Trust Dispute in Allegheny Co OC Court

Various articles in Pittsburgh newspapers last week described litigation arising from the testamentary distributions proposed from a "Living Trust" of the late Rita Conrady, formerly of Beaver County, which is subject to audit in Allegheny County, PA.

The articles reported about a trusted lawyer, a substantial trust fund, end-of-life changes to testamentary charitable distributions, questioned capacity to make such changes, implementation of those changes by that lawyer as an agent, allegations of conflict of interests, and an Orphans' Court Judge who must adjudicate objections by certain disappointed charitable organizations.

Initially, I read the article, "Nonprofits contesting settlement of estate", by Gary Rotstein, published April 26, 2007, in the Pittsburgh Post-Gazette, which framed the matter from the objections offered by certain disappointed charities to the proposed distribution of a trust fund worth approximately $10 million [links added].

Animal Friends and other nonprofit groups are contesting an estate settlement that would give them hundreds of thousands of dollars, amid accusations that a lawyer in the case diverted additional money intended for them to other organizations.

Lawyers for Animal Friends [of Pittsburgh, PA] , Geneva College [of Beaver Falls, PA] and the American Cancer Society were among those in Allegheny County Orphans' Court last week contesting distribution of the estate of Dr. William and Rita Conrady. The former Beaver County couple died separately in Florida in 1999 and 2006.

Pittsburgh attorney Gregory Harbaugh's handling of the affairs of Mrs. Conrady last year has been criticized by the Animal Friends group, whose board president said the group stands to receive an estimated $500,000 instead of $1 million as a result of being reduced from a 10 percent to 5 percent beneficiary of Mrs. Conrady's estate.

The board president, Marleen Ashton, contended yesterday that Mrs. Conrady's deteriorating health may have hindered her awareness of changes in beneficiaries that Mr. Harbaugh recorded for an estate worth about $10 million. * * *

A revision on March 27, 2006, three days after Mr. Harbaugh received power of attorney, reduces those shares to 5 percent for Animal Friends and the cancer society, and to 8 percent for the humane society and the college. * * *

Another Pittsburgh newspaper, the Tribune-Review, published an article by Justin Vellucci on April 28, 2007, entitled "Beaver Co. widow 'sedated' when will was changed", which reviewed the factual basis for the charities' objections:

A Beaver County widow signed away control of her $10 million estate last year as she sat sedated in bed, battling kidney failure and cancer, a neighbor and a former nurse said.

"She looked drugged up to me. She'd been drugged up a long time, so she didn't look different," said Neim Malo, 50, who lived next to Rita L. Conrady's $765,000 "snowbird" home in Naples, Fla., and witnessed her signing a will and power-of-attorney papers in March 2006, two months before she died. "Her mind wasn't all there, hardly ever was."

Downtown attorney Gregory A. Harbaugh used those documents three days later to shift more than $1 million from Conrady's trust fund to groups with whom he and his wife are affiliated. That action triggered a court battle over Conrady's estate and Harbaugh's ability to alter it. * * *

A longer, much more detailed article then appeared in the Pittsburgh Post-Gazette on April 29, 2007, by Cindi Lash & Jonathan D. Silver, entitled, "Attorney defends how widow's will was altered". Far more facts were reviewed, and the main issues of incapacity and conflict of interest were addressed by the proponents:

By spawning what promises to be an ugly legal battle, the groups have revealed problems that plague the world of estates and charitable giving but are often overlooked, according to the judge who handled a portion of the case.

The groups -- Animal Friends, Geneva College and the American Cancer Society -- claim that Mr. Harbaugh illegally and inappropriately signed off on the changes, cutting the amount they stand to receive by between $200,000 and $500,000 in favor of giving money to other charities with which he is affiliated.

"Your honor, there's something about this case that smells bad. Simply stated, it stinks," attorney James A. Ashton, who represents Animal Friends, told Allegheny County Orphans' Court Judge Frank J. Lucchino on April 16.

"He diverted at least $1.2 million to -- it's not a small amount of money involved here -- $1.2 million, your honor, to charities that he had a vested interest in. He feathered his own nest at the expense of my clients and these other people who are involved in this," Mr. Ashton said. * * *

Mr. Harbaugh, a prominent local attorney with the firm Houston Harbaugh who is active in Republican politics and the nonprofit sector, defended his handling of the couple's estate.

"As far as I'm concerned, I did nothing wrong,'' Mr. Harbaugh said. * * *

The allegations as to facts & law show the murky waters plied by a late-in-life testamentary action, further fogged by an agent's implementing action. You should read these articles to understand the conflict.

The publication on April 29th expanded on the generic problems and offered perhaps the best preventative solution in an accompanying article entitled "Best advice: Depend on those you most trust", by Joyce Gannon, of the Pittsburgh Post-Gazette.

As for the auditing judge, the latest article reported:

In comments to the numerous attorneys assembled before him on April 16, Judge Lucchino expressed concerns about what he called the "unfettered power" conferred to those with power of attorney and how little time charities sometimes spend investigating bequests.

"I'm not suggesting anybody did anything wrong here," Judge Lucchino said. "I'm just suggesting that the potential does exist."

Update: 07/24/07:

The Pittsburgh Post-Gazette published an article, dated July 24, 2007, entitled "Charity says attorney shifted estate funds for personal gain", by Jonathan D. Silver, which noted a recent filing by one of the objecting parties in this dispute:

Animal Friends Inc., which has accused local attorney Gregory A. Harbaugh of illegally reducing its portion of a wealthy widow's estate, along with the shares of three other charitable groups, claimed yesterday that he did so for personal gain.

By cutting the amount earmarked to certain groups by $1.2 million and shunting that money to other nonprofit groups with which he or his wife are affiliated, Mr. Harbaugh stood to drum up business for his law firm, according to a new filing in Allegheny County Common Pleas Orphans' Court Division.

Animal Friends' attorneys, James A. Ashton and Robert O. Lampl, also claimed that three charities added by Mr. Harbaugh to share in the estate were clients of either a lobbying firm founded by Mr. Harbaugh or another lobbying firm that employs the firm's former executive director.

Mr. Harbaugh's attorney, Mario Santilli Jr., has denied his client did anything wrong and said neither Mr. Harbaugh nor his wife received any compensation from the charities. * * *

Updated: 09/25/07:

The Pittsburgh Tribune-Review reported a development in this case on September 25, 2007, in the article entitled "Judge rejects changes to late woman's bequests", by Justin Vellucci:

An Allegheny County judge has sided with a group of nonprofits and an area college in a dispute over part of a deceased Beaver County widow's $10 million estate.

Last year, shortly before Rita L. Conrady died at her winter home in Florida, Downtown attorney Gregory A. Harbaugh used a power-of-attorney document to shift more than $1 million from Conrady's trust fund to groups with whom he and his wife are affiliated.

Common Pleas Judge Robert A. Kelly ruled Friday that Harbaugh did not have the authority under Florida law to change the trust fund. Kelly gave Harbaugh 30 days to submit new plans on how to distribute the fund. * * *

The state Attorney General's Office, whose charitable trusts section reviewed the Harbaugh case, declined to comment. Animal Friends had challenged Harbaugh's control over Conrady's finances in a civil action filed last month. A hearing on that matter has been scheduled for Dec. 6.