When the divorce trial of John Randolph (Bunky) Hearst Jr. and his wife, Barbara, makes its way to Manhattan Supreme Court next month, the missus will presumably jostle for some of the millions of dollars a year that her husband receives as one of the grandchildren of the founder of the Hearst publishing empire, William Randolph Hearst.
The case is already turning up details of the late, great media baron’s estate.
It turns out that Mr. Hearst-who was the closest of all the grandkids to Gramps-is not only an heir to the Hearst family fortune, but a trustee of the estate and a director of the Hearst Corporation. That means the soon-to-be-former Mrs. Hearst will want to see what value, if any, he has added to the estate.
For one thing, if under his leadership during their approximately 15-year marriage (his third) the worth of the trust and the corporation increased, she could argue to the court that she’d made an indirect contribution by being his wife and taking care of him.
She seems likely to argue that it entitles her to a larger stake of the trust, which otherwise is considered not marital but separate property.
Peter Bronstein, who is representing Ms. Hearst, said: “What we have uncovered during the process of discovery is very revealing and shows the enormous contributions that John Hearst Jr. has made to the value of the corporation and the trust. My client is not at liberty to discuss the details, since the discovery process in a divorce case is a private matter. But at the trial, we will have no choice but to present the evidence we have amassed to prove what is a fair, equitable distribution to my client and in order to fix an appropriate award of future support.”
“Under New York law, financial disclosure is mandatory in a divorce proceeding,” said Judith Poller, a matrimonial and trusts and estates partner at Bryan Cave.
Bunky Hearst’s lawyer, Sharon Stein, declined to comment.
But if Ms. Hearst’s side is allowed to bring this evidence into court, then the trial could be a juicy airing of the value and workings of the Hearst Family Trust, the private body overseeing the Hearst Corporation.
One might think that the Hearst heirs would be fiercely protective of that information. But not all of the Hearst inheritors are likely to object to a little more sunshine. Hearst heirs have called for a reopening of the original estate of William Randolph Hearst, the model for Charles Foster Kane in Orson Welles’ Citizen Kane.
According to the terms of the will, the family company is overseen by a 13-member trust. According to The Chief: The Life of William Randolph Hearst (Houghton Mifflin, 2000), at the time of his death Hearst didn’t trust any of his five sons not to break up the business, so he mandated that the trust consist of five family members (Bunky Hearst is currently one) and eight Hearst corporation executives. These trustees elect the 21-member board of the corporation, on which several family members sit. Hearst also had no patience for dissenters, adding an in terrorem clause (that’s from the Latin for “in terror”) to the will stating that those who contest it can be disinherited.
This clause has frustrated Bunky’s younger brother, William Randolph Hearst II. Of the 17 income-beneficiaries of the trust, he has become the self-appointed gadfly of the clan.
At the top of his list of crusades over the past decade has been greater access to information on the trust and greater control of its workings by its beneficiaries.
In his latest court appearance before a probate judge in Los Angeles Superior Court in April-first reported by the Daily News-he asked for the court to determine whether, if he requested the trustees to increase the distributions that the trust pays out to the heirs, he would be violating the no-contest clause. (That’s according to Andy Garb, the Los Angeles–based lawyer for the trustees; Mr. Hearst’s lawyer, Robert Sacks, declined to comment.)
And William Randolph Hearst II isn’t the only one interested in lifting the veil. After his cousin, Patty Hearst, was kidnapped by the Symbionese Liberation Army in 1974, the court acceded to the trustees’ demand that the will and probate files be sealed so as not to lead other potential criminals to their doorstep. Last month, as was first reported in Daily Variety, the brothers’ cousins-Patricia Hearst, her daughters Gillian and Lydia, and her sisters Victoria and Catherine-filed a petition seeking to unseal the document and “18 boxes of related legal proceedings.”
The sisters’ act, a largely symbolic move, would reopen the file that was available to the public for the approximately 20 years following their grandfather’s death in 1951.
A lawyer for the sisters, Kenneth Wolf, said their petition was different from Mr. Hearst’s inquiry: It related exclusively to a First Amendment issue regarding the public’s right to information. Patricia Hearst told Daily Variety: “I call it the Hearst family secret, not the Hearst Family Trust.
“I think we have a right to know the true valuation of the company,” she added.
Mr. Garb, representing the trust, said the heirs already know all they need to know.
“There is a substantial sharing of information with the beneficiaries,” Mr. Garb told The Observer. “The beneficiaries get more information than a shareholder of a public corporation would get about the company.”
Barbara Hearst’s case against her husband could give heirs like William Randolph Hearst II a risk-free window into the trust, and his cousins may be interested as well. (“I wasn’t aware of the divorce case,” said Mr. Wolf.)
Presumably, however, Bunky Hearst’s lawyers will attempt to convey as little of his wealth to the court as possible. And while Ms. Hearst may try to show that she is entitled not only to support for lifestyle purposes, but also to the “equitable distribution” of assets acquired as a result of work done by the parties during the marriage, it may be hard to isolate her husband’s role in the trust’s financial success-particularly since he suffered from a stroke prior to their marriage.
“They would need to know specific information regarding the assets of the trusts,” added Ms. Poller. “For example, at the time of the marriage, what was the value of the trust, what has the growth been, what responsibilities has the husband/trustee had for investing the assets, how much time has he devoted to it, how has his role been more significant than the other trustees, how have the assets grown as a result of his efforts versus market activity? It might be very difficult to show that the appreciation should be marital where you have 13 trustees, eight of whom are independent. But it is worth a shot.”
The resignation on May 4 of David Heleniak from Shearman and Sterling after 31 years with the white-shoe Manhattan firm was a shock to some and a relief to others.
As The Observer reported, during Mr. Heleniak’s nearly four years as senior partner-the firm’s top management position-profits per partner stalled when compared with the firm’s competitors, and his term has been bookended by involuntary exoduses: In 2001, the year he assumed the title, the firm laid off about 90 associates, and over the past year the firm has encouraged as many as 20 partners to leave. This winter, an anonymous memo calling for his resignation circulated among the partners. Anxiety at the firm was looking high, and morale low.
None of this seemed to cause much of a stir at Morgan Stanley, the investment bank where Mr. Heleniak is jumping. He struck a deal to become vice chairman of the company; according to The Wall Street Journal, he’ll be paid $40 million over three years. (Former partners estimate that he was making between $2 million and $3 million at Shearman and Sterling.)
According to a former partner, when Steve Volk, the senior partner before Mr. Heleniak, stepped down, he made his announcement about a year in advance. The pace in this year’s election will be accelerated (the vote is scheduled for early June; look for the white smoke issuing from the conference-room windows of the firm’s Lexington Avenue headquarters).
By many accounts, Mr. Heleniak was an old-fashioned firm loyalist during his three decades there, someone who, according to a former partner, “eats, breathes and sleeps Shearman” and “who never believed S. and S. could do anything wrong.”
So the sudden move has a certain tragic quality to it-even if Mr. Heleniak is more than quadrupling his annual salary in the process.
In 2004, Shearman and Sterling’s policy committee appointed two mergers-and-acquisitions partners, John Madden and Georg Thoma, to the newly created position of global co-managing partners, a move that some considered a sign of waning confidence in Mr. Heleniak.
Mr. Madden, whom the firm announced would be replacing Mr. Heleniak as interim senior partner, also appears to be the odds-on favorite to become his permanent successor. Mr. Madden was the runner-up to Mr. Heleniak in the last election for senior partner, and though the pair weren’t notably close, they did run the mergers-and-acquisition department together in the late 1980′s and early 1990′s, when it was clubbily referred to as the “Heleniak-Madden team.”
“He’s a strong contender for the role,” said a current Shearman insider about Mr. Madden.
“He’s not one of these guys: ‘Let me tell you about me and how great I am,’” said a former Shearman lawyer who knows the genteel Mr. Madden well.
But when the mergers-and-acquisitions heyday finally ended, things got rougher for the firm, which specialized in closing deals. And Mr. Madden’s professional ties to Mr. Heleniak could mean, in the end, that he won’t beviewed as new enough blood.
Capital-markets partner Rohan Weerasinghe’s name has also been tossed around, though some wonder if he’s interested (he didn’t return a call for comment) or has enough of a boardroom presence.
One dark-horse candidate might be Linda Rappaport, one of the firm’s 29 women partners and a member of the policy committee. ( The American Lawyer once predicted that she would have the senior partner position.) Other names being mentioned include the youngish M.-and-A. partner Creighton Condon as well as Mr. Thoma, a gruff M.-and-A. heavyweight whose chances seem slight because he’s based in the firm’s Düsseldorf office.
What do you get when you cross a plaintiff’s law firm known for winning large asbestos verdicts with a commercial- and civil-litigation boutique in Manhattan?
A boutique Manhattan firm that advertises on the subways?
Hanly, Conroy, Bierstein and Sheridan is creating a “joint venture” with SimmonsCooper, a leading personal-injury law firm based in what trial lawyers regard as the premier plaintiffs’ haven in the country: Madison County, Ill.
Hanly Conroy’s six lawyers will be joined by an as-yet-to-be determined number of lawyers from SimmonsCooper, which in 2003 won a $250 million verdict for a client who had developed a deadly form of cancer, mesothelioma, while working at a U.S. Steel plant.
The firm simply bankrolls the litigation on behalf of their clients-if they think the case has a prospect of success. And if it succeeds, they take 20 to 40 percent of the payout.
The new office, at 112 Madison Avenue, opens on May 16.
“I think this goes back to our philosophy as a firm, that it’s very important to diversify,” said Steve Jones, a partner at SimmonsCooper.
Mr. Hanly said that he wasn’t worried about enabling frivolous lawsuits, but rather saw it as allowing smaller businesses to pursue litigation that they might otherwise pass on because of the expense.
“I know for a fact that there are many, many situations where companies in that situation simply say, ‘Forget it. Why spend all that money? We may not win the case,’” said Mr. Hanly. “And the claim is not pursued.”
“I have a lot of respect for them, and it’s a very good idea,” added Manhattan lawyer Ed Hayes, who has consulted with SimmonsCooper.