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Financier's Dealings Disclosed

Courts: Leonard I. Green's divorce, lawsuit papers reveal an old SEC charge, IRS audit and partnership strife.


If written as a libretto, the life of Leonard I. Green--the wealthy impresario of corporate takeovers and chief executive of the Los Angeles Opera--certainly would not be titled "The Merry Multimillionaire."

Recently, the 68-year-old founder and namesake of the West Coast's biggest leveraged-buyout firm has endured trying times. He faced a boardroom coup by his partners, is under Internal Revenue Service scrutiny for a Cayman Islands tax shelter and is locked in an excruciating divorce battle with his third wife that has exposed his personal finances as well as the unvarnished dealings of a takeover artist.

He finds himself explaining an old federal insider-trading charge, settled years ago, that has come to light with a more recent claim by his estranged wife that he gave an improper stock tip to a friend. The latest allegation is a fabrication by an estranged wife who has "viciously spread hurtful, false rumors about Mr. Green," said his Los Angeles attorney, Dale F. Kinsella.

In an interview last week, Green expressed regret over his personal and professional troubles.

"I wish it didn't happen," he said. "I wish I didn't make hasty decisions, particularly in my marriage, that I did. And so I'll pay for it, then we'll go on--and should go on--and enjoy life."

His wife, Jude Green, 49, who also has been married three times, declined to comment for this story.

Leonard Green, considered a pioneer of the friendly takeover, co-founded a New York investment house that specialized in leveraged management-backed buyouts before forming Los Angeles-based Leonard Green & Partners in 1989.

Since then, his firm has raised $1.8 billion in investment capital through three funds, managing money for such blue-chip institutional investors as the California Public Employees Retirement System, the University of Texas Endowment, Citicorp and Wells Fargo.

Eschewing highflying technology stocks, Green's firm delivered annualized returns of 80% during most of the 1990s by picking successful takeover targets from sleepers in unglamorous industries such as retailing. Green estimated the funds' current returns at 40% to 50%.

The firm has built its reputation quietly. But the partnership has been dragged into Green's divorce proceeding, which includes a breach-of-contract suit by her and a $25-million defamation suit by him.

The cases, which have been merged into one proceeding before Los Angeles Superior Court Judge Richard E. Denner, fill dozens of files at the downtown courthouse.

The court records, along with hundreds of pages of previously undisclosed documents obtained by The Times, present a stark picture of a financial house in turmoil, a respected financier under government scrutiny and a high-society marriage on the rocks.

Green and his wife have fought over his private Gulfstream II jet, use of the Aspen, Colo.-area vacation house, the ownership of two paintings by John Singer Sargent and Marc Chagall and her monthly fur and jewelry allowance.

Records also show that the IRS is auditing Green's 1997 and 1998 returns in connection with a trust that claimed a nearly $20-million loss as a result of trades in foreign bank stock through an offshore company.

They also lay bare the details of a boardroom struggle within Green's own firm over his decision to invest $300 million of client funds in the financially troubled Rite Aid drugstore chain despite his partners' misgivings about the company's financial standing and a potential conflict of interest involving Green.

The dispute led to a succession agreement that restricted Green's participation and share of the profit from the next investment fund.

Green's business partners said they have since made peace with the firm's namesake and want to stay out of his personal affairs.

"Jude and Leonard are involved in a very acrimonious divorce," said partner Jonathan D. Sokoloff. "It's between the two of them and it doesn't involve Leonard Green & Partners."

A spokeswoman for CalPERS, which has $250 million invested in Green-managed funds, said its money managers remain confident in the partners' abilities.

"Whatever personal issues may be involved are not impacting the performance ... of the firm," Patricia Macht said.


Differing Accounts of Their Courtship

Green filed for divorce in June 2000 from Jude (pronounced Judy), whom he met on an Aspen skiing trip in 1994.

Jude, a physical therapist from Michigan, caught his eye the day before Thanksgiving in the lobby of the Little Nell Hotel, where she worked part time in the jewelry store. They had dinner two nights later; by the end of the year, Green had taken her to New York and Hawaii and professed his love for her.

"I'm not that experienced with women," Green said, adding that he was vulnerable at the time because he was going through a divorce. "I met this woman who seemed to be totally enthralled with me and had two really nice children and I felt, 'Gee, it would be nice to have that kind of family.'"

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