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Trustee Fraud
How the story starts:
*Disclaimer: This is a fictional narrative based on common fact patterns we have encountered. Names, characters, businesses, places, events, and incidents are either the products of the author’s imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events, is purely coincidental. The individuals who appear on the accompanying photos are dramatizations of fictional clients, witnesses, attorneys, or other parties. None of the individuals are actual clients, witnesses, attorneys, or parties to actual legal proceedings.



He calls himself William T. Woods III in his promotional materials, but he’s used other names: William Wood, W. Thomas Woods, W. T. Woods, to name a few. He’s not a lawyer or CPA, but he can prepare your taxes and give you estate planning advice. He doesn’t work for a recognized investment firm, but he’d love to sell you some annuities. With Bill there’s no need for an attorney, CPA, or financial advisor—he’s your one stop shop.

You may have met him at church. He attends regularly and always stays around after the service to chat. He’s even given free financial planning and investment seminars to the church’s Seniors Group. When you move all your investments to Bill, you do no due diligence or background check; you don’t even Google him. (It would be so awkward to ask for references because he’s a church member and everyone seems to know him.) You asked more questions of the contractor who remodeled your kitchen. Bill knows this, which is why he joined your church . . . and others.

Or perhaps you met him at a tax avoidance seminar, where he convinced you that by putting your assets in a “constitutional,” “pure,” “common law,” or “offshore” trust you wouldn’t have to pay taxes. Naturally, Bill is the trustee, and the trust is irrevocable. Most professional trustees take a 1-2% trustee fee; Bill takes 10%. After your house is titled in his name as trustee, Bill can borrow against your home and drain your equity.

Bill will allow you to participate in his “hedge fund,” which purportedly invests in small startup companies and various real estate ventures. He’ll promise fantastic returns, and provide financial statements and reports showing that your investment has exploded in value. If you ask to redeem your shares, Bill has a ready excuse for why he can’t do it—usually because your money is tied up in a big, lucrative investment that’s about to take off. He’s always on the lookout for new investors, and may offer you a finder’s fee if you have family or friends who might be interested.

If you or your children discover Bill’s fraud, you might assume that it’s a matter for the police. But when the police learn that you appointed Bill as trustee, and as your agent under a power of attorney, they will tell you it’s a civil matter. You’ll be forced to sue, and will be shocked to learn that Bill has been sued several times.

Bill will avoid your process server, so it will take several weeks or even months to start the lawsuit. He’ll file several motions before he answers your complaint. He’ll fail to answer your discovery requests, requiring your attorney to file serial motions to compel. He’ll fail to appear for his deposition. He’ll hire an attorney who he has used several times, then fire the attorney and represent himself. Then he’ll hire another attorney who will “need time to get up to speed.”
Bill’s objective is to make you spend so much money on the lawsuit that you will give up or accept a low settlement offer. This strategy has always worked for Bill.
Winning a judgment against Bill is only the beginning of the case, because the judgment is worthless if you can’t collect it, and Bill has been hiding his assets for years.

Years ago, Bill deeded his house to “Intrepid Investments.” Intrepid Investments, described as a “business trust organization,” then recorded a deed of trust against the property to secure a loan amounting to most of the house’s value. Intrepid Investments doesn’t exist. Bill put the name on title so it would be more difficult to find his assets. The loan is a sham to make it appear he has little equity in the property. If he has other assets, you may have to hire a private investigator to find them.

When your lawyers get too close to collecting on the judgment, Bill will declare bankruptcy even though you can’t discharge a fraud judgment in bankruptcy. Bill knows this; but he also knows that the bankruptcy judge may require your children to prove fraud again, this time in the bankruptcy court.
If Bill’s fraud comes to light before you die, you may feel so ashamed that you don’t tell your children or the police.

If you hired us, we’d tell you, first, that you should not be ashamed—elder abuse is an “epidemic” that costs seniors $2.9 billion annually, according to Senator Susan Collins, who heads the Senate Special Commission on Aging.

Second, we’d note that even sophisticated investors are defrauded by con men. According to Forbes, several billionaires and foundations were among Bernie Madoff’s victims.

Finally, we’d let you know that a few of these cases have satisfactory endings. Every now and then Bill goes to prison or is forced to return the money.

The best way to avoid Bill is exercising due diligence in selecting your professional advisors and knowing what to look for. For more on the characteristics of predators like Bill, click here.

Are you or someone you know in a similar situation?
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Heidi Imsand
Heidi Imsand
ESTATES & TRUSTS LAW
Donald J. Slater
Donald J. Slater
Trust & Estate Litigation
David Monsour
David Monsour
 
SECURITIES LITIGATION
Graham D. Douds
Graham D. Douds
Trust & Estate Litigation
Margot S. Williams
Margot S. Williams
ATTORNEY