A Lawyer Explains How Jeff and MacKenzie Bezos's $137 Billion Divorce Could Play Out
“It doesn't really matter how much money you have. It depends what they're going to fight about.”
Chip Somodevilla / Getty Images. Composite by the author
In a polished joint statement on Wednesday morning, Jeff and MacKenzie Bezos announced plans to divorce. “After a long period of loving exploration,” Bezos tweeted, they’ve decided to amicably continue their “shared lives as friends.” Just in case it didn’t sink in how cordial it's going to be, they added, “If we had known we would separate after 25 years, we would do it all again.”
The National Enquirer shed some light on a potential cause of the split Thursday morning by publishing a string of achingly boring sexts between Bezos and alleged mistress Lauren Sanchez. But regardless of the reason they're ending their marriage, Jeff Bezos’s status as the richest man in the world, worth a whopping $137 billion according to Forbes, means this could shape up to be the biggest divorce since Henry VIII and Katherine of Aragon. Bezos’s number one slot on the Bloomberg Billionaire’s Index—capitalism’s leaderboard—is in danger, and his novelist wife could become the world’s richest woman as a result.
When normal people end a marriage, the tension can revolve around how to afford ever more expensive legal fees, breaking the news to the kids, figuring out how to escape a situation with an imbalance of power, or simply moving on afterward. With Bezos's company having American government in a stranglehold while racing to the bottom of humane treatment for workers, one might intuit this divorce will be a bit more complicated. But according to managing partner in the NYC-based firm Berkman, Bottger, Newman, and Rodd Jacqueline Newman, it’s probably going to simpler than most expect.
Newman has practiced matrimonial law in New York for 20 years and says she works with high-income clients worth up to a billion dollars. She says rich and famous couples like the Bezos clan are likely to settle their divorce privately, rather than litigate it in court, to protect their privacy. The most expensive part won’t be legal fees, but rather experts and appraisers who must figure out how to divvy up the largest pile of personal assets in the world.
The couple is based in the community property state of Washington, which means they equally own the assets they’ve acquired over the course of their marriage, including corporate shares. Seattle-based divorce lawyer Michael Fancher told VICE that everything except personal gifts, inheritances, and assets owned before the marriage will normally be divided between the two. Since the vast majority of Jeff Bezos’s wealth is tied up in his 16% ownership stake in Amazon, which he started after marrying his wife, the pie will be sliced relatively evenly.
We asked Newman and Fancher all our burning questions about how the very big divorce will shake out. These interviews have been edited for length and clarity.
VICE: How much is this very big divorce going to cost the Bezos’s?
Jacqueline Newman: It’s hard to tell exactly how much it will cost because it doesn't really matter how much money you have. That doesn't necessarily equate to the class and the legal fees. It depends what they're going to fight about.
My assumption being that they will probably settle the case, whether they work with a mediator, their attorneys just work it out themselves, or they do any kind of private arbitration. Legal fees actually won’t be as expensive as one would probably imagine. I don't know how expensive their attorneys are or who they're going to be working with, but I would think that legal fees will be under a million dollars. That would be my guess if they settle this.
The thing that might get very expensive is they're going to need experts. I don't know what assets he holds outside of Amazon, but if he has private equity investments, other business ventures, there could be a lot of evaluations that may need to take place. If they own a lot of real estate, there’ll be a lot of real estate appraisers. They're going to need business counsel. They're going to need all sorts of people that are going to be supervising and drafting documents to make sure that any kind of business transfer assets that take place are going to be well-drafted and will protect both parties.
What do you make of the statement released by Bezos on Twitter? Is the whole "we part as friends" thing usually a ruse? Divorces, in general, get ugly even when they're singing this tune, particularly with this much at stake.
I mean, no, I wouldn't necessarily take it at face value. Everyone's going to say something to that effect. But that said, if it was really that bad they might not have released any statement at all. They're smart people. They have four children together. I think they're going to want to do everything they can to protect their children. Battling their divorce out in the press is not going to be protecting their kids.
Is there a comparable rich person divorce that can help us understand what to expect?
In Steven Wynn’s [second] divorce to his wife Elaine, she got $741 million, according to the New York Times. He was a casino billionaire. His was also a public company on the stock exchange, and she got 11 million shares, according to the SEC. They both owned more than 18-percent of the stock at that point.
If there's somebody who's a major stockholder [note: Bezos owns 16-percent of Amazon, by far the largest slice of the pie, according to Forbes], you don't transfer enough to the spouse to make it so they can't be the major decision maker. Say Bezos has 1,000 shares, and he has to maintain 800 shares in order to be the highest stockholder in the company. And let's say it's a 50/50 split for the purposes of this discussion. So if she's supposed to get 500, he's supposed to get 500 in this scenario, only 200 would get transferred, and the extra 300 that would make that 500 complete will stay with Bezos. His wife might get the dividends from it, and if there's a liquidity event, she might get bought out. But they won't do an actual transfer because you want to make sure that he maintains the major portion of shares. That’s one of the tools in my toolbox.
How does Washington being a Community Property state affect this divorce? Does it automatically mean MacKenzie is going to own half of Amazon now?
Michael Fancher: There are a variety of ways to do it. And I understand they're talking to each other, so they're going to be trying to figure out what works. But to the extent that much of his wealth is Amazon stock, they're going to need to do something with that.
Community property is generally divided between the parties, but it's not necessarily 50/50. The lawyers might start with an assumption of 50/50, but the court can divide it in whatever percentage it feels it needs to achieve an overall fair result. If one party has a much greater income stream going forwards in the other, a court might well award a larger percentage of community property to the person who does not have the big income stream.
A question, however, is where that income stream comes from, how much of his income is, you know, basically salary and how much of his income is just dividends on his stock.
I believe most of his wealth comes from his stock. His salary from 2017 was just over $1.6 million, according to the SEC.
If most of the income stream is flowing off of the investments in the stock, then awarding a percentage of it to her might mean that she's going to have a similar income stream. And so there may be more reason to divide the property equally. So these are the kinds of things that are going to have to be sorted out.
Potentially, Mackenzie could be quite a large owner of Amazon. She might step into a more active role in the company. Or they might work something else out. I had a client who did an arrangement where the wife chose to remain as a silent partner trusted her husband's ability to manage the company as he always had, when the time comes, that he sells out his interest in the company, she’ll get her share of that.
Or they might liquidate the stock, but that wouldn’t be a good idea for the company.
Could this jeopardize Bezos’s position as the richest man in the world?
Newman: I would say so. My guess is that since they didn’t really have huge assets when they got married, they probably don’t have a prenuptial agreement. And I don't know what the motivation would have been for her to sign a postnuptial agreement that would give her less than what the courts would have given her.
My understanding is that since he’s in a Community Property state it would be a 50/50 split. If that’s the case, he could definitely fall down on that list.
Fancher: I suppose that’s a possibility.
How much of the pie will MacKenzie get, all told?
I have a very hard time seeing her getting less than 50-percent of the entire community. Given that most of what they have is these assets, I would guess that she's probably looking at between 50- and 60-percent. There may be significant other things: other investments, other companies that he has or is invested in, and then there's the house. But that's small potatoes compared to the Amazon stock. Depending upon how diversified he is, it could involve throwing her more of some other assets and less of Amazon.
Why bother making it official, rather than just staying separated as they’ve apparently been doing? What are the benefits of making their separation legal?
Newman: That’s an interesting question. I mean, there are estate reasons. If you die you want to be able to leave your estate to whoever you want. But I think psychologically a lot of people want to be divorced if they want to be divorced. There are liability issues, healthcare issues, you know, but sometimes in a marriage is over everybody wants to be able to move on.
Do you think MacKenzie will have to start paying for Amazon Prime?
[Laughs] I guess it depends. I guess it depends on how applicable it is!
Sign up for our newsletter to get the best of VICE delivered to your inbox daily.