided here have been decided in New York."

Adjudicating those issues again in Connecticut, Schoonmaker argues, would conflict with the Full Faith and Credit Clause of the U.S. Constitution, which requires states to uphold the judicial decisions of other states.

But Silver says Liba Icahn, as a Connecticut resident, is free to bring the new action because the couple's divorce proceedings in New York are still pending.

On Dec. 4, Carl Icahn filed a motion to dismiss the Connecticut case because it lacks subject matter jurisdiction. The case has yet to be assigned to a judge and a hearing date on the motion has yet to be scheduled.

RICH AND FAMOUS

The 63-year-old Icahn was just beginning to amass his fortune when the couple took their vows in 1979.

His net worth statement at the time, which was included along with the prenuptial agreement and is now part of the court record, listed his assets at $6.5 million.

His soon-to-be bride, however, was virtually penniless in comparison. Her statement put her net worth at $500.

It wasn't until 1985 that Carl Icahn came to national prominence by staging a successful eight-month siege of Trans World Airlines. Other hostile takeovers followed. Soon, the very mention of the reclusive Icahn's name struck fear in even the most stalwart of corporate executives.

His shadow has faded a bit over the last decade as he can no longer raise the huge amounts of money he once did to back his takeover bids.

Still Icahn, who grew up in a middle-class neighborhood in Queens, N.Y., remains a formidable presence in the financial arena, while other corporate raiders of the 1980s have crashed and burned.

As part of its Oct. 12, 1998, survey of the 400 wealthiest Americans, Forbes magazine estimated Icahn's net worth at $2.6 billion.

Before marital strife hit, the couple primarily resided in a 14,000 square-foot mansion on 150 acres of land in Bedford, N.Y., says Liba Icahn's Jan. 18 memorandum opposing her husband's attempt to dismiss the Connecticut complaint.

But life-long happiness for the couple apparently wasn't in the cards.

HE SAID, SHE SAID

Carl Icahn began an affair with his secretary, and left his wife in 1993, alleged Liba Icahn in her original divorce filing in Westchester County. (Unlike Connecticut, New York has a fault-based system of divorce, and court files in marital break-ups there are automatically sealed. The unsealed file in Stamford Superior Court, however, contains many of the sealed documents in the Icahns' New York divorce proceedings.)

In addition to her husband's alleged adultery, Liba Icahn's October 1993 complaint claimed the couple's prenuptial agreement was invalid because it had been signed under duress. Her husband, she alleges, made it clear that their wedding would be called off had she not accepted the agreement.

But Carl Icahn, in a lengthy brief supporting his bid to dismiss the Connecticut case, contends that his wife has admitted, at a deposition, that she completely understood the agreement -- and that it was acceptable to her at the time of its signing. Both spouses, Carl Icahn says, were represented by independent counsel.

In addition to her other claims, Liba Icahn moved for divorce on the grounds that her husband treated her in a "cruel and inhumane manner."

The allegations as laid out in her original complaint, however, reveal behaviors that hardly seem out of character for a tycoon known for his fierce -- some would say ruthless -- business dealings.

Liba Icahn's claims include her husband's habit of eating dinner in front of the television; late night returns home -- or on many nights, not at all; and berating employees and family members for "hours on end and then suddenly behaving as if nothing had happened."

Leonard G. Florescue, of New York's Tenzer Greenblatt, who has represented Carl Icahn since the case began, declines to comment on the allegations of adultery brought against his client.

Schoonmaker, meanwhile, dismisses the claims of cruel and inhumane treatment as irrelevant mudslinging by an angry spouse.

In addition to Schoonmaker and Florescue, Carl Icahn's legal team includes Florescue's partner Stanford G. Lotwin and Manhattan attorney Jay Goldberg; both Lotwin and Goldberg helped represent Donald Trump in his divorce from ex-wife Ivana.

William S. Beslow, of the Law Offices of William S. Beslow on Madison Avenue, is representing Liba Icahn in New York.

A MISSED OPPORTUNITY

The New York court proceedings have taken so many twists and turns over the last six years that the Stamford Superior Court file contains a handy flow chart outlining the progression of the case.

Judge Burrows dismissed Liba Icahn's 1993 challenge of the prenuptial agreement's validity based on New York's statute of limitations. And, upon appeal, the decision was upheld by the New York State Appellate Division.

Elaine Silver, Liba Icahn's attorney, notes that it was possible to bring an action in Connecticut at the time of the New York divorce filing; Carl Icahn, upon leaving his wife in 1993, had lived for about a year-and-a-half in Greenwich. But the lawyer who handled the case back then apparently decided against moving the dispute to Connecticut, according to Silver, who began representing Icahn's estranged wife last year.

Silver declines to name the lawyer, who is now deceased, and whose name is not listed in the court file in Stamford. But she says her client "certainly wouldn't be in the position she is today" had that attorney recommended Liba Icahn to file the action here.

After losing before New York's appeals court, Liba Icahn, in 1997, was allowed by Burrows to withdraw the Westchester action without prejudice.

"She," according to Carl Icahn's brief in support of dismissing the complaint pending here in Connecticut, "blamed her lawyers for exacerbating the parties' marital problems, and stated under oath that she hoped for reconciliation with Mr. Icahn."

But within two weeks thereafter, Liba Icahn, the defense brief alleges, brought a new action in New York County, which includes Manhattan, where the Icahns also maintained a home.

Carl Icahn countered by filing his own bid for a divorce in Westchester County. He then successfully moved to have the two cases consolidated, after which Liba Icahn withdrew the New York County action.

On Nov. 17, 1997, Westchester County Supreme Court Justice Fred L. Shapiro held that Judge Burrows' ruling precluded her from challenging the prenuptial agreement's property distribution waiver. Shapiro also found that the provisions in the agreement waiving alimony were not unconscionable.

"The record reveals that [Liba Icahn] is receiving temporary maintenance and child support and has significant assets," Shapiro wrote. "Moreover. . . it is obvious that she is not in danger of becoming a public charge."

Despite the ruling, the parties still remain married because of subsequent legal maneuvering in New York. A trial in the Westchester divorce action is expected to begin in July, according to Florescue, Carl Icahn's New York attorney.

RACE TO JUDGMENT?

Liba Icahn claims that the short length of her residency in Connecticut prior to the commencement of her new action is immaterial. She acknowledges that, under Connecticut law, she cannot receive a divorce in the state until she has lived here for at least a year. But there's nothing stopping her from getting the process started, she claims.

Carl Icahn was served with the complaint, according to Schoonmaker, his lawyer, when he was visiting the couple's teenaged daughter at the prestigious Connecticut boarding school she attends.

His client is confident that his estranged wife will fail to get what the defense, in its briefs, calls "a third bite at the apple."

"You just can't relitigate this in 50 states," argues Schoonmaker. "I'd be amazed if a Connecticut judge will permit her to do what she's trying to do. . . . But I've been amazed before."

Silver, however, steadfastly maintains that her client's Connecticut action is permissible up until the time that a final determination has been made in the couple's Westchester County divorce case.

"It could be a race to judgment" in the two different jurisdictions, observes prominent New Canaan divorce attorney Jeroll R. Silverberg, who is not involved in the matter.

Silverberg sees good points in both side's arguments and praises Silver and Schoonmaker as two top-notch divorce attorneys.

Silverberg happens to be the only other Connecticut break-up baron in the "Dirty 30" network of divorce lawyers, he says. (The name, he points out, was given to the group by attorneys who felt slighted that they were not let in, and has nothing to do with members' litigation styles.)

Silver isn't a "Dirty 30" member but has staked out a name for herself among the state's divorce attorneys. According to Silverberg, Silver won what is still considered the largest reported annual payment ordered in a divorce case by a Connecticut judge. That came in the 1993 Baer v. Baer dispute. The husband in that case was required to pay his ex-wife $350,000 a year for life in alimony and another $100,000 a year in child support.

BEYOND RICH

Until Liba Icahn moved to Connecticut, she was living in what was "essentially temporary housing" after her husband duped her into moving from the couple's Bedford mansion into a guest house on the property, says Silver. He later turned around and sold the mansion for roughly $8 million, Liba Icahn alleges.

Florescue, the New York attorney, contradicts Silver's characterization of the dwelling. The so-called guest house is, itself, valued at between $5 million and $6 million, he says.

"I know she's trying to portray she's been put upon," he adds. "But she really hasn't been in any rational sense of the word."

His client, Florescue notes, has offered Liba Icahn $15 million to settle the case but has had no response.

"Wealth is relative," counters Silver.

The court file in Stamford comes complete with a feature story on what is apparently Carl Icahn's Manhattan penthouse that appeared in the December 1997 issue of Architectural Digest. (The article describes its owner only as a "businessman widely described as the iconic corporate raider of our time," and includes decorating tips from the man's "female companion.")

The display of wealth -- from the penthouses' Egyptian-motif bathroom to the aerie's view of the Manhattan skyline -- is ostentatious.

Schoonmaker and Florescue deny any knowledge of the article.

Under a 1997 New York court order for temporary maintenance and child support, Liba Icahn, according to the defense motion to dismiss, receives in excess of $30,000 a month from her husband.

That money, however, doesn't go as far these days, says Silver, because Liba Icahn has had to pay for her own housing costs since moving to Stamford.

"Compared to the magnitude of the wealth he has," says Silver, "she's not getting very much money."