Daddy´s Dog

Elena McMahan is disarmingly soft-spoken. She keeps her head lowered as she begins a conversation barely above a whisper. She wears a headscarf that identifies her as a member of the Russian Orthodox Church, and she speaks to her two unusually well-behaved children, Vladimir, 5, and Elizabeth, 3, in Russian. Elena is slender, and she has striking blue-green eyes. In the Brooklyn penthouse apartment she considers a refuge, the Ukrainian beauty talks quietly about her ill-fated 2002 marriage to Fisher Island millionaire D. Bruce McMahan.

¨The day we got home [from the wedding], he lost interest in me,¨ she says. ¨I became his dog. He said, If you don´t keep your mouth shut, I will take Vladimir.´ Then I got pregnant with Elizabeth.¨

McMahan, you may remember from the September 2006 New Times cover story ¨Daddy´s Girl,¨ is a Wall Street hedge-fund multimillionaire who married his own daughter. He declined to comment for this article.

Elena´s account provides new details about the bizarre incestuous relationship between McMahan and his daughter Linda.

A few weeks ago, Elena McMahan asked to meet with New Times in Brighton Beach. Her husband was out of the country, she said, and it was the best time to discuss the thing that had made him the talk of Wall Street last fall: the story New Times published last September about how McMahan, while legally married to Elena, carried on an incestuous relationship with a grown daughter, Linda, that culminated in a faux 2004 wedding ceremony in London´s Westminster Abbey.

For the first time, Elena gave her own side of the story, even though it may have serious legal repercussions in her current battle over custody of their children.

Elena had grown increasingly suspicious of the relationship between her husband and his daughter, she said, and in 2004, she found the evidence of that relationship in McMahan´s computer: eye-opening e-mails between the two of them and photographs from the Westminster Abbey nuptials.

When McMahan tried to divorce her in January 2005, Elena put that evidence into a court affidavit. The affair eventually led to a furious legal campaign by McMahan, resulting in five lawsuits in five U.S. states.

Documents in those lawsuits spelled out the extraordinary facts in the sordid matter: McMahan, now 68, had learned of his daughter Linda´s existence only in 1990, when she was a 21-year-old college student. As a baby, she had been put up for adoption by a woman with whom McMahan had a brief fling in the late 1960s, and she had contacted him when she wanted to learn the identities of her biological parents. After a paternity test established their biological tie, McMahan welcomed Linda into his family and funded her college and post-graduate endeavors.

McMahan already had six other children by three women (he has nine children today). He was a rich money manager, with homes in Pelham in Westchester County and on Fisher Island, a luxurious enclave off Miami. It was at the Pelham house that, according to Linda´s testimony, her father first began seducing her in 1998. She testified that they had sex for the first time in a hotel in London that year on a business trip. They carried on an incestuous relationship, she said, practically up to the day she married another man, Sargent Schutt, in 1999. After breaking off their affair for a few years, the two got together again when McMahan brought her to Fisher Island to recuperate after an illness, Linda testified.

Linda claimed that McMahan then intensified the relationship and even tried to woo her away from Schutt, her legal husband. Their e-mails, included in court records, document the salacious way the father-daughter couple spoke about having sex and how they called each other h and w for husband and wife.

Most gruesomely, Schutt discovered a vibrator in Linda´s luggage after one of her trips to Fisher Island and had it analyzed for DNA. The sex toy tested positive for Linda´s skin cells and the sperm cells of her biological father.

McMahan not only denied the allegations in the lawsuits but he also did what he could to prevent the publication of ¨Daddy´s Girl.¨ He tried to convince the judges in the lawsuits to seal them, but he was initially rebuffed.

Shortly before publication of the story, McMahan forked over $5 million to $8 million to settle all five suits and then persuaded four of the judges to seal them forever (one judge, in Connecticut, refused, and the documents in that federal case are still free for the public to view by visiting

As ¨Daddy´s Girl¨ was being prepared for publication, Elena reconciled with McMahan -- she was coerced, she says now -- and she refused to talk about her role in the drama. Still, reporters who cover the hedge-fund market say, the story was the talk of Wall Street, where McMahan was a well-known player. Since then, some of McMahan´s investors have reportedly pulled out of his fund, McMahan rarely appears on Fisher Island anymore, and he has been spending more and more time in a place where few, if any, know about the details of ¨Daddy´s Girl¨: the Persian Gulf superrich enclave of Dubai.

It´s a sunny and windy day in May, and the Brighton Beach penthouse apartment´s large windows overlook the beach at Upper New York Bay. If the location is scenic, the interior is pastoral: wallpaper borders feature forest scenes and bunny rabbits. Toys, meanwhile, are scattered everywhere. Elena uses the place as an escape for herself and her two young children now that her relationship with McMahan has soured.

McMahan met Elena Larionova in 2000 while he was on a family vacation aboard a European cruise ship. He was with his fourth wife, Cynthia, and the son, Joshua, from his third marriage. Elena was working in one of the ocean liner´s bars, and she says McMahan instantly took a liking to her, complimenting her specifically about her work ethic.

When the cruise was over, McMahan gave Elena his business card and told her to call on him for anything at all. A few months later, Elena´s mother needed surgery for circulatory problems (something Elena herself has inherited). She decided to contact McMahan.

The wealthy financier helped arrange for an operation and sent money for Elena to buy a computer so she could correspond with him via e-mail.

Elena says the still-married McMahan was soon writing her every day. He was also calling her from time zones around the globe. Before long, he asked if he could visit her in Odessa. After a second visit and hundreds more e-mailed love notes, McMahan proposed.

¨He was asking my mom on his knees,¨ she says.

But first, he had to get through the divorce with Cynthia, a legal fight that lasted more than a year.

During that time, however, Elena became pregnant. She came to London to live, unable to continue on to New York because the United States denies visas to unmarried Ukrainian women. After a difficult pregnancy, Elena gave birth to Vladimir, and then she waited for McMahan´s divorce to become final.

Bruce and Elena were married on July 27, 2002, at the Pelham estate. Vladimir was a year old.

Despite the hurdles they overcame to get married, Elena says, whatever romance that existed ended with their vows. By early 2004, the couple was estranged. McMahan, meanwhile, was spending a lot of time with Linda. She had inherited from her father Reiter´s disease, a genetic malady that affects the soft tissues, the eyes, and the heart. He brought Linda to Fisher Island to recover from a bad bout at the Argent Center, the resort he had built there. McMahan and Elena resided in unit 7925, and Linda stayed at number 7413, but Elena says that before long, McMahan openly relocated to Linda´s condo.

¨He moved in with her, his daughter,¨ Elena says. ¨Everybody there knew.¨

According to Linda´s testimony, it was the most intense time of a years-long illicit relationship with her father. Beyond simply having sex, she claimed that her father wanted to keep her away from her legal husband in Mississippi, Schutt, and that he wanted to formalize their affair. In June 2004, after buying Cartier wedding rings, McMahan and Linda flew to London and performed some kind of ceremony inside Westminster Abbey, took photos outside like any other newly married couple, and then began referring to each other as husband and wife in their e-mails. (The marriage wasn´t legal, but Elena says McMahan continues to wear his ring.)

Linda claimed in court testimony that Elena had hacked into her Yahoo e-mail account to find proof of the affair, but Elena says her stepdaughter got that wrong. She says that McMahan had left his computer on and that she happened upon the evidence. (As part of the court settlements, Linda signed a confidentiality agreement, and she has not spoken to New Times about this.)

¨I just clicked the button,¨ Elena says. ¨His e-mail was open. That was horrible. I was working on his computer. He left it on, and it was right there on the screen.

¨I knew something wasn´t right when he came back from London that time,¨ she says. ¨He loves to take pictures and show them around when he gets back, and this time, he didn´t show any pictures.¨

When McMahan filed to divorce Elena, she fought back by including the photos and e-mails with an affidavit swearing to her knowledge of her husband´s incestuous affair. But after Linda also defied McMahan, refusing to produce an affidavit of her own denying the affair, Elena finally relented. McMahan, she says, got her to swear under oath that she was mistaken about her accusations.

She says now that she signed the second statement because he told her it was the only way he would continue to help her get her green card, for which he was her sponsor. Without a green card, Elena could have been sent back to Ukraine, but she likely could not have taken their children because they are U.S. citizens.

¨I protected him to an extent. He was making a face like he´s a good family man.¨

Today, however, she says that her second sworn statement is untrue and that she stands by her original affidavit -- she has no doubt that Linda is telling the truth about the incestuous relationship between father and daughter.

After Elena signed her statement denying the incest, however, McMahan dropped his divorce action, and the couple reconciled at least long enough so that Elena agreed with his request not to speak with New Times when we called asking about her affidavit.

When ¨Daddy´s Girl¨ went to print and during the weeks of settlement discussions as McMahan tried to have the various lawsuits sealed, Elena says, he asked her to go to Ukraine -- probably, she suspects, to keep her from being questioned about the story or from being subpoenaed during the settlement talks.

Their reconciliation was short-lived. Since news about McMahan and the lawsuits broke last fall, their relationship has deteriorated, and now Elena says she´s a prisoner in McMahan´s big house.

Driving toward Pelham in her light-blue Lexus SUV, Elena points out the gilded, framed saints on her dash, Nicholas, Peter, and Paul.

¨They protect me from the troubles. He´s in a war, and he´s using his own kids. In their claims, it´s always about the money. I said to him many times, he has no heart; he has a dollar. He said there´s nothing for him to do with business in America after the story came out. In Dubai, people do not care, but in America and in Europe, they don´t want to do business with him anymore.¨

She´s an unusually cautious driver, stopping for yellow lights that others would hit the gas to blow through, signaling carefully for the simplest lane change. After an hour´s drive, she pulls slowly into the half-moon driveway at McMahan´s two-story brick house in the Tudor style. She parks near the older Bentley sedan in front of the home´s big wooden door. Elena is afraid that the five German shepherds have gotten loose, and she asks a house worker to put them into the basement.

Vladimir hops onto a bicycle. Elizabeth asks for a cookie.

The dark wooden paneling in the foyer makes it seem even darker than it actually is, but there´s an orange glow coming from a stained-glass window. Through glass doors, there´s a glimpse of the sweeping tracts that make up the four-acre estate, which includes elaborate gardens, a pond with ducks, and a playground for the children.

On a table in the entryway are photos of McMahan alone and with his daughter Heather. A humidor holds a plentiful supply of hand-rolled cigars.

In a room off the right of the foyer, two grand pianos can be seen through double doors. On the other side is a sunroom with a large swing and a sideboard with a photo of Linda. It´s also where Elena keeps her dried and silk flowers for arrangements and a few peacock feathers. She and her children live in a few rooms that seem obviously to have been intended by the home´s builders as accommodations for live-in staff. She points out that, for all of the home´s luxury, she´s actually denied access to its main wing, which is up a grand staircase and behind a locked door.

¨I am here like a guest. I cannot move. I cannot touch anything. If the kids break something, he makes me pay for it.¨

Because McMahan keeps his wife locked out of the home´s main wing, she can´t show us the study and bedroom where, Linda testified, he seduced her by showing her the first half-hour of the movie Braveheart and wondering if the two of them had been married in past lives.

Restricted to her wing of the house, Elena has installed a playroom for the children in what used to be a breakfast nook overlooking the estate grounds. It contains a television and a mountain of children´s movies -- in English and Russian. She keeps to her side of the mansion, and she and McMahan rarely talk.

¨The day he settled everything with Linda, he began to treat me like dirt again,¨ she says.

After a custody hearing last month, Elena says, she became concerned that she and her lawyer were no match for McMahan´s legal team. Since then, she has hired a new lawyer who, she says, is more aggressive and who intends to subpoena Linda. Even though a judge appointed a guardian for the two small children, Elena says her greatest fear is that her husband´s wealth will buy him custody of Vladimir and Elizabeth.

Telling her story now, she hopes, will persuade McMahan to stop waging war with her in family court. She wants sole custody of the two children -- she wants his visits with them to be supervised.

¨I am not fighting him because of the money,¨ she says. ¨Nothing could be worse for me than to lose these kids. I cannot imagine for them to be with him alone.¨

It isn´t the first time, she says, that she has worried about losing control of her children. During their 2004 divorce action, Elena says McMahan showed up hand in hand with Linda. ¨He wanted me to be deported to the Ukraine... She was with him. He wanted to take my kids and raise them with Linda.¨

Elena says it was her affidavit that forced McMahan to give up that plan. ¨Only those pictures saved me.¨

Today, McMahan alleges in court documents that he fears Elena will run with the children to Ukraine (a two-hour flight from Dubai), and he won a court order that requires Elena to stay within 90 miles of New York City. He also refuses to allow her to move to the Brighton Beach penthouse in Little Russia, where she says she feels safer.

Now, she says, McMahan plans to leave the country altogether because the publication of ¨Daddy´s Girl¨ embarrassed him from Wall Street to Fisher Island.

Former McMahan Securities executive Michael Shillan, who recently won an arbitration case against McMahan for back pay, says Elena is right about McMahan´s business suffering after his affair with Linda went public.

¨I don´t know if anyone really understands all of his businesses,¨ Shillan says. ¨I have a pretty good sense of what he is worth. When I left, he had about a $200 million to $250 million net worth.¨ But Shillan believes that the hedge fund McMahan manages has shrunk from about $4 billion to half that, in part because of the story and also because, at about the same time, the convertible securities market took a hit. Also in September, the hedge fund called Amaranth Advisors LLC dropped to $3 billion from $9 billion in one week because of its heavy investment in natural gas futures.

¨Let´s face it, after your story came out and it was reprinted in quite a few places, that´s really not the kind of guy you want managing your money,¨ Shillan says.

¨My personal experience is once you get on Bruce´s bad side, he tends to never forgive and forget, even when he´s wrong,¨ says Shillan, who was once close to McMahan.

But Elena believes there is one person McMahan could forgive -- Linda. She mentions the photograph of Linda that her father keeps in a gold frame at the Pelham estate.

¨I wouldn´t be surprised if they make up.¨

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Kelly Cramer