The Weird World Of Economics

Record Divorce

UPDATE: A judge today reaffirmed his decision that the couple should split their fortune equally in the divorce.

In one of the largest contested divorces ever, a Chicago energy industry magnate is fighting to overturn a judge's ruling that would give half of his fortune -- or about $176 million -- to his wife.

The case pits Michael Polsky, 57, chief executive of Invenergy LLC, against Maya Polsky, 55, who was primarily a homemaker during the couple's 31-year marriage.

In a two-month trial last year, lawyers for Michael Polsky argued that it was he who built the couple's amazing wealth after they emigrated from Russia in the 1970s with only about $500 to their names.

But Maya Polsky's attorneys contend that she has been her husband's trusted confidant through tough times and should be considered a full partner in his success.

In October, Cook County Circuit Judge William Boyd sided with Maya Polsky, but both sides filed post-trial motions that put the final result in doubt. Boyd is expected to rule Monday and could increase or decrease the award at that time.

The case is "remarkable and historic" for the size of the award and for the judge's decision to split the enormous estate equally between a breadwinning and homemaking spouse, said David Meyer, a law professor at the University of Illinois at Urbana-Champaign.

"Those are huge numbers," Meyer said. "When you get these cases of extraordinary wealth, it really puts to the test this notion of marriage as a complete partnership."

Judges have long split marital estates equally in working-class and middle-class divorces. But as recently as a decade ago, that result was virtually unheard of in mega-divorces, experts said.

In 1997, Lorna Wendt, the ex-wife of a former General Electric executive, made headlines merely by asking a Connecticut judge for half of Gary Wendt's fortune. A judge awarded her less than she sought, but still about $20 million.

Likely a new high for Illinois

Though no one tracks the outcome of every divorce trial, Meyer and other experts suspect the award to Maya Polsky -- if it stands -- would be a record in Illinois.

Gaetano Ferro, president of the American Academy of Matrimonial Lawyers, said he knew of no bigger award nationally.

Lawyers for Michael and Maya Polsky declined to comment about the case. But court documents show the couple's remarkable journey to the ranks of the super-rich.

The Polskys married in 1975 in Kiev, Ukraine, which then was part of the Soviet Union. Michael was an engineer and Maya taught English, but they left their jobs and families to seek a better life.

"It was the classic Soviet Union situation -- very political, no freedoms, no opportunities," Michael told the Tribune in a 2002 interview.

The couple briefly lived in Austria and Italy. When they arrived in Detroit in 1976, they had only four suitcases and $500 in cash, according to court records. Maya was pregnant with the first of their two sons. The Hebrew Immigrant Aid Society helped Michael get an engineering job in Ann Arbor, Mich.

The Polskys moved to Chicago in 1980 and Michael began his rise in the energy business. He worked for an engineering firm, then in 1985, co-founded a power equipment company. In 1991, Michael founded the company that eventually would become Northbrook-based SkyGen Energy, a leading independent power producer. The company prospered and in 2000, Michael and a Wisconsin-based energy company sold SkyGen for about $450 million.

Along the way, Michael received an MBA from the University of Chicago. He later would donate $7 million to the school to help establish the Polsky Center for Entrepreneurship.

Maya was a homemaker and mother, but she supported her husband at every turn, her lawyer Howard Rosenfeld argued last year in court filings.

"They would walk together after dinners, and Michael would share details of his work, looking for empathy, advice or merely an open ear," Rosenfeld wrote. "For many years, their marital partnership flourished. Michael provided sustenance and security, and Maya provided love, support, advice and counsel."

In 2002, however, the couple separated. Maya filed for divorce the next year, citing irreconcilable differences.

At the high-stakes divorce trial last fall, it fell to Boyd to determine the value of the couple's possessions and decide how to split the marital estate. Each side brought in experts to testify about the value of art, jewelry, homes, real estate and other investments.

The trial lasted two months, off and on, with much of the time spent debating proper value for Michael's newest company, Invenergy. Michael's expert said the firm was worth $24.7 million, according to court records. But in a key win for Maya, the judge rejected that expert's methods, saying they "appeared contrived to produce the lowest value possible."

Siding with Maya, Boyd valued the company at $75 million.

The even bigger issue was a legal one: How to compare Maya's contributions to the marriage as a homemaker with her husband's enormous financial success?

As in most states, Illinois law provides judges with no hard and fast rules regarding how to split marital assets. The state statute tells judges to consider certain factors, but leaves it to each judge to decide how much weight each factor deserves.

In the Polsky divorce, Maya's lawyers argued that the duration of the couple's marriage was the key factor. Michael's lawyers urged Boyd to consider each spouse's financial contribution to the marriage.

Homes, art split up

In a 25-page opinion in October, Boyd concluded that the couple should share the estate equally, but he provided few details about how he reached that result. Under Boyd's decision, Michael got the couple's $7 million home in Aspen, Colo., $2.9 million residence in Chicago and $2.1 million home in East Troy, Wis. Maya received the couple's $2 million home in Glencoe and $3.7 million home on Lake Shore Drive. She also gets various investments and cash and keeps the Maya Polsky Gallery, valued at $305,000.

Boyd also divided millions more in paintings, jewelry, rugs and other home furnishings.

Now both sides want Boyd to reconsider his ruling.

"The extraordinary marital estate in this case was built solely by Michael's skill, genius and drive," Joseph Tighe, Michael's attorney, wrote in court filings. "This court's 50-50 division of assets reflects a fundamental error of law and must be set aside."

Meanwhile, Maya's attorneys contend that she should get more than 50 percent of the estate, in part because Michael has more earning power that she does in the future.

Boyd's final ruling will be watched by family lawyers in Illinois, Meyer said, as will the virtually inevitable appeal.

That an estate so large could be split equally illustrates how much the legal landscape has changed since the 1980s and even 1990s, Meyer said.

"How hard is it to settle a case when you're dividing $300 million or $400 million?" Ferro said. "The only reason you try those cases is if somebody gets stuck on a principle. ... If you're hung up on the divorce really being vindication -- proof that you contributed the same, or that you contributed more -- you go to war."

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posted by UncommonBusiness @ 2:06 AM