Back in 1997, Bruce Toll (as in Toll Bros. aka “America’s Luxury Home Builder”®) couldn’t have been happier. The housing market was skyrocketing, with Chairman Toll’s McMansions popping up all over the country, leading to close to $1 billion in sales for that year. And in May, his 25-year-old daughter Elizabeth Suzanne Toll married Leonard Tannenbaum, a Wharton M.B.A., in whose businesses Papa Toll would come to invest large sums of money.
But nearly 15 years later, things aren’t quite so peachy, and I’m not talking about the housing market.
In October of 2010, Leonard and Elizabeth divorced, and one year later, Bruce Toll filed a lawsuit—first in Montgomery County, now moved to federal court—against his former son-in-law, alleging things like breach of contract, unjust enrichment and fraud.
The roots of the whole mess date back to 1998, one year after the couple exchanged nuptials at the Ritz-Carlton on Broad Street. Tannenbaum was working on Wall Street as an analyst but had bigger ambitions. He wanted to start his own fund, but he needed capital.
Enter the ridiculously rich father-in-law.
According to the suit, the pair struck an agreement: Toll would provide the much-needed cash (about $15 million to start), and the two would split the profits with 90 percent for financier Toll and 10 percent for portfolio manager Tannenbaum. The fund did well, and both men made millions.
Then in 2004, Tannenbaum launched a second fund, which Toll invested in, as well as Fifth Street Management, a private management company, in which Toll did not invest at the time. Two years later, according to the suit, Tannenbaum told his father-in-law that Fifth Street was in trouble and needed money to stay alive.
Toll claims that Tannenbaum asked him to personally guarantee $15 million in Wachovia loans and that Tannenbaum suggested a new arrangement for the division of Fifth Street’s profits: Instead of taking 90 percent, as he did with the original fund, Toll should forgo his cut and, in exchange, Tannenbaum would agree to split all Fifth Street profits equally with Elizabeth. Toll agreed. But when the loan became due in 2009, Toll says that Tannenbaum couldn’t pay it back and required another guarantee. In the suit, Toll says he “reluctantly agreed so as not to jeopardize the previous agreement … regarding a share of the profits of Fifth Street Management going to Elizabeth … ”
Within months, the couple separated, with Tannenbaum filing for divorce, and Toll claims in the suit that Tannenbaum has not held up his side of the bargain. This week, Tannenbaum’s attorneys filed a motion to dismiss or transfer the case to Connecticut, where he now resides.