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Gasket Case

Their marriage was on Lifestyles of the Rich and Famous. Their divorce was on Hard Copy.

Joe Hrudka is a self-made man. He came out from under the hood of a car andcreated the Mr. Gasket auto-parts empire.

Denise Hrudka, a former beauty queen, moved from her parents' house into Joe's mansion, dreaming of familial bliss.

They were once worth more than $100 million. They owned sprawling estates in Ohio, Florida and Paradise Valley. They had four daughters andspent a dozen years living in the lap of luxury.

Denise and Joe spent the next four years embroiled in the kind of vicious legal battles fought only in the realm of the ultrarich. The Hrudkas' war has been waged by at least 17 attorneys who have racked up nearly $1 million in legal bills.

They've been to divorce court. They've been to bankruptcy court. And last month they stood before the Arizona Court of Appeals, where Denise is challenging the terms of the divorce judgment.

Denise Hrudka has lost nearly everything trying to get away from Joe. Everything except Joe.

Denise also has screwed up a lot. She hired some of the wrong people and fired some of the right ones. She fought battles she couldn't win and ignored the good fights. The more Denise fought, the more she lost.

Joe apparently has come to view the divorce as a business deal--and he is a cunning master of that cutthroat game. It's something you pick up becoming a multimillionaire. In business, only a fool is merciful to competitors.

"Joe had a lot of money. He always told me, for years, that if she left him, she'd have nothing," says Murray Fox, a longtime friend of the Hrudkas.

Denise got $7,400 a month in spousal and child support, not exactly chicken feed to the average Joe.

But Mr. Gasket is not your average Joe.
He's turned the divorce into a cottage industry. Denise filed bankruptcy. He sent her into liquidation, positioning himself as her primary creditor. Now, as expensive jewelry, antique furniture and cars are auctioned to pay off Denise's debts, Joe often buys the valuables. So he is, in essence, both buyer and seller, plus he gets to keep the goods he buys.

How nasty has this gotten? It's off the charts. One day last July, armed with a bankruptcy-court order, Joe had the authorities clean out the rented home where Denise lives with their children. She made him take the children's furniture, too.

Denise Hrudka went into the divorce thinking the system would work for her.
But Joe Hrudka knew how to work the system.

Denise Zuzak met Joe Hrudka (pronounced RUDD-kuh) at a car show in Cleveland in the late 1970s. They met again at a party in a bar. The second time, something clicked.

Joe was 39 years old, the divorced father of three children.
Denise was charmed by the business wizard with the rough exterior.
Not long before their meeting, Joe had sold his wildly successful company, Mr. Gasket, to the W.R. Grace Corporation. He was a local celebrity, routinely described as "independently wealthy" and an "entrepreneur."

And he was smitten with Denise.
At 26, she was a tall, dark-haired beauty. She had been crowned Miss Cleveland a few years before she met Joe, and since then had worked in her father's aluminum foundry and taught piano lessons.

Their August 1978 wedding was preceded by an ominous event. Two days before they exchanged vows, Joe presented Denise with an antenuptial agreement and demanded that she sign it. No signature, no wedding, he said. She was caught off guard and, weeping, signed the document.

Denise's father paid for the wedding, despite Joe's wealth. It was a big affair--600 attended--that was covered by Cleveland TV stations.

Joe assumed the role of provider.
Denise was, by all accounts, deliriously happy on the pedestal where Joe had placed her. He showered her with gifts, jewelry, cars.

Friends say Denise didn't marry for money, though.
"She was never ostentatious, never had a big head about her," says Fox, who was at the Hrudkas' wedding. "She was just a real nice girl. She really, really cared about him. It's really sad."

Shortly before they married, Joe had bought one of the largest homes in the Chagrin Falls suburb of Cleveland, a 55,000-square-foot mansion known as Roundwood Manor. Together, the newlyweds set about remodeling and decorating the place with the finest furnishings and antiques.

Their first daughter was born about a year after their marriage. Three more daughters followed within six years.

By 1981, W.R. Grace was foundering withMr. Gasket. So Joe bought it back andreturned to work full-time. It was a profitable venture that netted him additional millions.

 

Denise's world revolved around her daughters.
"I spent my whole life raising children and decorating houses," she says now.
In 1983, Joe bought the Woolworth Mansion in Palm Beach, Florida, for $3.3 million. The oceanfront estate was once thehome of Barbara Hutton. The neighbors included Yoko Ono. They renamed the house Villa Denise, a move that each would later claim was the other's idea.

Denise avoided the wealthy-wife luncheon circuit in Palm Beach, mostly, friends say, because she was too busy.

"I don't care how much help they had, Denise always drove the kids to school, made their lunches, took care of their stuff," says Lynette Miller, a longtime friend. "The only thing she wanted to do in life was to be happy with Joe and be a good mother and a wife. She loved her home and children and family."

Miller and her husband bought the Hrudkas' 72-foot yacht in Palm Beach, right down to the Rosenthal china embossed withthe yacht's name, The Ten. It came witha captain and a crew, two jet skis, a Boston Whaler, a king-size bed in the master bedroom and mermaids etched on the windows.

The Hrudkas hadn't sailed much, though. Like so much of what they acquired, the yacht was mainly for show.

Joe's acquaintances say he's a perfectionist--everything in its place. The homeswere like museums of artwork andantiques. Joe's car collection once included as many as 130 mint-condition 1957 Chevys, Corvettes and assorted other "cherries."

Friends describe how Joe would guide them through his houses, showing off what he'd bought.

"He would take me by the hand and walk me through the home and say, 'Look at this, look at this, look at what I bought. Look at what I bought Denise,'" says Miller.

The Hrudkas weren't in Florida much, didn't go for "the season," and weren't exactly welcomed into tony Palm Beach society. The local gentry had little time for the likes of this flashy "new money," nor Joe Hrudka's garage demeanor. In Palm Beach, money means nothing without style.

Arizona was more to their liking. In 1985, the Hrudkas moved to a home in Paradise Valley. It was a temporary move while they shopped for a more suitable, permanent home.

They found it in the Wray Mansion at Saguaro and Invergordon roads in Paradise Valley. The Hrudkas bought the mansion in 1986.

Denise didn't want to leave Cleveland, didn't want to leave her family and her friends. But Joe insisted.

The ten-acre Paradise Valley property features a 20-bedroom main house and adjoining guest suite, a pool, a tennis court and two detached guest houses.

The couple was featured there on Lifestyles of the Rich and Famous.
Denise never worked during their marriage. Joe put $10,000 a month into her checking account. With that sum, she ran the household, paid the housekeepers--one full-time and two part-time--and took care of the children's needs. Joe handled everything else.

Joe Hrudka could be generous. He picked upthe tab at dinners with friends. Miller testified in court that Joe once spent $250,000 in15 minutes buying Denise jewelry.

"He liked to shop," says Alan Haire, another longtime friend of the Hrudkas. "He enjoyed shopping for Denise and the girls."

He would take Denise on sprees, spending hundreds of thousands of dollars on jewelry, furs and clothes, including Bob Mackie dresses that cost as much as $10,000 apiece.

"When he bought me things, the sky was the limit," says Denise. "But he had to be there. He picked them out. He paid for them."

The couple went to black-tie affairs in the Valley and socialized with the upper crust.

But there was a dark side.
In the late 1980s, the Mr. Gasket company fell on hard times. Joe was under a lot of stress to keep it together, according to business associates. He worked long hours and traveled a lot.

According to Denise, Joe also had a temper and became increasingly abusive. She says he degraded her, told her she was worthless and stupid. And on more than one occasion, she claims, he was violent and threatened to kill her.

"He scared me so bad, I didn't know what to do," she says.
Denise never made a police report, and Joe emphatically denies ever abusing her.

"Denise lies," he says. "I've never threatened her. She's a complete asshole as far as I'm concerned. That's a bad statement to make that I threatened her.

"I'd swear my life on it. That's something I've never done."
Denise didn't follow the unofficial code of wealthy trophy wives. She wouldn't be placated by opulence. She could have retained her lifestyle, living in one home while her husband conveniently lived in another. She could have kept the estate intact, kept up appearances, ignored the Paradise Valley gossip.

 

Instead, in 1990, she hired an attorney. Joe moved into the guest quarters. She hired another attorney who would file the divorce papers in February 1991.

Joe offered her a deal. She and the kids could stay in the mansion and he'd make house payments. He'd pay the household expenses, the kids' private school tuition and he'd pay Denise $5,000 a month. He'd even pay her attorneys what they'd already earned. All she had to do was agree to stay married to him for another year.

But that was the one thing Denise Hrudka didn't want.
"The whole point was that I wanted a divorce," she says. "He needed to get his little ducks in a row before he could divorce me. If that wasn't a setup, I don't know what is."

She turned it down. Her attorney quit.
"My friends, my acquaintances, said, 'Why don't you just hang in there? Look at what you have,'" Denise says. "It wasn't real. Everything had strings attached. What price do you have to pay?"

She would find out soon enough.

Anyone who knows anything about the auto-parts industry knows the legend of Joe Hrudka and the Mr. Gasket company. He is an icon to gearheads everywhere.

Joe's a flashy guy, decorated in expensive clothes and gold-rimmed sunglasses he wears indoors. The kind of guy with a diamond ring and a gold bracelet and a cellular phone.

And people. Joe has people who take care of things for him--"my legal people," "my financial people," "one of my people ..."

He's known for a resemblance to Neil Diamond, except Joe's voice is still attached to Cleveland.

Joe is undeniably coarse, a brash, fast talker who peppers conversations with statements in the form of a question--"Why would I wanna do that?"

"He has a hard shell," says Alan Haire. "His bark is worse than his bite. Down deep he's a very compassionate person."

Hrudka was a national drag-racing champion in 1961 and 1962. He and hisbrother, Tom Hrudka, teamed up in what would become permanently associated with Joe Hrudka, a'57 Chevy.

Joe worked in a Cleveland factory that made heat-resistant gaskets for industrial use. It wasn't a big leap tofit oneto his hot rod. In short order, Hrudka was selling them to other drivers, and the Mr. Gasket empire was born in the Hrudka garage.

The company developed new performance parts and swallowed up competition. Within five years, Hrudka took his business creation to Wall Street.

In 1971, Hrudka sold the company to W.R.Grace, a Midwestern conglomerate, for $17million. Of that, Hrudka walked awaywith a cool $6 million and a three-year contract with an earnings kicker that later got him another $6 million, according to Forbes magazine.

At the age of 33, Joe Hrudka was basically retired and worth about $10 million. He played the stock market and watched over investments.

In February 1978, he ended his 15-year marriage to his first wife, Janice, in a LasVegas divorce with a settlement exceeding $1.5 million. She is the mother of three of Hrudka's seven children.

In August of that year, he married Denise.
Joe served as a consultant to Grace for seven years, but the company didn't do much consulting with him, whichproved to be a mistake. Joe Hrudka wasMr. Gasket. Withouthim, Gasket floundered.

Finally, Grace realized it was on the wrong track and sold the company back to Hrudka forabout $4million--$13 million less than it had paid him a decade before.

He canned the suits and replaced them with the guys who'd had grease under their fingernails a few times. He also bought up enough smaller companies to create a network for distribution and turned Mr. Gasket around within two years.

In 1983, Hrudka took Mr. Gasket public for the second time--an unheard-of move--in a $32 million public offering.

Joe was back.
Mr. Gasket grew by leaps and bounds toinclude thousands of performance parts and companies like Hurst Shifters, Blackjack Exhaust and Crager, TruSpoke and ProTrac wheels.

Hrudka also sponsored auto-racing series, which helped solidify the company's bond with the driving faithful.

There were lavish parties at Las Vegas trade shows and cars in exhibitions across the country. Everyone knew Mr. Gasket.

At its high point, Mr. Gasket stock traded as high as $18 per share. The company had 11 facilities from Cleveland to Los Angeles and Mexicali, Mexico, and employed 1,500 people.

But expansion didn't come without growing pains. By the end of the go-go 1980s, the company had perhaps gone a bit too far.

 

Gasket had purchased a company that nearly doubled its size, a move analysts say was precipitous.

"The potential was there, but the people were not in place," says industry analyst Harry Millis. "Joe wanted to run things. He never had the management team to effectively manage a company in excess of $100million revenues."

The company reported a net operating loss of $1.7 million in 1989. Losses grew to $19 million in 1990.

The final blow came when Miami-based Rally Manufacturing Inc. won a $10 million judgment against Mr. Gasket for allegedly copying products and packaging designs.

Mr. Gasket appealed, but the damage had been done. Lenders ran scared.
Mr. Gasket filed Chapter 11 bankruptcy in Los Angeles in April 1991--two months after Denise Hrudka had filed for divorce in Phoenix.

From a bean-counter's perspective, her timing couldn't have been worse.

It had all the markings of a marquee divorce, the kind that makes attorneys salivate. But Denise Hrudka would spoil their appetites.

"It was scary," she says. "When you've been a homemaker all your life and then you're up againstthis, it's scary. I was afraid of how he would react."

Joe wasn't happy about the idea of losing Denise.
He says, "I knew nothing about the divorce. She hadan attorney grab me one day. ... It really hurt me."

In the beginning, Denise contacted legal big dogs across the country. And they were interested, but not without retainers in the $50,000 range. Denise didn't have the money. Joe had the money.

Lawyers told her to sell her jewelry, sell one of the cars, sell something and get on over to the office. But more than that, the bigdogs promised to take Joe to the proverbial cleaners.

"I couldn't do that," she says. "I didn't want to hurt the guy. I just wanted a divorce. I never in a million years believed he would do this."

To date, Denise Hrudka has gone through at least a dozen lawyers. Most of them were fired. Others quit when she wouldn't take their advice. Denise borrowed money from her family to pay most of them. Some were paid by Joe. Others just didn't get paid.

Regardless of why they came and went, Denise's parade of lawyers had the direct effect of annoying the court and making an irreparable mess of her case.

Even Joe thinks so.
"She's had bad advice and she's done the wrong things and destroyed everything she had," he says. "It's a disaster. You don't have 14 or 15 attorneys and do things right."

Denise was so snake-bitten, attorneys she didn't even retain compounded her problems.

While she was shopping for counsel, Denise visited the Phoenix law firm of Burch & Cracchiolo and spoke with attorney David Derickson. She didn't hire him.

But Joe hired another Burch & Cracchiolo attorney, Don Lindholm.
About a year into the divorce proceedings, Denise cried foul and attempted to disqualify the firm for conflict of interest. Shedidn't realize she'd been wronged, she said, until one of her new attorneys pointed itout.

Lindholm argued that this was yet another stall tactic on Denise's part.
In court, Denise said she had met with Derickson twice and had spoken to him another time on the telephone. And during those meetings, she said, she had spelled out her case--all the assets, including where she thought they were hidden, everything she knew about Joe's business, the kids, the antenuptial agreement, the whole can of worms.

Derickson, however, remembered only one meeting and that they had talked about her "goals," but had had no detailed discussions. He admitted that he and Lindholm had discussed Derickson's meeting with Denise when Lindholm began representing Joe.

Joe says, "I had absolutely no idea that shehad talked to them. This [divorce] went on for years before this ever came out. She'sbeen to every goddamn attorney who ever lived in this city, which is a disgrace. Ithink she did it on purpose so that legitimately every attorney you go to, she's been there."

An Arizona State Bar Association ethics opinion published in the bar's Lawyer's Manual on Professional Conduct states that when information given to a lawyer from a would-be client is "critical to the representation of an existing or new client in the same or related matter," the lawyer must reject the new client unless the would-be client signed a waiver of confidentiality. Denise Hrudka never signed such a waiver.

But the judge hearing the divorce case, Maricopa County Superior Court Judge Sherry Hutt, denied the conflict claim, saying it would be a "severe application of the attorney-client privilege if the spouse could interview numerous counsel and thus preclude the other spouse from obtaining representation from that group of attorneys."

 

Lindholm stayed on the case for Joe. The conflict issue is part of Denise's appeal.

Denise was off on the wrong foot with Judge Hutt, and things went downhill from there.

Later, Denise complained to the Judicial Commission that she wasn't getting a fair shake from Hutt, whom she termed "the judge from hell."

Hutt responded: "I endeavor to be knowledgeable of the law and apply it firmly. If that makes me 'the judge from hell,' then that is the cross one bears."

One of Denise's lawyers quit less than a month before trial when Denise insisted on filing the complaint.

It was a devastating blow that left attorney Gerald Sherrill alone to represent her. He had tried to quit, too, but Hutt refused to allow it.

Don Lindholm is one of the state's premier divorce lawyers, with a take-no-prisoners style. His representation of Joe was no exception.

Denise Hrudka's efforts to secure property she believed she owned would further antagonize Judge Hutt.

Before Denise filed for divorce, she took her jewelry to Cleveland and gave it to her mother to put into a safe-deposit box. She knew her marriage was over and she was afraid Joe would take the jewels.

Later, Denise used furniture to secure a loan from her mother to pay attorney fees. She had a friend move the furniture stored in a warehouse in Phoenix to an undisclosed location in Las Vegas for safekeeping.

"I needed an attorney. I didn't have any money. I needed the stuff for collateral. And I was afraid Joe would get into the warehouse and take everything," Denise says.

Judge Hutt didn't buy it. Hutt sent Denise to jail for the day until the jewelry and the furnishings appeared, which they did in short order.

Denise's hoarding would haunt her case.
Throughout the trial, Joe would contend that there was more than $350,000 in jewelry and another $200,000 in furnishings missing, even though he never filed an insurance claim.

Denise says some of the missing jewelry was lost or stolen years before the divorce. The rest, she says, she's never even seen.

Joe also alleged that Denise stole furnishings, antiques and artwork, but couldn't say for sure what was missing.

"Geez, if you have thousands of items, it is hard to say which ones are really missing," he told the court. "But a lot of them were missing, some of my favorites."

At least two of the items Joe contended were stolen had been sold in 1988 with their house in Palm Beach. He described another missing painting as "funny guy with a hat and a mustache," but didn't know the artist or the title of the painting.

At one point, it was even agreed that a faux warehouse be constructed around the items that were returned from Las Vegas for comparison purposes--to see if the same amount of stuff came back as left. But Joe sold the goods before that happened.

In the end, Hutt determined that Denise owed $400,000 for missing items.
Joe, meanwhile, was circling the wagons.
He had his "people" sell art and antiques for $435,000 to pay off debt, without court approval or an appraisal. The sellers made more than $7,000 in commissions.

Denise's protests fell on deaf ears.
She also bungled away the antenuptial agreement.
Denise initially argued that the agreement was signed under duress. She said Joe would not let her have an attorney, not even her uncle, look it over, and that she signed it in tears while Joe and his associates looked on.

"I was in love. There were 600 people coming in from all over the country," she says. "I never thought my marriage would end. I was 26 years old."

The agreement dictated that in the event of divorce, Denise would receive $1,500 a week for 521 weeks--$78,000 a year for ten years, but no assets.

At the beginning of the divorce, Denise didn't want the antenuptial agreement enforced because of the circumstances under which she signed it.

Then, when her prospects dimmed, she changed course and said she'd accept the terms of the agreement. This time, Joe's attorneys picked up her argument that it wasn't legal. All bets were off.

The antenuptial agreement is now a part of her appeal.

Denise's harsh legal education continued as she and Joe sparred over property she believed she had been given. As it turns out, her home was simply a showroom and she was simply a model for his "investments."

In happier times, Denise and Joe had hosted a holiday party at their home. Toward the end of the evening, Joe surprised Denise with a 13-carat diamond ring.

 

It was presented to her in a ring box, wrapped in paper, which everyone watched her open. But Joe maintained incourt that it was not a gift, it was an investment.

"... it was silly to leave it in a safety deposit box or locked up, so we had it mounted into a ring. And I wanted her to show it off. And that's exactly what she did," he said.

In fact, Joe contended that most of the jewelry--a fabulous array of pearls, diamonds and other precious gems worth nearly $500,000--were not gifts to Denise but were investments intended for his children and for his retirement.

"I let her use them," he told the court.
"I made it as an investment. And I would give it whenever I wanted to give it or present it and have her wear it for that time.

"I wouldn't want to buy something for $50,000 or $100,000 or $200,000 and just give it away as a gift."

Denise had given jewelry to Joe, but she didn't ask for any of it back.
"If I give you something, it's from the heart," she says. "It's yours. I gave it to you."

In the end, Judge Hutt determined that the lion's share of the jewelry, including the big diamond ring, was community property. Aside from that, Denise was awarded about $100,000 of the jewelry and Joe got about $40,000 worth.

Denise also contended that a white 1987 Rolls-Royce Corniche purchased by Joe Hrudka and delivered to her home with a red bow on it the day before Valentine's Day was a gift.

Actually, Denise never cared much for the car and only drove it once around the block. Joe kept it in storage, and the title had always been in his name.

Hutt called it community property, along with their 1991 Cadillac and a 1989 Dodge minivan.

Denise was awarded a bedroom set, Hummels and stemware her family had given her over the years, an antique piano and a 1984 Corvette.

The court ordered Joe to pay Denise $2,428 a month for their four children and $5,000 a month in spousal support until 1997.

Hutt ordered all of the community property to be sold and put Joe in charge of selling it. The proceeds were to be used to pay their debts, which totaled more than $7 million, then to reimburse Joe for shared debts he'd paid off. Joe got another $400,000 in waste--missing property, running up the legal tab--for Denise's misdeeds. Half of anything left was to be divided between Denise and Joe. Both had to pay their own attorneys.

"What would a woman do who wasn't lucky enough to have a mother like mine who would lend me money for attorneys?" Denise muses. "Just stay there with my children and take it?"

In June 1992, a federal court overturned the $10 million judgment against Mr. Gasket. And, in true Hrudka style, it was time for a rebuild of the company that had been parked in bankruptcy court for more than a year.

As part of the company's reorganization, Mr. Gasket sold its largest division, the maker of high-performance auto parts, for $34 million. It sold the wheel and tire division to an investment group for $11.3 million.

Judge Hutt signed the Hrudkas' divorce decree in November 1992.
A U.S. Bankruptcy Court approved Mr. Gasket's reorganization plan five months later, and the company emerged from bankruptcy in May 1993 as Performance Industries Inc., mostly debt-free, with Joe Hrudka at the helm.

In addition to his 63 percent interest in the company, Hrudka also got some cash out of the deal.

Echlin Acquisitions Inc., which purchased the performance division of Gasket in 1993, gave Joe a $1.5 million noncompete clause. Walker Manufacturing Company, which bought Gasket's exhaust business, paid Joe another $1 million to consult and not to compete.

But the divorce was already a done deal by then, so Denise didn't get any of it.

The noncompete agreements are the subjects of a shareholders' lawsuit in Ohio against Performance Industries, Joe and two business associates. The shareholders--a profit-sharing plan and trust--allegethat Joe and company diverted assets of Performance Industries into their pockets through the noncompete and consulting agreements.

The case has yet to be argued in court.
Meanwhile, Joe decided to try his hand at the real estate and restaurant businesses. Performance Industries is developer of a shopping center at 26th Street and Camelback, home to Hard Rock Cafe. The company also purchased Bobby McGee's restaurant chain out of bankruptcy for $1.1million.

At the time of their divorce, Denise and Joe Hrudka had two major creditors knocking on the door.

 

One was CIT Group/Equipment Financing, Inc., which had lent Joe more than $3.7million for a Gulfstream II jet. The loan was made through Joe for J&H Aircraft Inc., a business venture he'd started.

Denise never signed the CIT loan, nor was she listed as a party to the business. When CIT sued for the balance, Denise was not served and never went to court. The whole thing was handled by Joe's business attorney.

Nevertheless, Denise got stuck with Joeon the obligation to CIT. Joe paid it off through the sale of some of their antiques and artwork and a commercial building he owned in Ohio.

It left Denise indebted to Joe.
The other big bill was with First Interstate Bank, which had made three loans to Joe, including a $7.5 million line of credit that Denise had co-signed. That loan was secured by their Paradise Valley home.

Shortly after divorce proceedings began, the First Interstate loan came due. First Interstate foreclosed on the property and sold it, but that didn't satisfy the debt. The Hrudkas still owed more than $3 million.

Joe negotiated with their creditors, but Denise wouldn't go along with the deal. She didn't trust Joe, especially since it involved community property and a debt she didn't believe was hers to begin with.

"All she had to do was sign the piece of paper, but she refused to do that," Joe says. "She never does anything that they tell her to do."

In September 1992, Judge Hutt forced the issue.
"Let me advise you, Mrs. Hrudka, if you do not sign the documents from the time it is appropriate and necessary to do so, I will order your lawyer, on your behalf, to do so. To act as your attorney, in fact, and sign thedocuments on your behalf."

Denise argued that $1million of the First Interstate loan went to Joe's final payment to his first wife. Joe maintained he paid it through a separate investment account. The court didn't award anything for it in the divorce.

Overwhelmed and frustrated, Denise filed Chapter 11 bankruptcy in May 1992, before her divorce trial had even begun.

"I filed Chapter 11 to stop him [Joe] from selling assets," she says. "Everything was disappearing, everything was going out the door. ..."

It proved to be another mistake.
When her divorce decree was handed down, Denise ended up owing Joe more than $2million for the debts he had paid off--including to CIT--with what was determined to be his sole and separate property. She owed him another $400,000 in damages assessed against her by the court.

That made Joe the major creditor in her bankruptcy. He holds all the cards.
In the absence of an acceptable reorganization plan from Denise, the court granted a motion from Joe to convert Denise's bankruptcy to a Chapter 7 liquidation.

The court put U.S. Bankruptcy Trustee Dale Ulrich in charge of liquidating Denise's estate. Denise's sole and separate property, as well as all of the community assets, are subject to sale.

Besides Joe, Denise's other major creditor is First Interstate Bank, a substantial lender to Joe's company over the years.

Joe and First Interstate made a deal.
In exchange for at least $2 million and a security interest in company stock, First Interstate freed Joe Hrudka from all obligation. On top of that, according to court documents, First Interstate has agreed to pay Joe 65 percent of any money the bank receives from Denise's estate in bankruptcy.

"I'm free and clear," Joe says. "It was for ajoint effort for husband and wife to bereleased. She wouldn't sign the papers, soFirst Interstate said we will go after you for 'X' amount of money if you don't sign it."

So everything collected from the sale of Denise's assets will go to Joe and to First Interstate, which will, in turn, hand 65 percent back to Joe.

There's more.
As Denise's assets came up for sale in bankruptcy, Joe bought some of them. He offered $45,000 for the warehouse of antiques, artwork and furniture. And trustee Ulrich was eager to sell it to him.

Bankruptcy Court Judge Sarah Curley, however, said no. Instead, the trustee held a full-day auction that brought about $150,000 into the estate. Joe Hrudka bought a good deal of the items at auction.

"Nothing wrong with that, anybody can buy," Joe says, "I didn't do any bidding. I had people there that did the bidding."

Ulrich sold the Rolls-Royce for $80,000 to Brad Smith, a former business partner of Joe's in Celebrity Classics auto brokerage. Denise cried foul. Smith had possession ofthe car before the sale anda $60,000 check from Smith to the estate bounced.

 

The funds were eventually collected by the trustee.
State court documents describe an antique piano that belongs to Denise. It is an 1886 pear wood, concert grand. According to court documents, it was signed with the handwritten inscription "To Denise Hrudka from John Steinway," dated 1988, the year Steinway died.

Today, that piano sits at Washburn Piano Company, waiting for the bankruptcy court to approve its sale. Above theinscription from Steinway there is a smudge and the words "Joe Hrudka." Denise Hrudka's name had disappeared.

Joe says the inscription was "To Denise and Joe Hrudka."
No one seems to know how the inscription changed.
The jewelry, which is at a Mesa jeweler, is for sale, as well.

In a motion pending before the bankruptcy court, trustee Ulrich proposes to sell the jewelry through the jeweler and through Butterfield & Butterfield auctioneers.

The request details that the jeweler would receive a 10 percent commission on items of more than $10,000 and a 20 percent commission on items for less than $10,000. Then there's the third category: "4 percent on sales to Joe Hrudka or on sales which are arranged by Joe Hrudka."

Because he is a major creditor, Joe has first right of refusal to purchase the jewelry.

Pending litigation is considered an asset in bankruptcy. So Joe offered to buy Denise's right to appeal her divorce (from him) for $15,000.

Trustee Ulrich recommended that the court sell it to Joe.
Attorney Alan Cook, who represents Denise in the divorce appeal, vehemently argued that the case could be worth millions. Cook went so far as to pledge to Judge Curley that he would press the appeal even without Denise.

Curley turned down Joe's offer. The appeal is still pending.
Perhaps even more critical to Joe, however, are the nearly 800,000 shares of Performance Industries stock deemed ascommunity property by the divorce court. It's part of Denise's estate and under the control of the bankruptcy trustee, which means the trustee could join the shareholders' suit against Joe and his company.

But Ulrich has not done that.
Needless to say, Denise and Ulrich are not friends. She's still trying to get him kicked off the case, and might end up being fined for her efforts.

However, Judge Curley last week ordered the U.S. Trustee's Office to investigate Denise's allegations that some of her property has disappeared on Ulrich's watch.

Meanwhile, Joe maintains that he's merely protecting his interests and that Denise's problems are of her own making.

"If I held all the cards, I wouldn't be sitting here talking about it," he says. "I would have ended it somehow. You think I enjoy this? I don't enjoy going to stupid courts.

"It's just a waste of assets and a waste of money," he says. "The bankruptcy system is a farce. The judge hasn't handled this thing for shit.

"One of the biggest problems in this case is that the bankruptcy court has not handled Denise properly and put her in her place and shut her down," he says.

Denise has learned a whole lot about the legal system through the school of hard knocks. And she's bitter.

"There's got to be somebody out there who will say, 'Let's stop this,'" she says. "I don't have the money and the power that Joe has and the people behind me like he does.

"This is not a fight to see how much Denise can get. This is a fight for my kids."

It came down to that in July, when things got ugly.
Bankruptcy law specifies that certain things, including children's things, are exempt from liquidation. Debtors--in this case, Denise--are allowed to keep up to $4,000 worth of goods.

In July, Joe offered to buy everything inDenise's house for $15,000. Denise objected.

The court hearings dragged on.
Finally, Denise capitulated. All of the furnishings, including the children's beds, their television and their computer, were removed from the rented house where Denise and her children live in Scottsdale. The court sent her a check for $4,000.

But she would make sure everyone knew what Joe did.
"The day the truck was loaded up, Joe told me to leave the kids' things there," says Gerald Shelley, the trustee's attorney. "Denise called me up and said I'm not letting him take anything if he doesn't take everything."

Joe put the furniture in a warehouse.

Denise and Joe Hrudka's four daughters are between the ages of 10 and 16. The divorce case has been going on for nearly five years--half of their youngest daughter's life.

"It's completely destroyed the relationship with the children," Joe says.
Denise and Joe haven't spoken to each other in three years. She's had an Order of Protection against him for two. Judge Curley ordered that police be present during an inventory that involved the two of them.

 

Both have claimed an array of sins by the other, including threats, stealing and property damage. A private investigator hired by Denise said in an affidavit that he'd found that her telephones were tapped. Joe says she's harassed him constantly in the media, including stories in Hard Copy and a supermarket tabloid.

The children no longer go to private school.
"It's $40,000. How am I going to pay for that?" Joe asks.
He's particularly bitter about the Order of Protection that's still in force against him.

Joe says, "I purposely didn't pick my kids up for six months or didn't see them, because she had a restraining order. I just didn't like the whole thing. It didn't bother her. She didn't care."

On his daughter's 16th birthday, Joe Hrudka gave her an ultimatum: He would buy her a car if she would persuade her mother to drop the Order of Protection against him. Denise Hrudka didn't drop the order. Joe didn't buy the car.

In April 1993, Joe petitioned the Superior Court to reduce his support payments. He said his salary was only $50,000 a year.

But that didn't include the $2 million-plus in noncompete agreements he received from the sale of Mr. Gasket, or the six million shares of stock he owns in Performance Industries, the company it became.

"At the last minute, those noncompetes came up," he says. "One has nothing to do with the other, anyway. That's not income. That was to me personally."

The money, he said, went to pay the settlement with First Interstate Bank.
Superior Court Judge Kenneth Mangum apparently didn't buy Joe's story. Not only was his obligation not reduced, he was ordered to hand over the more than $10,000 he had not paid.

According to Performance Industries documents filed with the Securities and Exchange Commission, Joe made more than $200,000 in 1993.

"I think it's too high," Joe says. "If you take $250,000 [his current claimed salary], you end up with about $160,000 [net] and she gets $90,000 [in child and spousal support]. I don't think that's fair," Joe says.

"They're all tied together," he says of Denise and their children. "She's impregnated their minds. Brainwashed them.

"A mother who does that is totally worthless," he says.
"I really think that kids should be with their mother. But, in this case, I believe they're better off not being with their mother. But I do think kids really belong with their mother."

So does Denise.

About the only thing Denise and Joe Hrudka agree on is that their attorneys are getting rich, their children are losing and the courts could use an overhaul.

Joe says he'd have given Denise half of everything if she'd played by his rules from the beginning.

"I wasn't ever expecting half," says Denise. "I certainly wasn't expecting this.

"I'm in paperwork up to here," she says, motioning to her neck. "I'm doing all the legwork I can trying to save on attorneys' fees. And I've got four kids. I'm constantly driving here and picking up there--doctor, dentist, activities, cooking, cleaning. There's no room for Denise.

"I'd like to have a house to live in and own a car and have a life. I'd like to see my kids get educated."

Joe has no sympathy for her.
"She's always crying. She thinks she got ripped off or something.
"I think she brought everything upon herself," he says. "She wanted to do that. That's not being ripped off. Being ripped off is not knowing you're being ripped off is the way I look at it. She asked for all those things.


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