Trusts and Estates published an article by John T. Brooks and Samantha E. Weissbluth:

Wrestling with the Privacy Rights Of John E. du Pont, Convicted Murderer

A Pennsylvania court weighs in on a former wrestler’s bid to unseal the records of du Pont’s incapacity hearing so as to peer into his trust documents.

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U.S. District Court Judge Jack Weinstein when sentencing a former broker for securities fraud said:

"'What becomes evident in a trial like the present one, and in recent mortgage fraud cases, is how pernicious and pervasive is the culture of corruption' in the securities industry."
 

Daniel Solin writing for Daily Finance  on January 24, 2010 reports:

"Eric Butler, a former broker with Credit Suisse, had a lot to be worried about when he walked into the U.S. District Court in Brooklyn, N.Y., on Friday for sentencing. A jury had found him guilty of misleading his clients into believing they were purchasing low-risk, auction rate securities backed by student loans, with federal guarantees. Instead, the hapless clients were sold high-risk, high-commission auction rate securities backed by home mortgage assets.

Butler altered the trade confirmations to make them appear to reflect securities backed by student loans. But the scheme fell apart when the auction rate securities market collapsed.

The government claimed losses exceeded $1.12 billion and asked for a sentence of 45 years in prison, plus significant monetary penalties. But Butler caught a major break. U.S. District Court Judge Jack Weinstein sentenced him to only five years in prison and fined him $5 million.

Judge Weinstein isn't your run-of-the-mill jurist. He has been a federal judge for 43 years, is a prolific author and one of the most experienced and respected judges in this country. After the jury returned its guilty verdict, Judge Weinstein signaled his concern about allocating all of the blame for these misdeeds to Butler. Said Weinstein: "What becomes evident in a trial like the present one, and in recent mortgage fraud cases, is how pernicious and pervasive is the culture of corruption" in the securities industry.

He repeated these views on Friday, noting the reduced sentence took into consideration "the pernicious and pervasive culture of corruption in the financial-services industry," which is "beset by avarice."

Wake-Up Call to Investors

Weinstein left no doubt about his view of Credit Suisse's culpability, stating that "[T]he blame for this condition is shared not only by individual defendants like Butler, but also the institutions that employ them."

This judicial validation of the pervasive greed and dishonesty in the securities industry should be a wake-up call to investors. It's difficult to understand why investors continue to trust their assets to members of this industry. It's bad enough that brokers generally lack the expertise to manage your assets. It's worse that, if you're a victim of broker misconduct, the mandatory, industry-run arbitration process is rigged to ensure you won't recover any meaningful portion of your losses.

I appreciate Judge Weinstein taking corruption and greed in the securities industry into account as an argument against a long prison sentence for Butler. What's your argument for continuing to place your trust in the securities industry? "

More here on Affinity Fraud:  Misplaced Faith?

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Thank you to Juan Antunez of Florida Probate & Trust Litigation Blog for this information about the law governing undue influence.

The Undue Influence Worksheet was developed by forensic psychiatrist Bennett Blum, M.D. 

"The “Worksheet” is based upon the IDEAL protocol, which combines knowledge from the fields of psychiatry, psychology, and sociology regarding the mechanisms of human manipulation, with extensive review of statutes, case law, and legal theory. IDEAL describes those psychological and social factors that commonly co-exist in undue influence situations. These factors are: Isolation; Dependency; Emotional manipulation and/or Exploitation of a vulnerability; Acquiescence; and Loss. "

This is invaluable information for use in preparing your undue influence case.  Read Juan Antunez's post here. 

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The January 24, 2010 Lancaster Sunday News front page headline is "MISPLACED FAITH?".

Gil Smart's article (read it here) explained an investment scam that  looks like an Amish version of the Madoff debacle.  Full details have yet to emerge, but it appears that the interest rates promised by John M. Sensenig were simply too good to be true.

Why do people, from all faiths, all regions, and all walks of life fall for these scams?

The Securities and Exchange Commission calls these schemes Affinity Fraud:

"Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are - or pretend to be - members of the group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme, by convincing those people that a fraudulent investment is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraudster's ruse.

These scams exploit the trust and friendship that exist in groups of people who have something in common. Because of the tight-knit structure of many groups, it can be difficult for regulators or law enforcement officials to detect an affinity scam. Victims often fail to notify authorities or pursue their legal remedies, and instead try to work things out within the group. This is particularly true where the fraudsters have used respected community or religious leaders to convince others to join the investment.

Many affinity scams involve "Ponzi" or pyramid schemes, where new investor money is used to make payments to earlier investors to give the false illusion that the investment is successful. This ploy is used to trick new investors to invest in the scheme and to lull existing investors into believing their investments are safe and secure. In reality, the fraudster almost always steals investor money for personal use. Both types of schemes depend on an unending supply of new investors - when the inevitable occurs, and the supply of investors dries up, the whole scheme collapses and investors discover that most or all of their money is gone. "

 Read more from the SEC on how to avoid affinity fraud:  click here.

Also check out  " Why scams work - analyzing the reasons people fall for scams"

All too often, there is no recovery available.  But sometimes, there is recourse, in which case the expertise of an attorney experienced in investment fraud or stockbroker fraud is required.

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Thanks to Congress’s failure to act to "fix" the estate tax by the end of 2009, your estate plan may have a serious problem. If your estate plan divides your assets by use of a formula that refers to the estate tax, your plan could be in trouble.

Many people have this type of plan. It goes by various names. Some call it an A-B Trust, some call it credit shelter trust planning, some refer to it as by-pass trust planning. Whatever you call it, the salient feature is a word formula that directs part of the decedent’s assets to a trust and part to the surviving spouse (or to a trust usually for his or her benefit). These formulae were put into your plan so that your plan could adapt to changes in the federal estate tax, like the increasing exemption amount, and to take account of gifts you may make in your lifetime.

The formula divides the assets by reference to the federal estate tax law. Since we don’t have a federal estate tax right now, these formulae don’t work - they are either meaningless gibberish or they produce a bad result. (Thank you Congress.)

On December 31, I sent out letters to all my clients who had such formula provisions in their wills or revocable trusts. Many of them have been in to sign codicils or amendments already. If your plan has a formula, you really should get it fixed up for 2010.

One example of a formula would direct the distribution of the maximum portion of your estate amount that can pass free of estate tax to the credit shelter (or by-pass) trust. Since there currently is no estate tax, the maximum amount that can pass free of estate tax is 100% of your estate. Thus, if you died now, all of your assets would go to that trust; and your surviving spouse would not receive anything (except that he or she may have some interest in that trust). This is probably not what was intended when you signed the document.

Another example of a formula is one which provides that an amount passes to the spouse which is the whole estate minus an amount equal to the amount the federal exemption equivalent which is directed to the credit shelter (or by-pass) trust. Using this formula, if you died now, since there is no estate tax in 2010, 100% of your estate would pass to the surviving spouse, and nothing would go to the trust. Again, this is probably not what was intended when you signed the document.

With neither formula do you get the result that was intended when you signed your estate plan. Thanks to our venerable Congress’s failure to act with regard to the estate tax prior to the end of 2009, your plan now has a serious problem.

Remember, this type of planning was done to save estate taxes, specifically to use both spouses’ exemptions from the federal estate tax. In most cases, the only purpose of including a by-pass or credit shelter trust was to save estate taxes. It would not be good to saddle your surviving spouse with a trust to administer when the trust was completely unnecessary to save taxes and was funded only because of Congress’s current shenanigans.

The solution is to amend the formula provision. There is not sufficient time to revisit your whole plan. As an immediate "band-aid" fix, if your plan contains a formula division, you should contact your attorney to make a simple codicil to your will or amendment to your trust. The codicil or amendment should provide that if you die in 2010 when the estate tax and generation-skipping tax do not apply to your estate and if these taxes are not retroactively reinstated by Congress, any computations required to apply the formulae in your plan shall be made as if the Internal Revenue Code in effect on December 31, 2009 is then in effect.

If you make a change like this, your plan will be the same as when you signed it. That may or may not be good for you. Depending on when you created the plan, the federal exemption may have been $600,000. In 2009 it was $3.5 million. That’s a big difference. Maybe you don’t really want to direct up to $3.5 million where you had directed $600,000 before. If that is the case, you need a complete review of your plan, not just a band-aid fix.

The objective is to make sure your plan works and makes sense in 2010 until Congress acts, if it does. Don’t delay. This needs attention.

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Brooke Astor's son, Anthony Marshall, 85, was sentenced to one to three years in prison.  He was convicted earlier this year of 13 felonies and one misdemeanor.  Marshall's former attorney, Francis Morrissey was also convicted on five counts including forgery and scheming to defraud Astor.  CNN reports: 

During the trial, Marshall was portrayed as a cold, calculating man who spent the last years of his socialite and megaphilanthropist mother's life stealing her fortune to line his pockets

"These defendants, two morally depraved individuals, preyed on a physically and mentally ill 101-year-old woman to steal millions of dollars -- dollars that she had intended to go to help the lives of ordinary New Yorkers," Seidemann said, echoing his closing argument to the jury.

The sentence came after a six-month trial that featured as witnesses a "Who's Who" of New York's social elite, including Henry Kissinger, Graydon Carter, Barbara Walters, Vartan Gregorian and Annette de la Renta.
 

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Adam F. Steisand, Esq. of Loeb & Loeb LLP gave a presentation at the ACTEC Annual Meeting in Rancho Mirage, California, March 2009, entitled "To Tell the Truth (T&E Lawyers' Edition):  Will My Real Client Please Stand Up.  A pdf of his excellent presentation is posted on the Loeb & Loeb website:  click here.

He discusses the question of whether or not an attorney owes a duty to non-client beneficiaries as well as whom the attorney represents when he or she represents a fiduciary, what are the ethical duties when representing a husband and wife, and what duty is owed to a client with diminished capacity.

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Liliane Bettencourt is the heiress to the L'Oreal cosmetics fortune.  Forbes estimates her net worth at $13.4 billion and lists her as the richest woman in Europe.

Her daughter, Francoise Bettentcourt-Meyers fied a criminal complaint in December 2007 against Francois-Marie Banier, a photographer, for exploiting the frail Mrs. Bettencourt and influencing her to give him gifts valued at 1 .3 billion in euros plus life insurance policies and artwork.  Read more at the New York TImes .

Now daughter Francoise has asked that her mother be put under judicial supervision.  The case against Banier will come to court next week. The charge is what the French call "abus de faiblesse" -- the exploitation of physical or psychological weakness for personal gain.

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Thank you to Roy Newman of The San Diego Estate Center for his post, 8 Steps To Avoid Estate Litigation.

Newman reports:

"An article by the US News and World Report gives “8 Tips to Avoid Nasty Estate Surprises.”  I agree with most of the points, and add my critique after each tip below:

1. Get a good lawyer. I would add that your lawyer should concentrate exclusively in this area.
2. Pick the right executor and trustees. The right trustee will be solid and will react neutrally to avoid disputes over the estate’s property.
3. Talk about it now. This seems obvious, but most people will not let their intentions be known ahead of time. Unfair surprise is one surefire way to start a contest.
4. Know state laws. In California, as the Tax Professor adds, probate can be avoided entirely through the use of a trust.
5. Make your intentions known early and often. Making repeated modifications to the will or trust will make it harder to invalidate later.
6. Make sure title to your assets is clear. Circumventing the estate distribution by retitling assets later in life is another way to encourage litigation.
7. Consider including a “no contest” clause. Then give the beneficiary an amount that they would rather not sacrifice if they lost the contest.
8. Don’t try to manage your estate from the grave. Although I am not sure that I entirely agree with this one, in theory giving discretion to your beneficiaries may stop them from fighting over items to which they are personally attached. I agree that not every item need be listed in the instrument, but sometimes a person who writes a will or trust can avoid disputes ahead of time by simply making the right decision."

Whevener your estate ends up in litigation, only the lawyers win.  A good lawyer can help make sure youre state doesn't turn into a modren day Jaryndyce v. Jarndyce.

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