Not Exactly Kids’ Stuff

Heir to Herbalife Fortune Embroiled in Trust Dispute

By KATE BERRY

Staff Reporter

Suzan Hughes wants her day in court.

Ever since her ex-husband, Mark Hughes, founder of Herbalife International, died of a drug and alcohol overdose in Malibu three years ago, the former Miss Petite USA has been battling Hughes’ lawyer, his father and a longtime friend over who has control of a fortune estimated at $330 million.

That’s because the bulk of Hughes’ money was left in a trust for the couple’s 11-year-old son, Alex, a fifth-grader who likes skateboarding and go-carts. He only gets full access to the money when he turns 35.

Meantime, his mother receives a stipend of $10,000 a month for Alex’s care and support. And the trust’s three executors, all former directors of Herbalife, each receive $330,000 a year to administer the trust and oversee its investments.

“These three guys are employees, sycophants and dictators,” said Suzan Hughes, whose lawsuit against the Mark Hughes Family Trust was dismissed in April by a Los Angeles Superior Court judge. She says she plans to appeal.

“It’s a summary judgment it’s not over yet,” she said in a recent interview arranged by a PR agent working on her new aerobics video. “If you had all that money wouldn’t you just throw it at somebody? It’s not their money, so there are no consequences.”

Lawyers for the trust have a different take. They claim Suzan Hughes has incurred excessive legal fees and demanded property from Mark Hughes’ Grayhall estate, such as a Bentley, chandeliers, Louis XIV furniture and antique mirrors. “Suzan is unable to separate her personal emotional anger arising out of her contested divorce and ongoing visitation battles with Mark from what is in the best interest of Alex,” the trustees said in court documents.

Conrad Lee Klein, Hughes’ longtime lawyer and one of the three executors, maintains that “the trustees are normal conservative businessmen and we follow normal conservative business practices.”

Welcome to the world of dysfunctional wealth, L.A. style. When rich families fall apart, money has a way of getting in the way. If the parents happen to be in the public eye, it only magnifies the bitterness, greed and retribution. It mostly happens in divorce cases these days involving Kirk Kerkorian, Pamela Anderson, Nicole Kidman and Tom Cruise. But no matter what the circumstances, the kids often wind up in the middle, especially when they’re young and having their lives shaped by attorneys.

That scenario is being played out big time in the “Guardianship estate of Alexander Reynolds Hughes, a minor.”

In court documents, Alex’s mother is portrayed as a money-grubbing outsider bent on stealing her child’s wealth. The trustees, meanwhile, are accused of launching “a campaign to send Alex to boarding school in Switzerland… to create both physical and emotional distance between mother and son.”

The litigation is mountainous and covers a litany of claims and counterclaims some supportable, others just one person’s word against another’s. And unlike many court cases where children are kept in the background, this one has Alex popping up, time and again.

Introduced in court documents is a two-page letter said to have been written by Alex to his grandfather, asking for certain items on his ninth birthday, including his father’s drum set, golf clubs, a barber’s chair and the wedding ring his mother gave to his father when they were married.

“All these things have a special significance for me and my mommy,” Alex wrote on lined paper. “It would bring a smile to my face at this sad time (sic) these items in my house.”

Trappings, prudence

On one point there can be little argument: Alex and Suzan still enjoy a lifestyle of the rich and famous, living in a $6 million neoclassical mansion in Beverly Hills. Besides the $120,000 a year in child support, Suzan collects $400,000 in spousal support. This February, the two appeared at a ribbon cutting for UCLA’s Mark Hughes Cellular and Molecular Nutrition Laboratory, which was funded with a gift from Herbalife.

For all the apparent trappings, Suzan says she is instilling the value of money in her son, pointing out that when he recently went on a history field trip to Boston with his classmates from the exclusive Curtis School, she gave him just $40 to spend over a weekend.

“I’m not slipping him $100,” Suzan Hughes said. “We’re teaching him age-appropriate lessons. That it’s not what you wear on your back or a designer label. If it costs $20 and looks good on you, it looks good on you.”

The Mark Hughes overdose is a well-known story. At his death in June 2000 at age 44, he left behind $100 million in real estate and 54 percent of the voting stock of Herbalife, the marketer of health and nutritional products that he started out of the back of his car in 1980.

He also had been divorced for three years from Suzan, his third wife. (He was married to his fourth wife Darcy LaPier, a former Miss Hawaiian Tropic at the time of his death.) As part of her divorce settlement in 1997, Suzan Hughes received an estimated $10 million and custody of Alex. She has a net worth of $20 million, according to court documents filed by lawyers for the Hughes trustees.

Not drawing as much attention was the will that Hughes had redrawn right after the divorce, establishing a three-person trust that would control the estate until Alex reached adulthood. As part of the adjustment, Suzan was dropped as one of the trustees and replaced by Jack Reynolds, Alex’s paternal grandfather. The other trustees are Klein and Christopher Pair, who served briefly as chief executive of Herbalife.

Suzan Hughes was miffed about being replaced, especially by Reynolds. “That man is not listed as Mark Hughes’ father on his birth certificate,” she said. “Granddad was Larry Hughes, (his mother’s father) and that’s who really raised Mark. Jack has been Jack, so that relationship hasn’t really changed because there hasn’t really been one. They would like to say that there is.”

While not listed on Mark’s birth certificate as his father, Reynolds reunited with Hughes as a teenager and the two became friends, Klein said. A former plumbing subcontractor, Reynolds became a director at Herbalife.

Suzan Hughes might have been bothered by the change in trustees and by Reynolds’ involvement but estate planning seemed like a far-off necessity. With Mark still in his late 30s at the time, there was little prospect that the trust would actually be established anytime soon even with his extravagant lifestyle that included considerable drug and alcohol use.

Battle with trustees

It didn’t take long after his highly publicized death for the parties to begin warring.

At first, the trust settled a claim filed by Mark Hughes’ fourth wife, LaPier, for $20 million, in exchange for her vacating the couple’s Grayhall estate in Beverly Hills, said LaPier’s attorney, Leah Bishop of O’Melveny & Myers. LaPier, who was once married to Jean-Claude van Damme, has since moved to Oregon.

Later, the trustees faced a challenge from Suzan Hughes.

She filed suit in L.A. Superior Court two years ago to have them removed on the grounds that they had engaged in self-dealing and violated their fiduciary duties. This largely involved the trustees’ decision to sell the company to two investment firms for $685 million. (At the time, Suzan Hughes and other investors were attempting a buyout of Herbalife as well.) The trust’s share of the sale was $254 million, Klein said.

Suzan Hughes claims that the trustees used their control of the trust’s shares of Herbalife stock to secure positions for themselves in running the company.

“Klein, Pair and Reynolds enjoy lavish office space and receive many perks from Herbalife including inflated car allowances, drivers, bodyguards, luxurious global travel and accommodations and other benefits that take away from Herbalife’s bottom line to the detriment of the trust and Alex,” her lawsuit stated.

“Not satisfied with outrageous salaries, the trustees caused Herbalife to enter into long-term employment contracts with themselves, and made the contracts such that they could not be terminated from employment in the event of a change in control,” the lawsuit stated.

Superior Court Judge Thomas Stoever was not convinced.

“The assertions on which Ms. Hughes attempts to rely are not supported, either directly by evidence, or by any reasonable inference that can be drawn,” he wrote in an April 17 final order dismissing the case.

Asked about the fees collected by each trustee, Klein said, “Mark’s trust document provided a maximum amount for the trustees to get. We don’t make any money, we are paid a tiny fraction of the trust’s size as a trustee fee. The income goes back to the trust and is reinvested and any losses would be subtracted from it.”

Boxes of filings

Before the lawsuit was tossed out, the court appointed a lawyer, Lynard Hinojosa, as guardian ad litem a child advocate to have “someone looking over her shoulder insofar as Alex is concerned,” wrote Judge Edward M. A. Ross, who temporarily oversaw the case in 2001.

It is fairly routine for a court to appoint a guardian ad litem, said Carol Johnston, an attorney with O’Melveny & Myers who specializes in estate and tax planning. “What it means is that the court is striving to be advised by an independent third party to ascertain what’s truly going on and what’s in the beneficiaries’ best interest.” (Johnston is not connected to the Hughes case.)

Hinojosa has not been shy in his comments about Suzan Hughes.

“The mother had attempted to buy the company with other individuals who had very unsavory backgrounds and the purchase terms were very favorable to her and her two compadres,” said Hinojosa, who also expressed concern that a newspaper story “possibly could subject the child to increased risk for personal danger.” He wouldn’t elaborate.

With or without news coverage, this is not likely to end quickly or amicably not with two years of legal proceedings and countless boxes of filings in Superior Court.

Both sides seem to be talking around each other.

Klein, while available to answer questions for this story, was routinely terse in his responses. Asked at one point whether Suzan Hughes had tried to work with the trustees at any time, he responded: “I’m not going to comment. All she does is sue us.”

Suzan Hughes said Alex has been inured to the case because it has been going on for so long. “He knows that mommy has a lot of big papers to read all the time,” she said.

As for Hughes herself, she just completed her own aerobics video and is trying to develop a TV show, tentatively called “Sergeant Sue,” about child safety. There also is volunteer work, mostly for the Maple Counseling Center, which works with children in the Beverly Hills School District.

“I had moved on with my life and then Mark died,” she said. “This has all been very hurtful, it’s so wrong and unnecessary. I am witnessing not the high side of human nature. It’s not the way I would choose to act.”

Wars of the Roses

In the land where celebrity marriages have the longevity of fruit flies and divorce laws divide the stakes like King Solomon, it’s hardly surprising that child support cases often morph into cover stories and docudramas. Bruce Cooperman, who represented MGM mogul Kirk Kerkorian in what might be the largest child support claim in state history, concedes that “you get wildly inflated numbers of what amount will support the needs of children.” Here’s a rundown of some of the biggest recent child-custody cases.

Well-Traveled 4-Year-Old

Attorneys for Lisa Bonder, Kerkorian’s ex-wife, initially asked Los Angeles Superior Court for $1.5 million a month to support 4-year-old Kira Kerkorian. Bonder, married to the multi-billionaire for one month in 1999, claimed that the amount, calculated with the state formula and based on Kerkorian’s wealth, was necessary to cover the child’s monthly needs, including $144,000 for travel, $25,000 for parties and play dates, $11,000 for food and $5,900 for eating out. The court eventually reduced the claim to $50,000 a month. Last September, when Bonder, 38, appealed to have that amount raised to $320,000, Superior Court Judge Lee Smalley Edmon awarded her an additional $316 per month. Bonder has admitted to faking the DNA test that established Kerkorian, now 85, as Kira’s biological father.

Palling Around

Marlon Brando, 79, and Maria Christina Ruiz, a former lover, settled two lawsuits she filed against him for child support for their three children and palimony in Los Angeles Superior Court. Ruiz sought $100 million in damages and an undisclosed amount for child support, claiming that although they were never married, Brando promised he would always provide for her and her children.

In Dad’s Footsteps

Melissa Carrey, ex-wife of superstar comic Jim Carrey, went to court in April claiming that the $10,000 a month that Carrey was paying to support their 15-year old daughter, Jane, was not enough to meet her needs. Claiming their daughter was pursuing an entertainment career, Carrey’s ex-wife, who has primary custody, said she needed $200,000 to build a Pilates studio plus additional funds for private ski, tennis, dance, computer, horseback riding and music lessons.

International Incident

Los Angeles Superior Court Judge Paul Gutman ordered the Kingdom of Saudi Arabia pay $216 million to settle a dispute between Saudi Sheik Mohammed al-Fassi, a now-deceased member of the royal family, and his wife Sheikha Dena al-Fassi. The defendants, King Fahd Bin Abdul Aziz and other royal family members, did not respond to the lawsuit that settled Dena al-Fassi’s 20-year-old claim to $82 million when the couple parted ways in 1983.

Rock Fight

Former Baywatch star Pamela Anderson and rocker Tommy Lee, who fought for years over custody over their two sons, Brandon, 6 and Dylan, 4, finally settled in January for shared custody. Anderson got a provision allowing her to bring the children with her if she moves to Michigan to live with fianc & #233; Kid Rock.

Radical Surgery

Michael Crichton, best-selling novelist and co-creator of the NBC show “ER,” agreed in April to a settlement of $31 million in the divorce from his fourth wife Anne-Marie. Anne-Marie got the 19-room, $21.5-million New York home and art collection; Crichton keeps the rights to his books, the house in Hawaii and car collection. The couple split custody of their daughter, Taylor, 15.

Matt Myerhoff