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Attorneys Allegedly Diverted Estate Funds Meant for Charity

New York State Attorney General Letitia James has filed a civil complaint against two trust and estates attorneys, claiming they inappropriately diverted funds meant for a charitable foundation. According to the complaint, lawyers Paul P. Marchese and Robin S. Maynard, sole partners in Marchese & Maynard LLP of Manhasset, N.Y., inappropriately garnered more than $1.3 million from the estate of, and a foundation established by, Helen D. Gottlieb.

Through a spokesperson, Marchese and Maynard refuted James’ claims.

In a statement announcing the complaint, James alleged that Marchese helped Gottlieb establish a trust for her assets valued at more than $2 million. After Gottlieb died the assets were to be transferred to a foundation they created which was to support cultural activities, education and provide food and shelter for people in need.

According to James, Marchese — the sole administrator of the trust — directed the trust to pay almost $600,000 in fees after Gottlieb’s death. “The lawyers could provide no records showing that the client owed them any legal fees,” according to the statement from James’ office.

GuideStar had Form 990s for the years ending June 30, 2020, 2019 and 2018 available. GuideStar only provides Form 990s from the most recent three years available. According to the foundation’s most recent Form 990, the foundation had investment income of $473,704, disbursements for charitable purposes of $115,829 and assets of more than $1.7 million. Identities of nonprofits receiving funds were not part of the Form 990 filing available on GuideStar.

James also claimed Marchese and Maynard, in their role as sole directors of the foundation, caused the charity to pay them more than $750,000 in salaries. These salaries, according to the complaint, “exceeded the amounts the Foundation gave out in grants and contributions.” The foundation paid out around $478,000, according to the complaint.

James further claimed the lawyers could provide no records indicating Gottlieb owed the lawyers any fees and is seeking repayment of the funds, along with interest and penalties.

According to the spokesperson for the attorneys, “Marchese and Maynard and its predecessor firm have been the exclusive attorneys for Helen Gottlieb, for her living trust, for her estate, for the trust after her death, and for her foundation for 24 years. The legal fees and salaries paid during that time have been entirely typical and appropriate for the extensive work and broad range of services provided by the firm and its partners.”

The statement went on, “Due to the fact that Ms. Gottlieb’s assets were illiquid, the arrangement between her and the lawyers was that they would be compensated by the trust after her death. As directors and administrators of a foundation actively engaged in chartable grantmaking, the attorneys would be expected to receive a reasonable salary.”

James also noted that under New York law, governance of not-for-profit corporations must be overseen by a board with no fewer than three directors, and that compensation of directors must be approved by directors who have no conflicts of interest.

James alleges that Marchese concealed the funds transfers from her office by not registering the trust with the Office of the Attorney General’s (OAG’s) Charities Bureau, by September 2008, six months after Gottlieb died, as was required. Marchese allegedly did not provide the office with a report of funds transferred from the trust until 2019, after the OAG had begun its investigation, according to James.

“The missing documentation is a result of a fire in the law firm’s office on August 14, 2020, as well as the loss of documents due to incomplete records transfer during multiple transitions — from handwritten paper time sheets, to a primitive floppy-disk computer system, and ultimately to a more sophisticated law office technology package,” the spokesperson for Marchese and Maynard wrote to The NonProfit Times.

The spokesperson provided a link to a story detailing a fire at the Marchese and Maynard offices on that date. According to the article, investigators did not believe the fire’s origins were suspicious. 

“As the Attorney General’s office is aware, most of these issues are already before the Surrogate’s Court in Nassau County in an action we filed last year,” the spokesperson continued. “We are happy to resume discussions that stalled nearly a year ago with the attorney general’s office to resolve this matter.”

The complaint noted that “Mr. Marchese belatedly filed a petition, in August 2021, to settle the account of Ms. Gottlieb in the New York State Surrogate’s Court for Nassau County. This was 13 years after Ms. Gottlieb’s death and after several months of discussion with the OAG.”

In addition to the fees repayment and the penalties, James is seeking to bar Marchese from serving as a fiduciary of an estate or a trust holding a charitable interest for five years, and bar both individuals from serving as an officer, director, or trustee of a charitable organization for five years.

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