CONTENTS SEPTEMBER 10, 2000
Click. IS THE FBI PROBING MARIN COURT CORRUPTION?
Click. IT'S NOT LONG JUST "WHO GETS THE KIDS?" CUSTODY OF STOCK OPTIONS AT STAKE!
RUMORS ABOUT FBI PROBE TROUBLES COURTS.By Guy Ashley © 2000 Marin Independent Journal.
Critics who have rattled cages around the Marin courthouse in recent months have drummed home their claims of favoritism toward well-financed litigants and cronyism between judges and lawyers with one ominous assertion: that the FBI is investigating possible criminal violations within the local court system.
To this day, however, the FBI has remained conspicuously silent about a probe that many involved in the local court scene accept as a given fact.
"We can't confirm or deny the existence of any investigation into the Marin courts," FBI Special Agent Andrew Black said on Friday, reiterating the no-comment stance the bureau has taken since controversy began swirling around the local courts six months ago.
The unconfirmed reports of FBI involvement have peppered news accounts and claims of corruption by court critics, a fact that breeds plenty of resentment among the local court's staunchest defenders.
"It's easy to make claims that you can't back up," said John Montgomery, administrator of the Marin courts. "I've heard all the rumors but nobody's ever shown me one iota of evidence of an investigation by the FBI. And, until I see some solid proof, I can't help but think it's just another way people are trying to tarnish the reputations of the judges and the courts."
Public pronouncements of FBI involvement began on Feb. 29, when New York investigator Karen Winner issued a report asserting that cronyism and conflicts of interest were embedded in Marin's family court system, to the detriment of families who looked to the courts for fairness in hashing out divorce and child custody cases.
Winner, who was paid about $10,000 by a core of citizens dismayed by local court decisions, spoke pointedly at a Corte Madera news conference about a "broken system" in which Marin's two family jurists at the time, Michael Dufficy and Sylvia Shapiro, routinely disregarded the law and favored a small coterie of lawyers and psychology experts. She accused jurists of most often siding with parties who brought the most financial backing to family law cases.
Winner called for the immediate suspensions of Dufficy and Shapiro and outside review of the cases over which they presided. Her findings have since been soundly criticized in some circles as lacking objectivity and reflecting only the opinions of the people who hired her.
"The FBI is investigating," she told a standing-room-only audience in a banquet room at the Corte Madera Inn. "Agents started interviewing people in November."
Critics of the court have repeated claims of FBI involvement over the past several months, as Winner's report spawned a recall movement targeting Dufficy and three other judges and Marin District Attorney Paula Kamena.
One of the recall drive's leaders, Peter Romanowsky, admitted this week that the effort is falling short in its effort to garner public support for a recall election next year.
One person who says she was interviewed by the FBI is Kathryn Ballentine Shepherd, a Larkspur family law attorney who says her once amicable relationship with Dufficy soured earlier this year when she concluded that Dufficy was biased against women in family law cases. She cited this belief in seeking his removal from a heated divorce case.
"I've spoken to two different agents who were interested in the court and primarily Judge Dufficy," Shepherd said. "I took part in one lengthy interview at the end of May, possibly the beginning of June, and since then have had a couple of follow-up conversations with them on the telephone."
Shepherd declined to discuss the specifics of what was said in those conversations.
"They talked about the investigation being confidential. I got the impression they didn't want me to talk about what we talked about," she said.
Another person who claims to have been contacted by the FBI is Martin Silverman of San Rafael, one of a group of citizens who commissioned Winner's report.
"I spoke with them on two occasions, probably about three months ago," he said. "I also know about six other people who have been interviewed."
Absent from the list of purported FBI contacts is Dufficy, who resigned as Marin's chief family law judge and now presides over civil cases.
"I haven't heard one word from them," he said. "I've only read about it in newspaper stories."
Montgomery, the county courts administrator, said it will take more than claims of closed-door interviews with FBI agents for him to believe the bureau is conducting a full-blown probe of the Marin courts.
"To anyone who says you've been interviewed by the FBI, I say it's incumbent upon you to provide some specifics – when, where, what was said, what information was provided," he said. "Otherwise, to me, it's just more mudslinging."
Silverman said he's not comfortable discussing the details of his discussions with FBI agents.
"They met with me privately, and I feel it would be betraying a confidence for me to go into it any further," he said.
Published Sunday, September 10, 2000, in the San Jose Mercury News
Money is changing a lot about life in Silicon Valley. Even divorce. It's messier than ever.
``It used to be two kids and a car, a house and an IRA, furniture and credit cards,'' said William Dok, a veteran San Jose family law attorney. ``Now, we have huge equity in family homes, more homes, a multitude of deferred compensation programs and more toys.''
Luxury cars, airplanes, boats and time-shares -- ex-spouses are fighting over all this and more in increasingly complex Silicon Valley cases. The disputes can make Hollywood divorces look small-time.
Wed this area's high cost of living with the soaring value of couples' assets and the result, family law attorneys say, is that many marriages here are exceptionally difficult to dissolve. Attorneys, judges, mediators, court officers and family counselors are finding that:
Determining the value of employee benefits such as stock options and how they should be shared is taking more time and costing more.
All of this is happening at a time when the county's divorce rate is the lowest in eight years.
In 1990, according to Santa Clara County Superior Court's Family Resources Division, there were 8,997 divorces. By 1995, the figure had dropped to 7,983. Last year, it was 7,315, despite a larger population.
California and national statistics, while not consistently tallied, suggest similar declines in breakups. Family law attorneys and counselors cite a number of possible reasons: Better economic times put less stress on marriages, and most baby boomers have already passed the stage when unions are likely to come apart. Some lawyers even suggest that in Silicon Valley the decline may be due partly to the steep cost of living.
``People can't afford to be divorced,'' said Phil Hammer, a family law attorney and husband of former San Jose Mayor Susan Hammer.
Couples must think twice
While divorce always has meant economic strain in California -- a community property state where everything acquired as a result of work done by either spouse during marriage is divided equally -- it's especially true in Silicon Valley, Hammer said. Increasingly, he finds himself discussing the economics with potential divorce clients.
``I tell them to think twice about what they're doing,'' Hammer said. ``They just may not have thought about what is going to happen when they try to set up a second household, and they realize a one-bedroom apartment in Palo Alto is going for, what, $2,100 a month? And if they've got kids, one bedroom will not be enough.''
While the majority of Silicon Valley divorces settle before trial, that doesn't lessen the headaches. And it's not just the divorces of valley moguls like Oracle Corp. CEO Larry Ellison and renowned high-tech attorney Craig Johnson that are getting pricklier. (Ellison insisted his third wife sign a prenup on their wedding day; Johnson filed a $1 million fraud lawsuit against his ex-wife after their divorce was final.)
It's not even a matter of disputed premarital agreements gumming up the process, as they did in the recently decided case of San Francisco Giants slugger Barry Bonds. In fact, prenups aren't that prevalent in the valley, attorneys say, except in some second marriages.
It's the lesser-known but equally vitriolic breakups of lower-profile millionaires, near-millionaires and even middle-incomers that are getting more entangled, and tying up the courts.
Deborah Taylor, a San Jose mother of two, learned how high costs can complicate a divorce. After nine years, she and her husband, Richard, ended their marriage in 1998, sold their new home and divided the difference. With almost $240,000 in hand, Taylor bought a San Jose townhouse to share with their son and daughter. Taylor has 70 percent custody.
But her monthly $1,600 salary as a hotel reservations manager and the $1,845 in alimony and child support didn't go far when Taylor was paying a $2,200 monthly mortgage.
``I was living paycheck-to-paycheck going through the divorce,'' Taylor said. ``It was very difficult.'' This summer, after a real estate agent approached her with an offer to buy the townhouse for $350,000, she and the kids moved to Arnold, a mountain town near Bear Valley.
There, Taylor bought a two-bedroom, 1,900-square-foot home on a half-acre. And that's when the Taylors say their mostly amicable arrangement fell apart.
The plan they had contrived for the children to spend time with their father was too difficult for Deborah Taylor to negotiate from 2 1/2 hours away. She asked her ex-husband to drop his Wednesday visits but keep them every other weekend, plus spend more vacations with the kids.
But Richard Taylor, a former professional baseball player, says his quality time with them occurs during the kids' sports activities, and he wants them nearby.
More anguish lies ahead. A court assessment officer recently recommended the children stay in the Silicon Valley area. Richard Taylor said he understands the housing crunch and the cost of living -- ``it's tremendous, and that's a legitimate deal'' -- but he doesn't want the kids to be away from their mom, either. ``It's just not a great situation to be in,'' he said.
When it's not long-distance custody fights, it's stock options that increasingly take center stage in local divorces. The dilemma: How does a couple fairly divide a community interest in a future employment benefit?
Normally, stock options are considered property, but a recent San Diego case called Kerr now allows options to be considered instead as part of income, under certain circumstances. If the typical sources of income, like salary and bonuses, are not sufficient to meet the legally entitled needs of the spouse and children, then the court can look to stock options that one spouse exercises as income to make up those needs.
The issue is surfacing in a long-running Silicon Valley divorce case, called Cheriton, which is awaiting oral argument at the California Court of Appeal.
Arguing would not be new to Iris Fraser and David Cheriton of Palo Alto, who were married in 1980. On the brink of separating in 1986, they reconciled. Cheriton, a computer science professor at Stanford University, drew up a post-marital agreement asking, among other things, that all income he received outside his university salary was his property, not to be shared.
To the dismay of her attorney, Fraser -- pregnant with the couple's fourth child -- signed the pact in 1988. The union lasted until 1994, when Cheriton filed for divorce and the couple began their six-year legal battle. The divorce was finalized in 1998.
A sizable sum is at stake. In the spring of 1995, along with Andy Bechtolsheim -- a Sun Microsystems co-founder -- Cheriton co-founded Granite Systems, a networking company bought by Cisco Systems in 1996 for about $220 million in stock. Overnight, Cheriton was worth tens of millions.
The couple reached a property settlement: He agreed to create a trust for each child using a certain number of Cisco stock options, worth millions.
Additionally, Cheriton said, he exercised 3 percent of his Cisco stock options for Fraser, who has assumed her maiden name. Beyond that, Cheriton pays child support each month based on his income from Stanford and Cisco, where he works a day a week.
The case comes down to this: Is Cheriton obligated, with his considerable assets, to exercise his Cisco stock options and further share the wealth with his children, or his ex-wife?
In California, different standards hold for spousal and child support. Children are entitled after a divorce to enjoy the standard of living of the higher-earning parent, even if that parent earned $100,000 during the marriage but now makes $1 million.
Not so for spouses. Their alimony is capped by the marital standard of living and the marriage's length, among other things.
Why doesn't Cheriton sell more stock, share the gains and end the wrangling?
``It's not as if he's ever going to go broke,'' Fraser said recently. ``And it's not that I'm asking for a lot. It's just that I believe that after everything the children and I have been through, we shouldn't be treated like a bag of garbage.''
But Cheriton said he doesn't trust her -- or the system. ``People have suggested this, but my experience with the legal system is that I don't believe that would work. She would come back for more. . . . She has zero claim on it,'' Cheriton said.
Joint custody of the ideas
At one point during the case, Cheriton said, Fraser and her lawyer advanced a theory that Cheriton had developed all the ideas behind Granite early in the couple's marriage. ``I developed this stuff in 1988 or earlier, then I somehow kept it under wraps for seven years, and sort of hauled it out of hiding and convinced Andy -- a smart guy -- that it has some great value? It's absurd,'' Cheriton said.
That part of the case was later dropped.
So far, the courts are siding with the professor. Santa Clara County Superior Court Judge Mary Ann Grilli ruled that Cheriton's options could not be considered income for the purposes of support, unless he exercises his options and sells the stock.
Whatever the outcome, the Cheriton case spotlights the complexity of new-wealth divorces. Fraser's lawyer even hired an intellectual property attorney who subpoenaed both Stanford University and Cisco for thousands of lines of code linked to Cheriton's technology.
The new intricacies are stoking demand for all manner of expert services, like forensic accountants. Yet their number is shrinking.
``It's a huge problem,'' Dok said about the shortage of good forensic accountants. ``Where there were once 10, now there are five.''
Partly he attributes the shortage to attrition and retirement, and partly to the Bay Area's cost of living. And testifying in court about complicated financial formulas is an art.
``To an extent, not only do you have to know the tax accounting and in some cases, because of the stock options, the SEC rules and regulations, you also have to understand California family case law,'' said Oakland-based forensic accountant James Sheehy.
As challenging as the cases are for attorneys and experts, they can be major headaches for judges, too.
``In some courts, there is some concern about the experience of judges handling complex family law cases,'' said Don King, a retired appeals court justice and one of California's leading family-law experts. Now a private judge in San Francisco, he has overseen his share of bitter and expensive breakups.
Because of the complexity, area attorneys often recommend that clients who can afford it hire experienced private judges to oversee their cases. Not only is the process faster, it is more mediative.
Yet no matter what the wealth quotient, most of the county's divorces are settled before a trial. For those headed to the courtroom, the county hauls out its secret weapon: James Cox, an attorney and full-time family court settlement officer who says he settles up to 95 percent of the cases he gets.
Cox is believed to be the only such officer in the state. ``I'm an independent third party who can provide creative alternatives,'' he said. ``I'm a reality check.''