Russell & Taylor Armstrong’s Business Associates, Friends on Financial, Legal Troubles
Diane Dimond reports the financial cloud over Russell Armstrong and his famous wife, Taylor, loomed large.
The Los Angeles County Coroner’s Office pronounced 47-year-old Russell Armstrong’s death a suicide by hanging last month. It appeared to be a sad, cinematic ending for a man who had been shortsighted enough to allow his wife to lay bare their depressing marital difficulties on a reality-TV show, Bravo’s The Real Housewives of Beverly Hills. Russell’s tragic death was widely viewed as that of someone who couldn’t come to grips with the very public airing of his unraveling life and his pending divorce from a wife who had recently told People magazine that he had battered her.
But, as anyone in Hollywood will tell you, things projected on a screen are rarely true to life.
On a Season 1 episode of The Real Housewives of Beverly Hills, Taylor Armstrong had bragged, “My husband is a venture capitalist and he’s richer than Texas.” Yet in reality her husband had just struggled through a years-long bankruptcy. Viewers came to see that Taylor and Russell made a handsome couple, but he was a detached and emotionless partner—a man who was all about business, all the time. As the first season played out through last fall and winter, Russell was seen as the cold jerk, oblivious to his wife’s needs.
Devotees of the series were riveted by the Armstrongs’ lavish lifestyle, their lovely home in Bel-Air, their adorable daughter, Kennedy, and the extravagant way they seemed to breeze through life. One of the entire cast’s most memorable and decadent scenes showcased little Kennedy’s $60,000 4th birthday party. Taylor foreshadowed the strains in her marriage when she said to the camera, this “is the age I think a little girl should get her first special piece of jewelry…it’s time to get her some diamonds.” And then Taylor sarcastically deadpanned, “Russell is going to be thrilled.”
Still, in public, the smiling couple seemed like they were trying to stay together, and the TV show appeared to be a launching pad for Taylor, as lucrative endorsements came her way.
But past business associates and current and former friends of Russell and Taylor Ford Armstrong paint a very different picture from the one seen on television—and a much more complicated portrait of their finances than previously known.
Russell developed a reputation as a liar and a thief. His background is littered with legal problems: A guilty plea to tax evasion (1995), a bankruptcy (filed in 2005 and terminated in June 2010) that mysteriously never seemed to curb his expensive lifestyle, charges that he was violent to his ex-wife and a fiancée, and a string of lawsuits regarding missing money at companies for which Russell was supposed to be raising capital.
Many who spoke to The Daily Beast say that, since the Armstrongs got married in 2005, Taylor had been the arm candy for her husband’s business ventures, helping him rope in rich investors—a notion echoed in a complaint filed in July in Superior Court of California by MyMedicalRecords.com, a company in which Russell, at one time, had a significant stake. It says Russell engaged in “self-dealing” and, “in concert with Taylor,” the couple “secretly funnel[ed]" money to themselves to fund their “lavish lifestyle.”
Phone calls to L.A.-based attorney Ron Richards, Russell's lawyer and spokesperson, were not returned. On Taylor Armstrong’s behalf, The Daily Beast received a letter from famed celebrity libel attorney Martin Singer responding to certain of The Daily Beast’s questions about her and directing that Singer’s letter not be published.
According to people familiar with their ventures, Taylor’s most blatant tactic was to tell people that she was a member of the prestigious Ford family and by implication put a stamp of approval on her husband’s proposed investments. The MMR complaint makes a similar allegation: that she held herself out as a “Ford Family” member and falsely claimed others in the family were major investors in Russell’s business dealings. Taylor, through her attorney, denies that she ever portrayed herself as a member of “the Ford Motor Company family”.
“She’s from Oklahoma, for goodness sakes! And she’s changed her name from Shana Hughes to Shanna Taylor to Taylor Ford to Taylor Armstrong. She wants you to think she’s a dumb blonde but she’s not!” said Tom Crosswhite, a successful businessman who invested heavily in at least two of Russell’s past projects and spent considerable time with the Armstrongs. He spoke to The Daily Beast from his home in Park City, Utah. (His other home is in Hawaii.)
At the peak of their friendship, Crosswhite said, the Armstrongs were urging investment in MyMedicalRecords.com, a service providing secure online access to an individual or family’s medical history.
“We invested in MMR,” the company now suing Russell and Taylor in Los Angeles, Crosswhite said, “and I probably introduced him to a couple million dollars [worth] of investors.” He is now worried that his contacts may have lost money to Russell, as he and his wife, Barbara, have.
According to Robert Lorsch, CEO of MMR, Russell, through his company NuWay Digital Services, owned 60 percent of the startup’s stock and, with his eye-catching wife often at his side, was in charge of raising investor capital for MMR. But MMR’s lawsuit alleges that Russell was pocketing some investors’ money, eventually leading to his ouster through a legal settlement with MMR.
Russell Armstrong didn’t target only moneyed new acquaintances as investors. He also offered longtime friends, like Dr. Jon Franks, the opportunity to invest in his various projects. Franks was close to Russell—the three Armstrong children call him “Uncle Jon,” and he attended Russell’s funeral last month—and they remained friendly until the very end, even though Franks also lost money in Russell’s ventures. He remembers the good old days “catting around the clubs picking up women” with a happy-go-lucky Russell.
After Taylor came into Russell’s life, however, with her expensive tastes and demands for costly jewels, clothes, and fancy vacations, Russell’s carefree days were behind him, and Franks says his friend submerged himself in more investment plays. Once The Real Housewives of Beverly Hills came into their lives later, Taylor required cosmetic enhancements, a stylist, a maid, a nanny, landscapers, and pool attendants—all designed to showcase her in the best possible light for the TV public.
I asked Franks about Taylor’s role in raising money from investors. Could she have simply been acting as an accommodating wife?
“She’d go around working the crowd, especially the guys, mentioning her Ford family connection,” Franks said. “She would set up the presentations at the Hilton hotel in Beverly Hills, rent the room, make sure there were hors d’oeuvres and drinks. And he would make the presentation” to potential investors. Taylor’s lawyer says his client came from humble beginnings and never suggested any wealthy relatives had invested with Russell.
Franks said Russell told him he realized a healthy commission off every investment, between 10 and 15 percent. Taylor’s tastes, Russell told Franks, required an “$11,000 a month nut for the house and staff.”
Though Russell later told People magazine, “This show has literally pushed us to the limit,” in the early days of The Real Housewives, Russell told Franks and other friends that the show was going to catapult him and Taylor into even more multimillion-dollar deals.
Beverly Hills real-estate entrepreneur Philip Elghanian tells a story about the Armstrongs and their desire to live large in Beverly Hills. Elghanian said in 2006 the couple promised to buy his $7 million Sunset Boulevard house.
“They came to me and said, ‘We are going to buy it, Philip. Give us the keys, get us a contract, we are going to buy it.' ”
Elghanian took them at their word and turned over the keys. After all, the Armstrongs presented as a well-to-do couple, and Elghanian had invested $300,000 in Russell’s MyMedicalRecords.com venture. He thought, “What could go wrong?”
Three months went by and Elghanian says the Armstrongs never returned a signed contract for the house.
“They kept putting me off. Finally, I researched who they were and told them to get out.” According to Elghanian the couple immediately had him served with papers alleging he owed them $75,000 for the renovations they had already made to the mansion. Elghanian insists he never gave permission for any renovations.
“Taylor said, ‘My best friend is the decorator on this house. We’ve already paid him $50,000. We’ve already bought the wallpaper.’” According to Elghanian’s account, “My lawyer finally said to pay them because they’ll tie you up in court forever at a huge cost.” In the summer of 2006, Elghanian gave the couple $75,000 in return for his keys and their promise never to set foot in the house again.
Elghanian claims it cost more than $200,000 to undo the Armstrongs’ damage and the time wasted on the fixes put him smack in the middle of the housing crash. Elghanian said he was forced to sell for $2 million below his original asking price.
An addendum to this story comes from the aforementioned “best friend” decorator, John Wiltgen. He first met Russell several years ago when he came to the Chicago Mercantile Exchange to give a MyMedicalRecords.com presentation to potential investors.
“I went to hear it because clients of mine were involved and invited me,” Wiltgen said. “I figured [they] made a lot of money and I might consider doing what they did with investments.”
Ultimately, as the MMR complaint asserts, Wiltgen invested tens of thousands of dollars in MMR stock. He was convinced that an on-line way for Americans to keep track of all their medical records was the wave of the paperless future. Russell would also convince Wiltgen to invest more money in MyMedicalRecords Australia, at the time a licensed off-shoot of MMR.
“I saw the [Elghanian] house on Sunset and it was lovely. They were telling people I was their designer but they never signed the contract I sent them. They picked out furniture and fabrics … but they never paid for any of it,” Wiltgen said.
He added: “They never paid me a dime [but] they did offer me some more MMR stock. And Taylor can’t say she didn’t know because she was standing right there smiling.”
Taylor’s lawyer says his client was not privy to the details of any payments or financial arrangements relating to renovations made to the Elghanian property, including any by Wiltgen, or any potential purchase of the house.
Few of the many people we spoke with who know the Armstrongs believe the conventional wisdom that Russell died broke—or that his wife Taylor faces a penniless life. Too much money, these people say, has gone through Russell’s hands in recent years even before he and Taylor got married.
“In the late '90s and early 2000s, Russell had this company called WorkSeek.com,” Franks, Russell’s longtime friend, said. “We all invested…Russell raised $17 million. Where the hell did all that money go?”
As the WorkSeek.com project dissolved, Russell became involved with entrepreneur Jay Penske—now the CEO of PMC, the owner of Deadline.com, TVLine.com, and other websites—raising money for a very successful company called Velocity.
According to four sources who wish to remain anonymous so as not to interfere with on-going business relationships, Russell’s connection to Velocity ended amid allegations of financial impropriety in 2005. Specific circumstances of the split remain unknown—Penske did not respond to multiple emails requesting his comment.
In the more recent MyMedicalRecords.com deal, Russell again left a business partnership under a cloud of missing money. According to court records, whereabouts of more than $1 million Armstrong raised is still to be litigated.
Lorsch, a wealthy Los Angeles businessman, told The Daily Beast he first began to suspect something might be wrong with Russell’s efforts to raise capital for MMR on Feb. 1, 2007. Lorsch said that on that evening he went to the Polo Lounge in Beverly Hills to meet an out-of-town MMR investor who had put $1 million into the company. According to Lorsch, this man told him that on the previous night, at dinner with the Armstrongs, Taylor and his wife went to the ladies room where, “Taylor completely broke down … [She] told her how Russell was in a bankruptcy and she was unsure about how it would affect her friendships with people who had invested with them.”
“The very next morning,” Lorsch recalled, “I hired a private detective and found the bankruptcy.”
Lorsch claims in court papers that his internal investigation showed there was more than $1 million of investors’ money that never made it into the company’s bank account. To quote documents filed with the Superior Court of California lawsuit against the Armstrongs: “Russell and Taylor placed their own selfish interests above that of MMR, successfully and secretly funneling...money that should have been paid to MMR.” The lawsuit says this was done so that Russell “in concert with Taylor (could) live a lavish life-style, redecorate their mansion...and become business colleagues of (actress) Eva Longoria, in an upscale restaurant.”
Lorsch and his board of directors confronted Russell directly, according to the lawsuit. To quietly settle matters, Russell agreed to relinquish all of his shares in MMR, and both Russell and Taylor signed a stringent settlement agreement that required them to list every investor from whom they had gotten money. The document contained a clause for massive penalties to be levied if any other investors with legitimate claims later surfaced.
According to the agreement, “For the ‘first’ of the Representations that was inaccurate, Taylor, Russell and NDS [NuWay Digital Services] would be subjected to a Liquidated Damages award of One Million Dollars ($1,000,000), and that for any further of the Representations that was/were inaccurate, Taylor, Russell and NDS would be subject to a Liquidated Damages award of Two Hundred Fifty Thousand Dollars ($250,000) per violation.”
Three more disgruntled stockholders did, in fact, come forward, and they are listed in a lawsuit asking for damages filed on July 27, 2011, just weeks before Russell’s death.
“It’s very rare to have the wife of an executive sign a settlement—but we had to,” Lorsch said. “Her fingerprints were everywhere.” (Which the MMR complaint now details.)
While Taylor may not have brought a hefty bank account to the marriage, since she joined The Real Housewives of Beverly Hills she has opened up revenue streams for herself, attaching her name to several beauty companies. Last week it was reported that she has signed a deal to write a book about her abusive marriage, complete with photographs of her injuries, (some of which were shown on Tuesday's Entertainment Tonight).
And according to MMR’s internal audit that eventually led to the pending lawsuit, Taylor even wrote some big checks while Russell was in bankruptcy: In April and June of 2007, she wrote one for $20,000 to a charity, and another to an offshore Cook Island account for the “Taylor Family Trust.” Her attorney counters that any checks she wrote before, during, or after her marriage would have been irrelevant to Russell’s bankruptcy.
There were also other reported financial deals with Russell that Taylor could ultimately benefit from.
The couple had openly boasted socially about their partnership with actress Eva Longoria in the Hollywood restaurant Beso, describing their ownership variously as either one-third or a controlling 51 percent. (People with access to the legal and investment papers on Beso tell The Daily Beast, “There were over 60 investors in the restaurant. Taylor Armstrong is listed as having put in $11,000, which would give her about a 2 percent interest—that’s all.”) Taylor’s lawyer says her original interest has been significantly diluted as other investors have come onboard.
On an early episode of Real Housewives, Russell is seen speaking to Taylor about a $10 million investment he made in the film company of an Academy Award-winning director, a deal that sounded as though it could reap a tidy profit.
And two of Russell’s former business associates, including Tom Crosswhite, said Russell told them not long ago that he had cemented a huge deal with an unidentified Texas family that gave him $200 million—“Vegas money,” Russell called it—that they wanted Russell to invest for them at a hefty commission.
If any of these claims of lucrative deals are true, the couple came through Russell’s bankruptcy with flying colors.
Russell apparently didn’t always target the ultrarich. Buried in the middle of the newly filed MMR lawsuit is the name of a 69-year-old divorcée from a suburb of Chicago, Ill., named Patricia Ann Vile. She was one of the trio of shareholders with claims that MMR says it recently located.
Vile dedicates her life to “repairing the world,” she said during one of several telephone conversations. Her non-profit, Volunteer Expeditions, arranges trips for Jewish congregations to help the needy in places like New Orleans and Jamaica. Vile said she was introduced to Russell Armstrong in late 2006 by a trusted friend, who said Russell’s investments were “extremely safe.”
“I was in the middle of a divorce after a 43-year marriage … and I wanted to make a prudent investment, to leave a legacy for my adult children,” Vile said. She would ultimately write three $10,000 checks to MyMedicalRecords.com. For two of those checks, she received MMR stock.
Just a few weeks ago, after hearing Russell Armstrong was dead, Vile realized her missing investment was lost. She looked on the back of the last check she had written to MMR on June 5, 2007 and saw that someone had deposited it into a personal bank account.
Lorsch’s internal audit had already concluded that it was Russell’s handwriting and personal bank account.
The Daily Beast obtained documents that show the following. Vile wrote a $10,000 check to MMR; it was deposited two days later. Russell then wrote a check to Taylor for the same amount. On Russell’s check stub, dated June 7, he wrote, “For: Taylor Armstrong / FBO Russell Armstrong / Consulting (for) Patricia Vile.” And MMR, in its complaint, said that Russell deposited the check in the account of a separate company that he controlled, which utilized Taylor’s “services.”
Vile told The Daily Beast she never met nor employed Taylor Armstrong. And Taylor’s attorney confirms that his client has never heard of Vile.
“I’m not rich like these other investors,” Vile said. “This wasn’t funny-money to me. I need that money.”
In 2007, while still in bankruptcy, Russell joined the prestigious Tiger 21 Club in Beverly Hills, which has a $50,000 annual membership fee and requires a strict code that members prove a net worth of between $30 million and $40 million and substantiate it monthly. How was that membership possible unless Russell had that many millions? “That tells you there is no real bankruptcy, that there is money there…it’s still there,” Crosswhite said. Crosswhite was also invited to become a Tiger 21 member and attended a meeting with Russell before finally deciding the club’s iron-clad rules were too much. He declined to join.
Perhaps a better question: how could Tiger 21 Club money have gone unnoticed by the bankruptcy court?
As with so much about the Armstrongs, truth and fiction have blurred.