The Business of Breaking Up When You're Fabulously Rich

What Women Really Think
March 29 2011 4:44 PM

The Business of Breaking Up When You're Fabulously Rich

In the past few years, so many Real Housewives have broken up with their husbands that one fears television has run out of things to say about rich people’s divorces. Not so! Enter Divorce Wars , an hourlong magazine-format special (CNBC, March 29, 9 P.M. ET) about the big business of big-money divorce. Correspondent Melissa Francis profiles four divorces, including that of Silicon Valley CEO Elon Musk and his ex, Justine, who settled "America’s Messiest Divorce" last year; and the story of the much less famous Margaret Spenlinhauer, a dogged housewife who spent nearly two decades searching for money her husband had hidden during their divorce (she found it, and her 1988 award of $750,000 became a $15 million settlement in 2006).

What I found fascinating about Divorce Wars wasn’t the breakups themselves, but the businesses that surrounded the splits of the uber-wealthy. Some are old industries that are now used in new ways (forensic accountants, private investigators, digital forensics), while others-specifically divorce financing-are businesses that have emerged to cater to extremely rich divorcing couples.

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First there are the forensic accountants, who track hidden or misrepresented funds. The Bureau of Labor statistics estimates that, despite the economic slowdown in many financial sectors, forensic accounting will see a 22 percent increase in the decade ending in 2018. Accounting subspecialties in divorce finance are cropping up, too: the Institute for Divorce Financial Analysts, founded in 1993, has credentialed 5,000 "certified divorce financial analysts."

Even though no-fault divorce laws have rendered adultery irrelevant (legally speaking) and conduct doesn’t affect the bottom line in a divorce, private investigators aren’t out of the divorce business; they’ve just changed their focus. Most alimony obligations require the receiving spouse, typically the wife, to remain single. If she has shacked up, her ex-husband’s support payments could be reduced or stopped. The possibility of that kind of windfall leads one suspicious ex-husband in Divorce Wars to hire a private investigator.

The "digital forensics" field, developed largely to prosecute cyber crime, has in the past decade become integral to sussing out facts in the very ugliest divorces. Industry estimates say that about a third of digital forensics jobs-which include recovering deleted data and reconstructing search histories-are divorce-related. Experts are hired by divorce lawyers to go through family computer(s) in order to bolster or refute accusations of cheating or, shockingly, child porn. One particularly ugly example of the lengths to which a vindictive ex can go is Nancy Tauck of Connecticut, who planted illegal porn searches on a computer belonging to her husband, multimillionaire businessman Peter Tauck, in order to win sole custody of their kids. Digital forensics recovered hidden geographical and time stamps that cleared Peter and implicated Nancy, and ultimately won him sole custody (and $55 million).

What if you can’t afford the $13 million in legal and expert fees that the Taucks spent? Divorce financing, based on venture capital principles (the first specialized boutique was founded in 2003), is an emerging field that’s getting plenty of attention . Specialized divorce firms or larger funds put up "fight money"-legal fees, investigator costs, even living expenses for less-monied spouses who stand to obtain large judgments or settlements. In exchange, the financing company takes a cut of the divorce payout. Balance Point , a divorce finance firm founded in 2009 by divorcée Stacey Napp, says that by the end of 2010 it had invested $2 million in divorces. Asked in Divorce Wars whether her business model is profitable, she smiles contentedly and says that while that remains to be seen, "We think yes." About a billion dollars are invested in divorces by banks, hedge funds, and boutiques at any given time.

Florida businessman Bill Lasky blames his own romantic sensibility for his having ultimately paid a $20 million settlement to his second wife after their seven-year marriage ended. In the corporate world, "you’re typically looking at what the exit strategy would be," says Lasky in Divorce Wars , "but in this case I felt it was two human beings, and you don’t buy people." He’s right. But not everybody takes such a philosophical view. When an entrepreneur sees business opportunity, or an embattled spouse (like Peter Tauck) wants a fair shake, sometimes humanity takes the back seat.

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