A boy and his $400 million

Alex Hughes is to inherit the bulk of his father's Herbalife fortune. But in the meantime, his mother and the estate's trustees are in a bitter fight.

Los Angeles Times/September 13, 2005
By Robert W. Welkos

His name is Alex. He is 13 years old. And when he reaches 35, he stands to inherit an estate now valued at about $400 million.

This L.A. golden child is the only son of Mark Hughes, the late founder of Herbalife International, a maker of nutritional supplements.

Hughes' death at age 44 on May 21, 2000, made Alex the sole beneficiary of a vast trust. The multimillionaire died of a lethal combination of alcohol and an antidepressant after a drinking binge. The death was deemed accidental.

But Alexander Reynolds Hughes is now at the center of a lengthy and contentious probate battle in Los Angeles County Superior Court pitting his mother, Suzan Hughes, a former actress, court reporter and Miss Petite U.S.A., against trustees of the Hughes Family Trust. Mark and Suzan Hughes divorced two years before his death, in 1998, after nearly a decade of marriage. She was the third of his four wives.

Suzan Hughes wants the court to oust the trustees, who include Alex's paternal grandfather. She previously tried — and failed — to persuade the courts to remove the trustees on grounds of violating their fiduciary duties. Now, she has filed another petition seeking their removal on other grounds.

Hillel Chodos, her attorney, claims the trustees have paid themselves millions in fees while ignoring Alex's needs.

"Basically, they got the gold mine and [Alex] got the shaft," Chodos said. "They have paid themselves at least $5 million in trustee fees to date — maybe more. They paid their lawyers and accountants maybe $12 million to $15 million."

But attorneys for the trust have fired back in court papers, accusing Suzan Hughes of waging a "personal vendetta" against the administrators of the Hughes trust. They describe the case as "one of the most contentious trust and estate proceedings on record."

And this, they point out, comes even though the trustees have achieved "enormous success in administering the nearly $400-million estate Mark left behind (e.g. — they saved more than $100 million in estate taxes, they structured a sale of Mark's company for a price that was approximately twice the market price immediately before his death, and they successfully opposed nearly $500 million in claims)."

"While Suzan complains loudly over the legal fees incurred by the fiduciaries, the plain facts show her to be the root cause of the expenses," the court papers state. "The fiduciaries submit that a review of the history of these matters leads to the conclusion that the administration has not been complicated by any fault of theirs, but instead by Suzan Hughes' desire to gain access to the money Mark left for Alex (and not for her)."

"The trustees are doing their best to grow the assets," said Kenneth A. Ziskin, an attorney for the trust. "If they are successful, there will be way more than half-a-billion dollars" by the time Alex reaches 35.

The trustees include Alex's paternal grandfather, Jack Reynolds, former Herbalife chief executive Christopher Pair, who was a longtime friend of Mark Hughes, and Conrad Lee Klein, an attorney who was Mark Hughes' personal counsel for almost 20 years. Klein is the husband of California Appeals Court justice Joan Dempsey Klein and served for many years as an executive officer of Herbalife. (None of the parties, including Alex and his mother, retained financial ties to Herbalife after its sale.)

Under terms of the trust, Alex will receive one-third of the trust's annual income — or about $1 million judging by today's value — along with an additional $35 million from a separate custodial account, when he reaches age 25. At age 30, he could expect to receive about $2 million annually. Then, at 35, he will receive whatever remains in the trust, Ziskin said.

"That's assuming they still have the money when he gets to be 35," Chodos said. "Suzan wants [Alex] to have the life his father intended for him.... Their basic attitude is they want to control everything. They loathe Suzan. She has criticized them. They don't like to be criticized."

A onetime juvenile delinquent, Mark Hughes founded Herbalife in 1980, using his tale of a rags-to-riches past and his mother's early death from addiction to diet pills to sell the world on his weight-loss program. Herbalife relied on an international network of independent distributors to pitch the company's line of herbal and weight-loss products.

The charismatic Hughes, with his Prince Valiant hairstyle and expensive suits, seemed to be a walking success story in public. But behind the scenes, aides covered up his drinking problem.

Attorney Edward A. Woods, who represents the trust in the current litigation, noted that the trustees would like to sit down with Alex and determine what he wants, but his mother, who is Alex's legal guardian, has blocked such attempts.

"All the trustees want to do is have an opportunity to visit with and interact with Alex," Woods said. "Does he want a ski vacation in Switzerland, or does the mother want a ski vacation in Switzerland? Does he want to go to summer camp ... or the South of France? Does he need a chandelier or would he be content with something from IKEA? Lord knows there is sufficient money in the estate. But the trustees have an obligation under California law to exercise their discretion."

Ziskin said that the trustees were so concerned about what a lavish and extravagant lifestyle might do to Alex at his age that they consulted a psychiatrist, who they said has had many dealings with wealthy children, and also a rabbi who wrote a book on people of great wealth. "They both warned the trustees that providing enough money so that Alex would live an extravagant and lavish lifestyle would probably not be good for him — not be healthy," Ziskin said. "We shared those conclusions with Suzan and she did not agree."

Attorneys for both sides say Alex is a normal, well-adjusted boy.

Chodos claims that the estate has made it difficult for Alex to retrieve household items and other keepsakes from Grayhall, the 22,000-square-foot mansion that was sold last year for a reported $18 million.

"Alex had spent half his time at Mark Hughes' house in Beverly Hills," Chodos said. "Suzan wanted some of the furniture. They fought her for four years on that. In fact, after they offered to give [the furniture] to Alex, they sold it to an antique dealer. Suzan had to go and buy it. That was shocking."

The items included "chairs, bar stools, Aubbasson pillows, entry way lamps, fireplace irons, a gilded mirror, candelabra, a console from the Netherlands and a chandelier from France."

But, trustees wondered, were these the kinds of items a boy would want — or his mom?

The most recent bone of contention between the trust and Suzan Hughes involves her requests that the trust pay the rent on a Malibu summer vacation home for Alex. Chodos claims the trust has, to date, paid only $50,000 for a vacation for Alex.

This summer, Suzan Hughes filed a lawsuit against trustee Pair alleging sexual harassment. She contends in her suit that while wrangling over her request that the trust pay $160,000 for two months' rental on a Malibu vacation home for Alex, Pair telephoned her at home on June 27. It was the first time he had spoken to her in three years. According to the court papers, Pair told Suzan he loved Alex and was calling to invite him, along with Pair's son, to attend a free showing of the King Tut exhibit at the Los Angeles County Museum of Art that evening.

She claims that during the call, she asked him why the trustees only wanted to pay for one month's rent on the summer home and, according to the suit, he replied that she could obtain money for two month's rent "if she would be nice to him."

"You know everyone always had a thing for you," he allegedly told her, according to the suit. "You are one of the most beautiful, unattainable women in the world. Here's my home telephone number and call me when you're ready to give me what I want." When she told him his remarks were "crazy," he allegedly replied: "How crazy do you want to get?"

That evening, she took her son to the museum. In the suit she states that as they were going down the hall to enter the room containing King Tut's remains, Pair approached her and said, "I'll get you on your knees eventually. I'm going to [expletive deleted] you one way or another."

"The suit is totally without merit and I'm deeply offended and saddened she would resort to such tactics," Pair said in response to the lawsuit.

His attorney, Don Mike Anthony, described Suzan Hughes' litigation as the legal equivalent of "World War III" being waged against the trustees and noted that "huge attorneys fees have been incurred because of all of her litigation."

Under her divorce settlement, Suzan Hughes receives $10,000 a month in direct child support and the trust pays approximately $100,000 for property taxes and insurance on her home, for Alex's tuition at the Windward School in West L.A., and for his medical expenses and medical insurance.

Court papers filed on Suzan Hughes' behalf state that "child support did not take into account the lavish lifestyle that was provided to Alex by his father when Mark was alive and had custody of Alex. This lifestyle included vacationing with Mark at his lavish beach home, cruising on Mark's yacht, driving in Mark's fleet of luxury cars and attending events of extraordinary prestige, lavishness and extravagance."

She has asked the trust to reimburse her for Alex's expenses and to make annual payments of $877,000 in after-tax dollars "so that Alex may continue to live the lifestyle he enjoyed while his father was alive." Chodos said Alex's expenses include legal fees, charitable giving and accounting advice.

The trust's attorneys believe that Alex's mother has waged her legal fight for two reasons: her attempt with other bidders to acquire Herbalife after her ex-husband's death was rejected by the trustees, and, she may believe that her divorce settlement was "insubstantial" when compared to the payout received by Mark Hughes' fourth and final wife, Darcy LaPier Hughes. The former Hawaiian Tropic model, who married Hughes on Valentine's Day 1999 after previous marriages to Hollywood action star Jean-Claude Van Damme and Hawaiian Tropic founder Ron Rice, reportedly received a $34-million settlement.

But attorneys for the trust estimate Suzan Hughes' net worth in excess of $10 million, with a yearly income of more than $600,000.

Yet, they assert in court documents, "her wealth apparently falls short of what she believes she is entitled to."

Suzan Hughes would not comment for this story on the advice of her attorney.