crossing over to "the other side" when I left McCarter & English, I
have found that it is more fun, and more satisfying, to sue large
other vested interests than to defend them. In particular, I have
found that professional fiduciaries,
especially bank trust departments, are often far more eager to obtain
fee income than to implement a prudent investment plan, and so
they can be sitting ducks for breach of trust litigation. Since
1996, I have been in
litigation on behalf of customers of United States Trust Company, Bank
of New York, First Union, Merrill Lynch, and PNC Bank. Banks are
great fun to sue, because, as Willie Sutton famously said, "That's
where the money is."
Some of these cases have involved my own family. On August 25,
2000, New York Post business reporter
Crudele wrote an article describing my aunt's
with the Bank of New York. I originally filed this case here in
County. BONY had it "removed" to federal court in Newark, then
to federal court in Manhattan, and finally to the New York
Surrogate's Court. But whatever the court,
one fact was undisputed. The amount my great grandmother
placed in "trust" in 1929 with the Bank of New York was $18,333 (an
reporter Crudele described as "enormous" at the time). In 2000,
than seventy years later, that "trust" was worth less than
a sum far from "enormous" in 2002! Judge for yourself whether
record gibes with BONY's own description of
its fiduciary services.
In November, 2002, BONY agreed to bring the trust to a total of $102,000 in order to settle this case. They didn't pay until September 9, 2003. From first to last, customer service was the farthest thing from BONY's corporate "mind".
The case against First Union also involved my family. When my
uncle Thomas N. McCarter died in 1955, he established a $10,000
in his will to maintain "in permanent good order" a small cemetery
in Rumson where he had established a mausoleum
for himself and his family. His daughter, Madeleine McC. Kelly,
contributed another $10,000 to the trust, which was held by a bank that
is now First Union. By the spring of 2000, First Union had
all but about $300 of the $20,000 that had been entrusted to it.
Incredibly, the Bank wrote a letter asking
Borough of Rumson to sign a release agreeing to "indemnify, release and
forever discharge First Union National Bank from any and all liability,
loss or expense ... in connection with acts or omissions of the bank"
the entire 45 year term of the trust, in return for the $300 pittance
in the trust, plus a promise by Rumson that it would take over
of the cemetery. Rumson declined, and I filed suit against First
Union, pro bono, as a borough taxpayer to compel it to honor
terms of the trust. During the lawsuit, the Bank had to admit
it had lost 36 years of records for the trust and could only
for the most recent ten years. Rather than go to trial, First
agreed to restore the entire $20,000 that had originally been placed in
trust. Instead of a mere $300, the
full $20,000 was given to Rumson to take over management of the
cemetery. The local Two
River Times wrote a comprehensive
article about the settlement
. I also received a lovely letter from
the Mayor of Rumson, thanking me for my pro bono
If robbery is defined as theft by force, then
robbed its client Patricia Conte of $75,000. Mrs. Conte
had opened a brokerage account at
the Red Bank, N.J. office of Merrill Lynch to secure a loan from
Bank to Cap City Products, a company run by her daughter. The
loan was paid off in 2000, and the
Merrill Lynch Bank unit in Utah sent Patricia two
her collateral account in Red Bank would be released to her. But
when she tried to liquidate the account,
the Red Bank brokerage office unilaterally
withheld $75,000, claiming
that Cap City
that amount to the Red Bank office. Patricia had
never guaranteed any aspect of Cap City’s relationship with the Red
of Merrill Lynch. In discovery, we even
located an internal Merrill
Lynch memo in which the company admitted it knew at the time
that its $75,000 claim was "unsecured".
This case is a lot like the Bank of New York case above. PNC was
given money to hold in trust, and it invested solely in fixed income
during the entire period of the trust, to the detriment of my clients,
the remainder beneficiaries. Check this
document to see how in 1983 the Bank designated the investment
for this trust as “tax free income with growth.” Click to see the
same form ten years later , still indicating “growth w/ tx exempt
as the investment policy, even though the trust had been invested only
in municipal bonds during that entire decade. Note that on the
document someone (never identified) finally added a handwritten
“Change to #11, max inc, (tx ex),” presumably to reflect the reality of
ten years’ practice. Needless to say, the remainder beneficiaries
either of the original designation or the subsequent change.
If you think appointing a professional fiduciary like PNC Bank and a relative as co-trustees means the Bank will supervise the relative and make sure he acts according to law, think again. Look at this letter , where PNC Bank tells its co-trustee he is breaching his fiduciary duty by not investing partly in equities, but lets him continue that policy provided he signs an acknowledgment that he has been warned. So much for the professional watchdog. Once again, my clients had no knowledge of this document until the Bank was forced to produce it in the lawsuit.
PNC Bank ultimately agreed to augment the trust substantially to settle this lawsuit and avoid a trial. Before the settlement was consummated, PNC's lawyer falsely claimed that another beneficiary not represented by me was entitled to $12,000 that would otherwise have gone to my clients. Since that beneficiary did not want the money, apparently PNC was trying at the last minute to con us out of $12,000 for its own pocket. In any event, I had fortunately recorded a telephone message that revealed the fraud, and the court would not allow it. It is remarkable how petty and duplicitous these "trust" departments can be.
A few years later, a potential customer of PNC Bank's trust department came upon this website and asked me to review a trust agreement the Bank wanted him to sign. I am producing that Agreement here, with names appropriately changed to protect the innocent. The client's accountant had told him it was the worst agreement he had ever seen. I agreed. Don't even try to read all 36 pages. Just note that (a) PNC disclaims any duty to follow the prudent investor rule and agrees to be liable only for “willful misconduct” (i.e. outright theft); (b) PNC is entitled to all the fees that are in its "published fee schedule," whatever that is (it's not in the Agreement); (c) that “ the Trustee shall have no duty or obligation to make the disclosure described in Section 3312 of Title 12 of the Delaware Code or any similar provision of law that generally would be applicable to the Trustee but that may be waived by the express terms of this Agreement”; and (d) Delaware law governs this supposedly New Jersey trust, and the poor client can sue PNC only in Delaware. As far as I know, the client threw the whole thing into the trash.
U.S. Trust was named in a will
as co-trustee of a trust. The other trustee (the decedent's son)
was to receive income
from the trust for life, and my clients were the remainder
U.S. Trust also had a half million dollar loan due from the
when the decedent died. During the estate administration, both
trustees agreed to a "settlement" allowing them to use the entire trust
(instead of the debtor's own money) to repay the $500,000 loan to U.S.
had that decision approved in a "Consent Judgment" signed by the
judge. The trouble was, my clients never knew about the
by the trustees, and they never received a copy of the Consent
until six years after it was entered, when the trustees presented their
final account. That was when my clients discovered "their" trust
had no money in it.
For a clear example of how U. S. Trust duped my clients, read the last paragraph of this letter from U.S. Trust's lawyer, Joseph Imbriaco (rated one of New Jersey's "best" trust and estate lawyers by New Jersey Magazine), where he expresses reservations as to the fairness of the settlement to my clients ("the children of Robert E. Wallace, Jr.") Mr. Imbriaco sent copies of that letter to all interested parties in the case, except my clients. Despite its reservations, U.S. Trust took no steps to change the settlement and kept the $500,000 it had taken from the trust.
My clients objected to the trustees' account, but the probate judge was very sympathetic to Mr. Imbriaco (the judge had once been his client) and hostile to my clients. The probate judge's approach to the case is best expressed in this excerpt from the trial transcript, where he says my clients had no right to be notified of the settlement because they hadn't then retained their own lawyer to monitor the fiduciaries. In the judge's words, without their own lawyer, the trust beneficiaries weren't "players" entitled to an opportunity to object when the fiduciaries hired to protect them engaged in self-dealing. The learned judge proceeded to throw out the claim against U. S. Trust, on the ground that my clients were "negligent" in not discovering the fiduciaries' scheme. That was a staggering misapplication of fiduciary law. Beneficiaries don't have a duty to discover fiduciary self-dealing - the fiduciaries have a duty to disclose it!
Incredibly (and I mean that literally), the Appellate Division sustained the unfavorable result, but since it couldn't possibly sustain the court's negligence standard, it made up a fictional finding by the probate judge that he doubted my clients' credibility, and then it sustained that fictitious ruling. Although our appeal was focused on the probate judge's negligence ruling, the Appellate Division opinion never once mentioned it. Check the opinion at page 9 for its reference to "credibility" findings the trial judge never made. Read the entire opinion and see whether you can find any reference to the "negligence" ruling, or to the letter from Mr. Imbriaco cited above. That decision by the Appellate Division was the most intellectually dishonest judicial opinion I have seen in nearly 30 years practicing law.