Family attorneys in Pasadena often warn clients of the perils of missing spousal or child support payments. An expensive arrangement can become financially devastating if a spouse shrugs off paying their ex what they owe as part of their divorce settlement. Minneapolis-based CEO Andrew Redleaf is one millionaire who is learning this lesson the hard way.
Back in February 2008, Redleaf was ordered to pay his ex-wife, Elizabeth, $140.7 million in cash payments over a five-year period. Elizabeth, in exchange for the settlement, agreed to waive any interest in Andrew's business. Andrew Redleaf runs Whitebox Advisors, a hedge fund that manages $2.5 billion in assets. Initially, Elizabeth was to receive two lump-sum payments of $20.8 million before the divorce was granted, followed by another one-lump sum payment of $30 million in 2013 while the rest was to be paid off in monthly installments of $1.5 million. Redleaf initially stuck to the agreement, making the two upfront payments as well as monthly payments of $1.5 million through January 2009.
But according to court documents, he skipped more than a year's worth of payments after claiming his income had declined. After Elizabeth won a judgement worth $21 million, which he paid, Andrew then tried to renegotiate the settlement - again stating that his financial situation had changed. The courts also denied this request. After missing three more months of payments, he requested a 4 percent rate on what he owed. But last week, the court fired back and ruled that Andrew Redleaf must pay an additional 10 percent interest on the judgments as mandated by a Minnesota statute on judgements over $50,000.
Redleaf and his attorney then took the case to the state of Court of Appeals, arguing that the 10 percent interest rate was beyond the market rate. Judge Thomas Kalitowski of the Court of Appeals disagreed. His ruling did not address whether Redleaf could make the payments.
"The court here only had to determine that (Andrew Redleaf) was liable to (Elizabeth) for a sum of money that he had not paid," the judge said in the ruling.
Redleaf's attorney disagreed with the ruling and told reporters that the interest rate should be reconsidered.
"In family court, there should be discretion to the trial judge to decide the interest rate," the attorney said.