OKLAHOMA CITY (Reuters) - Last month, when oil magnate Harold Hamm was ordered to pay his ex-wife $1 billion in their divorce, he called the ruling "fair and equitable,” publicly thanked the judge and said he was happy to have the case behind him.
Now, with his estimated $19 billion personal fortune having fallen by half amid a rout in oil prices, the chief executive of Continental Resources has changed his mind.
Hamm has appealed the divorce ruling, which he now considers “erroneous and inequitable,” according to filings in Oklahoma County Court.
Hamm’s appeal hasn't been previously reported. The appeal, and an earlier one by ex-wife Sue Ann Arnall, will be heard by the Oklahoma Supreme Court. Arnall, a former Continental executive, has claimed the ruling wrongly allowed the oilman to keep more than 90 percent of the wealth the couple built together. (Arnall resumed using her birth name after the divorce.)
The dueling appeals are the latest twist in one of the largest divorce cases in U.S. history. The contest pits America’s top owner of oil against an attorney ex-wife who is intent on showing that the Hamm fortune stemmed from hard work – both his and hers – during a 26-year marriage.
Hamm contends his 68 percent Continental stake, which he owned before meeting Arnall, surged in value during the marriage due to “passive” or market factors, like rising oil prices. The distinction is crucial, since Oklahoma law says only marital wealth stemming from active efforts or skills of either spouse should be split in a divorce. In essence, the most successful oilman in America is arguing that he was lucky.
“The vast majority of the enhanced value of the CLR (Continental) stock was due to market forces and contributions of third parties,” Hamm said in an appeal filing.
The appeals risk dragging Hamm, and his oil company, deeper into a personal divorce battle that's already in its third year. The fight has featured costs in the tens of millions of dollars and a 10-week trial that ended last month. The case was conducted mostly behind closed doors, after the judge ruled that opening it would harm Continental.
November's billion-dollar judgment, while one of the biggest on record, allowed Hamm to retain his majority stake in Continental. But he recently told the court he would need to borrow money to fund the divorce payments, filings show.
Continental, the top driller in North Dakota’s oil boom, has publicly claimed its CEO’s divorce has had, and will have, no impact on its business or operations.
But according to new court documents reviewed by Reuters, the firm’s minority shareholders have also paid a price.
In a filing, Continental complained to the court about "all of the expense that Continental's minority shareholders have been dragged through” as a result of the divorce case.
How much time and money Continental has spent so far on its CEO’s divorce case isn’t clear, however.
A review of Securities and Exchange Commission filings shows the firm has not disclosed any such costs to shareholders.
Continental did not respond to questions for this article. The company hasn’t said if Hamm will reimburse it for the costs incurred. Hamm’s lawyer, Craig Box, didn’t respond to requests for comment.
RAISING THE STAKES
Hamm’s appeal “raises the stakes for his ex-wife,” said Carolyn Thompson, an Oklahoma family law specialist. As Arnall presses Hamm for billions more, the oilman will try to convince the state’s high court that what he owes her “should be reduced or eliminated,” Thompson said.
Arnall was awarded a total of about $1 billion, in cash and assets, to be paid over a period of years. In his appeal, Hamm is contesting most of that award, including the court's order that he split with Arnall $1.4 billion derived from the rise in his Continental shareholdings. He also lists 26 other investments or properties he says were wrongly split up as marital assets. These include the couple’s former Oklahoma City home and a $17 million California ranch, both awarded to Arnall.
Hamm’s appeal comes after the value of his Continental shares has fallen by more than half, to $9.3 billion, down from as much as $19 billion during the trial in August.
Continental's market capitalization eroded amid a recent plunge in oil prices, which now trade near five-year lows of $57 a barrel. In response, Continental plans to sharply cut spending next year.
Hamm founded Continental in 1967. When he and Arnall wed in 1988, the company was worth less than $50 million, filings show.
A month after the November 10 divorce ruling, Hamm asked the court to consider new evidence: a chart showing that Continental shares dropped 22 percent as oil prices fell 16.5 percent earlier this month.
“The dramatic drop in oil price post-trial and the corresponding drop in the CLR stock price demonstrate the overriding impact of the oil price on the value of the stock,” Hamm, 69, said in a court filing dated Dec. 16.
Hamm’s request is unusual, said family law specialist Thompson. In her view, she said, the courts should only consider evidence admitted during the trial, which ended in October.
Arnall, 58, believes she was short-changed when the court failed to take account of both spouses’ contributions to Continental, according to a person familiar with her case.
As an attorney for the company in the 1980s and 1990s, Arnall was part of Continental’s successful lawsuits against a string of industry competitors. The millions it won were reinvested in drilling. Between 1996 and 2008, she formed and often managed Continental’s profitable oil and gas marketing divisions, the person said.
Continental hasn’t commented on Arnall’s previous roles there.
At trial, Arnall told the court that during the marriage, Hamm had often refused to put property in both spouses' names. That became a point of contention between the couple, according to people familiar with her version of events, since she worried Hamm would leave her.
The couple had filed twice previously for divorce - Hamm in 1998 Arnall in 2005.
Arnall filed for divorce again, the current case, in 2012. At trial, Hamm admitted to spending $150,000 on an extramarital pursuit, without offering further details. His relationship with Arnall had been “loveless” for years, his court filings said.
In their divorce battle, Hamm has sought to tweak the historical record in his favor. Reuters reported in September that Continental had altered its corporate timeline on the company’s website, and made changes to language in SEC filings, in ways that could benefit Hamm’s case. The revised timeline was largely accepted by the court. It included claims that important milestones, such as Continental's lucrative shift in focus from natural gas to oil, came years before the marriage began.
In August, under questioning from Arnall's attorney, Hamm testified that several statements on Continental's web site had been incorrect and that he had only recently discovered the errors.
Hamm has also sought to downplay Arnall's role. Among the evidence the couple has battled over is a 104-page book published in late 2012 and commissioned earlier by Hamm, entitled “Continental Resources – A Tribute to the Enid Years.”
It chronicles the huge success of Continental since it was founded by Hamm in Enid, Oklahoma. The book, read by Reuters, was written by longtime Hamm friend and fellow oilman Mickey Thompson.
The saga contains no mention of Sue Ann Arnall. Thompson said in an interview that he had intended to include material on Arnall, a person he considered among the “key players” in Continental’s rise. But after Arnall filed for divorce in May 2012, Thompson said, Hamm told him that “Sue Ann was not going to be in the book.”