Patricia Kluge: Billionaire's Ex-Wife Faces Foreclosure

Patricia Kluge photos, Patricia Kluge house photos

Patricia Kluge, the 1980s society queen and ex-wife of billionaire media mogul John Kluge, has fallen on some hard times. Kluge was famously awarded the largest divorce settlement in history (a reported $1.6 million a week) but she seems to have figured out a way to spend it – and then some.

She's allegedly in default of nearly $23 million on her gilded mansion in Virginia, which made headlines for its outlandish $100 million price tag when it first hit the market in October 2009. Sotheby's didn't get that asking price, nor the drastically reduced $24 million it was eventually priced at. Instead, on Feb. 16, the 23,538-square-foot home will be auctioned on the Albemarle County courthouse steps.

Kluge's house isn't the only possession she's losing: Her antiques and jewelry have already been auctioned through Sotheby's. Her winery was foreclosed on and its inventory also sold off at auction. On top of that, several lots in the Vineyard Estates subdivision she devised for her property were also auctioned.

The Hook reported that according to court records, Kluge borrowed a whopping $66 million for the house, winery and subdivision.

How could Kluge have blown through her fortune and now lost it all?

From the sound of it, ambition got the best of the nude-model-turned-landed-gentry.

Kluge entered the Virginia wine industry in 1999, flush with cash and an outspoken desire to be the most prestigious winery on the East Coast. That kind of hubris irritated the rest of the Virginia wineries who aimed to promote the state's wines as a whole. Kluge wasn't looking for friends; instead she pumped a reported $50 million into developing the winery. Of that, $27 million was said to be spent on state-of-the-art equipment alone. In comparison, a source at one well-regarded winery down the road says they haven't spent that much in their 30-plus-year history.

Kluge spared no expense. She also lured renowned consultants and a winemaker from France whose salary was rumored to be $1 million. And while most Virginia wineries produce about 5,000 cases a year, Kluge tried to bottle 50,000 to 60,000 cases. But those in the wine industry say her unrealistic timeline is most likely where Kluge went wrong.

As one insider puts it, "The old saying goes: 'how do you make a small fortune in wine? You start with a big one.' But you can't spend like a drunken sailor because it's already expensive.

"You plant three years before you get useable fruit...it takes a decade just to figure out what you're doing," the source says. "The problem wasn't with the grapes or the winemaking, it was bad business."

Interestingly, Kluge's wines were well received. Kluge Estates was a regular winner in the state's Governor's Cup wine awards. But one of her many business missteps was in her pricing. The Kluge Estates New World Red, a Bordeaux-style red blend, was originally priced at $75 a bottle. That's steep for Virginia wine, no matter how good it is.

Bob Kocher, owner of Once Upon a Vine wine shops in Richmond, Va., sells more Virginia wine than any other retailer and is intimately familiar with the challenges of the industry. "The problem with Virginia wines is the first thing they build is a huge, beautiful tasting room that costs a million-and-a-half and they want you to pay for it by charging a high price for their wine. Napa started in barns, they didn't start in tasting rooms. [Kluge Estates] was trying to make a fast dime when they should have made a slow nickel."

The price of the New World Red was reduced several times until it ultimately went for $22 a bottle.

"I don't think she was a person that really knew the wine industry in general and I think she just went overboard telling people she would go global before even she went Virginia-wide," Kocher says. "I think she just overspent."

The Beginning of the End

The winery's debts piled up and Kluge did what she could to save it. She took out multiple mortgages on Albemarle House (above), the home she built with ex-husband Kluge and had lavishly decorated with rare antiques from around the world. In a January 2010 interview, Kluge told Luxist that she and third husband, William Moses, were looking to downsize. What she didn't mention was the true dire financial straits she was in.

A month later the price of Albemarle House was chopped in half, to $48 million. By April, Sotheby's announced it would be auctioning the contents of the estate in its first home auction in 20 years. The auction, which included a $3.8 million Imperial Chinese clock and custom $300,000 sporting guns, was estimated to bring in $14 million. The resulting sale exceeded that, earning $15.2 million. Next on the auction block was Kluge's jewelry. In late April 2010, Sotheby's auctioned her personal jewelry collection, a sure sign of the coming apocalypse for Kluge. That sale earned $5 million.

All was quiet on the Kluge front for the next six months while Kluge struggled to stave off creditors. Until October, when Kluge Estate Winery was hit with foreclosure. Last month the 960-acre winery and vineyards were auctioned but failed to sell when no one stepped up to top lender, Farm Credit, and its $19 million bid. So for now the winery stays in the hands of Farm Credit. Bill Shmidheiser, a lawyer with Farm Credit, said the bank hopes to sell the property and that $19 million is a good deal for any buyer considering the $50 million Kluge and Moses spent creating the winery.

Most recently the winery's inventory was sold at auction. Due to Virginia alcohol laws, only licensed sellers were able to attend. Much to the dismay of the state's wine industry the wine sold at bargain-basement prices and even had to be stopped after one case sold for just $2. A Virginia wine insider says that upset the other wineries who are now expecting a flood of inexpensive Kluge wines to hit the market, devaluing their wines. "It makes us all look amateurish."

The most recent foreclosure to wallop Kluge is that of her Vineyard Estates subdivision. Much to the displeasure of the rest of tony Albemarle County -- which is filled with multi-acre plantations including Thomas Jefferson's Monticello -- Kluge launched a plan to subdivide a portion of her 300 acres into the luxury "Vineyard Estates." The development would offer plots from $1.5 to $13 million and offer a selection of pre-screened architectural plans as well as a "global concierge" service.

Five lots in the 24-lot subdivision -- it's first phase -- went into foreclosure when the partner on the deal, First Colony Corporation from North Carolina, went bankrupt. The subdivision's 122 acres are assessed at $6.9 million and Vineyard Estates LLC owes $8.2 million, according to a property auction notice. Only one house was built in the subdivision as a spec house. In an interesting twist, Kluge and Moses bought that house back at the foreclosure auction: They were its only bidders. The home, Glen Love Cottage, is 6,600 square feet and assessed at $2.76 million. They paid $3.675 and currently live there.

"Vineyard Estates has suffered from a lack of sales as have many other real estate projects during the recent economic downturn," Bill Moses said in a statement.

In an interview with The Hook, Moses outlined the fall of the winery. Apparently in 2008 an equity investor was lined up to partner with the winery when, on the eve of the banking collapse, Farm Credit called in its $34.8 million loan. Moses says it was a non-monetary default. The winery had simply not met its 2007 sales projections. Kluge and Moses' outsized ambitions had gotten the best of them.

"There was no way we could immediately repay the loan," Moses told The Hook. "We had over-leveraged the company."

And while they tried for a year-and-a-half to desperately to save the company -- negotiating with the bank and selling their belongings -- it still wasn't enough. In the end, Moses said, "it was like swimming laps with lead weights."

PATRICIA KLUGE: How to Turn Those Skeletons in Your Closet into Scaasis / people.com / May 1990

Billionaires are attracted to their opposites. Bores want bewitchers. Shrimps fall for amazons. Fatties want bean poles. And the haves frequently seek out the have-nots. Finding a billionaire can be as easy as looking up the word in a magazine, locating the name just to the right of it, then following the prey to his lair. After that, it’s merely a matter of reeling in the quarry.

“The women usually do everything for their men,” says Doris Lilly, 63, author of the 1951 book How to Many a Millionaire (which inspired the 1953 Marilyn Monroe movie) and its 1984 sequel, How to Marry a Billionaire. “They pack for them, make their phone calls and see that their drawers look nice. It’s intoxicating for a man to be waited on. Combine this with very, very skillful sex, and that will get them.”

Once captured, a billionaire must be nurtured. The traditional maintenance plan consists of building or renovating multimillion-dollar homes, throwing million-dollar parties, sending thoughtful gifts, keeping up spa-induced, couture-enhanced appearances and deflecting criticism by generously supporting charities.

In the end, even if the relationship does not work out—and many don’t—a billionaire’s ex has gained cash, prizes and entry into society. Patricia Kluge’s rumored settlement will include residences in the Virginia hunt country and Scotland. According to her post-nuptial agreement, Ivana Trump would leave her marriage with no less than $20 million and a Connecticut estate. As a bonus, she’d also leave with a surgically rejuvenated face. All of which makes these women, if nothing else, terrific catches for men whose tastes surpass the reach of their own wallets.

With an accumulated $5.2 billion in assets, 5’4” John Kluge, chairman of Metromedia Co., is, according to Forbes, the richest person in America. As for his 5’9” wife of nine years, their “amicable” parting, announced last week, has left her with an undisclosed but presumably healthy income, as well as the 45-room mansion near Charlottesville, Va.—where she’ll live with their 6-year-old adopted son, John II—and a shooting lodge near Balmoral. Nice work for a former soft-porn queen.

At 19, Patricia Rose was a belly dancer in a seedy London club. There, she met her first husband, Russell Gay, then publisher of Knave, a British skin magazine. While under Gay’s influence, she posed nude and lent her name to a Knave column that dished out sex advice. The British tabloids exposed “the naked truth” about Patricia’s past in 1985, when the Kluges were about to host a benefit for Prince Charles and Princess Di in Palm Beach. Politely, the Kluges begged out. A plucky survivor, Pat, now 41, said the scandal was “the best thing that ever happened” to her because “I realized how many friends I had.” Even Prince Charles, she said, sent “a lovely note.”

Though she eventually gained footing with a prince, Patricia Rose Gay Kluge began life more as a pauper. She was born in Baghdad to a British father, Edmund, a translator of legal texts, and a Scottish-Iraqi mother, Sylvia. Sixteen years later the divorced Sylvia moved her three children to London. Pat signed up for a secretarial course, but dropped out at once. “I went in and I saw pale, sallow faces,” she remembered. “I thought, I am not like them.” Certainly not.

After shedding Gay in 1976, Pat started a low-budget film company. Later that year, at a fund-raiser in New York City, she first laid eyes on John. Never mind that Pat was engaged to a London psychiatrist, or that Kluge was married to second wife Yolanda. “I remember thinking about John that this is a brilliant man,” Patricia later recalled. A self-made man, Kluge admired Patricia’s spunk. Before long, her wedding was off, and so was his marriage. “John was so in love, he even converted to Catholicism to marry her,” said Barbara Sinatra, a family friend. They wed in 1981 in St. Patrick’s Cathedral.

Patricia began enjoying John’s fortune immediately by constructing their Virginia homestead. But the Georgian country house, Gothic-style chapel, 18-hole golf course, helicopter pad, stables and gardens were only the beginning. In 1989 the Kluges, who also have residences in Manhattan and London, bought an estate in the Scottish Highlands, close to Balmoral. Patricia, who had ingratiated herself with other royals, went to work on Queen Elizabeth but was repeatedly ignored.

Still, the Queen’s Christmas gift of a Labrador retriever seemed to indicate a softening. And few insiders question Pat’s ability to retain her hard-won social stature. Despite her tarnished reputation. John has called his third wife “the greatest treasure of all.” Available again, her value has appreciated considerably (as of 1990).

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