Grab your salt shakers...

---
...I advise a few grains for this one. The Wrap has published an anonymous letter suggesting Frank had an intra-Dodgers fling, just like Jamie.

This doesn't have much bearing on the litigation, and I wonder why Jamie's legal team didn't hold on to this and use it as a bargaining chip in negotiations. Or maybe they did, and Frank's side wouldn't play ball.
---

It's like he read my mind.

---
On Monday, I halfheartedly speculated on whether Frank would fight Jamie's request for money to cover her professional fees. Via Shaikin, that's exactly what happened Tuesday:

Jamie McCourt has asked the court to order Frank to pay almost $1 million per month in temporary support and $9 million in fees for attorneys and accountants. In today's filing, Frank McCourt calls those fee amounts unreasonably high.

Frank claims that Jamie has about $11 million in liquid assets in addition to six residential properties she could rent or sell, as they are rarely occupied.

Man, that's cold. And a little brilliant. Frank's putting Jamie between a rock and a hard place; If Jamie disposes of any of the residential real estate, she's implicitly acknowledging the validity of the post-nup. If she doesn't, and the court orders her to pay her own costs, her war chest starts to grow a little thin.

Logically, it doesn't make sense for the court to side entirely with Frank on this one. Jamie's authority to sell the residential real estate depends on the validity of the post-nup, which is very much in question. I just don't see the court tipping its hand on that issue at this point. 

Now, if Jamie really does have a handful of cash (or other liquid assets), the court might reduce the amount Frank has to chip in for her lawyers and accountants. Heck, maybe the court will cut Jamie off entirely. But the most interesting thing to come out of this most recent spat is Frank's attempt to make Jamie follow the post-nup and sell off some of the homes. I doubt it gains much traction, but it's clever nonetheless.

---

On $19 million in professional fees.

---
Late last week, Bill Shaikin of the Times ran a pretty neat piece which speculated that the professional fees in the McCourt divorce--lawyers, accountants, and the rest--might end up totaling $19 million. As Shaikin cleverly notes, that's more than the Dodgers will spend on their starting infield going into the 2010 season. Further on in the article:

Divorce lawyers generally charge from $250 to $750 per hour in the Southland, according to Sharon Hulse, executive director of the Levitt and Quinn Family Law Center in Los Angeles. She said a "simple" divorce could cost $10,000.

The Britney Spears-Kevin Federline divorce cost $835,000, The Times reported last year. Former NFL quarterback Bernie Kosar told the Miami Herald last year he spent more than $4 million on attorney fees — at $600 an hour — on his divorce.

Charlotte Goldberg, who teaches family law and marital property law at Loyola Law School, said costs in the McCourt case appear to be extraordinarily high.

"Millions of dollars in a family law case — even in a high-profile one — is unusual," she said. "It's hard to imagine what issues are so complex as to entail such high attorneys' fees."

Jamie's lawyers justify their pay by referring to the complexity of unraveling the McCourt Enterprise's financial structure and dealings. And there's surely some truth to that; you can see the ultra-simplified organizational chart here. All of it exists, essentially, to launder money. I don't mean that pejoratively; there is nothing suggesting the McCourt Enterprise was operating outside the law. But our country's perverse tax structure begets complex mechanisms to avoid it. It's smart business.

There's likely something else behind the astronomical sums being expended in the discovery phase of this litigation: Jamie probably doesn't have to pay for it. Not really, anyway. Given that her motive here is to drag things out as long as possible, it makes sense for her to throw request after request at Frank's legal team, which must respond in kind. Because Jamie ends up billing Frank for the costs of her representation, she feels free to run up the bills with relative impunity.

What's going on is that neither Jamie nor her lawyers have incentives to cut costs. The court will likely grant Jamie's request that Frank pay her legal bills; he's unquestionably in a much better financial position than she is at the moment. And even if the court sticks her with the bills, the firms involved shouldn't be too worried about getting paid; Jamie's going to be a very wealthy woman coming out of this. It's just a matter of degrees.

As Shaikin's article notes, settling at least part of the litigation would save a goodly sum. However, both McCourts are taking the long view on this. For Jamie, what good is settling spousal support now to save $5 million in professional fees if she's leaving much more than that on the table by settling? Remember, she's asking for about $1 million per month. She'll spend whatever it takes.

The post-nup issue is even less likely to be settled any time soon. The outcome is so binary--the team's either Frank's or it's both of theirs--that it's hard to find common ground. I suppose Frank could pay Jamie a certain amount of money to drop her claim to the team, but there's no indication the two could ever agree on a number. 

So, yeah: $19 million is a lot of money, even an unprecedented amount. But this is an unprecedentedly expensive divorce.

---

Where did Russell Martin's power go?

---
Maybe it was just misplaced. This is Russell's Dodger Stadium performance superimposed on Fenway Park. The blue dots are his doubles and the orange ones are his fly outs. The obvious caveat here is that many (if not most) of the hits to left field would have caromed off the Green Monster in Fenway. But still, this is a pretty fun tool to play around with.

Here's the link.

Some post-nup tips.

---
The Diamond Law Firm ("serving family law clients throughout the Los Angeles area") put out a Press Release today titled "Responsible Drafting of Marital Property Agreements in California." While I'm not entirely sure why it's a Press Release and not just, you know, an article, it is what it is. By way of preamble, it begins:

The high-profile separations and/or divorces of the rich and famous sometimes offer lessons of what not to do when it comes to marriage. The split after 30 years of marriage between Los Angeles Dodgers owner Frank McCourt and his now estranged wife Jamie serves as an example of the importance of properly drafting and maintaining marital property agreements to protect personal property in the event of a divorce.

The friendly folks at Diamond Law Firm offer some basic information about this difficult issue. I'll present it in the context of what went wrong with the McCourts.


Draft early and review often.


Drafting early wasn't an issue for the McCourts. Their post-nup was created prior to their move to Los Angeles. And they did an acceptable job reviewing it, as well. They reaffirmed it through subsequent property transfers. Of course, there came a time when Jamie wanted it to go away, and the couple even had the legal framework drawn up. If that doesn't constitute review, I don't know what does. 


Diamond does bring up one way that the McCourt post-nup is lacking: the parties weren't represented by independent counsel. They contracted out of this potential land mine in the agreement, but you can bet it will be one of Jamie's principal arguments in her attempt to invalidate the post-nup. Personally, I don't like it, seeing as how she's a lawyer. But California courts have done stranger things.


On community property.


Diamond notes that courts will treat marriages differently based on the length of the union and time elapsed since the pre- or post-nup. If, for instance, a pre-nup was signed 30 years ago, prior to the McCourt marriage, and it didn't contemplate anything close to the wealth attained by the couple, it might not be enforced. I don't see the length of the marriage being an issue here.


The McCourt post-nup was created and signed well-after the couple was on its way to remarkable wealth. What's more, the post-nup was made with these specific assets in mind. The intention of the party was to separate the business entities from the real estate. Jamie claims this was done not in contemplation of divorce, but to shield the homes from the businesses' creditors. Frank's response is, and should be, a resounding "so what?"


California courts are more concerned about fairness than the letter of the law.


Diamond suggests that, while the post-nup pretty neatly severs the Dodgers from the real estate, courts may look at commingling of assets as evidence that the assets were not effectively separated. Jamie will argue that the post-nup didn't really do anything. Frank will counter that, on more than one occasion, he surrendered his interest in the residential real estate pursuant to the post-nup. He'll also point to the MLB documents listing Frank as the sole owner and "control person" of the team.


The "Press Release" also notes that a valid post-nup should leave each party with enough assets to support itself in the event of a divorce. Jamie's argument on this point will be that the post-nup, by its terms, leaves Jamie with much, much less than Frank. Two things work against her here. First, she's asking for nearly a million bucks each month in spousal support. That award would serve to bridge the gap between Frank's net worth and her own. Second, it's important to look beyond the dollar amounts. When the post-nup was signed, everyone knew the Dodgers assets were worth more money than the residential real estate. Once you factor in the perceived risks at the time of the post-nup, however, the values even out considerably. 
---


The post-nup litigation has been pushed back until God-knows-when, so it will be a while before these issues are even briefed extensively. In the mean time, we'll just have to settle for the fight over spousal support, scheduled to begin in court on May 24.
---

I suppose this was bound to happen.

---

Robert Cruickshank,* writing for something called the California Progress Report (featuring a 'Navigation' widget with one link: 'Donate'), has a problem with Frank and Jamie's tax dealings. In discussing how California might make up its dramatic budget shortfall, he writes:

*Not 'Crookshanks', but wouldn't that be delightful?

Maybe one place to start is by looking at how the rich evade their tax obligations. Last week the LA Times's Michael Hiltzik showed that Frank and Jamie McCourt paid no federal or state income tax between 2004 and 2009. 

Many wealthy Californians and large corporations have similarly evaded taxes.

There's a lot there for investigative journalists to pore over. For example, California Watch could examine how much money some of California's largest corporate landowners have cost the state by using shell companies to get around property tax reassessments at sale, unfairly extending Prop 13 protections. Or they could examine how many other California CEOs follow Meg Whitman's lead and use offshore tax shelters. There is much more money the state loses through these means than the paltry $486 million over 3 years cited in the California Watch article.

But instead they seem to be focusing on attacking public workers. It's a sad reflection of the fact that in today's California, workers are seen as an acceptable punching bag, but corporations and the wealthy aren't.

I'm happy to see that, but for an odd article here and there, people haven't been to quick to demonize the McCourts for the tax issue. Cruickshank, here, has a nasty habit of using the work "evade" and its variants, which I think is unfairly pejorative. In addition to being legal, using loss carryforwards is a common, accepted practice. Joe Kristan at Going Concern explains:

Imagine of a world without loss carryforwards (I think you can!). You start a business and you lose $2 million in Year 1. In Year 2 things turn around and you make back $1 million. Without loss carryforwards, as a 35%-rate taxpayer you would pay $350,000 in Year two, even though the business is still $1 million in the hole. That’s an effective rate of >infinity%.

Perhaps Mr. McCourt is prosperous in spite of his loss carryforwards. Maybe his real estate has held its value, unlike everybody else’s. Maybe he’s even running personal expenses through his business (though Leona Helmsley learned that the IRS looks for that). But even a Los Angeles real estate empire can suddenly come crashing down.

Remember that maybe, just maybe, Mr. McCourt’s soon-to-be-ex-wife has a vested interest in making him look prosperous, and in making losses look like a mark of wealth. She might like some of that.

The commonwealth of Massachusetts is already auditing McCourt tax returns from several years ago, and all this notoriety might indeed attract a California or federal audit. If it does, running personal expenses through the various business enterprises is likely to be a much, much bigger deal than using loss carryforwards to offset income. 

It's frustrating to come to grips with the fact that the McCourts have taken $108 million out of the Dodgers which hasn't been subject to taxes. And it's certainly true that if we were to take an "if we weren't already doing it this way, how would we do it?" approach, we'd likely decide to go with something completely different. But the law is the law, and what the McCourts were doing could have been completely kosher. 

---