A Florida judge ruled in a favor of Ashley Kozel, ex-wife of former Gulf Keystone Petroleum CEO Todd Kozel, after her attorneys argued the stock she was owed from their divorce settlement was not transferred to her when required, affecting the stock’s worth. She was awarded $34.6 million based on the calculations of a little-used precedent from a 1977 case.
The Kozels’ divorce settlement required Todd Kozel to deliver 23 million shares of Gulf Keystone stock to Ashley by January 27, 2012. Instead, he delivered the stock in four installments from late January to late March 2012. Ashley’s attorneys argued that during the 5-week period that the stock transfer was delayed, the stock literally doubled in value but came right back down when it was finally in her possession.
Ashley claimed her ex-husband owed her millions of dollars for the delay because she planned to sell the stock soon after receiving it. She testified she called Todd on February 20, 2012, to demand he transfer the stock immediately so she could sell it.
Ashley’ team argued the judge should use the damages test established by the 1977 case Madison Fund v. Charter, which was filed in the Southern District of New York but would also apply to Florida law. The doctrine first asked whether there was a preliminary showing that the plaintiff intended to sell the stock during the delay. The judge found Ashley Kozel met that requirement.
The next step was to calculate damages for the delayed delivery. Ashley’s attorneys called for testimony from a former American Stock Exchange economist to prove their position. The economist composed a financial model that convinced the judge that the 11.5 million shares Mr. Kozel still owed on February 20, 2012 lost more than $30 million in value between the Kozels’ phone call and March 6, 2012, a few trading days after they were transferred.
Todd Kozel contended Ashley was not entitled to any damages because of a provision in their settlement agreement stating that if he transferred the shares late, he would have to pay 6 percent of their value annually. The judge disagreed and found the settlement clause did not limit Ashley’s recovery.
Todd Kozel was ordered to pay $34.6 million and place $3.8 million in escrow for failing to provide a correct tax basis for the shares, causing her to overpay capital gains tax. The judge also ordered him not to sell or move any assets after learning he had attempted to transfer $100 million to an overseas trust to avoid paying his ex-wife money she was owed.
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