ID#140412

PUBLISHED ON
APRIL 9, 2014

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Pritzker Family Enterprise

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A Family Governance Case Study
BY PATRICIA ANGUS *

ABSTRACT
C CONTENTS
For generations, the Pritzkers—one of the wealthiest
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and most philanthropic families in the United States—
primarily managed their assets in order to enrich the
family as a whole, as opposed to generating wealth for
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Introduction: A Fateful Family
Gathering .............................................1
From Humble Beginnings… ...............2
Expanding (and Protecting) the
Enterprise .............................................3
Core Family Values .............................6

The Family Evolves .............................8

individual family members. The Pritzkers were
historically publicity shy, but their saga gained much
media attention in the early 2000s when some family
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June 1995 Meeting: “Keep Family and
Fortune Together” .............................10
End of an Era .....................................13

Revolution Within ..............................16

members questioned the asset distribution and The Pritzker Family in 2013 ..............17
Questions for Discussion.................20
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leadership requests of their forefathers. The outcome Exhibits...............................................21

of the resulting family battles changed the Pritzker
family enterprise forever. What does their experience
tell us about family governance?

* Adjunct Professor, Columbia Business School Copyright information

© 2013-2014 by The Trustees of Columbia University in the
City of New York. This version of the case replaces an earlier
version published on December 4, 2013.

This case is based entirely on publicly available sources. It is

for teaching purposes only and does not represent an
endorsement or judgment of the material included.

This case cannot be used or reproduced without explicit

permission from Columbia CaseWorks. To obtain permission,
please visit www.gsb.columbia.edu/caseworks, or e-mail
ColumbiaCaseWorks@gsb.columbia.edu
Introduction: A Fateful Family Gathering
“Jay Pritzker was a man who detested conspicuous consumption and who feared the effect of too
much wealth on individuals and on society.” 1
On June 5, 1995, Jay Pritzker—the Chicago-based financier and philanthropist who led the Pritzker
family enterprise 2 as its worth grew to $15 billion in trusts, holding companies, operating businesses,
and philanthropic ventures—called his closest family members together to share his plans for the
future. 3 The assembled group included his wife, Marian (“Cindy”), their four children, his brother
Robert (Bob), his cousin Nicholas (Nick), and six nieces and nephews. Now 73 years old, Jay had
begun to slow down and had decided that the moment had come to set in motion a plan for continued
family unity and business success. Ensuring that would be no small feat for a family with over 100
years of financial good fortune behind it.

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Despite his remarkable business accomplishments, Jay approached the meeting with trepidation.
Indeed, the gathering held great significance for everyone present, as it concerned all aspects of their

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lives. The family’s joint activities were complex and far reaching: their holdings were consolidated in
myriad trusts, which owned hundreds of holding companies and legal entities both in the United
States and abroad. 4 Their business interests were global and diversified, including, most notably,
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Hyatt Hotels. In the philanthropic realm, the Pritzker Foundation contributed millions of dollars
annually to health care, educational, and cultural institutions. Jay was the oldest member of several
generations living at the time, and Chicago still served as the family’s geographic hub. (See Exhibit 1
for Key Pritzker Family Members.)
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Jay hoped to clarify his intentions for all aspects of the family enterprise and was quite clear about
his values and goals. He believed that shared commitment was critical to the sustained success and
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influence of the family. He presented the group with a letter, cosigned by his brother Bob, that
declared: “Our generation and our forebears were raised with the concept that we not spend more
than we, as individuals, earned or contributed to the Family or society.” It warned: “We earnestly
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hope that providing money from the Trusts will not destroy the family ethic, and it is our belief that
in some circumstances making excessive amounts available could have that effect.” 5
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The meeting raised a number of critical questions: How would the family receive the message?
Would Jay’s vision for the family be realized? Indeed, the Pritzkers were facing a critical challenge

1
Suzanna Andrews, “Shattered Dynasty,” Vanity Fair, May 2003.
2
For this case study, a “family enterprise” is considered to exist where one “family” (which may be as small as a
single household or as large as multiple generations) effectively owns or controls multiple businesses with one or
more holding companies, legal entities such as trusts and limited partnerships, and organized philanthropy.)
3
Andrews, “Shattered Dynasty.”
4
Andrews, “Shattered Dynasty.”
5
Melissa Harris and Julie Wernau, “Fortune’s Fate: Pritzker Family Agreement to Divide Billions in Wealth Comes
to a Close,” Chicago Tribune, December 18, 2011.

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BY PATRICIA ANGUS*
common to all multigenerational family enterprises: could they support the development of
individual family members while smoothly navigating the complexity of their joint endeavors? Their
family enterprise story provides an excellent opportunity to explore family governance in action and
to focus on governing in its original sense—that is, to “steer” or “guide.” 6 Would Jay’s actions, and
the letter presented, have the intended effect of smoothly steering and guiding the family into the
future? 7 What was the nature of the family governance system then in place? And had the family
built the groundwork to support the challenges ahead?

From Humble Beginnings…

“The Pritzkers’ rise from penniless immigrants to gilded financiers is indeed one of the triumphant
sagas of American capitalism.” 8

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In 1881 ten-year-old Nicholas Pritzker arrived in Chicago, Illinois, having emigrated with his family

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from Kiev. Industrious from the start, he helped support his family by taking a number of part-time
jobs, from shining shoes to delivering newspapers and serving as a tailor’s assistant. He reportedly
taught himself English by translating the Chicago Tribune into German and then from German into
Russian. He initially studied to become a pharmacist, but his career took a defining turn that would
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become a Pritzker family signature when he went to law school. While supporting his wife and three
sons, he earned his law degree through DePaul University’s evening program. He founded Pritzker &
Pritzker in 1902.
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All three of Nicholas’s sons—Harry, Abraham Nicholas (A.N.), and Jack—obtained law degrees and
joined the family firm. A.N. was a larger-than-life figure who earned his law degree at Harvard,
loved dealmaking, and began shifting the family’s interests into real estate and investing. During the
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Great Depression, A.N. and Jack made a number of successful investments in distressed real estate,
buying up properties at discounted prices and building up the family’s holdings. “A.N. was doing
leveraged buyouts in the 1930s before anybody had even heard of such a thing,” said a family
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employee. 9
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Like his father, A.N. had three sons—Jay, Bob, and Donald—all of whom appeared to inherit his
innate intelligence and strong business acumen:

6
See Oxford English Dictionary (www.oed.com) for definition and etymology.
7
Patricia M. Angus, “The Family Governance Pyramid: From Principles to Practice,” Journal of Wealth
Management 8, no. 1 (Summer 2005): 7–13.
8
Shane Tritsch, “Tremors in the Empire,” Chicago Magazine, December 2002,
http://www.chicagomag.com/Chicago-Magazine/December-2002/Tremors-in-the-Empire/.
9
Stephane Fitch, “Pritzker vs. Pritzker,” Forbes, November 24, 2003,
http://www.forbes.com/free_forbes/2003/1124/142a.html.

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BY PATRICIA ANGUS*
 A.N. introduced his three sons to the family business early on, bringing them to the
office when they were little boys and quizzing them over dinner about math problems
and financial issues. Jay finished high school when he was 14 and then went to
Northwestern University, where he majored in accounting. He served as a naval flight
instructor at an air station outside Chicago during World War II, attended
Northwestern’s law school, and then joined Pritzker & Pritzker. In 1953 he borrowed
about $95,000 from his father’s main banker, the First National Bank of Chicago, and
made his first acquisition, the Colson Company, then a run-down manufacturer of
metal goods in Elyria, Ohio. He then brought in his brother Robert to run it. 10

A natural synergy emerged between Jay, the strategic dealmaker, and Bob, who was highly skilled in
turning around business operations and restoring profitability. An engineer by training, Bob was
quiet, methodical, and shy. His temperament proved to be a powerful complement to Jay’s.

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Expanding (and Protecting) the Enterprise
“Jay Pritzker quietly built a $15 billion empire of more than 200 companies, including Hyatt Hotels
Corp., and a network of 1,000 family trusts.” 11
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From the 1950s through the mid-1990s, the family businesses were led by the Pritzker brothers and
achieved ever-increasing success in multiple industries. As they expanded, the Pritzker businesses
ultimately became one of the largest American family-owned conglomerates of their era.
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THE MARMON GROUP
The Colson Company was the first in a long line of manufacturing and industrial businesses that the
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family would acquire and develop. The brothers consolidated their holdings under the Marmon
Group, with Bob in charge. The Colson transaction served as the prototype for their business
approach: “Bob, the engineer of the family, went to Ohio, jettisoned Colson’s laggard operations,
pared down inventory, and moved the company’s fast growing caster business to a modern plant in
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Arkansas.” 12 Jay applied his unique skills to the transaction:

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What made the deal was the tax plan Jay came up with. He found a completely legal
way to buy a company and, even though it was in desperate straits, make money on
the deal through tax credits. That’s the way they ran: Bob figured out what company

10
Andrews, “Shattered Dynasty.”
11
Andrews, “Shattered Dynasty.”
12
Tritsch, “Tremors in the Empire.”

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BY PATRICIA ANGUS*
 he wanted, Jay figured out how to make the deal work, and then Bob would run the
deal successfully. 13

Over the years, the Marmon Group would acquire interests, often sold later at great profit, in such
diverse companies as Braniff Airlines, McCalls Magazine, Levitz Furniture, and Ticketmaster as well
as casinos in Las Vegas and Lake Tahoe, Nevada, and Atlantic City, New Jersey. 14 The Marmon
Group eventually grew to a $6 billion conglomerate. 15

HYATT HOTELS
At Jay’s initiative, in 1957 the family took an impulsive step into a business that would change their
destiny. The story of how Jay, then 35 years old, acquired Hyatt became legendary. Sitting in a coffee
shop on the ground floor of a Hyatt hotel near Los Angeles airport one day, he noticed, among other
things, that the hotel was active with foot traffic and fully booked. At the time, jet travel was growing
among business travelers, and Jay reasoned that they “would pay good money to stay at nice hotels

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near airports.” 16 According to oft-told lore, Jay purchased Hyatt for $2.2 million that day—writing

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his offer on a coffee shop napkin. He later commented to the Chicago Daily News that it was “simply
the first first-class hotel I had ever seen at an airport.” 17

Jay and Bob’s younger brother, Donald, led Hyatt’s rapid early growth. By 1961 Hyatt had become a
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chain of six hotels. A graduate of Harvard College and University of Chicago Law School, Donald
was at the helm when Hyatt established its trademark atrium lobby and signature features, including
glass elevators, lobby fountains, and caged tropical birds. In 1972 Hyatt was the fifth-largest and
fastest-growing hotel chain in the country. Tragically, Donald’s life abruptly ended that year when, at
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age 39, he suffered a massive heart attack after playing tennis on a hot day at a Hyatt hotel in Hawaii.
His death cast a shadow over the family for years to come. However, on the business front, Hyatt’s
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growth continued apace, with the family coming to manage more than 200 hotels worldwide and
owning an additional 40 hotels outright. By 2003 the value of Hyatt was estimated to be $5–$7
billion. 18
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COMPLEX HOLDING STRUCTURES

From the start, the leaders of the Pritzker family enterprise did more than run successful businesses.
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They carefully structured their holdings, both to take advantage of tax opportunities and to maintain

13
Tritsch, “Tremors in the Empire.”
14
Anthony Ramirez, “Jay Pritzker, Who Built Chain of Hyatt Hotels, Is Dead at 76,” New York Times, January 25,
1999.
15
Andrews, “Shattered Dynasty.”
16
Tritsch, “Tremors in the Empire.”
17
Tritsch, “Tremors in the Empire.”
18
Andrews, “Shattered Dynasty.”

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BY PATRICIA ANGUS*
secrecy. While most of the details of the family’s trusts have been kept private, some publicly
available information sheds light on the types of trusts used and their intended purposes. 19

In 1963 A.N. set up a series of trusts, the 1740 Trusts, in New Providence, Bahamas, taking
advantage of the Bahamian common law legal system and finding a way to defer paying US taxes on
earnings held offshore. Because the trusts were established with an offshore trustee, and because a
non-US citizen (François Harispuru, a French citizen) served as settlor of the trusts, they were
essentially outside the US tax net. At the time, no US tax had to be paid on the current income or
capital gains derived from the 1740 Trusts until those funds were distributed to US beneficiaries.
Those trusts were therefore subject to a more favorable tax regime than would have applied to their
US counterparts. By structuring the trusts through these “arms-length transactions,” the Pritzkers had
found a way to compound their profits to be used for future business ventures (see Table 1).

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A.N. funded additional Bahamian trusts, the T-551 Trusts, in 1971. Again, a foreign settlor (Carlos
Echavarria, a Colombian national) was put in place to initiate the vehicle. The T-551 Trusts were

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placed under the care of a Bahamian bank, Castle Trust Co., which was co-owned by the Pritzkers’
Chicago tax attorney, Burt Kanter. One analyst summarized the offshore trusts as of 2003:

The assets in key offshore trusts today include AIC Holding, which owns Hyatt
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International, operating hotels outside the U.S. and Canada; Rockwood, a holding
company that has a 10% stake in Marmon Group, the family conglomerate of
industrial businesses; Triton Holdings, a lessor of passenger jets, cargo planes and
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cargo containers; Western International Financial Group, which has interests in
reinsurance companies; and a 20% stake in Royal Caribbean Cruise Lines. These
assets produce an estimated $90 million in income each year—but the beneficiaries
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pay no tax unless there’s a distribution. 20

Since A.N. had transferred so much to these trusts and others, when he died in 1986 the value
of his estate was reported as $25,000 on his US estate tax return. US estate tax is levied on all
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assets of a US citizen owned worldwide at death. At the time, the federal estate tax exemption
was $500,000 and the highest marginal tax rate was 55%. The IRS did not accept the nominal
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value of the estate and originally sent a bill for estate taxes totaling $53.2 million. After
protracted negotiations, the case was settled in 1994 with the estate paying a total of $9.5
million plus interest. 21

In addition to the offshore trusts, numerous US trusts must have been created by A.N. and
other family members along the way, although public information on those trusts is also

19
Fitch, “Pritzker vs. Pritzker.”
20
Fitch, “Pritzker vs. Pritzker.”
21
Ramirez, “Jay Pritzker, Who Built Chain of Hyatt Hotels, Is Dead at 76.”

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BY PATRICIA ANGUS*
limited. In establishing them, the Pritzkers relied upon a network of lawyers and accountants,
primarily based in Chicago, as well as on the legal expertise in the family.

TABLE 1
PRITZKER FAMILY OFFSHORE TRUST STRUCTURE

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Source: Stephane Fitch, “Pritzker vs. Pritzker,” Forbes, November 24, 2003.

Core Family Values

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“You could play cards with Jay over the phone….You could absolutely trust him” 22
— Bruce Leadbetter, long-time business associate of Jay’s
HONORING HONESTY, FRUGALITY, AND EARNED SUCCESS
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Within the family, standards were known to be set high and values were clearly articulated by the
oldest generation. Jay, for one, strongly believed that each member of the family ought to make a
contribution to society and expressed the point of view that “anything that went to individuals should
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be based on productivity and contribution, not just because you were in the bloodline.” 23 While Jay
was known to be polite and soft-spoken—often talking in the so-called Pritzker whisper—he could
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also be very direct and cutting if family members were not carrying their weight. A story told by a
business partner gives some sense of this: “One day we were talking about this venture and he [Jay]
looked at me and said, ‘There is a reason John isn’t with us in Chicago, and it’s a matter of [his]
competency.’” 24 It is also reported that Jay stated that no Pritzker “has a right to anything until he has

22
Andrews, “Shattered Dynasty.”
23
Andrews, “Shattered Dynasty.”
24
Andrews, “Shattered Dynasty.”

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BY PATRICIA ANGUS*
made a contribution doing something and doing it well. He doesn’t have to be in the family business.
He can be a Yugoslavian-poetry professor. But he had better be a good one.” 25

In the public eye, Jay and Bob, at least, appeared to present a united front in the way they expressed
their values. They both extolled frugality and sought to instill it in their business cultures. Managers
and employees of the Marmon Group traveling on business stayed at a Holiday Inn, rather than a
Hyatt. When asked why they didn’t stay at a Pritzker-owned hotel, Bob replied, “Because it’s too
expensive.” 26 Jay was reported to drive a Ford Taurus and wait in lines at his own hotels; he
maintained a belief that “the greatest risk [to society]” was “too much separation between the haves
and the have-nots.” 27

PRIVATE LIVES
During their long, steady ascent, the Pritzker family worked hard to stay below the radar. “They were
always more interested in building an empire than in getting their name in the newspaper,” said

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Patrick Foley, former president of Hyatt Hotels Corporation. “They just didn’t enjoy that kind of

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notoriety.” 28

There were, however, some tragedies that shook the family on the inside and challenged their efforts
to keep a quiet public front. Donald’s untimely death sent ripples through the family, and the death of
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his wife, Sue, a decade later at age 49, only added to the disruption they felt. In 1972 Jay’s oldest
daughter, Nancy—who had long suffered from mental illness—committed suicide at age 24 in Jay’s
car at home, on a day when other members of the family were headed out on a ski vacation together.
She was found with a copy of The Best and Brightest, a critical account of the moral underpinnings
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of the Vietnam War, at her side.

The family did not, however, shy away from charitable events. In fact, as one Chicago-based
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journalist observed:

The family balances [their] blessings through philanthropy, giving away millions of
dollars to health care and educational causes and spreading the wealth to major local
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cultural institutions, from the Art Institute of Chicago (where you’ll find a Pritzker
wing) to the Lincoln Park Zoo (home of the Pritzker Children’s Zoo).…Beyond that,
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though, the family is loath to reveal much. 29

GIVING BACK
Over time, the Pritzkers' philanthropic impact was extensive, especially in the Chicago area. Family
members led numerous philanthropic institutions and served as trustees for many of them. Jay and

25
Andrews, “Shattered Dynasty.”
26
Tritsch, “Tremors in the Empire.”
27
Andrews, “Shattered Dynasty.”
28
Tritsch, “Tremors in the Empire.”
29
Tritsch, “Tremors in the Empire.”

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Cindy founded The Pritzker Foundation, donating millions of dollars each year to support Chicago-
based cultural, educational, and healthcare institutions. In 1977, in honor of their deceased daughter,
Jay and Cindy founded the Nancy Friend Pritzker Laboratory for the study of clinical depression at
Stanford University, Nancy’s alma mater.

Jay and Cindy also established the Pritzker Prize for Architecture in 1979, modeled on the Nobel
Prize, with the following mission:

To honor a living architect/s whose built work demonstrates a combination of those

qualities of talent, vision, and commitment, which has produced consistent and
significant contributions to humanity and the built environment through the art of
architecture. 30

Their son Tom pointed to the influence of his parents in inspiring a sustained interest in, among other

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civic missions, architectural excellence and revitalization in Chicago. He stated, “Mom and Dad…

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believed that a meaningful [architecture] prize would encourage and stimulate not only a greater
public awareness of buildings, but also would inspire greater creativity within the architectural
profession.” 31

Bob made significant contributions to University of Chicago Medical School and to his alma mater,
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the Illinois Institute of Technology, among other organizations. In 2002, to mark the 100th
anniversary of the founding of the family law firm, the Pritzker family donated $30 million to the
University of Chicago (the largest gift ever received by the University) for biomedical research. As
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Tom noted at that time, the Pritzkers felt a duty to give back to the community in which they had
long “prospered.” 32
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The Family Evolves

“It is easy to think of the tight-knit Pritzkers as a monolith, a collective of wealthy blood relatives
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thinking and acting as one. In reality, though, they are a diverse collection of individuals with widely
divergent interests and aspirations.” 33
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As the younger Pritzkers—Nick (more than two decades younger than his cousins Jay and Bob) and
the sons and daughters of Jay, Bob, and Donald—grew into maturity, the family expanded in multiple
dimensions. Not all of the Pritzkers were interested in pursuing business careers, or at least not in the

30
“Purpose,” The Pritzker Architectural Prize, http://www.pritzkerprize.com/about/purpose.
31
Scott B. Wilkinson, “OSU Architect, Professor Honored with Top Award,” Lantern, April 26, 2001,
http://thelantern.com/2001/04/osu-architect-professor-honored-with-top-award/
32
Tritsch, “Tremors in the Empire.”
33
Tritsch, “Tremors in the Empire.”

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existing family businesses—and it appears that not all were necessarily welcome to join those
businesses. In 2002 one analyst commented on the evolving Pritzker family:

Most of the 11 adult Pritzker cousins (two more are under 21) are not even involved
in the family business. Dan Pritzker, 43, one of Tom’s two younger brothers, owns a
record label and is the leader of the alternative rock band Sonia Dada. Gigi Pritzker,
40, Tom’s kid sister, is a co-owner of an entertainment production company that
makes feature films and documentaries, and she was a producer of the movie The
Wedding Singer. Jay Robert “J. B.” Pritzker, 37, the younger of Penny’s two kid
brothers, made an unsuccessful run for Congress in the 1998 Democratic primary. 34

TRIUMVIRATE OF NEW FAMILY LEADERS

As the second half of the 20th century reached its close, three younger family members—Penny,
Nick, and Tom—began to emerge as leaders of the family businesses and to take on roles of

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increasing responsibility across the family enterprise.

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Donald’s only daughter, Penny, earned a BA in economics from Harvard College and a JD/MBA from
Stanford University. She was known for her tenacity and talent, described by one analyst as follows:

Penny is the first female Pritzker to crash the previously male bastion of Pritzker &
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Pritzker. She is also said to be sweet and disarming—the easiest of the new
generation to talk to. But no one should doubt her bull-by-the-horns toughness,
earned perhaps in part through personal adversity. Penny was just 13 when her father,
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Donald, died; her mother, Sue, died a decade later in an auto accident. More evidence
of her grit: A few years ago, Penny participated in Hawaii’s Ironman competition. She
completed the swimming and biking, but early in the run she slipped and injured her
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leg on a shard of lava. Rather than drop out, she continued the race, finishing the last
22 miles in pain. “That’s Penny,” says Laurence Geller, who acted as a mentor of
sorts to her when he was an executive at Hyatt. “She is a bulldog and won’t let
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anything get in her way.” 35

Penny’s early professional achievements included founding Classic Residence by Hyatt in 1987,
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creating the Pritzker Realty Group in 1991, serving as chairman of Superior Bank 1991–1994, and
cofounding The Parking Spot, an off-site parking management company, in 1998.

Nick earned bachelor’s degrees from Lake Forest and Reed colleges and a doctoral degree in law
from the University of Chicago. He appeared to inherit his late father Jack’s zest for life as well as
his interest in real estate. Nick was known to possess a curious mind and intellect, and was a
vegetarian with a deep interest in environmental causes. He maintained many connections to

34
Tritsch, “Tremors in the Empire.”
35
Tritsch, “Tremors in the Empire.”

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prominent figures in the academic and scientific worlds. On the business side, Nick took a lead role
in the Park Hyatt, the family’s boutique hotel; was instrumental in increasing the family’s presence in
casino gambling; and eventually became chairman of the board and CEO of the Hyatt Development
Corporation.

Jay’s son, Tom, earned his BA from Claremont McKenna College and a JD/MBA from the University
of Chicago. From an early age, he showed an interest in business, often accompanying his father to
the office and engaging in discussions with him about the inner workings of the family businesses.
He also had a passion for art and exploration. Before Tom joined Pritzker & Pritzker in 1977, he and
his wife, Margot, went on a 400-mile trek through the Himalayas, during which he pursued his
interest in Tibetan culture and art. He eventually became an expert in 11th–15th century Tibetan
painting.

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On the business front, Tom’s ambition and connection to his father were clearly apparent:

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“From a business perspective, Tom and Jay had a real symbiotic relationship,” says
Tom Begel, chairman of TMB Industries, a leveraged buyout group that has done
deals with the Pritzkers. “They would often literally complete each other’s sentences.
Their mannerisms and figures of speech were the same.”
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But Tom Pritzker was not a clone of his father; Jay’s genius could not be replicated.
“Tommy has a lot of the same characteristics that Jay had—the same humor, the same
sense of responsibility,” says Patrick Foley. “He sets his priorities as well as Jay did.
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But Jay had that imagination for dealmaking that very few have.” 36
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June 1995 Meeting: “Keep Family and Fortune Together”

“Since our generation primarily created the wealth our Family possesses, within the limits imposed
by the law, we are entitled to express our wishes as to the disposition of that wealth.” 37
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— Jay Pritzker

By the time Jay called the family together in 1995, he was 73 years old and had started to slow down.
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He had long been challenged by heart problems, and his health was beginning to falter. It was clear
that he would no long be able to pursue his interest in heli-skiing. He remained active in business but
believed that it was time to put into place a plan for succession, with an eye toward management of
the Pritzker family interests into the future. He was especially concerned about the family’s trusts and
financial holdings.

36
Tritsch, “Tremors in the Empire.”
37
Andrews, “Shattered Dynasty.”

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FAMILY OVER INDIVIDUAL WEALTH
Five years earlier, a series of cash payouts from the family trusts had been put in place for the
younger Pritzkers. The payouts were graduated over time to coincide with successive life stages, and
they were large enough so that each member of the family would, over time, have substantial assets.
Now Jay, with Bob at his side, wanted to take still stronger, more explicit steps in planning for the
family’s future. The two brothers believed that the family interests should continue to be held as a
single unit, rather than broken up to augment the wealth of any one individual. That was how it had
long been done in the family, and in addition, it was possible that the tax advantages already achieved
could be jeopardized, or even eliminated, if the family attempted to restructure its holdings.

One analyst described the Friday, June 5 meeting as follows:

Jay’s four children gathered that afternoon at Tom’s magnificent Lakeview Drive
apartment. They were joined by Robert and Nicholas and six of Jay’s nieces and

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nephews. Liesel, who was then 11, and Matthew, then 13, were not invited. As

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everyone took their seats, Jay prepared to speak. He was worried, as was Cindy, about
how his plan would be received. His family had grown; there were so many adult
members now, with such different interests. After making a few opening remarks, he
handed each person a copy of the letter. Two pages long, typewritten and single-
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spaced, it was signed by Jay and Robert, and, reading much like a last will and
testament, it laid out their instructions to the family. “We are writing to clarify some
of the confusion that may exist about the Family wealth and Family Trusts,” the letter
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began. Most of the family’s wealth, it explained, was in corporations owned by trusts.
“From time to time,” the letter continued, money from the trusts would be distributed
to family members “to meet their reasonable needs.” However, after those needs were
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met, “the Trusts were not intended for and should not be viewed as a source of
individual wealth.” What they were primarily designed for was to accumulate wealth
to invest in the family’s business and enhance the family’s position through
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philanthropic donations—not to make billionaires out of individual Pritzkers. 38

SUCCESSORS AND STRATEGY SPELLED OUT

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The letter named Tom as Jay’s successor as the family business leader and identified him as trustee of
the family trusts. It also stated that Penny and Nick would serve, in effect, as vice-chairmen of the
Pritzker businesses. The places in the triumvirate that Jay and Bob believed would carry the Pritzker
family well into the 21st century were thus secured. The letter made it clear that “the family trusts
were not to be broken up until the law governing trust perpetuities required it, which one source
suggested might not be until 2042.” 39 In addition, a separate memorandum outlining a series of lump-

38
Andrews, “Shattered Dynasty.”
39
Andrews, “Shattered Dynasty.”

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sum distributions that would be made to the younger Pritzkers was attached to the letter. The
schedule of payments had been updated and increased since the 1990 schedule. Family members
were to receive an annual after-tax stipend beginning at $100,000 when they graduated from college
and reaching $1 million when they turned 40; in addition, lump-sum distributions were to be made on
the occasion of major life events. It was estimated that by age 45, each family member would have
received an after-tax amount of $25 million. Presumably, this meant that the vast majority of trust
holdings would remain available for reinvestment in the family businesses or for philanthropy.

Jay’s view that the family members should “feel morally bound,” came through clearly, as did the
idea that he and Bob were entitled to set out the roadmap for the family.

THE FAMILY REACTS

In contrast to the magnitude of the mandates in the letter, the announcement was received with
apparently little response and reportedly “no dissent.” No one objected to the management succession

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plan naming Tom, Nick, and Penny. No one proposed new ways to manage or distribute the trusts, or

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to make adjustments to the current distribution plan. No one promoted further discussions or offered
new perspectives about how the family trusts had been handled or might be managed going forward.
Philanthropy was no doubt a topic on the agenda, but it is not clear how it factored into the overall
conversation. C
Notwithstanding this quiet reception of the message at the meeting, many observers pointed to a
number of potential sources of discontent already brewing. Previously, Jay’s sons Danny and John
had approached their father expressing opposition to Tom’s place as heir apparent. Both before and
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after the meeting, they informed Jay that they wished to have their respective ownership interests,
direct and/or indirect, taken out of the family businesses. In response to these concerns, Jay
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reportedly gave Danny, John, and their sister Gigi an additional $30 million each.

Bob’s divorce in 1991 from his second wife, Irene, also contributed to the backdrop of family
tension. Related court filings had revealed aspects of, and allegations concerning, internal Pritzker
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family issues that they had worked so hard to keep private and that (whether true or not) certainly
tarnished the family image. Irene accused Bob of neglecting his duties as a father; she even described
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his actions as “at times … injurious” to his children. For his part, Bob believed that Irene had turned
the children against him. Disagreements about custody defined the post-divorce years, with Irene
telling the court in 1994, “[Liesel] has no relationship with Robert, nor does she desire one.” 40
Another private detail that emerged was the rumor that when Bob was hospitalized for intestinal
surgery in the late 1980s, Jay arranged on more than one occasion to have him unhooked from
medical equipment at the hospital and taken to a nearby hotel to visit his then girlfriend (and eventual

40
Andrews, “Shattered Dynasty.”

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wife) Mayari Sargent. Bob even resorted to using the court to make sure that Liesel would attend his
wedding to Mayari.

End of an Era
“I’ve called on them numerous times to help me with different items and different events, and they are
always there to help me. If that unity disappears, it will be a great loss to the city.” 41
— Norman Bobins, President, LaSalle National Bank
While internal family discord might have been kept fairly quiet before the 1995 gathering, it appears
that the meeting itself, and the years following, marked the end of an era for the Pritzkers and their
family enterprise. In 1997 Jay suffered a stroke that left him incapable of carrying on day-to-day
business or even caring for himself. Disoriented and suffering from memory loss, the consummate

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dealmaker was no longer in control of his faculties. At the same time, Tom, Penny, and Nick had not

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yet fully assumed their leadership roles. Jay died in 1999; it was later reported that “Although many
of Jay Pritzker’s friends say he died believing that his family was at peace and that his wishes would
be followed, his closest friends say that is far from the truth. He was too embarrassed, ‘as a father,’
says one friend, to tell most people what was happening among his sons.” 42
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After Jay’s passing the situation deteriorated still further:

After his death, the animosity among the sons erupted. “The bitterness was just
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terrible,” a friend says. “It was sibling rivalry taken to the 10th power. It was
horrible, just horrible.”…His brothers resented it when Tom would not let them use
the Falcon 900 jet; they complained that he blocked charitable donations they wanted
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to make….As time went by, friends say, Tom’s brothers and a number of the cousins
felt they were being excluded from the family business. 43

For employees and professionals doing business with the Pritzkers, the transition presented
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difficulties as well:
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When Jay died, that authority passed to his eldest son, Tom, who had built a career
within Hyatt Corporation. “No longer can everyone look at the leader and say,
‘You’re 30 years older than I am; I’m going to listen to you because you’ve been
around longer and understand things better than me,’” the former Marmon executive
says. “You have Tom and Nick and Penny, who are contemporaries and are all

41
Jodi Wilgoren and Geraldine Fabrikant, “Knives Drawn for a $15 Billion Family Pie,” New York Times,
December 11, 2002, http://www.nytimes.com/2002/12/11/us/knives-drawn-for-a-15-billion-family-
pie.html?pagewanted=all&src=pm
42
Andrews, “Shattered Dynasty.”
43
Andrews, “Shattered Dynasty.”

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 successful, smart, good people, deeply involved in the business. And you have this
other group of thirty- and fortysomethings who are also contemporaries but not
involved in the business. The question becomes: ‘What happens to this big, far-flung
family empire? What do we do with all of it?’ And it’s only natural for everyone to
have an opinion.” 44

Other issues continued to crack the surface calm the Pritzker family had projected for decades.
Superior Bank—which Jay had purchased with business partner Alvin Dworman in 1988, before
deputizing Penny to oversee the investment—spiraled into collapse amid an accounting scandal. A
fine totaling $460 million was levied by federal regulators, and a dispute arose between the Pritzkers
and Dworman over who should bear responsibility. Under Penny’s leadership, the family paid the
entire amount. “‘It was right after 9/11,’ says an associate of Penny’s, ‘and she called me and said,
“My family is not going to litigate with the federal government at a time like this.”’” 45

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Dissatisfaction also arose within the family about reports that Tom, Nick, and Penny had received

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hundreds of millions of dollars beyond the usual compensation for their contributions to the family
businesses:

Sources close to Tom, Nick, and Penny say they were entitled to “promotes” (large
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equity stakes) for devoting their careers to the family business. They cite Jay’s 1995
memo, which states, “special recognition and financial participation should be given
to those who assist in administering the family’s affairs and enhancing the family’s
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wealth, a very difficult and thankless task.”

However, there were of course several versions of the story. “The bottom line is that Tom has
created many billions of dollars of value for his siblings and cousins,” said Mel Klein, a
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longtime friend and business partner of the Pritzker family. “Nick and Penny have
contributed substantially as well.” 46

CHALLENGING THE TRIUMVIRATE

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By the summer of 2000, Tom’s brothers, Danny and John, had aligned with Penny’s brothers, Tony
and J.B., against the triumvirate and the plans Jay had envisioned for the family trusts. The four
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cousins jointly drafted a letter to Tom, Nick, and Penny, asking to have their concerns addressed, but
it appeared that the two sides were already at an impasse. Soon thereafter, Danny, John, Tony, and
J.B. hired an attorney, who threatened legal action. An investigation ensued:

Soon an entire room at Pritzker & Pritzker was filled with boxes and documents.
Some say the dissenters were looking for a “smoking gun,” a reason to justify

44
Tritsch, “Tremors in the Empire.”
45
Andrews, “Shattered Dynasty.”
46
Susan Chandler and Kathy Bergen, “Inside the Pritzker Family Feud,” Chicago Tribune News, June 12, 2005.

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BY PATRICIA ANGUS*
 breaking up the family’s trusts. Others say they were genuinely shocked by what they
found in the records—specifically, $480 million that they alleged Tom, Nick, and
Penny had paid themselves without anyone’s knowledge. They began to lobby older
cousins and soon had all but Gigi on their side. …The cousins, friends say, found no
evidence that Jay had authorized payments that even approached $480 million. “They
did not feel that what was taken out was equitable or appropriately disclosed,” says
one friend. In their view, breaking up the empire was the only solution. 47

During this period, the family was experiencing other changes as well. In 2002 Bob retired as CEO
of the Marmon Group, prompting observers to note:

For as long as Jay was alive, Bob had been free to run Marmon as he saw fit. In the
years since Jay’s death, Bob has had health problems, according to sources close to

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the family, and when Marmon’s profits slumped in 2000 and 2001, he apparently
came under increasing scrutiny from the new Pritzker brain trust. Finally he was

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persuaded to step down in January of [2002], though he still retain[ed] a limited role
running half a dozen Marmon operations. “Jay was no longer there to say, ‘That’s
Bob’s—stay out of it,’” says the former Marmon executive. 48
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Following Bob’s retirement, Tom became chairman of the Marmon Group, and John
Nichols—who was not a member of the Pritzker family—became the new CEO.

DISSOLVING THE FAMILY TRUSTS

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Amid threats of legal proceedings and continued family pressure, Tom relented and the group agreed
to an effective liquidation of the family trusts over a 10-year period. As trustee of most of the
family’s trusts, Tom was not legally obligated to follow the wishes or demands of trust beneficiaries,
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and there could be a debate, from a legal perspective, about how the trust and business issues were
resolved. However, the ultimate economic result speaks for itself: the family’s accumulated assets,
totaling over $15 billion, were divided among 11 family members or trusts for their benefit; an
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estimated $1.4 billion was allocated to each. A 10-year period was chosen to allow the most efficient
ways to be found to unwind the assets to make the allocation possible. The family contemplated a
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potential public offering of Hyatt Corporation and reviewed other assets to see which family
members might have had an interest in continued ownership or control. The family also agreed to
take half of the Pritzker Foundation’s $600 million in assets and divide it among foundations
established by Nick and 10 of the cousins. Finally, the family “adopted a formal governance structure
for the Pritzker Organization, requiring Tom to hold annual meetings of family shareholders and
issue regular financial reports. Under the plan, Tom [had] until 2011 to divest the family assets. After

47
Andrews, “Shattered Dynasty.”
48
Tritsch, “Tremors in the Empire.”

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that, decisions [would] be made by majority vote.” 49 To keep the family out of the courts, they agreed
that disputes would be settled through arbitration. Michael Sovern, former president of Columbia
University, was their arbiter.

In line with the Pritzkers’ tradition of keeping personal affairs to themselves, the terms of the
agreement were meant to be kept solely within the family circle. Of note, Bob’s children from his
second marriage, 50 Liesel and Matthew, the youngest of their generation, were excluded from the
agreement.

Revolution Within
“This suit isn’t about getting back at them; it’s about being treated as a member of the family.” 51

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— Attorney representing Liesel Pritzker
Any illusion that the family might have had that the family agreement would be kept private was

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soon shattered when, in November 2002, 18-year-old Liesel filed a $6 billion lawsuit against her
father and other family members, accusing them of giving away or selling at a deep discount
substantial assets in her trusts. A freshman at Columbia University, Liesel was already a successful
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actress, having played alongside Harrison Ford in the film Air Force One. She had also appeared on
Broadway in Vincent in Brixton. The case attracted attention in both the business and popular press.
Some accounts presented Liesel as a spoiled rich girl looking to assert herself or get even with family
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members who she perceived had wronged her. Other accounts presented her as a fairly down-to-earth
college student who fit in well with her classmates. For her part, Liesel insisted the suit had nothing
to do with dredging up past family grievances. “I filed because I wanted to know what happened”
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Liesel said. “It’s going to be tricky, and it will take a long time. But I just need to know what
happened.” 52 After an initial delay, Matthew joined her in the suit.

As a result of the lawsuit, it was revealed that Tom and the family attorney, who were then trustees of
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Pritzker trusts, had turned control of Liesel and Matthew’s trusts over to their father in October 1994:

By the following March, Bob had completely emptied out two of his children’s trusts.
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He had also …reduced the value of several others by selling their assets to trusts held
by their cousins for less than market value. In return…[Liesel and Matthew or trusts
for their benefit] were given promissory notes. 53

49
Chandler and Bergen, “Inside the Pritzker Family Feud.”
50
James, Linda, and Karen were Bob’s children from his first marriage to Audrey Gilbert.
51
Fitch, “Pritzker vs. Pritzker.”
52
Fitch, “Pritzker vs. Pritzker.”
53
Andrews, “Shattered Dynasty.”

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The rationale cited was that Liesel and Matthew should be treated differently from the rest of their
generation because of the gap in age between them and the others. For trust purposes, they were, in
effect, treated as if they were A.N.’s great-grandchildren, rather than as grandchildren of equal
standing with the other cousins.

The suit was eventually settled for $900 million, with Liesel and Matthew (or trusts for their benefit)
each receiving $450 million. The proceedings naturally contributed to the firestorm of publicity
about the family, and family relationships that were already strained were shaken further. The events
were said to take a heavy toll on Bob, then 77 and suffering from Parkinson’s disease. He declared, “I
love Matt and Liesel. I am deeply hurt by their lawsuits.” 54

The process of bringing a lawsuit within a family that held its privacy so dear appears to have been
undertaken without substantial discussion among family members. Liesel stated, “I had dinner with

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Tom. He told me some things. I filed suit.” Some of the cousins believed that Tom had missed an
important opportunity to avoid escalating matters to the courts. “‘There could have been a deal,’ says

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a source close to the family. ‘There can always be a deal.’” 55

The Pritzker Family in 2013 C

“[The new way] complicates matters for people seeking to do deals or raise money from a Pritzker. If
they do a deal with one, does that exclude them from dealing with another?” 56
ot
In the decade or so since the private family agreement was reached and the lawsuit filed, the Pritzker
family enterprise has been fundamentally reconfigured and family members have spread further
afield. Since Jay’s passing, no family member or grouping has firmly held the position of leader of
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the entire Pritzker group. The family steadily and methodically sold off its vast business holdings,
and individual family members traded some businesses among themselves and/or their trusts. In 2005
Marmon’s Trans Union credit bureau was spun off into a stand-alone entity, and in March 2008
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Berkshire Hathaway acquired a majority in the Marmon Group of companies. 57 Hyatt was put up for
an initial public offering in 2009. As of 2013, two family members still served as directors of the now
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public Hyatt board, where Tom remained as its chairman. Donald’s sons, J.B. and Anthony, founded
and ran a technology-based private equity/VC firm, the Pritzker Group.

As a result of the division of assets, individual family members now had access to substantial
resources, either directly or in trust. The 2013 Forbes 400 list included 11 Pritzkers whose net worth
ranged from $1.35 to $3 billion; their aggregate net worth was $25 billion. Although Jay had

54
Fitch, “Pritzker vs. Pritzker.”
55
Fitch, “Pritzker vs. Pritzker.”
56
Harris and Wernau, “Fortune’s Fate.”
57
“Our History,” The Marmon Group, http://www.marmon.com/our_history.html.

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envisioned having Tom serve as the sole trustee for all family trusts, family members presumably
now had a variety of individuals and/or institutions as their trustees.

Many Pritzkers have pushed forward in new directions and into ventures that span a number of
industries that are different from those in the original family conglomerate. Most notably, in June
2013 Penny was appointed US Secretary of Commerce. Jay’s youngest child, Gigi, produced an
Oscar-nominated film, Rabbit Hole, starring Nicole Kidman, as well as the Broadway show Million-
Dollar Quartet. Daniel, Jay’s next-youngest, was a rock musician and the director of a silent film.
Liesel started an organization to help families make the most of “all their wealth” and began to be an
active speaker on the topic of family and wealth.

As of 2013, the family had also continued to diversify its philanthropic efforts (see Exhibit 2 for a
representative list). J.B. served as the Pritzker Family Foundation’s president and created The

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Children’s Initiative, funding “innovative research and programs for children in underserved
communities.” 58 Bob’s oldest child, retired Col. Jennifer (formerly known as James) Pritzker, opened

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the Chicago-based Pritzker Military Library in 2003 and, through the Tawani Foundation, supported
the study of military history. Bob’s second child, Linda, founded a Buddhist enclave based in
Montana. In 2004 the Jay Pritzker Pavilion, designed by architect Frank Gehry, was completed as a
part of Millennium Park in downtown Chicago. C
The family’s public disputes, as well as its efforts to split up the family fortune, created uncertainty
in the minds of some who were involved in business or philanthropy with the Pritzkers. An
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amendment to the Hyatt IPO filing cited family disagreements as a potential risk factor for investors.
According to the filing, “Disputes among Pritzker family members and the trustees of the Pritzker
family trusts may result in significant distractions to our management, disrupt our business, have a
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negative effect on the trading price or our Class A common stock, and/or generate negative publicity
about Hyatt and the Pritzker family.” 59

Relationships among family members were still adjusting to the new reality, and as the saying goes,
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“things would never be the same.” Some reports indicated that there were schisms that might not heal
for a long time. When Penny and Nick moved their offices out of the Hyatt Center, some asked what
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might have been done differently to preserve Jay’s vision of having the triumvirate in charge of the
family. Those observers looked with sadness at the wishes expressed in the 1995 letter: “I expect our
modus operandi will continue harmoniously through this next generation.” 60 However, others
reasoned that the developments that have taken place, including the division of assets among family
members, was a favorable outcome not just for those individuals, but also ultimately for the family as
a whole and the communities they support. To some, the fact that individual family members could

58
“Civic Involvement,” J.B. Pritzker, http://jb-pritzker.com/civic-involvement/.
59
Katie Barker, “Will a New Pritzker Family Feud Derail the Hyatt IPO?” Campden FB, October 22, 2009.
60
Chandler and Bergen, “Inside the Pritzker Family Feud.”

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now pursue independent careers (in business or other areas), investments, and philanthropic
endeavors was a fair and successful outcome for present and future generations.

Whether the outcome is viewed in a negative or positive light, it is clear that the Pritzkers, a family
with a time-honored tradition of maintaining a calm facade, publicly lost their way as the family
navigated its way through rough waters for nearly two decades.

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Questions for Discussion
1. What could Jay have done differently to increase the chances of his vision being
implemented?
2. What type of governance did Jay think would work? What led him to think this?
3. How would the lives of the family members have been different if the 1995 plan had come to
fruition?
4. What could family members have done to minimize the fallout from the disputes that arose
between 1995 and 2013?
5. What type of governance did the family create in the family agreement?
6. How do you think the following family members (or groups) feel about how things have
turned out?

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a. The triumvirate (Tom, Nick, Penny)
b. Liesel and Matthew

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c. The rest of the family
7. How would you describe the environment for family governance among the Pritzkers in
1995? In 2013?
8. Do you agree with commentators who said that the end result was good? With those who said
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it was bad? What definition of success are you using in making that judgment?
9. Until recently, public information has primarily focused on A.N. Pritzker’s direct male
descendants. What does this reflect about the family culture and the roles of other Pritzker
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family members, including spouses?
N
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Exhibits
Exhibit 1
Key Pritzker Family Members

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N

Note: Robert’s son James later changed his name to Jennifer after undergoing sex-reassignment surgery.
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Source: Chicago Tribune

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Exhibit 2
Representative Prizes and Institutions Funded by Pritzkers in 2013
• Pritzker School of Medicine at the University of Chicago
• Pritzker Architecture Prize
• Pritzker Military Library
• Pritzker Legal Research Center at Northwestern University School of Law
• Pritzker Institute of Biomedical Science and Engineering at Illinois Institute
of Technology

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• Jay Pritzker Pavilion at Chicago’s Millennium Park

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• A.N. Pritzker Elementary School
• Pritzker College Prep, A Campus of Noble Network of Charter High
Schools
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• Pritzker Family Children’s Zoo at the Lincoln Park Zoo
• Jay Pritzker Academy, Siem Riep Cambodia
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• Pritzker Marine Biological Research Center at New College of Florida
• Pritzker Galleries of Impressionism and Post-Impressionism at the Art
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Institute of Chicago

Note: Information accessed from Wikipedia, October 10, 2013.

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