Disclosure Requirements in a California Divorce

In late January of this year reports surfaced that former Apple CEO, John Sculley, was being sued by his ex-wife Carol Lee Sculley post-divorce settlement. Why? For alleged omission of marital assets in excess of $25 million dollars. Ms. Sculley, known as Leezy, and the former CEO settled their divorce in 2011. However, Leezy has since sued in Palm Beach, FL for failure to fully and honestly disclose assets in the process of their divorce settlement. Leezy claims that Sculley began hiding assets in 2000 with the help of his brothers, Arthur and David, who he had hide and/or transfer assets so as to keep them from his now ex-wife. As a result of this newly filed suit, complex financial discovery is in full swing. While Sculley’s representatives strongly deny this allegation, should it prove to be true, Sculley is in hot water.

In California, from the very inception of divorce proceedings, when one party files, both spouses are obligated to deal honestly and candidly with one another. Under Family Code Section 721(b) there is a fiduciary duty, which “imposes a duty of the highest good faith and fair dealing on each spouse.” Further, the Code explicitly states “neither shall take any unfair advantage of the other.” So what does this mean? It means that in the process of divorce, when parties exchange their Preliminary and Final Declarations of Disclosure, each party must honestly, and to the best of their ability, disclose all information pertaining to any and all assets. This duty is ongoing and requires disclosure of any relevant information that arises throughout the divorce process. When either party serves the other with a discovery request, often a request for production of documents, it is imperative that the party served provide all requested information. Hiding assets is always a bad idea. Why? Because if caught, you risk losing everything you tried to keep hidden in the first place.

The court has a policy of ensuring that there be an equitable division of the assets. As such, a failure to satisfy one’s fiduciary duties often results in the court awarding 100% of the omitted assets to the innocent party. Not only that, there can be an order for sanctions by way of an order that the guilty party pay the other’s attorney’s fees and costs. In short, this can often result in paying more money than what the party sought to keep to his/herself in the first place. For Sculley, if he did hide assets from his ex-wife, he is looking at paying a lot more than just the $25 million. Cases involving omitted assets almost always requires the work of an attorney, due to the need for discovery. This means costly attorney fees and costs.

Making sure you comply with your fiduciary duties with regards to financial disclosures can be complicated. At Mello & Pickering, LLP, with 40 years combined experience in family law, we can help you with your divorce and assist you in gathering all information that must be disclosed.