'Rich Dad Poor Dad' team splits

by Craig Harris - Jun. 2, 2008 12:00 AM
The Arizona Republic

Their advice in Rich Dad Poor Dad has appealed to millions of readers and even drew the interest of Oprah, but the Valley co-authors of the wildly popular financial book have broken up.

And, like many divorces, it isn't pretty.

Sharon Lechter, who co-authored Rich Dad and other similarly branded books with Robert Kiyosaki, alleges in a lawsuit that her ex-business partner and his wife are enriching themselves, diverting assets and wasting money in a business that she claims to

The Kiyosakis deny the allegations and contend in court records that if Lechter has been "damaged," it was caused by her own actions.

Success from the original book catapulted their joint venture, commonly known as the Rich Dad Co., into a multimillion-dollar operation with offices in Scottsdale. The company now offers more than 20 financial books, CDs and games with a key objective: to achieve wealth.

Lechter said in a lawsuit that while Robert Kiyosaki has been the face of the company and appeared on TV programs, she was the one who "refined and created" the original book. She also claims in the suit that Kiyosaki once told staff members she was the only "indispensable" person on the team.

Lechter, a certified public accountant who lives in Paradise Valley, now wants a judge to dissolve the joint venture, appoint a receiver and have Robert Kiyosaki and his wife, Kim, pay her compensatory and punitive damages. Lechter also alleges that Robert Kiyosaki's "volatile temper, spurious accusations, foul language and inappropriate behavior" created a hostile work environment for her. The Kiyosakis denied the allegation.

"It is evident that Robert and Kim have executed a plan to willfully destroy the joint venture, while simultaneously and purposely diverting opportunities belonging to the joint venture to one or more entities owned exclusively by them," Lechter alleges in the suit.

Robert Kiyosaki, who co-wrote a financial book with billionaire Donald Trump and has appeared on The Oprah Winfrey Show, declined to be interviewed. He and his wife live in Phoenix, and the suit claims the couple has accumulated more than $9 million through various Rich Dad entities.

The Kiyosakis have sought to dismiss the case, but the two sides also have set June 11 as a deadline to reach a settlement. They began fighting last year in Clark County District Court in Nevada.

In court records, Lechter said she filed there because the Rich Dad entities are part of a joint venture based in Nevada called CASHFLOW Technologies Inc. If a deal can't be reached, a trial is set to start Dec. 29.

Kim Kiyosaki said the full story has not been told.

"I guarantee you, what you have is one side of the story. We have not presented our case," said Kim Kiyosaki, who, court records show, owns an equal third of CASHFLOW with her husband and Lechter.

Kim Kiyosaki also responded in writing to a series of questions from The Arizona Republic.

She wrote that the lawsuit was a first for CASHFLOW. And she added that Rich Dad Poor Dad is her husband's story; he wrote the book and Lechter edited it. She also wrote that there is no reason to consider having a receiver appointed based on "our profitability and growth."

"The bottom line is that Robert and I are going through a divorce with our former business associate. Sharon Lechter resigned from the company in July 2007," she wrote. "As in many divorces, Sharon's perception of her contribution and value to the company is a surprise to us and at odds with what we perceive it to be."

Lechter also declined to be interviewed, and her attorney did not return calls. An attorney for the Kiyosakis declined to comment.

Lechter, however, issued a statement May 22, after being told that The Republic was doing a story on the lawsuit.

In her one-page statement, Lechter was complimentary of the Rich Dad organization, saying its mission always has been to "elevate the financial well-being of humanity."

She also wrote, "We remain hopeful that an amicable resolution can be reached and that the business partnership can be closed on pleasant terms."

In the lawsuit, which includes hundreds of pages and some sections that are sealed, Lechter's tone is harsher. The case also could become fodder for those who have challenged the non-traditional advice in Rich Dad Poor Dad. The book advises readers to avoid mutual funds and 401(k) plans and to leverage themselves up to invest in small businesses and real estate.

Allegations

Lechter, in the lawsuit, claims she "often rewrote large sections" of other books she and Robert Kiyosaki co-authored. And she alleges that Success Stories, Rich Dad Poor Dad for Teens and Escape From the Rat Race were written with ghost writers. Robert Kiyosaki's "involvement was limited" even though he is listed as the lead author on the cover of those books, the suit alleges.

Kim Kiyosaki, in responding to the paper's written questions, said a writer/editor was brought in for Success Stories to organize stories readers sent in after reading Rich Dad Poor Dad. She added that Rich Dad Poor Dad for Teens is based on the original book, and the company hired a cartoonist to work on Escape from the Rat Race.

Lechter also alleges:

• Robert and Kim Kiyosaki manipulated their salaries with Robert's increasing and Kim's decreasing for personal tax-planning reasons, and they gave themselves a discretionary bonus of $250,000 each in August, shortly after Lechter left the company.

Kim Kiyosaki wrote that it was not appropriate to discuss company finances or personal taxes, but she added that their pay and bonuses have not varied from what they were historically paid.

• Robert in 2005 demanded that his wife get a 25 percent royalty on all new books even if she didn't have a role in writing them.

Kim Kiyosaki wrote that she and her husband did not want to get into that issue, but she wrote that the allegation was "petty and hurtful."

• In February 2007, Robert attended the NBA All-Star game in Las Vegas with a Rich Dad adviser and had the company pay for a private jet and other travel expenses that weekend. Lechter, in an affidavit, cited this as an example of "exorbitant" spending and mismanagement of company funds.

Kim Kiyosaki wrote that the company has an ongoing business relationship with the NBA, which wants to bring financial education to its players.

An NBA spokesman acknowledged that league officials had met with Robert Kiyosaki "but he has not done work for us."

• The couple has commenced a systematic campaign of mismanagement to suppress the value of the company and one primary goal is to ensure product "housed in Nevada does not sell."

Kim Kiyosaki wrote that the allegation is "ridiculous" and the company is "more profitable and productive than ever."

The Rich Dad story

Lechter currently has her own Web site and for free writes a personal finance column for Arizona Woman, an Arizona Republic magazine.

She and Robert Kiyosaki developed their partnership around 1996. At the time, he was looking for someone to help write a book to promote an educational board game he had co-created, the suit says.

Lechter, in the suit, says Kiyosaki gave her hundreds of pages of material and she "reorganized and coordinated the content" and determined which portions to "include and exclude" in Rich Dad Poor Dad.

At the time, no major publisher wanted it. So it was self-published and released April 8, 1997.

Within a few years, the book had taken off, and an appearance by Robert Kiyosaki on Oprah Winfrey's show in 2000 enhanced his celebrity status. Today, the book has sold more than 27 million copies in 109 countries and has been translated into 51 languages.

Robert Kiyosaki advocates taking control of your finances and buying investments that create cash flow, and the book is based on how Kiyosaki's two "dads" approached money.

He has said his biological father was highly educated but struggled financially and left a legacy of unpaid bills. However, he said his other father, a mentor, never finished eighth grade but became one of the richest men in Hawaii, leaving millions of dollars to family members and charities.

Sara Fleury, a Phoenix-based public-relations consultant who offers crisis management guidance, said how much the suit damages the Rich Dad Co. and the Kiyosakis depends on how the couple and their employees react.

"They need to lay low and hope it doesn't elevate," said Fleury, president of B.J. Communications. "If they pay a lot of attention to it and convey their concern frequently, it will cause more alarm."

John Reed, a California-based real-estate writer and frequent critic of Robert Kiyosaki's advice, said he doesn't believe the lawsuit will hurt Kiyosaki. Reed added that he had heard it was filed months ago, but didn't know the details.

"I don't think it will dent him, and I don't think it will hurt her," Reed said.

Reach the reporter at 602-444-8478 or craig.harris@arizonarepublic.com