ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, September 27, 1996 TAG: 9609270015
SECTION: BUSINESS PAGE: 4 EDITION: METRO
DATELINE: NEW YORK
SOURCE: ELLEN JOAN POLLOCK THE WALL STREET JOURNAL
On Aug. 16, 1995, the luxurious Fifth Avenue duplex of Toys `R' Us founder Charles Lazarus was more like a hospital ward.
Upstairs, his wife, Helen Singer Kaplan, the eminent sex therapist, lay dying of breast cancer. Downstairs, attended by a male nurse, Lazarus recuperated from emergency heart-bypass surgery two weeks before. Lazarus was lying on a sofa in the library when he was handed a certified letter from his wife of 16 years. He opened it and passed it to his daughter Ruth, who sat nearby.
The letter ostensibly triggered a complex postnuptial agreement that the couple had signed five years before. The crux of the agreement was that if either spouse notified the other by certified mail of his or her intention to seek a divorce or permanent separation, Lazarus had to pay Kaplan $20 million.
Accompanying the letter, which was written in legalese, was a brief note from the dying 66-year-old psychiatrist. She and Lazarus were childless, and she explained that she wanted only to provide for her three grown children from her first marriage. ``Nothing personal - I do not intend for you to leave the premises,'' Kaplan scrawled, signing the note, ``love always.''
``He just shook his head,'' recalls Ruth Lazarus, one of Lazarus' two daughters by a previous marriage. ``I think he felt incredibly saddened. Here was this woman who he loved, who was dying, who he felt had always trusted him, and she clearly, in the very end, was showing him that she didn't totally trust him.''
Kaplan died the next day.
Her move was an attempted checkmate in a long-running dispute with her husband over how their assets would be disbursed after death. They bickered over how their money would be split if he died first, if she died first and even about what would happen if they died together in a plane crash. But the essence of the matter seems to be this: an obsession by Kaplan that her children get a portion of her husband's huge fortune in line with what his own children stand to get.
The couple's jockeying - and the havoc it has wreaked on their family in the year since Kaplan's death - has now spilled into the public arena. In Surrogate's Court filings in Manhattan, Lazarus is now resisting paying the $20 million. He contends the divorce notice by his dying wife was a ploy designed solely to increase the prospects that her children - all of them generally well-to-do and living on Manhattan's pricey Upper East Side - would be made multimillionaires.
The matter has turned ugly. Two of the Kaplan siblings, Peter and Phillip, accuse Lazarus of abusing their mother, a charge that Lazarus vehemently denies. Peter says his mother also believed Lazarus was having an affair as she languished with cancer, and it was that suspicion that prompted her to send the letter asking for divorce. Lazarus, who remarried four months after his wife's death, also adamantly denies having an affair.
Peter, 37, and Phillip, 41, both of them doctors, have hired lawyers to press their claims that Lazarus owes the estate the $20 million. A third sibling, Jennifer Kaplan D'Addio, 34, is no longer on good terms with her brothers and says she hopes that the issue can be resolved.
The Lazarus family legacy, of course, is more than healthy. Lazarus, 72, is one of the nation's most successful entrepreneurs. In the compensation game he has been a trendsetter; his cumulative compensation for the decade of the 1980s ranked among the top of all U.S. chief executives at $156.2 million. Lazarus is still Toys `R' Us chairman, although he stepped down as CEO in 1994. Last year, he earned $7.1 million as a consultant to the company.
Nor was Kaplan a slouch. Dynamic and ambitious, she was a pioneer in the field of sex therapy, founding the Human Sexuality Program at New York Hospital-Cornell Medical Center. Her work was embedded in popular consciousness; quoted widely in magazines, she dealt with issues such as sexual inhibitions and prescribed ``hot monogamy'' for couples as a way of overcoming them.
In the process, she made a lot of money. ``Every few years, she and I would compare net worth, and whenever her net worth was better than mine she gloated,'' says her brother Frank Singer, a California engineer and investor who owns three homes and an airplane.
Her estate is estimated to be worth roughly $15 million - not counting the $20 million Lazarus has been asked to pay. Though her children seemingly stand to inherit a hefty portion of that, their efforts to make Lazarus pay up may be fueled by the opinion of Stanley Diamond, the estate's executor. He says, after estate taxes, fee expenses and a major bequest to Lazarus, there won't be ``any significant money to distribute'' to the children.
Indeed, lurking behind the facade of prosperity were financial preoccupations on the part of both Lazarus and Kaplan. Lazarus, who didn't go to college, opened his first children's furniture store in his father's bicycle-repair shop in 1948. He sold Toys `R' Us to Interstate Stores Inc. in 1966 for $7.5 million but Interstate languished and slid into bankruptcy in 1974. By 1978, the company had emerged from bankruptcy with Toys `R' Us as the parent and Lazarus back in control.
Born in Vienna, Kaplan fled war-torn Europe in 1939 on the Queen Mary's last sailing before the war. Family members say she met Lazarus at a barbecue thrown in the Hamptons. When they married in 1979, Kaplan had as much, if not more, money than her husband.
It was then that Lazarus' years of plenty began.
By all accounts, Lazarus was generous to Kaplan's children. He made donations to a foundation that funded Phillip's medical research. He was the guarantor on Peter's Park Avenue apartment, and he is still paying the private-school tuition for the son of Kaplan's daughter, Jennifer.
Says Phillip about his mother: She ``loved the money. She loved being Mrs. Lazarus.''
The marriage had its rough spots, however. Lazarus and Kaplan were ``extremely accomplished people, both with very intense personalities, and it made for a very intense relationship,'' says his daughter Ruth Lazarus. ``Sure, they fought.''
Some of the fights were about money, ``where it's going to and how it's being spent,'' recalls Linda Gordon, who cooked for the family for more than 10 years. Lazarus, who had grown up modestly, sometimes objected when he thought his wife was lavishing too many expensive gifts on him.
When the couple entered into a postnuptial agreement in August 1990, there were several changes in the family's situation that made it expedient to put their financial understanding in writing. For one thing, Lazarus had become extremely wealthy. In 1987 alone, he made about $60 million, becoming the nation's highest-paid executive; in 1992, he topped that with $64 million in compensation. By the time he and his wife signed the 1990 postnuptial agreement, he was worth in excess of $100 million, she about $4 million, according to the agreement.
The complex and detailed postnuptial agreement runs 32 pages, including exhibits, and took six months to negotiate, according to Peter, who like his mother is a psychiatrist. Aside from providing that Lazarus would pay his wife $20 million in the event she filed an intention to divorce - it even provided the form letter that she eventually mailed to her husband - it sets out how assets would be divided after their death. If Kaplan survived Lazarus, she would receive one third of his estate. If she died first, or if they died simultaneously, Lazarus was bound to leave Peter, Phillip and Jennifer $3 million each. But his daughters, under the latter scenario, were likely to inherit vastly more than the Kaplan siblings, Kaplan believed.
By many accounts, Kaplan was increasingly unhappy over this issue. ``They fought because she wanted her children treated the same way'' as his, says Kaplan's mother, Sofie Kane, who says she didn't agree with her daughter on this issue. She says she told her daughter, ``You'll make your life miserable for something you'll never get.''
When Kaplan's cancer recurred in 1994, it had spread throughout her body. In October, she signed a will leaving her personal effects and real estate to her husband and the rest of her estate to her children. Her will, though it wasn't binding on Lazarus, admonished him to leave her children $20 million - more than double the $9 million under terms of the postnuptial agreement. ``It is my expectation and understanding that in light of the bequests that I have made to Charles he will include in his Will a bequest of Twenty Million Dollars to be distributed in equal shares to my children,'' the will stated.
As she was dying, Kaplan continued to worry over what would happen to her possessions. Although her will stated that paintings and jewelry would go to her husband, she promised a Dubuffet and Picasso to Peter, two Rembrandts to Phillip and a Toulouse-Lautrec to Jennifer, her sons say.
Almost immediately after Kaplan's death, a schism opened between Lazarus and his stepchildren, but the battle between Peter and his stepfather became especially abusive. Peter says Lazarus threatened to have him arrested over his effort to obtain the return receipt for the certified letter their mother had sent to Lazarus. Lazarus, through his lawyers, calls this ``nonsense.''
At the moment, Lazarus and his stepsons are only communicating in Surrogate's Court documents and through their lawyers. Diamond, the estate's executor, says, ``I'm working my head off to try to come up with a settlement.'' He declined to speak about the negotiations, but a draft settlement circulated to lawyers in May proposed a settlement between the $9 million the children would have received at the time of Lazarus' death under the terms of the postnuptial, and the $20 million their mother tried to get for them by triggering the divorce clauses of that agreement.
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