Dysfunctional Family Businesses: Hyatt

By Mike Schuster Jun 30, 2009 7:50 am

At least there aren't any sex scandals!

The Pritzker family fortune -- largely amassed from Jay Pritzker's founding of the Hyatt hotel chain and Robert Pritzker's Marmon Group -- has for decades been tied up in inheritance disputes and federal investigations. It's been said that the Pritzkers have exploited so many tax loopholes that their actual net worth is a mystery not just to the Internal Revenue Service (or IRS), but to many family members as well.

With millions -- potentially billions -- of inheritance dollars on the line, it's easy to see how the 11 Pritzker cousins could become so litigious.

The Pritzker empire began in the late 1920s with Jay Pritzker's father, Abraham. With a line of credit from First National Bank of Chicago, he entered the real estate business using whatever knowledge he had gleaned while working for the family law firm, Pritzker & Pritzker.

Abraham gave rise to the family tradition of sheltering the estate via a complex matrix of trusts.

His son Jay continued this tradition by purchasing a hotel near Los Angeles International Airport and transforming it into a 6-property chain under the Hyatt brand. As the company expanded, a large portion of the Pritzker's assets were moved into offshore accounts in the Bahamas, raising the curiosity of the IRS.

Jay Pritzker, Nancy and Ronald Reagan

The agency alleged the family was skirting taxes on Abraham's estate -- a claim his heirs vehemently denied. After his death in 1986, the IRS, refusing to accept that the patriarch didn't owe any estate taxes, sent the family a $53 million bill.

Hamstrung by strict Bahamian privacy laws, the IRS eventually settled for $9.5 million plus interest.

After earning a reputation in the 1980s as a corporate raider -- one that would make Gordon Gekko jealous -- Jay Pritzker brought the family fortune to dizzying heights. But it would be his death in 1999 that would turn the clan into money-hungry cutthroats.