More than Private Asset Management: The Family Office and Crisis Management

To sum it up, a CNBC article described it as: “…when the money began to run out, it triggered a family feud … [one] that saw mother and son turn on each other, landed one family member in prison, and left a name once associated with entrepreneurship and philanthropy forever tarnished by scandal.”
Scripps article

I’m not someone who has a great deal of down-time for video or television viewing, however recently, a colleague recommended I watch a 2016 episode of a show called American Greed. The episode explored the tragedy that was the James E. Scripps family wealth.

The episode details how an heir to a Scripps newspaper fortune was ultimately sentenced to nine years in federal prison after being found guilty of embezzling $3.6 million from his mother and mentally disabled uncle to pay for a lavish lifestyle.

Michael Scripps, whose family once owned newspapers such as the Detroit News, was convicted of seven counts of wire fraud; using interstate wire communications for the purposes of fraud.

The patriarch of the Scripps family in Michigan was James E. Scripps, who owned the Detroit News. He was the half-brother of Edward Willis Scripps, the founder of what became the Scripps-Howard newspaper group. The two newspaper companies were separately owned. Michael’s trust fund was from the fortune of James E. Scripps, his great-great grandfather, not E.W. Scripps. The James E. Scripps holdings were sold in the 1980s for more than $700 million.

The tragedy that pre-dated the embezzlement of funds by Michael Scripps however, was the mismanagement of the more than $100 million dollars left in the hands of Michael Scripps’ mother, Melissa Scripps after the asset sale in the ‘80s. 

During Michael’s trial, Melissa testified that she had inherited $11 million, and also took over her elder brother David’s share (said to be more than hers), because he was mildly autistic. But during his trial, Michael Scripp’s defense attorney argued that her fortune was closer to $100 million. Whether $11 million or $100, it rapidly evaporated.

As a weak justification for his actions, Michael Scripps is said to have thought that his mother was spending too much money and that she was spending his inheritance.

U.S. District Judge Legrome D. Davis reminded jurors that they had to decide if a crime occurred, not if people had “squandered, in a profound way, their lives.”

To sum it up, a CNBC article described it as: “…when the money began to run out, it triggered a family feud … [one] that saw mother and son turn on each other, landed one family member in prison, and left a name once associated with entrepreneurship and philanthropy forever tarnished by scandal.”

From Barriers to Enablers

In one section of the television episode, the story uncovered that Melissa Scripps was quite simply, “grossly unprepared for the responsibilities of managing significant wealth.” Her own attorney acknowledged to “American Greed” that at the time his client inherited the family fortune, she had never held a real job, and had no formal education beyond high school.

Those in trusted advisor positions of her late grandfather and father aged-out of her life. Others went from protectors or barriers of irresponsible spending to enablers. Their jobs became to make sure the checks cashed…until the checks didn’t.

Years of lavish spending included four husbands, two of Princess Diana’s gowns, a Napoleonic tiara, luxury cruises around the world, the purchase of Queen Elizabeth II’s coronation chair and Queen Victoria’s nightgown.

Michael Scripps had his own six-figure trust fund and a $3,900 monthly allowance. But that wasn’t enough; Michael soon persuaded his mother to entrust the management of her assets to an old college friend in the money business within a high-profile investment firm.

At some point — only after she began to understand that her own resources were rapidly diminishing — she noticed a mysterious $40,000 withdrawal that went to her son after she had turned down his request for the same amount.

Ultimately, Michael Scripps’ fraud of $3.6 million was settled by the high-profile investment firm necessitating his mother to report the fraud to the FBI in order to move the settlement forward. The rest as they say, is history and jail time.

While this is an oversimplification of a more involved, very public story involving a multi-generational, complex dynamic, it does go to the very essence of the Family CFO and Family Office Private Asset Management.

Managing Crisis through Anticipation

The best way to manage a crisis is to not be surprised by it.

As a part of our conversation with any Family, we discuss challenging subjects in what can be a series of family meetings; we must do this to understand the entire family dynamic. We plan for the “what ifs?” (and we have seen some spectacular ones). Experience counts when planning for crisis and for success.

Through these meetings and conversations, we construct a Family Profile which includes a Family Constitution, a Family Investment Philosophy and an Investment Policy.

We next create an Asset Summary Report including a detailed assessment and historical performance review of private assets owned by the family. We then build a ten-year, Family Global Cash Flow together; we assure access to information and trusted resources for decision-making, an infrastructure to support and manage a high-wealth family’s complex needs, and investment options for capital placement. 

I built i3 to be the trusted Family CFO – an objective, experienced voice in crisis and calm. A trusted expert who considers the complex dynamics of family change.

Had Melissa Scripps had access to and knowledge of the power of a Family Office, perhaps her wealth would be working today to support future generations.

To learn more about creating a sound Private Asset Management strategy for your family, visit us at i3resources.com

About Kevin Heaton

Kevin Heaton is a CFO who understands the cycles of wealth, the dynamics of family change and resultant behaviors. His expertise is in developing and implementing focused tactics to protect and manage private assets through the objective application of information tools, infrastructure support and investment strategies.

Mr. Heaton is the founder and principal of i3, LLC, and has grown the organization into a team of professionals who provide clients with access to relevant information to make informed decisions, the infrastructure (team and tools), to actively manage their assets and investment opportunities (directly or through managed funds) to (re)invest their capital.

As an accomplished speaker and presenter, Kevin’s talks give in-depth analyses of his own experiences in family office asset management and makes even the most complex asset strategies clear with concrete action plans.

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i3 Services, Kevin Heaton The Family CFO and the Family Office Insurance Program

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(This article by Kevin Heaton is reprinted by permission and originally appeared in the Insurance Research Letter, November 2019 issue.)

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