Justice Anil Singh. Photo by Rick Kopstein/ALM

The impact of a husband's insider trading conviction on his family was egregious and shocking enough to make it “just and proper” to divide his $4.75 million Park Avenue apartment unequally in divorce, with his wife taking more than half of it, a state appeals court ruled Tuesday.

An Appellate Division, First Department, panel modified slightly the lower court's division of the couple's co-op apartment, which was bought in the 1990s.

The unanimous panel, in an opinion written by Justice Anil Singh, awarded the wife 60 percent of its value, rather than 75 percent of it. The divorced couple was referred to as “Linda G.” and “James G.” in the opinion.

But Singh and the other justices affirmed Manhattan Supreme Court Justice Deborah Kaplan's unequal “equitable distribution” of the home. Singh explained that the husband's fighting of conspiracy and insider trading charges, and subsequent conviction and prison sentence, gave rise to one of the exceptional circumstances that a catch-all provision of Section 236(B)(5)(d) of the Domestic Relations Law aimed to address when laying out courts' latitude in fashioning “fair” equitable distribution awards.

The section, at 236(B) (5)(d)(14), includes a “catch-all provision that empowers a court to look at any other factor which the court shall expressly find to be just and proper,” Singh wrote.

He added that “marital fault may not be considered as 'just and proper' except in 'a truly exceptional situation, due to outrageous or conscience-shocking conduct on the part of one spouse, that will require the court to consider whether to adjust the equitable distribution of the assets,'” quoting Howard S. v. Lillian S., 14 NY3d 431, 436 (2010).

The justice noted that Kaplan had taken into account James G.'s adultery, as well as his criminal behavior, in awarding Linda G. 75 percent of the Park Avenue apartment. He wrote that “the husband's adulterous conduct is not sufficiently egregious and shocking to the conscience to justify making an unequal distribution of the marital home.”

But Singh said the panel, which also consisted of Justices Peter Tom, Angela Mazzarelli, Richard Andrias and Jeffrey Oing, ruled that “the impact of the husband's criminal conduct on the family may be considered in making an unequal distribution.”

Then he broke down why James G.'s criminal behavior and fighting of charges merited an exception to the usual rule that marital fault not be considered in the distribution.

Singh wrote in Linda G. v. James G., 300828/10, that the “parties were required to spend down their savings from 2007 through 2010 when the husband was forced to resign [from his partner job at Ernst & Young] due to the SEC investigation [into his actions].”

He added that James G. then “refused to take a plea bargain and insisted on going to trial, blaming a woman with whom he had an extramarital affair for his insider trading.” James G. had argued that the woman stole his BlackBerry and committed the insider trading herself.

He then was convicted of a felony and lost his license to practice law. Moreover, his post-incarceration earnings at the time of trial dropped to less than 20 percent of his previous income, which had risen to more than $1 million a year before his downfall, according to the decision.

And his income never returned to the level he had earned before the conviction, Singh wrote.

The justice added that, as a result, Linda G., who'd left a lucrative career at JPMorgan Chase to raise their children years before, was compelled to return to work after being away from the work force for nearly a decade.

“This meant that the wife could no longer remain at home with the children. During this time, the younger son suffered from psychiatric issues and the older son from significant emotional issues,” Singh added.

“In short, the husband's insider trading, and ensuing criminal trial, conviction and incarceration caused the family to undergo financial losses and a substantial decrease in the standard of living. These events also significantly disrupted the family's stability and well-being,” he wrote.

But Singh said the panel believed that “a 60 percent/40 percent equitable division of the value of the marital estate is just and proper when taking into account the hardship that the husband put his family through as a result of his volitional and irresponsible behavior,” rather than Kaplan's 75 percent/25 percent division.

Matthew Kesten, a partner at Schwartz Sladkus Reich Greenberg Atlas in Manhattan, who represented James G., said on Tuesday that he was ”gratified that the [panel] saw there was an error in the lower court in the vast inequality of the division.” But he added that he was “still somewhat disturbed that they took something that shouldn't have impacted equitable distribution, and let it impact it.”

“If you look at the case law,” he said, “virtually in all cases where they're talking about a marital residence, the precedence is generally a 50-50 split.” He said that James G.'s criminal conviction and resulting loss of income “all emanates from the adultery issue and so there should not have been any deviation from the 50-50 split.”

Nina Epstein, of Goldweber Epstein in Manhattan, represented Linda G. She did not return a call seeking comment.