The Rich Do Have Problems: Hiding Assets in a Divorce
When it comes to divorce between affluent spouses, there is inevitably a lot of money at stake. Courts must often scrutinize reams of financial documents, untangle complex corporate holdings, and dig extra-deep to identify assets and income that should be made available for spousal and child support purposes.
The task is made more difficult when the support-paying spouse is determined to either hide those assets, or else put pressure on the other spouse by cutting them off financially.
Both approaches were used by the husband in the high-profile divorce case of Oesterlund v. Pursglove, which played out in the courts of both Ontario and Florida, and was even the subject of an article in the New York Times, titled “How to Hide $400 Million”.
The couple, who were extremely wealthy, split after 16 years of marriage and two children. The husband was very successful in business, and had amassed assets and residences worldwide. In Ontario alone, he had at least $35 million in real estate, with title held by one his umbrella corporations for which he was the controlling shareholder.
Soon after their split, the husband stopped paying child or spousal support to the wife. It quickly became apparent that he had a maze of corporations and offshore bank accounts, and had no intention of being transparent or making full financial disclosure. In one of a series of court decisions in their divorce proceedings, the wife was successful in getting some of her legal costs up-front, with the court noting:
In addition, I accepted the Wife’s statements that the Husband had deliberately dealt with assets that were jointly owned by them, closing out a joint account and selling or transferring a joint asset. He terminated joint credit cards and removed her as a managing member and bank signatory for various corporate entities. She is left in a position of being unable to live her ordinary day-to-day style in Florida. She says she has no means to pay for this litigation, while the Husband travels around the world, has control of three yachts and has residences in various jurisdictions.
The court took various other steps to redress the husband’s obfuscations, and permit the divorce to proceed on a more level playing ground.
Fortunately, when it comes to particularizing the full extent of a divorcing couple’s finances, Family courts have many tools and legal principles at their disposal. For example, a court may impute income to a support-paying spouse where appropriate. It may also choose to “pierce the corporate veil”, which can circumvent the attempt by a spouse who is a controlling shareholder to evade support obligations by hiding behind the corporate structure.
In an upcoming Blog, we will look at another unique challenge the courts face when dealing with affluent divorces: Putting value on niche and luxury items such as artwork, jewellery, and multi-million-dollar homes for which there is only a limited re-sale market.
For the full text of the decision, see:
Oesterlund v. Pursglove, 2014 ONSC 3962
