Archive for the ‘Loss of Trust’ Category

Bill to Protect Elderly and Disabled Adults in California From Excessive Lawyer Fees Sails Through Key State Senate Committee

April 24, 2013

Legislation to protect incapacitated adults in California from excessive legal fees when their lives and finances are under court supervision sailed through a key committee Tuesday and is headed to the Senate floor.
Members of the Judiciary Committee voted unanimously for Senate Bill 156 — a bill inspired by 38-year-old Danny Reed’s years-long battle with a court-appointed estate manager and bevy of lawyers. Together, their hundreds of thousands of dollars of fees would have gobbled up most of the San Jose man’s life savings.

“When you see what really happened, everyone agreed,” the bill’s author, Democratic state Sen. Jim Beall of San Jose, said after the hearing. “Our bill is pretty simple. It just allows judges to protect people.”

SB156 would avoid the burden Reed faced of “fees-on-fees,” which leaves dependent adults paying for both sides of legal disputes over excessive fees, whether they win or lose their arguments. The bill would tackle that problem by creating a “loser pays” system. If an elderly or disabled adult objects to the fees of a court-appointed conservator and wins the case, then the conservator could be required by a judge to pay his or her own legal fees. Otherwise, those fees would be drawn from the person’s estate.

In Reed’s case, he objected when his court-appointed trustee charged $108,771 for four-and-a-half months’ work in 2010, but that spiraled into legal bills more than double the original amount. Reed’s case — highlighted in this newspaper’s investigation “Loss of Trust” — was resolved in the appeals court, but only after a lengthy court fight and the help of a dedicated pro bono legal team.

SB156 has so far attracted only one formal objection — from the trade group representing fiduciaries, who serve as probate court-appointees handling the money and daily care of dependent adults. Jerry Desmond, the lobbyist for the Professional Fiduciary Association of California, was the sole opponent of Beall’s bill testifying at Tuesday’s Senate Judiciary Committee hearing. While Desmond said his group shares Beall’s intent to best serve vulnerable adults, he believes the bill would scare fiduciaries away from seeking court assignments.

“We could end up in a situation where we don’t have enough professional conservators to take the cases,” Desmond told senators.

Full Article and Source:
Bill to Protect Elderly and Disabled Adults in California From Excessive Lawyer Fees Sails Through Key State Senate Committee

See Also:
Loss of Trust Series – Santa Clara County’s Court-Appointed Estate Managers are Handing Out Costly and Questionable Bills

Appellate Court: Disabled San Jose Man Owes Nothing to Trustee and Attorneys in Bitter Probate Dispute

December 17, 2012
In a stunning ruling, a California appellate court on Thursday declared that a Silicon Valley trustee and his two attorneys are not entitled to a penny of compensation, after a years-long dispute over their six-figure bill to briefly manage a disabled San Jose man’s life savings.

The decision is a major victory for Danny Reed, a brain-injury victim whose story was featured in July in this newspaper’s investigation “Loss of Trust” — an exposé of how the Santa Clara County Superior Court long allowed estate managers to receive outlandish fees for their court-appointed duties serving the disabled and elderly.

Not only was the ruling major vindication for the 37-year-old man who waged a rare fight against powerful interests in the local courts, it also sets legal precedent that strengthens the rights of others to maintain control of their court-overseen trusts.

“This is much bigger than me,” Reed said Thursday. “It’s for all the people who can’t understand what’s going on. This is something that will help them too.”

Reed’s life became entangled in Santa Clara County’s probate court after a pair of accidents left him partially disabled. The money he received in legal settlements was set aside in a special needs trust overseen by a judge.

While Reed never sought help, a probate judge appointed trustee Thomas Thorpe in 2010 to temporarily oversee Reed’s trust — including $650,000 and a townhouse — when questions arose over  his mother’s handling of the funds.

Thursday’s opinion, written by 6th District Court of Appeal Acting Presiding Justice Eugene Premo, reversed a lower court’s order that Reed’s trust must pay $51,285 to Thorpe and his two attorneys, Diane Brown and Michael Desmarais. The trio originally sought $108,771 for Thorpe’s 4½ months on the job.

The appellate court said the judge had the power to appoint Thorpe but should not have awarded him and his attorneys any fees, because the trust document included a provision that explicitly denied any new trustees payment for”> their services. That was a provision of Reed’s trust document that Thorpe and his attorney had tried unsuccessfully to change.

Thursday’s ruling, however, did not address another $146,000 in fees that the lower court ruled Reed’s trust must pay Desmarais for his work defending Thorpe’s original bill. That dispute is part of a second case that the appellate court is still to consider.

It remained unclear whether Thorpe would appeal the ruling to the state Supreme Court. Calls to Thorpe and his attorneys were not returned.

Full Article and Source:
Appellate Court: Disabled San Jose Man Owes Nothing to Trustee and Attorneys in Bitter Probate Dispute

See Also:
Document:  Ruling in Favor of Danny Reed

San Jose Appeals Court Justice Accuses Estate Trustee of ‘Feeding Frenzy’

San Jose: Appeals Court Justice Accuses Local Estate Trustee of "Feeding Frenzy"

December 11, 2012

Accusing a local trustee of engaging in a “feeding frenzy,” an appeals court justice Thursday expressed outrage over a case that has brought widespread attention to excessive fees plundering the estates of elderly and disabled adults.

Private estate manager Thomas Thorpe of Los Gatos charged a brain-injured San Jose man $108,771 after just 4½ months’ work — and then billed him more than twice that much in a legal battle to defend his fees.

“What did he contribute to the whole process? For the $100,000, could you give me one example?” Justice Franklin Elia demanded of Thorpe’s attorney, Ellyn Nesbit. “Give me a $20,000 example!”

At the rate Thorpe and his lawyers were running up bills in 2010, Elia said, there would soon be nothing left of 37-year-old Danny Reed’s $653,000 in life savings.

“Ultimately, it became a feeding frenzy,” the justice said.

In their first appearance before the 6th District Court of Appeal, lawyers on both sides of Reed’s case made oral arguments Thursday, but a decision is not expected for weeks.

Reed’s plight was first publicized in this newspaper in July to illustrate how some Silicon Valley estate managers and their attorneys have charged extraordinary rates as trustees and conservators appointed by Santa Clara County Superior Court judges.

After Thorpe submitted his $108,771 bill for a judge’s approval, Reed challenged the fees in court. That led to $261,878 in additional charges for Thorpe and his attorneys to defend the original bill.

Full Article and Source:
San Jose: Appeals Court Justice Accuses Local Estate Trustee of ‘Feeding Frenzy’

See Also:
San Jose:Judge Rejects Nearly $30,000 Attorney Fee to Disabled Man’s Trust

Public Hearing: Proposed Rate Change Plan for Santa Clara County Professional Fiduciaries

November 8, 2012

Elderly adults, the disabled and their advocates packed a San Jose auditorium Wednesday, expressing outrage over excessive fees charged by court-appointed estate managers who are now under fire as a state lawmaker and Santa Clara County’s top judge promised action.

One woman described losing everything to trustees, whose fees landed the onetime philanthropist on food stamps. Another lamented a $182,000 bill for nine months’ work billed to her ex-husband’s estate.

“I’m a senior and I’ve lost everything,” Annette Aiassa told Judge Brian Walsh and state Assemblyman Jim Beall, D-San Jose. “So I’m wondering, can you do anything for me?”

Their pleas for help came in the first public hearing over proposed reforms since this newspaper’s investigation “Loss of Trust” exposed how permissive Santa Clara County’s court has been over the years as some private conservators hand six-figure bills to incapacitated adults under the court’s watch.

Less than a month after the newspaper’s story, the court convened a panel that has proposed new rules to curb fees that, in some cases, are double what neighboring counties allow.

Local judges vote Nov. 15 before sending the new rules to state officials.

If approved, as of Jan. 1, conservators here would be expected to charge hourly rates between $115 and $165 — half what many now charge. Routine tasks such as opening mail and grocery shopping could not be billed at rates higher than $55 an hour.

Realtor Richard Calhoun said the proposed changes sound good but do not go far enough. “Cutting the hourly rate is fine,” Calhoun said, “but they could double the work that they do.”

Walsh told the crowd that the court is committed to change, noting that Santa Clara County is likely to pass the strictest set of guidelines on conservator fees in the state. But he described the difficulty crafting rules that are not “too strict,” thereby driving away “caring and capable people.”

Full Article and Source:
Rate Change Plan Seeks to Rein in Expensive Estate Manager Fees

See Also:
Special Report: Loss of Trust

Santa Clara County judges set new curbs on fees for court-appointed care of disabled, elderly

September 25, 2012

Santa Clara County judges on Thursday took a major step toward cracking down on runaway costs that elderly and disabled adults can face for court-appointed care, setting new curbs on fees and stepping up scrutiny of inflated charges.

The proposed new rules, which would start next year, come 2½ months after an investigation by this newspaper revealed how the local court has been lax in stopping estate managers, known as fiduciaries, from running up six-figure bills on mostly voiceless adults.

“These are some of the most vulnerable members of our community, many left with very little assets to see them through their lives,” assistant presiding Judge Brian Walsh said in announcing the new rules Thursday. “Our court must be the guardian of those assets by overseeing how they’re spent.”

Walsh said the new rules would give Santa Clara County’s court “the most comprehensive rule affecting private professional fiduciaries in the state of California.” Critics say the changes are long overdue. The newspaper’s investigation found that, unlike other Bay Area counties, Santa Clara County has had few local rules restricting conservators’ fees.

Full Article and Source:
Santa Clara County judges set new curbs on fees for court-appointed care of disabled, elderly

See Also:
San Jose: Judge rejects nearly $30,000 attorney fee to disabled man’s trust

Santa Clara judge reconsiders his early ruling on a trustee excessive fee case

The Mercury News’ “Loss of Trust” Series (Anchor article)

Probate Judge OK’s Payment for Tustee Under Investigation

September 10, 2012

John E. Larkin will receive $50,000 from the trust fund of an 88-year-old heiress while the FBI probes his handling of her finances.

The Los Angeles County probate judge who oversees an elderly heiress’ trust fund approved $50,000 in compensation for a Kabbalah Centre official who is under criminal investigation for his handling of the woman’s financial affairs.

Los Angeles County Superior Court Judge Michael I. Levanas signed off on John E. Larkin’s payment request without comment. The money covers work that Larkin, a veteran Hollywood financial advisor, performed last year as a trustee for an $11-million family trust fund benefiting 88-year-old Susan Strong Davis. The probate court approves such payments because the trust fund was set up by Davis’ mother’s will.

Davis’ nieces have said she has suffered from dementia for several years, a period in which Larkin sold her a vacant lot he owned in Beverly Hills for what public records indicate was a $300,000 profit. Davis, who has lived in the same home in Palos Verdes Estates for three decades, borrowed more than $2 million from her trust fund to buy the Beverly Hills land and build a four-bedroom home there.

After a Times report detailing the transaction and a $600,000 donation she made to the Kabbalah Centre in 2005, police in Palos Verdes Estates launched an investigation into her finances, an inquiry taken over last month by federal agents. The IRS has been investigating the Kabbalah Centre for possible tax evasion since 2010. Larkin helps oversee the religious organization’s finances.

Through his lawyer, Larkin has said he did nothing wrong and consistently acted in Davis’ best interests.

Full Article and Source:
Probate Judge OKs Payment for Trustee Under Investigation

See Also:
Public Guardian Possibly to be Appointed Conservator of Heiress

San Jose: Judge rejects nearly $30,000 attorney fee to disabled man’s trust

August 6, 2012

SAN JOSE — In his strongest language yet, a Santa Clara County judge threw out almost $30,000 in attorney’s fees charged to the trust of a disabled San Jose man whose fight against excessive charges in the local probate court is spawning sweeping reforms.

While Judge Franklin Bondonno said he lacks the power to strike down another $145,000 in attorney’s fees billed to the trust of Danny Reed, the judge — in a highly unusual gesture — implored a higher court to overturn his decision.

The ruling comes in the aftermath of this newspaper’s investigation, “Loss of Trust,” which highlighted Reed’s costly fight to beat back high trustee and attorney’s fees billed to the 37-year-old brain-damaged man’s special needs trust. When Reed objected, his trustee’s attorney charged even more to defend the original bills.

“At some point, this endless wasting of Danny Reed’s trust assets must stop,” Judge Franklin Bondonno stated in a ruling released Monday. “As far as this Court is concerned, that moment is long past.”

Bondonno’s latest action strikes down a third set of fees requested by attorney Michael Desmarais, who is representing prominent Silicon Valley trustee Thomas Thorpe in this closely watched case illustrating the high cost of estate managers who serve elderly and disabled adults — and how the court did little for years to stop it. In less than a month, the newspaper’s series has prompted more scrutiny in Santa Clara County’s lead probate judge’s courtroom and a 25-member task force to study more far-reaching changes.

Original charges

In 2010, Thorpe hired Desmarais to defend a six-figure bill for just 41/2 months’ work as a court-appointed trustee to manage Reed’s estate, which — under state law — is on the hook for “reasonable” legal bills racked up on all sides of the case. When Reed objected to Thorpe’s and his attorneys’ original $108,000 bill, the costs soared.

The bills submitted by Thorpe’s team so far amount to more than half of the money Reed has left in his trust. Reed’s legal team includes a public defender and two private attorneys working free of charge.

Full Article and Source:
San Jose: Judge rejects nearly $30,000 attorney fee to disabled man’s trust

See Also:
Santa Clara judge reconsiders his early ruling on a trustee excessive fee case

The Mercury News’ “Loss of Trust” Series (Anchor article)

Norine Boehmer: Court-appointed estate managers do their best to help people

August 6, 2012

The San Jose Mercury News’ investigative articles and video “Loss of Trust” raised issues relative to fees of court-appointed personal and estate managers, or licensed professional fiduciaries. Readers should have additional facts to provide a thorough and balanced perspective regarding their compensation.

Courts determine the amount of compensation based on the California Rules of Court established by the Judicial Council — specifically, Rule 7.756, “Compensation of Conservators and Guardians.” Those rules say the court may consider various factors in determining just and reasonable compensation, including the size and nature of the estate; the necessity of the services performed; amount of time spent; and whether services were routine or required more than ordinary skill or judgment, or unusual expertise or experience. The customary level of compensation in the community also can be considered.

“No single factor listed … should be the exclusive basis for the court’s determination of just and reasonable compensation,” the rule says. It does not authorize a court “to set an inflexible maximum or minimum compensation or a maximum approved hourly rate for compensation.”

In the case of the fees that were the subject of the article and video, this rule was utilized. The fiduciary submitted to the court a bill for services consistent with the business model of his company. The court applied the rule and reduced the fees significantly to the level it deemed appropriate. There has been no court determination that there was any wrongdoing or violation of the law.

Experience demonstrates that costs and effort are highest in the first several months of a conservatorship or special needs trust, depending on the difficulty of a situation — hoarding issues, financial abuse or mismanagement, mental issues, family dysfunction, etc. The worse the situation, the more the skill and effort needed to create a safe and stable environment in which a conservatorship/special needs trust can be maintained.

Full Article and Source:
Norine Boehmer: Court-appointed estate managers do their best to help people

Santa Clara judge reconsiders his early ruling on a trustee excessive fee case

July 30, 2012

SAN JOSE — In a case that has already spawned reforms in Santa Clara County’s probate court, the battle over a six-figure bill that a trustee charged a brain-damaged San Jose man landed back before a judge Friday.

Judge Franklin Bondonno agreed to re-evaluate the $146,500 he awarded just two months ago to a Los Gatos attorney for defending the trustee’s high fees.

Danny Reed, 37, took a bold stand in 2010 and opposed his court-appointed trustee’s $108,000 bill for just 4 ½ months’ work. When Reed and his public defender challenged those fees, trustee Thomas Thorpe and his attorneys charged more than twice that amount in legal costs to defend their original bills.

Friday’s showdown in court was the latest twist in a lengthy battle that has taken on far broader meaning than the average estate dispute. Reed’s case was at the heart of “Loss of Trust,” an investigation published this month by this newspaper that revealed how some Santa Clara County estate and care managers are charging excessive fees and how the court was doing little to stop it.

Reversing his own decision would be extremely rare, but there were signs the judge understood the objections.

In a nod to Reed’s pro-bono defense team, Bondonno said Friday the lawyers had “done a terrific job in saying: ‘Judge, there’s something that just isn’t right in how this whole thing played out.’ “

Full Article and Source:
Santa Clara judge reconsiders his early ruling on a trustee excessive fee case

See Also:
The Mercury News’ “Loss of Trust” Series (Anchor article)

FBI Probes $17 Million Missing From Santa Clara County Trusts

July 18, 2012

The FBI is investigating how $17.3 million has vanished from the trust funds of dozens of people who relied on a Silicon Valley money manager to oversee their life savings.

A love betrayed and an alleged embezzlement scheme are emerging as the storylines behind this latest chapter exposing he vulnerability of trust funds and estates.

Santa Clara County probate court records show the case centers on the office of Christine Backhouse, who administers more than $104 million in assets — and lacked sufficient insurance to make up for the theft.

While she is responsible for the money, Backhouse claims she was the victim of an unscrupulous boyfriend who, court records allege, secretly wired millions of dollars out of the trusts.

The scandal is unfolding shortly after this newspaper published “Loss of Trust,” an investigation that revealed how some of Santa Clara County’s estate and care managers charge exorbitant fees to handle the money and affairs of dependent adults under the probate court’s watch.

The vast majority of Backhouse’s cases were private arrangements with no judicial oversight of either her fees for service, or the process by which the Campbell money manager accounted for and invested her clients’ funds.

But taken together, both examples underscore the vulnerability of elderly and often incapacitated people who rely on private business people to oversee their assets.

Full Article and Source:
FBI Probes $17 Million Missing From Santa Clara County Trusts