Editor’s note: This article was originally published in the January 21, 1985 issue of Fortune.
A raging and bizarre family fight is buffeting the Sarah C. Getty Trust, the chief beneficiary of last year’s sale of Getty Oil to Texaco. At stake is control of about $4 billion in assets that, even after huge capital gains taxes, will still stack up at around $3 billion. That is almost as big as the Ford Foundation ($3.3 billion in assets) and it is bigger than the stock market value of J.P. Morgan & Co. or General Foods or CBS. The trust is so immense that last year, when it tried to move the Texaco proceeds into Treasury bills with dispatch, it was slowed to a crawl by a Treasury rule prohibiting any one buyer from taking more than 35% of the bills sold at each weekly auction.
The battle is being waged in a Los Angeles court, in proceedings that have drawn little public attention. Legal action began there in 1983 in the name of Tara Gabriel Galaxy Gramaphone Getty, a boy now 16, who is a remainderman of the trust, which means he is in line to inherit part of its assets. The battle was escalated to all-out war by three sisters who are income beneficiaries of the trust, entitled to receive a share of its income. They are Anne Catherine Getty Earhart, 32; Claire Eugenia Getty Perry, 30; and Caroline Marie Getty, 27. An acquaintance describes the three as sweet, unassuming, and nonmaterialistic. Anne and Claire married men who served in the Peace Corps. Explaining why his wife won’t be interviewed, one says: “We’re just trying to lead normal lives.”
The obstacle to that is too much money. In 1983, when Getty Oil was still an independent company, the trust provided each sister income of about $8.6 million annually. But when Texaco bought Getty for more than $10 billion in early 1984 (see Deals), the trust’s income leaped and so did each sister’s share—to more than $35 million in 1984.
It is hard to make that sound like bad news. Yet the sisters are infuriated at the man who brought the jump in income about, their uncle Gordon Peter Getty, 51, the sole trustee of the trust and an income beneficiary with three times the take of each sister. The sale, say the sisters, violated the trust’s provisions.
But the gut issue is that neither the sisters nor most other members of the Getty family want Gordon in charge of their money. Young Tara Getty‘s request for a co-trustee seeks to diminish Gordon’s control, and the sisters have asked the court to boot Gordon altogether. They also ask that he personally be made to pay the more than $1 billion in capital gains taxes. And because this fight has grown nasty, they have thrown in all sorts of charges, claiming for example that Gordon leaked inside information about Getty Oil.
While the feuding goes on, the Getty billions sit in Treasury bills and cash equivalents, by order of the judge on the case. He is thus frustrating the hopes of masses of money managers who would like to have a hand in investing the pot. In wishing that the portfolio were in the hands of professionals, that crowd has something in common with Gordon’s relatives.
Certainly Gordon is an improbable fiduciary—a 6-foot 5-inch personification of an absent-minded professor, with limited and erratic business experience. His passion since boyhood has been music, and today he both sings and composes. This March his home-town orchestra, the San Francisco Symphony, will perform a scene from his latest work, a cantata called Plump Jack, built around the Shakespearean character Falstaff.
Lately most of Gordon’s on-stage work has been videotaped depositions, arising both from the trust litigation and from other suits that sprang from Texaco’s acquisition of Getty Oil (see following story). His deposition in the trust proceeding was extraordinary—a marathon, consuming three weeks last September and October, producing 1,978 pages of transcript and scores of exhibits.
The deposition has not been introduced into the court record. In the course of reporting this article, however, a FORTUNE staff member read a copy. It not only explores just about every recess of Gordon’s mind but also reveals many unpublicized facts about the sale of Getty Oil and the fight within the family. Nothing about this tale deals with normal lives. It is Dallas and Dynasty and Dickens’s famous inheritance case, Jarndyce v. Jarndyce, all rolled into one.
The trust was established in 1934 by the founder of the fortune, J. Paul Getty, then 42, and his mother, Sarah Catherine Getty, then 81. Together they capitalized the trust with $3,368,000 in securities of the budding Getty companies. The growth from that figure to approximately $3 billion in after-tax proceeds from the Texaco sale works out to an annual average return, compounded, of nearly 15%—an excellent result.
The trust, of which J. Paul became sole trustee, contained an exotic restriction that is a root of today’s litigation. Intended to perpetuate family control over the empire that J. Paul was building, it forbade any trustee other than J. Paul, including trustees coming along after his death, to sell the trust’s holdings—unless sale was made “to save the trust estate from substantial loss.”
J. Paul, a crashing failure as a husband, was by 1934 into his fourth marriage and had four children, all boys (see the family tree). The trust made J. Paul the sole income beneficiary while he lived, though he orally agreed to give his sons part of the income. After his death the sons were to get it all. When the last son dies, the trust is to terminate. Its assets will then be split into four equal parts, to be shared by the sons’ descendants.
But the trust did not otherwise treat the sons equally. J. Paul was bitter about the divorce settlement extracted by his third wife, Adolphine Helmle, coached by her obstinate German father. Said J. Paul in his autobiography: “I was forced to admit ruefully to myself that, in Dr. Helmle, I had encountered a businessman who was most certainly my equal.” Maybe not quite. J. Paul got even in 1934 by providing that his and Adolphine’s 6-year-old son, Jean Ronald, would never draw more than $3,000 annually from the trust. Ronald grew up to work for a time in the Getty companies and when J. Paul died, in 1976, was named an executor of his father’s estate (which went mainly to the J. Paul GettyMuseum in Malibu, California). But today Ronald, 55, a Los Angeles businessman, gets $3,000 annually from the trust, no more. His four children, however, are due to share eventually in the trust’s assets.
J. Paul‘s other three sons were made roughly equal income beneficiaries. The oldest, and J. Paul‘s favorite, was George Franklin II. Starting as a service station attendant in 1947, George whooshed up to president of Getty‘s Tidewater Oil subsidiary in 1958 and to operating head of Getty Oil itself in 1967. But he died in 1973 of an overdose of barbiturates and alcohol, and with a nonfatal knife wound in his chest—apparently, said the coroner, self-inflicted. His daughters, Anne, Claire, and Caroline—whom the lawyers in today’s litigation have dubbed the Georgettes—then began to get his one-third in-terest in the trust’s income.
The next son after Ronald was Eugene Paul, who rose in the Getty companies to head of Italian operations. But he eventually fell prey to heroin and cocaine. Asked in his deposition about Paul, as he is called, Gordon said he believes his brother is “a drug addict.” Paul‘s second wife, Talitha, was an addict also, dying in 1971 of a drug overdose.
Paul, now 52 and unmarried, lives reclusively in London. He collects rare books and in 1984 had an income from the trust of about $110 million. He has five children. The youngest is Tara G.G.G., the oldest Jean Paul III, who gained notoriety in 1973 when his ear was cut off by kidnappers in Italy. Ransomed, Jean Paul some years later suffered a methadone-induced stroke that has left him, at age 28, blind and crippled. His father at one time refused to support him until forced by a California court to do so.
The fourth son in this disaster-torn family was Gordon—”Gordo” sometimes to his father. Said Gordon in his deposition: “I think he envied me my serene family life, knock on wood.” Gordon has been married since 1964 to the former Ann Gilbert, 43, and they have four boys aged 14 to 19. Gordon, like Paul, had income of about $110 million from the trust in 1984, plus a trustee’s fee of some $20 million (5% of the trust’s income before expenses). Ann, a tall, glamorous redhead, sometimes spends as if she meant to zip through it all; Gordon’s tastes run to hamburgers. She delights in the San Francisco-New York social whirl; he prefers to curl up at home with a good opera. At Le Cirque, a fashionable Manhattan restaurant, he was once escorted, tweedy and unrecognized, to a table by the kitchen while she awaited him at the best table in the house.
LIKE HIS BROTHERS, Gordon worked as a young man in the Getty companies. But he abruptly quit twice, and while working had a ragged record. In 1959, heading Getty operations in the Neutral Zone, an area between Saudi Arabia and Kuwait, Gordon was tried and convicted for a minor offense committed by a Getty employee, who had fled to avoid taking the rap himself. J. Paul got Gordon out of the country safely but was convinced his son had handled the matter poorly—not, Gordon says, “with enough of the velvet glove.”
Gordon did not care for 9-to-5 work, regarding it as “plow horse” duty. He liked instead to roam as a kind of consultant. His ideas tended to be unconventional and to unsettle his elders. At one point J. Paul proposed to install Gordon in a job at Spartan Aircraft, a Getty company in Tulsa. Later J. Paul told Gordon that the head of Spartan threatened to resign rather than assume this burden. “I cannot work with Gordon,” J. Paul quoted the man as saying.
J. Paul himself seemed bemused by Gordon. Writing from his home in England, J. Paul called his son “intellectually brilliant” and, according to Gordon, once declared to him: “Gordon, if I’m ever remembered by the future, it will be as your father.” To the lawyer questioning Gordon, this revelation seemed so startling that he asked whether J. Paul was being sarcastic. No, said Gordon: “It was the comment of a doting father.” The description does not easily fit J. Paul, who was never close to his sons, and besides was given in his letters to dwelling less on Gordon’s brilliance than his flaws. J. Paul criticized Gordon’s unsteadiness, his inability to work well with others, his unfortunate inclination to think that being a Getty entitled him to loll through life.
In the questioning, the Georgettes’ lawyers hammered at the disagreements between Gordon and his father, trying to build a case that J. Paulcould not possibly have wanted Gordon to have sole control of the trust. They brought out that on Gordon’s 29th birthday J. Paul had summarily removed him as a successor trustee, leaving his three brothers in place. The reason, said J. Paul, was Gordon’s immaturity, as evidenced by such matters as the Neutral Zone incident. Gordon thereafter strove for years to get re-appointed, in the process attempting to convince J. Paul that father and son were really alike in character, with forgivable quirks. Wrote Gordon to J. Paul in 1965: “If a plow horse and cow pony were pressed into each other’s occupations, each might appear lazy, irresolute, and unstable. Aptly employed, they won the West together. You are a cow pony, father, and it seems to me I am too, though vastly less adept. That’s a lot different from a bucking bronco.”
But the next year Gordon sued his father, unsuccessfully, seeking to add some of the trust’s Getty Oil stock dividends to the cash dividends that were bringing him roughly $55,000 annually in income. Gordon assured his father that the litigation would not affect “my confidence in you as a trustee or my love for you as my father.” Nevertheless, their relationship chilled. In 1966 Gordon stopped working for the Gettycompanies, following on the heels of Ronald and Paul. That left only George in the family enterprises. J. Paul responded by making George the sole successor trustee and that was where things stood when George died in 1973.
Saddened by the loss, J. Paul, then 81, must also have thought himself facing a formidable problem about successor trustees. His solution was to pick three: a corporate trustee, Security Pacific Bank; one of his lawyers, C. Lansing Hays Jr., then 55, of New York; and from the family, Gordon. All three indicated that they would accept the job upon J. Paul‘s death.
But when that moment came three years later, Security Pacific backed out. Later, the bank again said no—all this time, of course, passing up a monster fee. A subpoenaed 1980 memo shows that the bank feared it could be sued, as Gordon himself is being sued now, because of the trust’s restrictive provision regarding sale of Getty stock. Security Pacific visualized mammoth suits, big enough to threaten its capital position.
Lansing Hays and Gordon had meanwhile begun to run the trust. Both were also on the Getty board, where they were an odd pair. Hays was argumentative, obstreperous, and dominating. Gordon was invincibly polite—as he was also throughout his three-week deposition—but became the great dissenter of the board, often casting the only negative vote on major issues. In particular he unsuccessfully opposed Getty‘s diversification into insurance and a related increase in debt, which he dislikes generally.
To other board members Gordon came across as pleasant but spacey. Getty insiders claim he once closed his eyes at a board meeting, tilted his head back, and retreated to some private world. Later, they say, he explained he was running through opera scores in his head. In the deposition Gordon claims that did not happen—”altogether possible around a dinner table” but “out of the question at a board meeting.”
On May 10, 1982, Lansing Hays died and a new era began. Gordon was the lone cow pony on the range, in sole control of a trust that held 40% of the 13th-largest U.S. oil company.
Much has been written about events at Getty Oil over the next 1½ years, culminating in the sale to Texaco (FORTUNE, December 26, 1983, and February 6, 1984). Gordon had been accumulating ideas about the oil business and he began working in that period to close what he called “the value gap”—the difference between the market price of Getty Oil stock (around $50 a share in mid-1982) and the true value of its assets, which he believed was much higher. In his field of action were two other major forces. One was the J. Paul Getty Museum, which owned 11.8% of the stock and of which Gordon also served as a trustee. The other was Getty Oil’s management and directors other than Gordon. In general, they saw him as inexperienced and no particular problem to deal with. But less than a month after Hays’s death, Gordon was asking for studies on possible ways to restructure the company, beginning with a look at royalty trusts.
Gordon was mainly a learner at that stage, deeply uncertain as to the route to take. He did not contemplate sale—but neither did he rule it out. He worried that the trust, as a huge but minority stockholder, was vulnerable to predators. He could imagine, for example, that a raider might buy the museum’s stock and then tender for all other shares. The trust might then be faced with tendering at an unacceptable price or remaining a minority holder at the mercy of the majority. In Gordon’s opinion this kind of blow could not fall if the price of Getty Oil stock rose much closer to the underlying asset values.
Aside from his lawyers, Gordon had few advisers at the time he became sole trustee. But as if sniffing oil in the wind, would-be advisers and helpers promptly began arriving at his door. A number were prominent businessmen whose role in the Getty drama has not until now been publicly described:
Paul and his adult children appear to have argued over who should control the assets coming to that branch of the family. With drugs in the picture it is easy to see why.
• Sid Bass, head of the wealthy Fort Worth family, was the first to come, visiting Gordon in San Francisco in mid-1982. The Basses, he said, owned about 1% of Getty Oil. He recommended that Getty buy in about 20% of its own shares, offering to pay perhaps 15% over the market price. The trust, simply by sitting still, would thereby move into a majority position. Gordon took no action on this plan (which undoubtedly both the company and museum would have opposed). But of Bass he says: “I was pleased and honored to have his advice.” Bass stayed a friend and occasional adviser.
• William Tavoulareas, president of Mobil, was brought together with Gordon in New York in September 1982 by Alexander Papamarkou, a New York stockbroker who is a close friend of Gordon and his wife. Tavoulareas thought various major oil companies would be interested in buying Getty, but that they would surely face antitrust problems, as Mobil had in trying unsuccessfully to buy both Conoco and Marathon. Those problems could be eased, Tavoulareas thought, if Getty moved first to sell off its refining and marketing operations (the usual hotbeds of antitrust actions) and subsequently put its producing properties up for sale. Gordon listened with interest, but did nothing.
• Corbin J. Robertson Jr., a member of the oil-rich Cullen family of Houston, came to see Gordon in October 1982, bringing with him John McGillicuddy, head of Manufacturers Hanover Corp. McGillicuddy, says Gordon, was there to vouch for the “stature and seriousness” of Robertson’s proposal—namely to take Getty Oil private. The stockholders other than the trust, said Robertson, would be bought out at $80 a share, about 30% above the then market price. Part of the financing would come from the Cullens, part from Getty Oil cash and borrowings. The Cullens and the trust would then “disincorporate” into a partnership. As Robertson saw it, the Cullens would end up the majority partner. Gordon does not seem to have liked that part of the plan. He went on, however, to grow enthusiastic about the general idea of dis-incorporation. He also adopted Robertson as a friend.
• T. Boone Pickens—who else? Head of Mesa Petroleum, scourge of oil companies, Pickens showed up in the spring of 1983 with a plan to merge “Blue Company” (code name of Mesa) with “Gray Company” (Getty). The plan would for tax reasons have made Mesa the surviving company but given Getty shareholders control. Ultimately the new company would spin off a royalty trust to its shareholders. Pickens first discussed this plan with Gordon, who then sent him along to Getty Chairman Sidney R. Petersen. At a July 1983 board meeting, Petersen reported that he had found the plan unacceptable. Pickens went away, and he and Gordon remain friends.
• Clifton Garvin, chairman of Exxon, has said the prices paid in major oil acquisitions make no sense for his company. But in October 1983, Garvin called Gordon to say the company might be interested in acting as a “white knight” if the need for one arose. Gordon referred Garvin to Kidder Peabody, the investment banking firm that Gordon had just hired to advise him.
Many months before Garvin’s call, Getty Oil had privately turned its guns against its 40% owner. Gordon had cooled on royalty trusts even before the company finished its study, and to management he seemed to be drifting inconclusively from one restructuring idea to another. Aware of Corbin Robertson’s recent overtures, the company thought Gordon might do something unilaterally, with little regard for any shareholders but the trust. Getty‘s top executives were no doubt concerned also about their jobs.
At a heated meeting at the Bonaventure Hotel in Los Angeles in January 1983, a Getty Oil contingent, led by Petersen, accused Gordon of disrupting the company’s affairs. They also asked whether he had been revealing inside information. Gordon claimed he had been circumspect. His deposition, however, makes clear that he had talked quite openly to some people. Furthermore, only days after the Bonaventure meeting, Gordon’s lawyer, Moses Lasky, wrote him a long, lecturing letter about inside information. “For obvious reasons,” said Lasky, he was hand-delivering the letter, not mailing it. For less obvious reasons the letter remained in someone’s file, where it could be subpoenaed in the trust litigation.
After the Bonaventure meeting, Getty management went down two separate tracks. In the one visible to Gordon, management kept studying restructuring alternatives, attempting to reach agreement with both him and the museum on a course of action. Finally, on October 19, after much acrimony and many twists and turns, the three parties signed a standstill agreement that was to last one year. It barred actions that would change the control of the company and committed all to seek fair solutions. This truce was announced, providing the first public acknowledgment that behind the scenes there had been war.
On Getty Oil’s part, however, the war continued, pressed on the second front the company had duplicitously established early in the year. Seeking to neutralize Gordon, the company began searching for ways to get a corporate co-trustee appointed to the trust. Security Pacific said no for the third time. The company then went looking for a small Getty—a minor beneficiary of the trust who would petition the court to appoint a co-trustee.
The company seems not to have cared much about which small Getty it got. Court papers suggest that an early candidate was Beau Maurizio George Getty-Mazzota, then 6 years old, the illegitimate son of Claire Getty Perry. But eventually Paul Getty, J. Paul‘s addicted son in London, authorized the action by his son Tara. To bring the suit, Tara needed a guardian ad litem—meaning for this case only. Getty Oil lined up Seth Hufstedler, a distinguished Los Angeles attorney. Earlier the company had been turned down by the major Los Angeles law firm of Gibson Dunn & Crutcher, which didn’t want to get involved with any suit so strangely initiated.
OF ALL this preparation Gordon knew nothing. But in October, with the news of the standstill agreement out and with Getty Oil management privately recruiting a petitioner, Gordon began getting letters and calls from relatives. The letters from his nieces, the Georgettes, were polite, and even affectionate, but also lawyerly. Wrote Claire: “I am concerned that you are continuing to act as sole trustee.” The trust, she reminded him, prohibited sale of its Getty Oil stock.
At a meeting Gordon held later with his nieces, he remembers one of them asking, “Since the trust has so much money already, why are we trying to get more?” Replied Gordon: “A very interesting philosophical question.” But it was his fiduciary duty, he said, to maximize the wealth and income of the trust and to prevent it from falling into a weak minority position.
Paul Getty called Gordon from London, deeply apprehensive about the upheaval at Getty Oil. At one point, Gordon says, Paul burst into tears. In a subsequent letter, Paul was belligerent: “It was Father’s clear intention that there should be a corporate co-trustee … I don’t want to threaten you or even appear to; but I’m afraid that litigation will be inevitable if you don’t quickly agree to another trustee and I’m sad to think that I too would be sucked into it.”
On November 14, Tara’s guardian went into the Los Angeles County Superior Court and petitioned for the appointment of a corporate co-trustee. Hufstedler charged that Gordon, as an income beneficiary, had a conflict of interest in representing the remaindermen. The next day Getty Oil petitioned to intervene, stating that the co-trustee was needed to protect all of Getty Oil’s shareholders and its employees from the trustee’s follies.
Totally surprised, Gordon and Harold Williams, chairman of the museum, were outraged, feeling that they had been tricked into the standstill agreement. Banding together, they assumed legal command of the company and before the end of 1983 got Getty Oil out of the trustee suit. But the case called In the matter of the Declaration of Trust of Sarah C. Getty lived on.
In Wall Street parlance Getty Oil was by that time “in play”—obviously ripped by dissent and therefore ripe for assault. The man who took action was J. Hugh Liedtke, chairman of Pennzoil, who first announced a tender for 20% of Getty Oil, then began talking a deal with Gordon. The plan they devised was a $110-per-share leveraged buyout. Gordon was to be chairman, Liedtke president and chief executive.
The deal had to be approved by the Getty board, which took it up on January 2, 1984, in New York City. In a raucous, contentious meeting extending into the next evening, the board negotiated a new price—roughly $112.50—and seemingly gave its approval to the deal (though whether it did or not is the subject of two major lawsuits). Gordon went back to his suite at the Pierre hotel to celebrate with champagne.
He had not calculated on his niece Claire, or his brother Ronald, or the cast of thousands getting into the family brawl. Claire got the judge hearing the trust case to temporarily enjoin the Pennzoil deal, on the ground that the beneficiaries deserved a chance to understand what was going on. That delay allowed Texaco to move into the picture with a $125-per-share bid and, as a first negotiating move, get the museum’s agreement to sell. Gordon was then in the bind he had anticipated, facing a threat that Texaco would end up with all Getty shares but the trust’s—and leave it in a weak negotiating position. Gordon decided the trust was in danger of the “substantial loss” that was the only permissible rationale for selling Getty Oil stock. Backed in this opinion by his lawyer, Gordon signed with Texaco.
Ronald’s children came into court with their own guardian ad litem and succeeded in getting the Texaco deal temporarily enjoined. These Gettys claimed Gordon had no right to sell. But when the dust finally settled, Texaco had raised its bid, all the family members had agreed that the sale could be made, and the judge had approved it. The deal was done at $128 per share, around 150% better than the stock’s price when Gordon took over as sole trustee.
That sounds like a possible reason for family peace. Indeed, it did lead to a kind of cooling-off period, in which, says a lawyer in the case, “people were trying to tiptoe toward a settlement.” But many of the Gettys were still unhappy about the sale. When the Texaco deal was signed, the family members insisted that it include a provision giving them the right to take further action against Gordon and barring him from ever using their acquiescence to the sale against them in court. That is, he presumably cannot say, “Hey, you agreed to let me sell. Why are you suing me because I did?” The peace, in other words, was about as stable as Jell-O.
And in the next few months the peace simply collapsed, partly because Gordon made an ill-advised (and, as it turned out, impermissible) attempt to appoint trustees to serve after his death. The Georgettes moved into court with their action petitioning for damages and Gordon’s removal as trustee.
While that petition and Tara’s for a co-trustee inch toward trial, the court has been trying to deal with complex problems concerning the trust’s $4 billion. When he wrote the trust, J. Paul put an extraordinary clamp on where the money could be invested: only in government securities of seven countries (the U.S., Canada, Denmark, Britain, Norway, Sweden, and Switzerland). Another provision, a real money manager’s nightmare, says that no more than 25% of the money can go into any one country’s securities.
The rules are plainly a relic. In the early part of 1984, however, Gordon took a stab at complying, proposing to buy some securities of Canada and Britain to supplement the trust’s holdings of T-bills. The beneficiaries rose up in protest, and that is when the judge, Richard P. Byrne, ordered the entire. $4 billion to be kept, while litigation rages, in Treasury bills and cash equivalents. The judge appears, so far, to be an expert money manager. T-bills last year were a lot better holding than stocks.
The next big problem for the judge is deciding who pays the capital gains taxes—around $800 million due to the U.S. government, $300 million to California. The Georgettes aren’t likely to win their argument that Gordon should be socked with the whole bill for his sins as trustee. That outcome would fly in the face of the judge’s ruling that Gordon’s sale of the trust’s Getty stock was permissible. The judge is likely to turn instead either to the capital of the trust, in which case the remaindermen will in effect pay, or to the income beneficiaries—or, in some compromise, to both.
LOGIC MIGHT SUGGEST that the capital of the trust should foot the capital gains bill. In California, when a trust document is silent on this subject, that is indeed how taxes are paid. But the Getty trust contains language saying that all taxes shall be paid out of “gross income.” Does that put the income beneficiaries on the hook? Naturally, the lawyers in this case—and they are legion—are coming down hard on both sides of that question.
The ultimate answer will be enormously expensive for somebody. The trust can easily raise the tax money, simply by liquidating T-bills. But the income of the trust, even though a net $330 million in 1984, is already taxable as income to the beneficiaries and will obviously not cover the capital gains taxes. If the income beneficiaries must pay the capital gains taxes, they may do it by borrowing from the trust.
The final question about the trust is whether the Gettys can settle their fight out of court. Their lawyers have been talking settlement, and a plan is floating around that shows promise. It would administer strong medicine, splitting the Sarah C. Getty Trust into six new trusts that would hew to the spirit if not the letter of the original.
Three of the trusts would each be allocated one-quarter of the present trust’s assets and would be assigned to the branches of the family that now include income beneficiaries. So one trust would go to Gordon’s branch, another to Paul‘s, another to the Georgettes. In each of these trusts, the current income beneficiaries would keep that status, with the remaindermen arrayed behind them. The other one-quarter of the present trust would be split into three trusts. In these, the income beneficiaries would be Gordon, Paul, and the Georgettes, but the remaindermen would be Ronald’s children.
Each new trust would have its own trustees and the trustee’s fee now going to Gordon alone would be split among them. Conceivably Ronald could be a trustee of one trust or another, thus coming in for a share of the fee (and perhaps in some way also drawing his $3,000). If these plans are to work, however, a lot of very difficult problems must be solved. For example, Paul and his adult children have apparently argued over who should control the assets coming to that branch of the family, and with drugs in the picture it is easy to see why.
In the end a partitioning would also require a ruling from the Internal Revenue Service and the approval of Judge Byrne. He would have to weigh the fairness and wisdom of breaking up a trust that J. Paul and Sarah Getty had assumed would remain intact until the last of the four sons dies. Actuarially, that point is more than 30 years off. If the judge allowed the breakup, he would also need to approve investment policies. The probable course is a “prudent man” rule, freeing the trusts to be run like pension funds.
Gordon favors a partitioning solution. He is ready, he says, to stop being his brother’s keeper, and his nieces’, and so on. He also thinks that people would applaud a breakup. “The public is not fond of large concentrations of wealth,” he says. Only lawyers and money managers and at least some people named Getty.
With additional research by Kim Bendheim.
