W.A. Clark Memorial Library
Huguette Clark's estate will now be managed by a public official, not her attorney and accountant. Still to be determined: Which of her documented wills should the court honor?
NEW YORK ? Based on "shocking" evidence of tax fraud, a judge on Friday suspended the?attorney and accountant for reclusive copper heiress Huguette Clark from handling her $400 million estate.
The judge said there was more than enough evidence that the two men engaged in a tax fraud that allowed the elderly woman to run up an IRS bill of $90 million in unpaid gift taxes, interest and potential penalties.
The decision costs each man about $8 million he would have earned as an executor.
Also Friday, a remaining executor of the estate?said he will?try to recover at least one of the gifts given from Clark's accounts in recent years, a $5 million check written by Clark's attorney to Clark's registered nurse, Hadassah Peri. Clark's attorney had no authority to make that gift, the executor alleged. The $5 million was part of about $26 million given to the nurse over the past 15 years, even before Clark left more than $30 million to Peri in her will.
In Surrogate's Court in Manhattan, Surrogate Kristin Booth Glen took away the powers of Clark's attorney, Wallace "Wally" Bock, and accountant, Irving Kamsler. The two men remain under criminal investigation by the Manhattan district attorney for the way they managed her estate. They have not been charged with any crime and have said they acted appropriately.
The judge?only suspended the men's privileges in handling her estate, instead of revoking them permanently, because their attorneys?said a conflict of interest has arisen, apparently indicating that the two men are starting to tell different stories about the handling of Clark's affairs over the past 15 years. Until that is sorted out, attorney Barry Vasios said, the attorneys couldn't file an answer to the claim of tax fraud.
Even without hearing from the two men, the judge said she couldn't imagine?how?they could?refute the claim that they are?"unfit to serve" for wasting money from the estate, violating rules of conduct, dealing dishonestly with authorities and violating their fiduciary duty.?She called the allegations shocking and suspended them immediately.?If they want back into the case, she said, they can file a petition. And she said the two men may have to pay some of their own attorney fees, instead of having them paid by the estate, if their delay or dishonesty ran up the legal bills.
The estate will now be managed entirely by attorneys for the public administrator,?who earlier this week alleged the tax fraud. Details on the allegations are in our earlier story: Tax fraud alleged in estate of heiress Huguette Clark; accountant resigns. Earlier this week, the accountant, Kamsler, told the court through an attorney that he planned to resign as an executor. He had not yet resigned by the time of Friday's hearing, however.
An attorney for the public administrator, Peter Schram, said an expert in legal ethics "could tell you how many ethical considerations and disciplinary rules Mr. Bock has violated. My guess is you'd need two hands and a couple of toes to count them."
Huguette Clark, daughter of William A. Clark, who was a senator from Montana and a copper magnate.
The judge also ruled on a second question, whether to allow Clark's relatives, descendants from her father's first marriage, to become parties to the case?during the accounting of the estate. The judge blocked the family from entering the case now, saying that the interests of the estate are being well looked after by the public administrator, who was appointed at first as a third temporary executor to watch over Bock and Kamsler. This ruling will not keep the family from entering the case later. The family's entry was opposed by Clark's nurse, Peri.
Clark, who died in May at age 104, gained public attention in a series of articles on msnbc.com over the past two years, focusing at first on the mystery of her empty mansions and then the financial dealings of her attorney and accountant. The full series of articles is at http://clark.msnbc.com. Born in 1906, Clark was the youngest child of former U.S. Sen. William Andrews Clark (1839-1925), a copper miner and U.S. senator from Montana, said to be one of the richest men in the world. Below are links to the full story.
A dozen lawyers stood before Judge Glen on Friday morning in the courtroom in lower Manhattan, less than a mile from the office where Clark's father?managed his mines, railroads and other properties until his death in 1925.?Huguette, born in Paris in 1906, was his youngest daughter.
Clark signed two wills, in 2005, at age 98. The first left $5 million to the nurse, and the rest to the relatives. The second, signed just six weeks later, left nothing to the family, more than $30 million to the nurse, about $12 million to a goddaughter, $500,000 each to her attorney and accountant, $1 million to Beth Israel Hospital in New York City, $100,000 to her physician, a Monet painting worth about $25 million to the Corcoran Gallery of Art in Washington. It also?set up a charitable foundation to run an art museum at her oceanfront estate in Santa Barbara, Calif., to be controlled by her attorney and accountant. Her apartments on Fifth Avenue in New York City and her country home in Connecticut would presumably be liquidated.
The public administrator alleges that while Clark lived as a recluse in New York City hospital rooms for the last 20 years of her life, attorney?Bock and accountant?Kamsler:
- Failed to file federal gift tax returns for Clark for the years 1997 through 2003, when she made approximately $56 million in gifts to individuals. The gift tax and generation-skipping transfer (GST) tax due would have been about $41.5 million.
- Charged her for filing tax returns that were not filed.
- Paid only $7.5 million in estimated tax payments toward the gift tax in those years.
- Failed to pay the remaining $34 million during the years since, exposing her to millions in IRS interest and?penalties for failure to file.
- Failed to tell Clark about the unpaid taxes or possible interest and penalties, even though she had sufficient liquid assets to pay the bill in full.
- Filed false returns with the IRS for the years 2004 through 2009, claiming that previous gift tax returns had been filed, and understating Clark's current tax liabilities by more than $7 million.
- Underreported and underpaid by millions her federal taxes.
- Misrepresented to the IRS that returns had been filed.
- Lied to the IRS, with Kamsler claiming he was unaware of a $5 million gift to Clark's nurse, when documents show he listed that gift on a profit and loss statement seven months earlier.
- Lied to the public administrator, claiming that they were searching for the gift tax returns, until the IRS disclosed that none had been filed.
The new allegations raise the possibility that the men could face federal charges, with the public administrator noting that it is a felony to willfully submit fraudulent tax returns.
The accountant, Kamsler, 64, from the Bronx, N.Y.,?is a convicted felon and a registered sex offender who pleaded guilty in 2008 to attempting to distribute indecent materials to teenage girls in a chat room on AOL, under the moniker "IRV1040."?The court granted Kamsler a "relief from civil disabilities," a document that allowed him to keep his state license as a certified public accountant. The attorney, Bock, 79, is?from Queens, N.Y.
Msnbc.com reported last year that the two men also handled the affairs of another elderly client, Donald Wallace, who in fact was the previous attorney for Huguette Clark. After the man's will was revised six times, during years when his relatives said he was suffering from dementia, Bock and Kamsler ended up as his executors and also beneficiaries in his will, getting his New York apartment and his Mercedes.
An attorney representing Bock and Kamsler in the estate case, John Dadakis of the firm of Holland and Knight, issued this statement Wednesday through a spokesman: "For 30 years, Irving Kamsler was Mrs. Clark's accountant, and for 15 years Wallace Bock was her attorney. There is no allegation in the papers filed that either individual was taking anything out of her account for themselves. Their entire handling of her affairs was an effort to protect and preserve Mrs. Clark's chosen lifestyle."
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Documents (PDF files)
Family reply to nurse Peri and Bock and Kamsler, Dec. 21, 2011
Public administrator's petition to remove Bock and Kamsler, Dec. 20, 2011
Bock and Kamsler reply to the family's motion to intervene, Dec. 16, 2011
Nurse Peri's motion opposing the family entering the case, Dec. 7, 2011
Family motion to intervene in the estate case, Nov. 28, 2011
Huguette Clark's last will and testament, signed April 19, 2005
Huguette Clark's previous will, signed March?7, 2005
Family's petition seeking a guardian for Huguette Clark, September 2010
Attorney Bock's sworn statement to the court, September 2010
Judge's ruling rejecting her family's guardianship petition, September 2010
Kamsler letter informing Clark of his guilty plea, February 2009
Kamsler's criminal court file and investigator's report
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Previous stories in the Huguette Clark mystery on msnbc.com:
Archive of all?stories, photos and videos
Photo narrative, "The Clarks: An American story of wealth, scandal and mystery," Feb. 26, 2010.
Printable version of the photo narrative, Feb. 26, 2010.?
Clark family notes and sources, Feb. 26, 2010.
Investigative report, part one, "At 104, the mysterious heiress Huguette Clark is alone now: Relatives are kept away. Only her accountant and attorney visit. Who protects HuguetteClark, with 3 empty homes and no heirs?" Aug. 19, 2010.
Investigative report, part two, "Who is watching Huguette Clark's millions? Reclusive heiress's assets are sold by two advisers, one an accountant with a felony conviction. Another elderly client signed over his property to the same accountant and attorney," Aug. 20, 2010.?
"Criminal probe begins into the finances of reclusive heiress Huguette Clark: Manhattan DA's Elder Abuse Unit is on the case. The same unit prosecuted the Brooke Astor case?? though Clark has about four times the wealth," Aug. 24, 2010.?
"Report sparks welfare check on heiress Huguette Clark," Aug. 25, 2010.?
"Generosity of an heiress: four homes for a nurse, gifts for attorney's family," Sept. 1, 2010.?
"Huguette Clark, the reclusive heiress, has signed a will, attorney says," Sept. 2, 2010.
"Family of copper heiress asks court to protect her from attorney, accountant," Sept. 3, 2010.
"Attorney for 104-year-old heiress defends his handling of her finances," Sept. 7, 2010.?
"Judge leaves pair under investigation in control of heiress Huguette Clark's fortune,"?Sept. 9, 2010.?
"Huguette Clark, the reclusive copper heiress, dies at 104," May 24, 2011.
"Family excluded from Huguette Clark burial," May 26, 2011.
"Heiress Huguette Clark's will leaves $1 million to advisers," June 22, 2011.
"The 1 percent of the 1 percent: How Huguette Clark's millions were spent," Nov. 19, 2011.
"A $400 miillion twist: Huguette Clark signed two wills, one to her family," Nov. 28, 2011.
"Tax fraud alleged in estate of heiress Huguette Clark; accountant resigns," Dec. 21, 2011.
"Nurse, in line to inherit millions, battles family of heiress Huguette Clark," Dec. 22, 2011.
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