Tuesday, November 11, 2014
Oklahoma Oilman's Billion-Dollar Divorce is One of Largest Ever
During his nearly 50 years as an Oklahoma oilman, Harold Hamm has done everything on a huge scale. The chief executive and majority shareholder of Continental Resources, he owns the largest piece of the greatest oil discovery of our age, in the shale-rich plains of North Dakota. His net worth has been pegged at more than $18 billion by Forbes, making him the 24th richest man in the country.
Now another superlative can be added to Hamm's outsize career: He is paying one of the biggest divorce settlements in history.
After a secretive, nine-week trial, a judge in Oklahoma City has ruled that Hamm, 68, must pay nearly $1 billion to his ex-wife, Sue Ann Hamm. With the bang of a gavel, she has joined the ranks of the wealthiest women in the United States.
Or rather, she will join those ranks over time. The judgment requires Harold Hamm to pay his ex-wife about $320 million, or one-third of the total settlement, by the end of 2014. The rest is to be paid in chunks of at least $7 million a month. For a little perspective, that figure is slightly larger than last year's salary of the chief executive of U.S. Steel.
The settlement looks economy-class compared with the $4.8 billion that the Russian oligarch and "fertilizer king" Dmitry Rybolovlev paid his ex-wife, Elena, this year. But the payment is large enough that the presiding judge in the case, Howard Haralson, placed a lien on 20 million shares - or more than $ 1 billion - of Harold Hamm's Continental stock.
Hamm, who has described himself as "more hardheaded than other people," did not have a particular document that is all but standard now whenever tycoons wed: a prenuptial agreement. Barring future fiascos, this will surely stand as the costliest decision of Hamm's life. He has already paid his ex-wife roughly $25 million since the case was filed in 2012, the ruling stated.
Messages left with Continental Resources and with a lawyer for Sue Ann Hamm were not returned.
Harold Hamm was just another middle-age multimillionaire when he married Sue Ann Hamm, his second wife and a woman a decade his junior, in 1988. At the time, she was a lawyer at Continental and Harold Hamm was just beginning to snap up roughly 1 million acres of land leases in North Dakota, Montana and parts of Canada in what is the Bakken formation.
The Bakken turned out to be a rich underground trove. The question at the center of the divorce trial was what exactly led Hamm to it and his epochal fortune - expertise or dumb luck?
Under Oklahoma law, the answer matters. The money a spouse earns while married can be part of a divorce settlement if it is made through skill. If, on the other hand, the increase is attributable to "changing economic conditions, or circumstances beyond the parties' control," as the state's Supreme Court put it in a 1995 case, then that money is off the table.
The law put Hamm and his lawyers in an odd spot. They had to argue that one of the country's singular entrepreneurs, an up-from-nothing wildcatter, had essentially stumbled into his billions. This seemed like a tough sell. Hamm was once quoted as saying that "My biggest advantage is that I was born with no advantage."
As Hamm sought to poor-mouth his prowess, his company followed suit. Continental's proxy filings with the Securities and Exchange Commission for years have praised Hamm for "his leadership and business judgment." Not anymore. As Reuters wrote in September, that phrase was excised in the company's most recent proxy, along with a reference to Hamm as "one of the driving forces" behind Continental.
Haralson did not seem to buy this just-lucky account of Hamm's accomplishments. In arriving at the settlement terms, the judge cited Hamm's "skills and efforts" and said his leadership spurred an "increase in value for Continental." He also called Hamm "an expert in the oil field service business" and even after this ruling, Hamm remains one of the richest. As a fraction of his net worth, the settlement leaves him with many billions to spare.
Aside from the final judgment, little of the proceedings have been public. All but three days of the trial were held in a room at the Oklahoma City county courthouse with a handmade "Do Not Enter" sign attached to the door. Most of the voluminous filings in the case were placed under seal by the judge, who ruled in early August that "confidential financial information" about Continental could be revealed in the proceedings that might harm the company.
But enough about the case has come to light to make clear that it did not stint on drama. In a 2013 filing, Sue Ann Hamm accused her husband of infidelity, and seven years ago - after she had moved out of their home and to another city - she began documenting his extramarital behavior on audio and video tapes. Lawyers for Harold Hamm would later demand those tapes as a way to prove that the two hadn't lived as husband and wife for a long time.
Filings by Harold Hamm's lawyers stated that the union had been loveless for more than a decade, a "marriage in name only." Sue Ann Hamm's lawyers retorted in a filing of their own that "nothing under Oklahoma law suggests that a loveless marriage does not qualify as a marriage for the purposes of property division issues."
The settlement is a rare setback for a man accustomed to success on his own terms. Hamm is the 13th and youngest child of sharecroppers, and he moved with his parents from job to job as a child. "We went wherever the cotton was good," he told National Review last year.
His interest in the oil business started when he was a teenager, living in Enid, Oklahoma, with a job at truck stop called the Potter Oil Co. In 1967, he parlayed the proceeds from his truck hauling business into a tiny oil drilling company and struck a 75-barrel-an-hour gusher on his second try.
When he turned his attention to the Bakken formation, in the mid-'80s, other companies had already tapped into it and moved on. Hamm thought that was a mistake, and fracking and horizontal drilling would prove him right.
His hunches and persistence led not just to a vast windfall, but notoriety. He was named one of Time magazine's 100 most influential people in the world in 2012. He and Sue Ann Hamm were photographed at a gala celebrating the occasion at Jazz at Lincoln Center. Mitt Romney, during his run for president, named him his chief energy adviser.
Harold Hamm has two adult daughters with Sue Ann Hamm, Jane and Hillary. His first marriage, to Judith Ann Hamm, ended when she accused him of having an affair with Sue Ann.
Much of the judge's ruling is given over to a lengthy inventory of the Hamm's considerable holdings, which include a $17.4 million ranch in Carmel Valley, California, a $4.6 million home in Nichols Hills, Oklahoma, as well as homes in Enid and Branson, Missouri. There is also a hangar at an airport and shares of an assortment of companies, many of them worth multiple millions. Then there is Orbit Gas Storage, which was given a "value of zero" in the ruling.
Hamm was granted that apparently worthless entity by the judge, who painstakingly divvied up everything else. He awarded livestock, farm equipment and home furnishings from the California ranch to Sue Ann Hamm but gave Harold Hamm two horses, Star and Uno. The judge even addressed a last-minute request from Harold Hamm for "certain family pictures, a few books, guns, shotguns, some pictures, geode in quartz display, and his hand tools" in the Nichols Hill residence. Harold Hamm was awarded all of it, with one exception.
"Respondent's request for the geode in quartz display," the judge wrote, without explanation, "is denied."