The ex-wife of Peter Morton, founder of the Hard Rock restaurant and casino empire, is alleging that he dealt her a bad hand by understating the value of her ownership in the business and fraudulently persuading her to sell him $12.8 million worth of stock for $451,000.
In a lawsuit filed last week in Los Angeles County Superior Court, Tarlton Morton also alleged that her ex-husband transferred to himself an additional $29 million in company stock that had been in her name.
Peter Morton, the son of famed Chicago restaurateur Arnie Morton, was unavailable for comment, a spokeswoman said Tuesday.
The couple married in 1990 and divorced in 1997, the year after Morton sold his shares in the Hard Rock Cafe for $410 million. Last May, he sold the Hard Rock Hotel & Casino in Las Vegas to Morgans Hotel Group for $770 million.
The May sale triggered the dispute, which stemmed from an amended prenuptial agreement in which Tarlton Morton was to receive a 1% stake in the Las Vegas hotel-casino, then in the planning stages, according to lawsuit.
Without her knowledge, Peter Morton allegedly instead gave her stock in a holding company that owned nearly all shares of Hard Rock Hotels Inc., the complaint states. The transaction afforded her a 1.67% stake in that company.
In November 2004, when Tarlton Morton was “financially compromised,” her ex-husband offered to buy her stock at “fair value,” the lawsuit states.
He allegedly presented her with a report by accounting firm Ernst & Young that placed the value of the stock at $451,000, the lawsuit states. Believing he was telling the truth, she agreed to sell it for that amount in late 2004, according to the complaint.
However, she learned of its actual value in May, the lawsuit states, when Peter Morton announced the $770-million sale.
“By that valuation of the hotel, [her] 1.67% interest in the hotel actually had been worth $12,859,000, not $451,000,” according to the lawsuit.
It alleged that an Ernst & Young cover letter, which had not been disclosed to Tarlton Morton, said the report was “for internal management purposes and could not be used to place a fair valuation” on her stock.
The lawsuit also alleges that Peter Morton transferred to himself a 4% interest in the holding company, Lily Pond Investments Inc., which had been in his ex-wife’s name for 10 years and was worth $29 million.
Tarlton Morton’s attorney, Paul D. Nelson, declined to comment.