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The Trouble with Harry Winston

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Harry Winston was a master showman and a fanatical jewelry collector who eventually donated a large chunk of his diamond collection to the Smithsonian. His old-world aura still pervades the Winston salon, where elderly designers painstakingly draw and craft the lavish necklaces and earrings Harry made his trademark. One oft-told tale has Harry mailing the Hope diamond to Washington via registered U.S. mail, saying it was the most secure means of shipping. Others remember Harry and Edna rescuing millions worth of diamonds from the Nazis in the South of France just after the outbreak of World War II. Edna concealed the jewels in her girdle before boarding a ship out of Europe.

The trouble began with the patriarch's death in 1978. Harry recognized that his sons had different temperaments, and his will acknowledged Ron's greater business acumen while ensuring that his bounty would be fairly divided. Though Harry left Ron to run his company with the help of two independent trustees, he decreed that both his sons would receive equal shares of the company's proceeds. The brothers co-existed peacefully under the terms of the will for eleven years, from the time of their father's death until 1989. During that time, Ron ran the company with the two trustees. In the early years, both he and Bruce drew roughly the same amount from the business: Their salaries and perks amounted to around $350,000 a year. The brothers jointly inherited the Fifth Avenue edifice that houses the store, and they split the additional $700,000 a year they received for rent.

But while Bruce's salary from the company remained unchanged until Ron cut him off in 1994, between 1980 and 1990 Ron steadily increased his own salary to $1.13 million, arguing that since he ran the company he was entitled to greater remuneration. (He later lowered his take to $400,000, after his brother's suit.) During the years he occupied a position on the Winstons' board, Bruce showed almost no interest in the company's day-to-day operations. Whenever a decision required both brothers' approval, Ron sent Bruce the papers and Bruce signed them without even bothering to read them.

But in 1990, Bruce filed suit against Ron at the Surrogate's Court in Westchester, which oversaw Harry Winston's estate. His suit demanded that Ron provide him with a thorough accounting of the company. Two years later, he went to court again, charging that his brother had taken advantage of his financial naïveté, seriously mismanaged the family firm, and used company assets "for his own personal benefit." "I don't know who to trust anymore," he complained during one deposition.

The litigation has been fed by a growing army of high-powered lawyers.The company's independent trustees, fed up with the internecine warfare, have adopted a strictly neutral position. "It's a street fight!" sighs Ron Winston. "I can't walk away now."

In 1995, the Westchester surrogate sided with Bruce, ruling that it didn't matter whether Bruce had actively participated in the operations of his company -- Ron had a duty to take care of him as set out in their father's will. In a scathing criticism of Ron, the judge noted that the "downward spiral of loss from the operation" since Harry Winston's death was well documented. He wrote that Ron "evinces an abject disregard for his paramount obligations as a fiduciary and paramount concern for his personal welfare. . . ." Conceding that the differences between the two siblings seemed irreconcilable, he suggested that the company be sold and proceeds from the sale be divided between the two brothers.

The legal documents generated by the case now fill seven massive file cabinets in the Westchester court, chronicling the interminable haggling over the value of the company and bitter debate over Ron Winston's management of it. Ron has offered his brother ever-increasing sums to settle the case: first $4.5 million, then $17 million and, most recently, $28 million. Bruce has spurned all the offers, insisting that his brother continues to massively underestimate the company's real worth.


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