A California judge has ruled that the girlfriend of former Clippers owner Donald Sterling must pay back the $2.6 million given to her in gifts from Sterling in a surprising ruling that defines these gifts as community property even though the couple was separated and moving toward divorce. Judge Richard Fruin Jr. awarded Shelly Sterling most of the nearly $3 million she had sought. I have previously discussed how the case highlights the often troubling line of what constitutes prostitution and what constitutes a gifts. [Notably both Sterling and Stiviano deny having a sexual relationship] If Sterling had given V. Stiviano money directly for sex, it would be illegal. Instead, he gave her millions in gifts as part of a relationship. Regardless of where to draw that particular line, Fruin said that the line on community property is drawn to include the house, luxury cars and expensive gifts given to Stiviano as she served as the companion of the octogenarian Sterling.
The decision is obviously sweet justice for Shelly Sterling, particularly after tape conversations showing Stiviano laying the groundwork for claiming that these are gifts, including one conversation played in court where she tells Sterling “The truth is that everything that I have, you’ve given me from your heart without me begging or asking or throwing myself all over you.” Very creepy. Stiviano also claimed that, while Sterling paid for most of the luxury duplex, she contributed an unknown amount of small bills that she kept in a dresser drawer.
In just over two years, Sterling gave her a Ferrari, a Bentley and a Range Rover, and paid the lion’s share of a $1.8 million duplex. Anyone looking at (or listening to) Sterling might conclude that Stiviano still got the worst end of the deal. However, I am still unclear as how this line is drawn. Clearly, both Sterlings gave gifts to various people during this period. However, the size of the gifts appear the determinative factor.
In the meantime, Stiviano has insisted that their relationship was not romantic and that Sterling was more of a “father figure.” Sterling also insisted that they never had sex.
Mrs. Sterling initially sought about $3.6 million but secured $2.8 million, based on evidence at trial and Stiviano’s own admissions.
Clearly, given the $2 billion sale of the Clippers, this was not about the money for Mrs. Sterling.
I’m puzzled as to why the court did not see fit to
require that Mr. Sterling, himself, compensate the soon to be ex Mrs. Sterling for the gifts,
That is a good question. Part of that answer might be that if HE is required to pay out of his remaining share of the assets, the wife is still OUT the amount that was illegally removed from the whole. In other words if he gave away 3 million and then they cut his half of the remainder by that amount. Mrs. S is still out millions of dollars that should have been part of the community pot but wasn’t and was illegally removed from her part of the assets.
The entire estate or community asset pool has been reduced by 3 million dollars (not to mention potential appreciation of the given away assets lost to the community). There now exists lost opportunity cost and a time value of money calculation to consider. I’m so glad to be retired 🙂
Perhaps the court was more concerned with making her whole instead of reducing Mr. S share.
In addition if they have children (see my previous example/horror story) the removal of assets illegally from community property might adversely affect the children. Some attorney will need to weigh in on that concept.
@ Karen
I would be rolling in my grave. His children were without recourse then?
No recourse. The assets were titled in their names jointly. New wife and husband. His wife had passed away some time ago and it was his 2nd marriage. And yes. They were her kids from a previous marriage.
Was there anything the first wife could have done, before her death, to ensure her estate went only to her children after her husband’s death?
Yes. They could have set up a trust arrangement so that when either of them were to pass a trust arrangement would “kick in”. An A-B trust or ABC (Q-tip trust), or establish an irrevocable trust for the assets that were to go to the first marriage’s children. They could have set up a FLP for the rental properties and done a gradual gifting of those to the children. There are many many different ways to set things up.
All of these, obviously, require a good estate-trust attorney to set up. My job was not to give legal advice or to set up trusts, but to recognize when there was a need and to refer to the legal professional.
Unfortunately, many people just didn’t hold things in joint tenancy and don’t even have a trust so that when the first spouse dies, the survivor just inherits everything with no estate taxes due. They also lose the deceased spouse’s unified credit if they do that. Unified credit = the amount each person is entitled to shelter from estate taxes. If you don’t have a trust, you can lose that exemption.
http://www.trustlaw.ws/abc-or-q-tip-trusts.html
When he got married again, he just put everything in both of their names. Joint tenancy JTRWOS. BAAAAD idea.
Now that the Unified Credit exemption is so much higher, the instances of people needing to shelter their assets from estate taxes and go to these measures is much less. BUT….still people need to plan for just such horror stories as these.
Instead of the girlfriend being required to return nearly three million in gifts, I’m puzzled as to why the court did not see fit to
require that Mr. Sterling, himself, compensate the soon to be ex Mrs. Sterling for the gifts, allegedly distributed, without her knowledge. That, to me, would make far more sense than going after the recipient of the gifts, where there is no allegation of theft, fraud or duress on the part of the girlfriend. Force the wrongdoer, which would be Mr. Sterling, to make restitution to his own wife for the allegedly unlawful gifts. Let it come out of his share of the marital assets when everything is said and done in the divorce.
I find the girlfriend despicable and void of a moral compass, yet the court is going after the wrong person to recoup these gifts. Her only wrong was accepting the gifts. Mr. Sterling was the one who made these transactions possible.
DBQ:
“Note: in my example at 11:09. Those assets, house etc were owned by the husband BEFORE the newest marriage and many of them were inherited by him from his deceased wife and her assets that she inherited from her family. The intention was that those separate things would go to the children from the first marriage.
All of these family assets from the first marriage went to the new young wife and her children instead of the children of his first marriage….as he intended.”
I’m still freaking out about this. Was there anything the first wife could have done, before her death, to ensure her estate went only to her children after her husband’s death? Anything that couldn’t be unwound by bad decisions the husband made later, such as commingling assets? Did the children have no case in court because too much time had passed from their mother’s death, and by the time the father passed the statute was gone? What if they didn’t know how the finances had been botched?
This is how poltergeists are made . . .
Nick – that is so cool about the Packers. Next time I watch the game I can say I know one of the owners. 🙂
DBQ:
“If you don’t title things properly, your wishes….that the stock go to YOUR heirs, will not necessarily be carried out. I had one client who just trusted, refused to listen when advised….and when he died everything!!! the stocks the property, the rental properties, the vacation homes etc etc etc….went NOT to his children but to the children of his newest wife. She took everything and his children were left out in the cold. They even lost their mother’s jewelry and other family heirlooms.”
I would be rolling in my grave. His children were without recourse then? And the 2nd wife’s children were hers from a previous marriage and not their children together? That sounds straight out of Cinderella, where unhappily life imitates art. I don’t know what gets into people. I suppose money and opportunity are a crucible where your true character is revealed.
A friend of mine went through a divorce where he and his wife stayed somewhat on good terms, throughout. They even got it on from time to time. The divorce was inevitable, there were two kids, and sizable property. They both got screwed because she got a great team of lawyers. In Victoria, there is a street downtown called Broad Street. There is a firm of all women lawyers that specialize in divorces. They are known as the ‘Broad Street Bitches’. When my pal’s soon to be ex went to them, he knew they knew they in for it. She told him that at the end of her first meeting the lawyer casually said, “We’ll get him honey.”
In the end they split most everything down the middle. They had acquired everything while married. In the end any law firm would have resulted in the same split. What made it interesting but not unique was that they both ended up paying a sizable portion of their ‘to be shared wealth’ to the lawyers for long protracted unnecessary proceedings.
Lawyers are a necessary evil in our society. Sometimes they are just evil.
Forgot to add, that I’m sure your daughter appreciates how you handled things, and that you spared her the torment and financial distress so common in divorces. You sound like a very good man. 🙂
Aridog – that is a good story about how you parted with your ex, taking care of her even in how the marriage ended.
@ bam bam
I believe that a valid argument could be made that Mrs. Sterling CONSENTED to these distributions if she knew, or, perhaps, should’ve known, of these expenditures. How closely was she monitoring the books and the accounts?
Given the scope of businesses and business assets as well as personal property, I would imagine that she did not have much personal interaction with the business or the books.
At this level of wealth, you have “little people” to take care of those chores. She probably doesn’t know what laundry soap they use either. But. That lack of knowledge doesn’t excuse her from being robbed by her husband of community assets during their marriage.
The court likely looked into your point, though, and determined that she didn’t have knowledge nor did she give her consent
I was separated from my husband, about to get divorced, and sold off some of the family assets and gave the money to my new boyfriend.
@ BitchinDog
Well, you are still married. Separated doesn’t count. If you are still married, the assets belong to both of you, in a community property state. UNLESS you take the advice of a financial planner and your attorney and put separate assets, owned before marriage or inherited by you during marriage, into a separate account.
Plus, if you are still married, not divorced yet and you are robbing the community pot of assets, you are purposely committing a “fraud on the community” and could be in big trouble. The assets in a divorce have to be equitably divided or agreed upon during the divorce proceedings and approved by the Court. (in Calif anyway)
Don’t do it 🙂
Barkin, The girlfriend is so phony from plastic surgery I find her quite unattractive. There are SO many women like that here in SoCal.
Now, if he had gone to a cathouse and spent some money on a pay for event sort of thing then that would be different. No one could then go after the hooker and say that she did not earn her keep or that she was a hooker but not a good looker and all that. Different strokes for different folks and no pun intended.
Please, no photos of Sterling– the girlfriend, yeah.
Lets see: I was separated from my husband, about to get divorced, and sold off some of the family assets and gave the money to my new boyfriend. Why on Planet Earth would some court overturn that?
We are on a legal blog here.
Superb substantive, civil discussion. DBQ is leading w/ her knowledge and calm demeanor. Not taking away from that. However I find the KEY to substantive civil discussions being the people not commenting, as much as those who are commenting. The archives proves that.
DBQ
I believe that a valid argument could be made that Mrs. Sterling CONSENTED to these distributions if she knew, or, perhaps, should’ve known, of these expenditures. How closely was she monitoring the books and the accounts? Over the course of how many months or years were these gifts received? At what point, along the line, was the wife put on notice that her creepy husband was doing this? Does he have a history of doing this? If so, did the wife demand the return of the gifts given to previous girlfriends?
If the wife had access to the couple’s financial records, especially if these distributions occurred over an extended period of time, her CONSENT, in my opinion, could, perhaps, be IMPLIED. While I have no expertise in this field, I think that her consent could be established from various factors.
DBQ, You are one knowledgeable mofo. Actually, the Packer stock gift was given to both myself and my bride. And, Wisconsin is a community property state like Ca.
Note: in my example at 11:09. Those assets, house etc were owned by the husband BEFORE the newest marriage and many of them were inherited by him from his deceased wife and her assets that she inherited from her family. The intention was that those separate things would go to the children from the first marriage.
All of these family assets from the first marriage went to the new young wife and her children instead of the children of his first marriage….as he intended.
Nauseating. 🙁
part owner of the Packers, the most unique professional sports franchise in the world. My share was a Christmas gift.
In Calif, if the gift was given to you exclusively and not to both of you, then it is not community property. An inheritance received is also not community property.
I had to deal with this inheritance issue and gift issue all the time in my practice and advise people that those types of assets should NOT be put into the community “pot”. Co-mingling assets will cloud the ownership.
For instance: Say you inherit 15,000 shares of Chevron stock from your grandfather. (I had clients who had this and more happen to them). You would like to have those shares go to your children or grandchildren when you die. This is your second marriage (hypothetically) and your children are from your first marriage. If you put the stock into a separate account (or separate/dedicated trust) then they are not community property. If you have the dividends remain in that account or reinvest into more shares….still not community property.
However, if you have the dividends sent to your and your current spouse’s bank account, those now become community property as they are income earned by you during the marriage.
If you don’t title things properly, your wishes….that the stock go to YOUR heirs, will not necessarily be carried out. I had one client who just trusted, refused to listen when advised….and when he died everything!!! the stocks the property, the rental properties, the vacation homes etc etc etc….went NOT to his children but to the children of his newest wife. She took everything and his children were left out in the cold. They even lost their mother’s jewelry and other family heirlooms.