Bloomberg News

Economist Stiglitz Seeks $1 Million From Former Divorce Lawyer

June 30, 2011

June 30 (Bloomberg) -- Economist Joseph E. Stiglitz is asking a federal jury in Washington to award him more than $1 million in damages from his former lawyer, who he says failed to file divorce papers in time to prevent his second wife from claiming part of his $300,000 Nobel Prize money.

Jury selection begins today in the trial of Stiglitz’s professional-negligence suit again Rita M. Bank of Ain & Bank in Washington. The trial, scheduled to last six days, will include testimony by Stiglitz and divorce lawyers from New York and Washington, according to court papers.

Stiglitz, 68, who shared the Nobel in 2001, alleges he lost more than $5 million because Bank kept him in the dark about her loyalties, according to court papers. Jane Hannaway, Stiglitz’s second wife, filed for divorce in 2002.

Bank, who has denied the allegations, declined to comment, as did Stiglitz, who is scheduled to travel to Beijing this weekend to be sworn in as president of the International Economic Association.

Bank never told Stiglitz she had consulted with Hannaway about a potential divorce before he hired her to represent him in August 2000, according to a complaint filed in 2005 in Washington.

Stiglitz said in court papers that he repeatedly asked Bank to file divorce papers in Washington in 2000 and 2001 to limit his financial exposure, though this was never done.

Stiglitz anticipated “that certain future publications he was working on, along with the potential award of the Nobel Prize in Economics in October 2001, would generate income which he wished to protect from being awarded in a divorce to Hannaway,” according to the complaint.

Advice to Negotiate

“Bank assured Stiglitz that he would be better off continuing to negotiate rather than filing suit,” Stiglitz alleges.

After he won the Nobel, which earned Stiglitz more than $300,000, Bank advised him to reject settlement offers made by Sanford Ain, Hannaway’s attorney, for half the assets accrued during the 24-year marriage, according to court records.

In October 2002, Bank told Stiglitz she could no longer represent him because she was joining a law firm with Ain, he said.

Hannaway found out “weeks, and perhaps months” earlier and responded by seeking new counsel and filing for divorce in New York, where “celebrity status” rules allowed her to make a claim against Stiglitz’s future income that would be enhanced by his Nobel, the complaint said.

‘Millions’ Lost

Had Bank filed the divorce case in a timely manner in Washington or informed Stiglitz of the legal cost of not accepting the settlement offers, he would have saved “millions of dollars in legal fees, expert fees and future incomes and royalties,” according to the complaint.

Stiglitz initially sought $5 million and suggested that he could testify as his own damages expert. U.S. District Judge Richard Leon rejected those requests and ruled on June 14 that his case would be limited to legal costs related to the case being filed in New York rather than Washington.

Those possible damages are about $1.3 million, according to court documents filed by Stiglitz.

Stiglitz won the prize for showing that markets are inefficient when all parties in a transaction don’t have equal access to critical information. His book “Globalization and Its Discontents” was published in 2002 and became a bestseller, translated into 28 languages, according to court documents. A follow-up book, “The Roaring Nineties,” came out in 2003.

Stiglitz last worked in Washington as chief economist at the World Bank, a position he held until he resigned in early 2000. He is now a professor of economics at Columbia University. He remarried in 2004.

The case is Stiglitz v. Bank, 05-1826, U.S. District Court, District of Columbia (Washington).

--With assistance from Cary O’Reilly in Washington. Editors:

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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