Tuesday, May 22, 2007

Trusts & Estates ... and the FBI: Pt. I

"Robert Goldman, a former Assistant U.S. Attorney in Allentown, said in 29 years as a prosecutor he never saw the FBI involved in a will contest."

"Northampton County District Attorney John Morganelli said he could not think what federal crime would have been committed in regards to the will dispute to get the FBI involved."
"What case is being discussed? -- The "will contest" involving the Estate of Peter J. Karoly, deceased, administered in Northampton County, Pennsylvania.In this posting (Part I), I note the reported federal law enforcement involvement in the Peter J. Karoly Estate. In my next posting (Part II), I will note the recent greater involvement of federal law enforcement authorities in other trust & estate matters nationwide.

According to an online Obituary & Memorial page, "Peter J. Karoly, 53, of Bethlehem, prominent area attorney and businessman, died February 2, 2007, along with his wife of 22 years, Dr. Lauren Angstadt, in a private plane crash in Massachusetts."

As noted in that Obituary, Peter & his wife were quite accomplished. Peter was the younger brother of John P. Karoly, Jr., Esq., for whom he worked before he opened his own law practice. He also entered medical business
ventures with his wife, a dentist. The childless couple became wealthy.

Fairly soon after the deaths of Peter & Lauren, controversy arose, first before the Register of Wills, and then in the Orphans' Court Division (of the Court of Common Pleas of Northampton County, PA), regarding Peter's true & effective Last Will & Testament. I noted the caveat proceeding, and then the formal "will contest", in my PA EE&F Law Blog posting Will Contest from Bethlehem, PA (04/10/07), which contained links to posted newspaper articles.

This case has taken what appears to be a highly unusual turn. The United States Attorney for the Eastern District of Pennsylvania, employing powers to present a matter to a federal grand jury, has utilized the Federal Bureau of Investigation to conduct a search of the home of the surviving brother, John Karoly. The FBI is reported to have seized property & records there.

In this case, complaints as to criminal activities were made by other of Peter's family relations to local police and the county's district attorney, as reported in an article entitled
"Half brother calls 2006 Karoly will a fraud", by Matt Birkbeck, of The Morning Call (Allentown, PA), last updated on March 29, 2007:
A new will that leaves a sizable portion of Peter J. Karoly's estate to brother John P. Karoly Jr. is fraudulent, a half brother of the lawyers said in a complaint filed with Bethlehem police.

But Northampton County District Attorney John Morganelli, who reviewed the complaint, said Wednesday it doesn't warrant a criminal investigation, leaving the matter up to a probate judge to sort out.

Michael J. Karoly, 21, a college student who lives in Sommerville, S.C., alleged numerous ''discrepancies'' in the new will, Morganelli said, including a forgery of Peter Karoly's signature.

''Based on information supplied by the Bethlehem police, I cannot find any basis to open a criminal investigation,'' Morganelli said. ''You can't just start a criminal investigation because someone believes a will is improper.''

Bethlehem Deputy Police Commissioner Stuart Bedics said there was no evidence of a crime. ''It appears to be a civil matter,'' he said. * * *

Apparently, complaints about criminal activity were also directed to federal law enforcement officials. It was reported on May 17, 2007, in an article entitled "Grand jury to examine Karoly will dispute", by Bevin Milavsky, posted on Penn-Live, that a "dispute over the will for Allentown attorney Peter Karoly has led to a federal grand jury investigation."
The U.S. Attorney's Office in Philadelphia issued a subpoena to Northampton County Register of Wills Dorothy Cole May 10 to "provide any and all documents which verify or affirm the signatures of Peter J. Karoly, Esquire and Dr. Lauren B. Angstadt, as related to wills maintained in Northampton County."

Rich Manieri, spokesman for the U.S. Attorney's office, would not comment on the grand jury. * * *

The subpoena requires Cole to appear before the Grand Jury of the U.S. District Court in Philadelphia at 9:30 a.m. May 24 or mail all applicable documents to the federal courthouse in Allentown before that date. * * *

FBI spokeswoman Jerri Williams said federal agents conducted a search of John Karoly's home this morning. But she could not comment on what was found or if it was related to the subpoena. * * *
On Thursday, May 18, 2007, The Morning Call also reported the FBI's search, in an article entitled "Karoly's attorney questions federal probe", by Bevin Milavsky, posted on Penn Live as "Breaking News". This article contained the two quotes that began this posting.

For a more detailed article,
see: "Feds probing Karoly's will -- U.S. Attorney subpoenas documents. FBI searches John Karoly's home", dated May 18, 2007, published in the Express-Times (Lehigh Valley) & posted by Penn-Live.
FBI spokeswoman Jerri Williams confirmed federal agents searched John Karoly's home in the 4200 block of Winchester Road in South Whitehall Township on Thursday morning. She said the search warrant is sealed, and she would not comment on what was removed or if the search was related to the subpoena. * * *

Last month, two of Karoly's sisters challenged the will's authenticity. In court documents, Kim Karoly Luciano of Kissimmee, Fla., and Joanne Karoly Billman of Monks Corner, S.C., claimed John Karoly created a second will to replace one Peter Karoly had drawn up in 1985.

Peter Karoly's most recent will, which his sisters claim is fraudulent, would leave a portion of his estate to John Karoly. * * *
In another, similar article by Matt Birkbeck & Joe McDonald, entitled "FBI raids Karoly's home in dispute over will", also published in The Morning Call on May 18, 2007, that newspaper posted copies of documents publicly filed in the litigation to date, and then reported:
FBI agents raided the South Whitehall home of lawyer John P. Karoly Jr. on Thursday, seeking evidence in a federal grand jury probe into allegations he submitted a fraudulent will that would give him the bulk of his late brother's estate.

Several agents from the bureau's Allentown office, some wearing blue shirts with ''FBI Evidence Response Team'' on the back, showed up at Karoly's neatly kept colonial home on Winchester Road at 7:30 a.m and left hours later with boxes of documents.

Karoly could not be reached for comment, but his lawyer, Bob Goldman, confirmed that the search of the home was related to the federal probe.

''I have never seen the federal government involved in a will contest,'' said Goldman, a former federal prosecutor in Allentown. ''[The FBI] won't give us access to the supporting affidavits, and we don't have the ability to say, 'Hey you're wrong.'''

"Goldman said it's unclear what documents the FBI seized. But he said it was clear that the investigation was spurred by two of Karoly's sisters, who allege Karoly submitted a bogus will after another will, from 1985, had been presented.

"The search warrant was supported by ludicrous allegations,'' Goldman said. ''But the truth of this case is going to come out.''
See also: "Karoly under fed's microscope for a year", by Matt Birkbeck, published May 19, 2007, in The Morning Call.

In Part II of this posting, I'll review other recent reported cases in other states where the FBI and the Department of Justice were involved in trust & estate matters. Such involvement may be a "sea change" in fiduciary disputes, where fraud & interstate communications are involved.
* * *
Update: 05/22/07:

Professor Gerry W. Beyer, who authors the Wills, Trusts & Estates Prof Blog, noted my posting on May 22, 2007, by his entry "
The FBI-Will Contest Interface".

Update: 05/23/07:

For Part II of this posting on the PA EE&F Law Blog, see:
Trusts & Estates ... and the FBI: Pt. II (05/23/07).

Update: 05/26/07:

On May 25, 2007, an article regarding the federal investigation in this matter was posted by the Express-Times (New Jersey) entitled "
Feds silent on whether jury hears Karoly case":
A federal grand jury was slated to convene Thursday to investigate a dispute over the will of Allentown attorney Peter J. Karoly. * * *
Jurors sat in a waiting room of the Robert Nix Federal Building and Courthouse Thursday morning. But federal officials would not confirm whether the grand jury convened on the Karoly case
"I can't comment about grand jury matters at all, and that includes scheduling," said Rich Manieri, a spokesman for the U.S. Attorney's office in Philadelphia.
John Karoly's attorney, Robert Goldman, a former U.S. Attorney in Allentown, said Wednesday he did not know of anyone ordered to appear this week. He would not reveal the identities of anyone called for a later date.
Goldman said since grand juries convene in secret and hear several cases during the 18 months they are impaneled, it is unknown when Karoly's case will arise.
He said the prosecutor is not required to call witnesses each week, and indictments could be handed down at any time.
Update: 09/26/08:

In the Karoly case, on September 25, 2008, the U.S. Attorney's Office for the Eastern District of Pennsylvania announced issuance of federal criminal indictments against three defendants. See: PA EE&F Law Blog posting "Attorney in PA Indicted for Will Fraud" (09/26/08).

Update: 04/07/13:

The Orphans' Court Division of the Court of Common Pleas of Northampton County issued a ruling that the contestants to the wills did not meet the required burden of proof to overturn the questioned wills. No federal charges were pursued by the Justice Department on such matters. See: PA EE&F Law Blog posting Karoly Estates Will Forgery Case Ruling (04/07/13).