Julia Haart’s divorce from Silvio Scaglia has made headlines recently, but an important issue in the divorce has wide-ranging implications for anyone who owns a business and is seeking divorce. It is alleged Haart used business funds to pay her divorce attorney.
Haart’s Back Story
Julia Haart was raised in the ultra-Orthodox Jewish Haredi community in New York. She married a man in the community when she was 19. After having four children and then questioning her beliefs, Haart left the strict community in 2013. She went on to found a shoe company and became creative director for La Perla.
In 2019 she married Scaglia and was appointed CEO of Elite World Group, a talent media group they both have an interest in, valued at $1 billion. She also became a social media influencer and public persona. She starred in the Netflix reality show My Unorthodox Life, which depicted her life after leaving the Orthodox community.
She has released a memoir, Brazen. In 2022 Haart was reportedly suddenly fired from her position as CEO, and she filed for divorce the same day. Shortly after that, she filed a request for an order of protection from Scaglia. The temporary order gave her exclusive occupancy of the couple’s 10,000 square foot, $65 million New York City townhouse.
Haart May Have Used Business Funds for Divorce Attorney
It has been reported that Haart used funds from the couple’s business to pay her divorce attorney’s retainer. Scaglia accused Haart of illegally taking the $50,000 from the business account. He filed a lawsuit alleging misappropriation of funds in a New York court. Scaglia also reportedly has ongoing concerns about Haart’s spending habits and her use of company funds for personal expenses. Haart’s attorneys have denied all of the allegations.
Who Owns Elite World Group?
In untangling the allegations between Haart and Scaglia, perhaps the most important question pertains to ownership of Elite World Media. The funds used to pay Haart’s attorney came from e1972, Elite World Group’s made to measure clothing brand.
Haart has claimed she is co-owner of Elite World Group. Scaglia’s attorneys have issued a statement that while she owns 50 percent of the common stock, Scaglia owns 123,665 shares of preferred stock and 50 percent of the common stock.
Commingling of Personal and Business Assets
Corporations may be owned by a person or a couple but are separate business entities with their own tax status. Business assets belong to the business and, according to the IRS, cannot be used for personal use unless they are a taxable fringe benefit. When business assets are used for personal expenses, it jeopardizes the corporation’s liability protection and can trigger considerable tax concerns. The use of business funds for personal use complicates accounting for the business.
Attorney’s fees for a divorce are unquestionably a personal expense. Tax courts have clearly held that even though some aspects of the legal work may pertain to the business, the divorce itself is only a personal expense and cannot be used as a business expense for tax purposes.
When an employee or co-owner of a company withdraws company assets without permission from the company’s other owners, it can be viewed as misappropriation of funds. This is essentially theft of business assets for personal use.
According to Scaglia's attorneys, it appears Haart did not have permission to use the business funds for her divorce attorney and thus may have misappropriated funds. However, it is also likely that there will be significant ongoing negotiations between her legal team and Scaglia’s team.
Her firing, her personal ownership stake, and what part of the business will be considered a marital asset are significant concerns that will be discussed and reviewed throughout negotiations. The use of the business funds will likely become absorbed into those negotiations and be considered and incorporated as part of the full-blown division of assets in the case.
Haart and Scaglia reportedly do not have a prenuptial or postnuptial agreement. Because of this, any asset that was acquired during the marriage by either spouse is considered a marital asset and will be considered in the equitable distribution of their assets in the divorce.
If the couple had entered into a prenuptial agreement, they could have clearly delineated how ownership of the business would be handled in the case of a divorce, likely avoiding much of the conflict they find themselves in at the moment.