If you read a copy of Stieg Larsson’s The Girl With the Dragon Tattoo, you might have been surprised at the Swedish concept of legal guardianship, a more extreme version of parole where the state basically gets to take control of your life. Now get ready to hear about a fucked up American legal situation where counties aggressively seize an estate’s finances. This happened in the case of Charles ‘Mask’ Lewis, the deceased creator of Tapout. From the OC Register via The Fight Lawyer:
Orange County Public Administrator/Public Guardian John S. Williams moved quickly to take control of Lewis’ fortune, which he initially valued at up to $15 million, arguing that he was better suited to handle the “large, complex estate” than Diane Larson, the mother of Lewis’ children. Orange County Probate Court Judge Gerald G. Johnston agreed in May 2009, turning the estate over to Williams.
“The Public Administrator is forcing itself into this Estate where it is neither needed nor wanted,” Adam Streltzer, an attorney for Larson, complained in court filings.
Eleven months later, the 4th District Court of Appeal would agree, accusing Williams of overreaching his authority and chastising Johnston for abusing his discretion. The estate was eventually handed back to Larson.
But by then, it was too late. The public administrator had already agreed to sell TapouT at a price other shareholders would later call “pennies on the dollar.” It sold Lewis’ Bentley and Mercedes-Benz for $58,000 less than their appraised values, and paid $45,000 to Lewis’ former business partners for funeral expenses they promised to provide for free, court records and interviews show.
The OC wrote a sprawling 7 page story on the situation which is worth reading the whole way through. Some highlights:
In the past few years, Williams has been criticized for unnecessarily taking control of people’s estates. In addition to the Lewis case, where he was rebuked by the 4th District, he was criticized in back-to-back Orange County grand jury reports in 2009 for “egregious” mismanagement, including dubious internal promotions that cost taxpayers hundreds of thousands. In the wake of those reports, Williams narrowly escaped having the Board of Supervisors strip his appointment as public guardian.
How the county stepped in when they obviously shouldn’t have:
Larson’s attorney was in Orange County Probate Court in April 2009, filing papers necessary for Larson to administer the estate for her minor children, when a probate court staffer called the public administrator’s office to inform them of Larson’s petition, attorneys for both sides agree. A county lawyer for Williams showed up at the hearing. The court postponed a decision.
A week later, Williams filed his own petition to administer the estate, saying that Larson, the children’s mother and caregiver, wasn’t their guardian in the eyes of the law.
“Petitioner, as the biological and legal guardian of the minor children, has priority, and is the natural choice to be appointed the Administrator of Decedent’s estate,” Larson’s attorney argued in court papers.
Last May, the 4th District Court of Appeal sided with the mother, overturning the probate court’s decision to hand over the estate to Williams.
“Larson’s sole contention on appeal is that the court ‘erred by appointing the public administrator, whose statutory authority is below all persons other than creditors and legal strangers, rather than the mother and legal guardian of the children, who has primary statutory priority,’ ” the justices wrote.
“Larson is correct. … Children are second in order on the priority list, compared to the public administrator in 16th place,” the court said.
How the county allowed Tapout to be sold, even though Mask’s ownership percentage was 28% and the courts were already in the process of returning control to Larson:
In August, while Larson was struggling to get the $4 million bond the probate court required for her to take over the estate, Williams agreed to the sale of TapouT, the cornerstone of Lewis’ wealth, to Authentic Brands Group, or ABG. The sale came three months after the 4th District Court of Appeal ruled Williams had no right to administer the Lewis estate, and over the objections of Larson, according to court filings.
The details of TapouT’s sale and the sale price have been kept secret, but two shareholders in the company quickly filed suit against TapouT executives, ABG and other individuals involved in the sale, saying the price was “unconscionably inadequate.”
“In a matter of a few weeks, the Individual defendants agreed to sell the Company without seeking out other alternatives and despite management stating its view that TapouT was substantially undervalued in the market and that its value was well in excess of the Transaction consideration,” read the lawsuit, filed by TapouT shareholders Bert Bedrosian and Kenneth Stickney in a Los Angeles court last month.
The public administrator never told the court of the “fire sale,” or made any mention of the TapouT sale to the court even though Lewis’ share made up the bulk of his fortune, Larson’s attorneys complained. “The lack of disclosure in Orange County’s report of the true extent of the (mis)management of the Decedent’s assets is nothing short of fraud against the Court.”
And, interestingly enough, the county’s counter that Tapout was on the verge of financial collapse:
Greer, Williams’ attorney, said a quick sale was necessary because the company faced bankruptcy.
“Ms. Larson’s attorneys were kept fully informed, both by County Counsel and by TapouT management, about the progress of the negotiations and the terms of the sale. They were informed, as we were, that TapouT was nearly insolvent and would file bankruptcy within days if the sale was not agreed to,” Greer wrote.
“All the other major shareholders agreed to the sale, including the receiver for the PEM Group (appointed by the Federal Court), whose counsel told us that they had an audit of TapouT and believed that the company was about to collapse financially and the sale to ABG was the only option.”
It’s a pretty fucked up story … considering the drunk driver that killed Mask got a few stories written about him every time he had a court date, I’m surprised this has gotten so little attention. Big props to the Fight Lawyer for the find.