TROUBLE IN THE HOUSE OF SPIRITS
A Miami courthouse is the stage for a family drama as dark as Lorca, vulgar as Dynasty. The Bacardis, purveyors of the world's best- selling brand of spirits, are immensely rich - and riven by bitter feuding. Could their current civil war wreck the empire of this proud Cuban clan?
Sunday 22 September 1996
Randy Bisson, a big man with a taste for the dramatic, is engaged in what he sees as a holy war to protect his family from a privileged but predatory clan which, he believes, would deny his wife her birthright. That is how he views his life's mission; but never far from his mind is the dream of making a film after the final battle is won. It will be an epic, spanning nearly two centuries, about the rise and fall of a secretive, vastly wealthy Catholic dynasty. The themes will be classical: greed, hate, revenge, betrayal, deceit, parents turning on children and children turning on parents. The settings will range from the feudal opulence of pre-revolutionary Cuba, via Puerto Rico, Panama, Miami and the Bahamas, to the banking boardrooms of New York. The cast of characters will be colourful: playboys, drunken matriarchs, ruthless corporate executives, conniving Latin beauties. There will be tragedy and there will be comedy; and the avenging hero, his rage for justice matched only by his craving to secure the family cash, will be Bisson himself.
For now, though, Bisson, 41, is busy acting out his role in the real- life drama from which he has spun out his Hollywood fantasies. Playing the female lead is his wife, Lisette Arellano, who is suing her mother, her brother and her sister for between $100m and $200m. Arellano is the great-great-granddaughter of Facundo Bacardi y Maso, the Spanish-born Cuban wine merchant who in 1862 founded the rum company that bears his name - and that produces what is now the world's best-selling brand of spirits.
Lisette claims that her fabulously wealthy mother has conspired with the present management of Bacardi Ltd - a private company in which the mother is a major shareholder - to deprive her of her rightful inheritance. Her other siblings received a share of the family fortune, Lisette says, but - she claims - she was denied hers. The court case has been dragging on in Miami for four years with no sign of a conclusion (or even much beyond a beginning). Along the way, claims have been made concerning alleged tax evasion that, should they ever be substantiated, could theoretically spell financial disaster for the family empire. At the very least, the affair risks exposing the Bacardis to huge embarrassment.
Mr and Mrs Bisson do not care. They do not care if the whole edifice comes crashing down. In their eyes there can only be one happy ending: the two of them enjoying the Bacardi family millions in a yacht on the Caribbean, their children's future assured, while Lisette's 61-year-old mother, Vilma Schueg Arellano, rots behind bars.
The unlikely stage for this relentlessly intense drama - dark and claustrophobic as Garcia Lorca, vulgar as American soap opera - is a small courtroom on the 13th floor of Miami's Dade County Courthouse. One hot and humid afternoon last month, the warring parties in the suit were all gathered together inside the air-conditioned chamber, plush and compact as a mini- cinema, preparing for the start of the latest in a string of hearings to debate the technicalities of Lisette Arellano's suit. On the right of the room, facing the bench, sat a dozen lawyers in dark suits. They were the defence team, variously representing Mrs Schueg Arellano (Lisette's mother); her children Jorge and Laura; Bacardi Ltd; and Citibank, the mighty New York institution which has handled Bacardi's financial interests for the past 50 years. On their left, also in sombre dress, sat Randy Bisson and his one lawyer, a diminutive Cuban-American lady called Fulvia Morris. Also present were an elderly Cuban gentleman, his wife, and their two beautiful, dark-haired daughters. It was not immediately clear why this foursome was there, but the elderly gentleman, who was very agitated, kept muttering that the portion of the Bacardi fortune at stake in this case was peanuts compared with what was owed to him.
Then Judge Philip Bloom entered, with a distracted air and a cream suit that matched his hair. "Good morning, good afternoon, good evening - whatever it is," he began, setting the tone for a chaotically inept performance that Randy Bisson hopes will be emulated in his movie by Mel Brooks. Chastened by the criticism he drew for crossing the boundaries of political correctness at a hearing last year ("Bisson means bitter in Jewish," he had said; "Maybe he married the wrong girl"), Judge Bloom now overcompensates. "Guys. Guys. Guys!" he exclaimed when proceedings became too boisterous, adding quickly, with a nervous glance at Ms Morris: "I mean `guys', of course, in a generic way." Interrupting another heated exchange, he said: "Come on, now. It sounds like a Greek chorus in here - of course, I don't mean that in any derogatory, nationalistic way."
Most of the litigants seemed unamused by such antics, but Bisson himself has done his best to keep the proceedings jolly. A fiery-tempered man, he is in the habit of standing up in court and hurling abuse at his rival lawyers. He has called one a "potato farmer", invited another to perform unspeakable sexual acts, and described all of them as thieves. Yet his histrionics mask a obsessively meticulous mind. A building contractor by trade, he has dedicated himself for seven years to the task of seeking evidence for what he believes is a rottenness at the heart of the Bacardi empire. With demonic energy and tireless perseverance ("They call me `the gringo from hell'," he boasts), he has accumulated 2,500 documents which, he claims, point to a conspiracy not only to cheat his wife but also to defraud the US taxman.
The basis of the legal suit is the charge that Lisette Arellano's family conspired with Manuel Jorge Cutillas (the chairman and chief executive of Bacardi Ltd) and a subsidiary of Citibank in the Bahamas to deprive her of her rightful share of the estate of her grandmother, Gladys Schueg Bacardi, who died in 1993. Lisette Arellano and Randy Bisson, the married co-plaintiffs, have alleged in court that the defendants used a complex web of off-shore trust funds as their cover to perpetrate the fraud. They allege that Lisette's mother, Vilma Schueg Arellano, counselled by senior Bacardi executives and their Citibank advisers, intercepted money the grandmother intended for Lisette and placed it in trusts off shore. The purpose of the exercise, according to allegations made by the Bissons in court papers, was to allow Vilma to collect the share dividends and Bacardi to manipulate the stock, and all parties to minimise their US tax returns.
Among those who have taken an interest in the Arellano suit have been the US tax authorities. Bacardi is unusual for a corporation of its size in being entirely private: it has shares, but the shares are not publicly traded. The majority of Bacardi shareholders are US citizens or residents. Between them they hold 10m of the 23.5m total of shares in Bacardi Ltd, the holding company for the corporation's worldwide interests. And Randy Bisson - in the second part of what has become a two-pronged assault on Bacardi - is actively encouraging the tax authorities to investigate his allegation that Bacardi shareholders and company holdings in the US could be liable for hundreds of millions, even billions, of dollars in tax. He could be deluding himself. The tax authorities have declined to comment to the press, and there is no question of Bisson's allegations having been substantiated. But Bisson has certainly been busily stirring things up. Since the end of last year, he has held meetings with the Internal Revenue Service, the Florida Department of Revenue, the Department of Justice, the FBI and staff overseeing foreign trust laws at Congress in Washington. What he hopes is that, if he can bloody Bacardi's nose with his lawsuit, he might subsequently deliver a killer punch in his capacity as unofficial tax inspector.
All the defendants' lawyers have robustly denied all the accusations against their clients, variously describing them during the court proceedings as "unfounded", "scandalous", "defamatory" and "a total fabrication". Jim Armstrong, who is Vilma Schueg Arellano's attorney and has previously acted for the Bacardi company, has said that the charges are "wrong, unfair and unproveable". "Anybody can say anything in a law suit," Armstrong has said in court.
Lisette's brother, Jorge, said through his lawyer that the suit was "malicious blackmail" intended not so much to determine the truth of the allegations as to extort a financial settlement. Bacardi's chairman, Manuel Cutillas, has said in a sworn affidavit that the charges are untrue. He told the New York Times in May that there was "absolutely no connection between these trusts and whatever problems these people allege, and the management of the company".
Whatever the truth of the matter, the court case has exposed Bacardi, a family-run business whose affairs have traditionally been enveloped in a cloak of secrecy, to much unaccustomed and unwanted public attention. The court case and tax investigations may drag on for years, and may well end favourably for the company. But, for this proud, intensely private family, the shame lies in the fact that any of this is taking place at all - the scandal of having its private quarrels aired in vulgar public gaze.
Lisette Arellano was born in Havana on 6 October 1956, into a world of leafy tropical mansions, servants, chauffeurs and international jet- setters. Her destiny looked sweet. Heir to a fortune, she would follow in the footsteps of her rich and beautiful young mother. What the happy family photographs of her infancy failed to convey, however, was the hatred that would grow between the mother and her first-born child.
Lisette, now herself a mother of two young children, sat in the kitchen of her lakeside Florida home last month struggling to explain the unhappy relationship that she considered to be at the root of her financial misfortunes. Petite, attractive, looking younger than her age in a short floral dress, she said that she believed her mother's resentment towards her began before she had even emerged from the womb. "It was a difficult pregnancy and I was born three and a half months premature. The doctors thought I would die. They had priests ready at the hospital to baptise me. But after three months in the incubator I was OK. But that was the beginning of it. She was angry right from the day I was born."
Angry or not, Vilma gave her daughter the sort of upbringing that children of the Bacardi clan have come for several generations to expect. She went on family holidays to the US and Europe; she went to finishing school in Switzerland; she attended Washington's exclusive women's university, Mount Vernon College. Lisette contends that this was down to the devotion of her father, Fernando Arellano, who was not a member of the dynasty. "I was my father's favourite. I adored him. She [Vilma] hated me because I sort of took her place in his affections."
If this is true, it would appear that hatred runs in the family. Egged on by her volcanically indignant husband, for whom Vilma is just plain "evil", Lisette describes her mother in the most bitter and vindictive language, laced with phrases such as "manipulative bitch". But when she is alone more ambiguous feelings emerge. "In my opinion she is torn with self-hate, but I also believe that she is a very, very unhappy person who has always wanted to control people and has found, in my case at least, that she can't. A part of me thinks this is very, very sad."
Vilma Schueg's lawyers are shielding her from the press, but her friends say that she is a more caring and refined person than her daughter's caricature portrait might suggest, and most people who know the Bacardis feel that, if the family does have a problem, it isn't confined to one individual. The whole dynasty is dysfunctional.
"You have to understand that the Bacardi family is a matriarchy," says one member of the extended family, "and the men, with some exceptions, are people of weak character. The worst defects are found in the Schuegs, the most powerful branch. They control the family and the money - so the Schueg women, even by the family's standards, are unusually authoritarian. The women rule and that's it - there is no room for argument. Neither the children nor the husbands are allowed to have opinions, much less to counter their commands. Money is all they have and it confers on them a terrible sense of power. This is also because their world is confined to a tiny circle of people, most of whom are not so much friends as acolytes - other Cubans who unlike them did not prosper in exile. So they create a world for themselves totally removed from reality, from normal human behaviour. Power is everything for them. Submit or leave: there's no other choice."
This family member (who admittedly has had his own legal difficulties with Bacardi) says that the Bissons might enjoy more success in their case if they could restrain their passions and behave with greater civility. "Lisette broke the rules. She challenged the matriarchal order. She married a man Vilma did not like. Things might have been different if he had been more accommodating, more subservient. But that's the way it has always been with this family. There's a terrible history of family feuds, vendettas, constant clashes between mothers and daughters and in-laws. They are terrible people. Terrible. Money is the catastrophe in this family. Money should be used to build people up, but in this family it doesn't, it destroys."
Vilma's millions certainly proved of little value when it came to the business of raising her four children, one of whom is dead. Both Lisette's brothers proved well below average at school. Fernando Jr - once known as "Miami's richest kid" - died of a crack cocaine overdose at the age of 26. Dozens of young girls wept at his funeral. "He was emotionally crippled," Lisette says. "And he knew it."
Lisette's two other siblings, Jorge and Laura, have been content to allow their mother to run their lives while they devote themselves to pleasure ("He likes motor-boat racing," says Lisette, "she `has lunch'."). Lisette used to be close to Jorge, but today that relationship also appears to be beyond repair. Not only is she bringing a suit against him, he is counter- suing her, claiming that the public exposure in court has caused him emotional and social damage. Laura, according to lawyers in the case, has a similar case against her sister pending.
If the Arellano family is being torn apart, the whole Bacardi dynasty is feeling the pain - especially among the older generations. In the rarefied upper reaches of the Bacardi aristocracy they have always done things according to tradition. The men ran the business - to this day, 15 of the 17 board members belong to the extended family; the women - who tended to be the actual owners of the wealth - enjoyed their riches and exerted their power at home. Lisette, who reached adulthood as the feminist revolution was in full cry, was already breaking with family protocol when, after university, she resolved to be her own woman, and obtained a job teaching children with learning disabilities. According to Lisette, Vilma not only considered such work beneath a daughter of hers, but was horrified because Lisette seemed to be undermining her matriarchal authority. When Lisette then married beneath her station - first, in 1982, to the owner of a mobile home business from Tennessee and then, after that marriage ended in divorce after four years, to the untameable Randy Bisson in 1987 - her relationship with her mother was damaged beyond repair.
In a letter to shareholders last month, Manuel Cutillas, chairman of Bacardi Ltd, urged his fellow Bacardis to "increase our resolve to stay and work together as one united family". The animosity between Lisette and her mother suggests that, for many of the family, that letter came far too late.
The unity of the dynasty came under serious pressure after Castro overthrew the Batista regime in Cuba's 1959 revolution. The Bacardis fled into exile and scattered to Europe and the Americas, and, while the company prospered as never before, the empire fragmented, leaving many of its members more dependent than ever on the good faith of those actually running its affairs.
Confidence in this good faith began to evaporate, according to Lisette and her husband, with the deaths in 1966 of Bacardi's two biggest shareholders, the brothers Jorge and Victor Schueg. Jorge Schueg was a bon viveur who loved sports cars and travelled the world in five-star opulence with his glamorous wife, Gladys. In between their jet-setting they found time to bear two daughters, Vilma and her sister Yvonne. Victor and his wife had no issue (although they adopted a daughter), so with Jorge's death the sisters were poised not only to inherit large fortunes but to exercise tremendous influence - through their shareholders' voting rights - over a company which had been under the control of the Schueg branch of the Bacardi family since the 1920s.
The president of Bacardi, Edwin Nielsen Schueg, needed Vilma and Yvonne (his cousins) on his side in order to consolidate his authority over the now fragmented company. Power in Bacardi, for the men in the family, tends to depend on how successful they are in winning the support of the rich women who own the major shareholdings. Vilma and Yvonne, in turn, had an obvious interest in having Nielsen as their protector: their upbringing had left them ill-equipped to understand - let alone control - the corporate affairs of a complex, modern, multi-million-dollar business. And all concerned stood to gain from any strategy which would help to keep Bacardi tax payments in the United States - the company's biggest market - to a minimum.
The mechanism whereby this was achieved was the establishment of a complex and often bewildering network of off-shore trust funds in Panama and the Caribbean, into which the company's wealth could be channelled; and these trust funds have been the source of much of the subsequent acrimony.
According to the Bissons, the problems with Lisette's inheritance began with her grandmother, Gladys. When Jorge, her husband, died, half of his $60m estate went to her, while the other half was evenly split between her daughters Vilma (Lisette's mother) and Yvonne. But Gladys, who in the time-honoured fashion of the Bacardi ladies had never taken an interest in the minutiae of the family fortune, never knew how rich she was; according to the Bissons, she merely entrusted the management of her funds to Nielsen. The Bissons' allegation in the Miami court case is that he, working closely with Vilma and Yvonne, then initiated what would evolve over the next 30 years into a dizzyingly elaborate, convoluted, dispersed, multi-layered system of transferring Bacardi stock from one off-shore trust fund to another, far from the prying eyes of the US tax authorities.
According to the Bissons' legal suit, Vilma used "trickery and deceit" to gain control of her mother's assets and keep the money away from Lisette. The court papers allege that the deception was carried out with the complicity and assistance of senior Bacardi personnel.
Speaking outside court, the Bissons said that in 1988, five years before her death, they went to visit Gladys (who had moved to the Dominican Republic after leaving Cuba) and were surprised to find her living not in the opulence they had expected but in a small seventh-floor apartment in one of Santo Domingo's less fashionable neighbourhoods. "By grandma's standards it really was what Randy calls a hovel," Lisette said. "The electricity would fail at all times of the day, and she'd become a prisoner inside her own home, because there was no way she could go up and down the stairs. Her main pleasure in life was watching TV - she loved Dynasty and Dallas - but she'd be frustrated even in that when the electricity went off."
The Bissons claim that she told them that she had been wanting for some years to move permanently to Miami, where her grandchildren and the best doctors were. They also claim that in 1988 Gladys received a visit from Vilma, her three other children (Lisette's siblings) and a Bacardi lawyer, after which she signed a document transferring control of the entirety of her Bacardi shares to trust funds in the names of Vilma and Yvonne.
According to the Bissons' calculations, based on Bacardi documents, Vilma now had under her control 1,250,000 Bacardi shares - some 5 per cent of the total shareholding. The precise value of these is a mystery even to the US tax authorities, because Bacardi Ltd is private and does not trade in the market-place; but trade estimates place them at more than $100 each, and possibly as much as $200 each.
Gladys, who never made the move to Miami, died in Santo Domingo in 1993.
For the Bacardis, the mere airing of such claims - baseless or not - is deeply wounding. This is a dynasty that prizes its dignity almost as highly as it prizes its wealth. And, quite apart from the financial implications of litigation that, at this rate, could drag on for decades, there is the loss of face involved.
It was bad enough when Luis del Campo Bacardi, a distant cousin of Vilma's and one of the dynasty's biggest individual shareholders, appeared in court in an alimony case in Geneva in 1993. The allegations of drunkenness, incompetence and tax evasion that surfaced then still cast a shadow over the family's self-esteem. Now, amidst all the continuing bad blood, older rumours and accusations, which were once closely guarded family secrets, have been surfacing - about now-dead Bacardi barons who consorted with black servants, bearing illegitimate "mulatto" children; of rampant alcoholism; of children declaring their parents legally incompetent in order to collect their inheritances prematurely.
The current feud, meanwhile, threatens to run and run, with no apparent end either to the supply of disgruntled claimants or, because of the complexity of the financial affairs involved, to the stream of allegations and counter- allegations. One might just as well focus on, for example, the question of what happened to the fortune of Victor Schueg, Vilma's uncle. This is the issue that consumes the elderly gentleman who showed up in Judge Bloom's court last month with his wife and two daughters. His name is Jose Ramon Morcate. He is a vet in Miami, where he has lived most of his life since his departure from Cuba in 1959.
"Victor Schueg and I," he said, speaking in Spanish, "were intimate friends. We travelled abroad together, we would play cards and chat until 4am." Their friendship was cemented in 1956 with Morcate's marriage to Tina Monje Perez, the adopted child of Victor and his wife Marcia, who were otherwise childless. The Morcates' wedding was a grand affair attended by all the leading lights in the Bacardi family. The couple have an album of mementoes from the wedding, which include a good wishes card from Edwin Nielsen Schueg. Today, however, Morcate has nothing but ill wishes for Nielsen (who retired from the Bacardi company in 1992), holding him responsible, among others, for the fact that his wife is not currently enjoying an incalculably huge inheritance.
Morcate believes that, when Victor died in 1966, Nielsen put his estate in a trust and shared part of it with Vilma (who was Victor's niece). Marcia, Victor's widow, was, he claims, left with next to nothing: just a payment from Bacardi of $18,000 a year. Unable to fend for herself, Marcia lived with the Morcates. One reason why no one else in the family came to her aid, according to Morcate, was that she was originally from Jamaica and, although she was light-skinned, they had always called her "la negrita" - the little black woman - and never fully accepted her into their circle.
"You have to understand," explained Tina Morcate, "the racism that has always existed in the Bacardi family. It is because of a racial complex that lies at the core of their psychology, which comes from knowing that somewhere along the line their ancestors have had black blood. Vilma's father Jorge, for example, was more dark-skinned than his brother Victor. They used to call Jorge behind his back `el negrito'. I think this complex is the reason why these people hate themselves, and hate others, so much."
In 1980, Marcia died - virtually penniless, according to Morcate, in whose home she lived her last days. Her will defined Tina as her sole heir in all the world. Morcate, who had been litigating on behalf of Marcia and Tina since 1976, pressed on with his suit against Bacardi with renewed enthusiasm.
Like the Bisson case, Morcate's suit did not mince its allegations. Morcate - a proud Cuban who speaks animatedly and indignantly - argued in court that the half-share in Victor Schueg's estate which belonged by law to his widow was never handed over to her. "Millions of dollars and thousands of shares owned by Victor Schueg Bacardi have disappeared and have never been recovered," he says. Now, he says, he and Tina live off his earnings as a vet - while Vilma, he adds bitterly, "leads a grand life with her millions."
Needless to say, Bacardi vigorously denied all Morcate's charges of impropriety, and for six years Morcate fought in the courts against the massed ranks of the company lawyers. Nielsen said in a sworn affidavit that the papers relating to Victor's estate had been destroyed. The lawyers argued - and argued. Eventually, after half a dozen years of tediously unresolved legal action, Morcate, having lost $250,000 of his own money in lawyers' fees, bowed out.
But he still refuses, aged 72, to accept that he is beaten. "Whenever the name Schueg is involved, it involves me," he said. He attended the hearing in the Arellano case, he said, because of the sense of proprietorship he has over the Schueg inheritance, but also because he hopes that if Lisette gets her way the door may open for him to resume his legal battle.
Whether or not Lisette will get her way is altogether another matter. The hearing last month centred on the question that bogged down Morcate's case: whether or not a US court has the jurisdiction legally to intervene in the affairs of a company that does business in the US but is officially based in another country. (Bacardi Ltd has its headquarters in the Bahamas but is registered in Bermuda.) Lawyers involved in the case said that they believed that, whatever the outcome of that particular debate, one of the two sides would appeal against the judge's ruling, delaying a final outcome for possibly many years more.
Perhaps of more immediate concern to Bacardi is the auditing exercise in which the US tax authorities are currently involved. The prospect of the massive penalties that might ultimately be due on unpaid taxes - were Randy Bisson's allegations ever to be substantiated - makes Bisson's mouth water. ("We're talking $1bn," he gloats, "and you can quote me on that!")
Worse still is the thought that, whatever the outcome of the Bisson suit or the tax investigation, there is probably more to come. There are many members of the family, close and distant, who are currently watching the outcome of the Arellano case with interest. Some have called Lisette's lawyer, Ms Morris, at her Miami offices to seek her advice on how to press their own claims against the company. One gentleman in Spain wrote to Ms Morris in July claiming that his wife's Bacardi inheritance had been transferred from a trust in the Cayman Islands to a trust in the Bahamas, from which she had now been excluded as a beneficiary. No one imagines that there is a shortage of other aggrieved would-be claimants.
It could be that the claims are baseless, that the Bacardi name has been grossly traduced. It could be that the US tax authorities will discover that the company and its shareholders have acted with the utmost probity. What seems certain is that what is possibly the world's most successful family business will remain riven with dissension, acrimony and hate.
How was it that the House of Facundo Bacardi became a house so horribly divided? How to explain mothers, daughters, brothers, sisters turning so viciously against one another? Fulvia Morris, the Bissons' lawyer, came up with the answer, and in the process gave Randy Bisson the title for his movie. "It all boils down to one word," she said. "Greed." !
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