Friday, September 24, 2010
C.A. Upholds Judgment Against Philanthropist for Looting Trusts
By KENNETH OFGANG, Staff Writer
A judgment against a venture capitalist and philanthropist who is reportedly one of Los Angeles’ wealthiest residents for looting two trusts he was administering for a young widow has been affirmed by this district’s Court of Appeal.
Div. Three Wednesday not only upheld findings by retired Los Angeles Superior Court Judge Henry W. Shatford that Neil Kadisha used the trusts for his own benefit, it added about $20 million in prejudgment interest to the judgment.
Kadisha will owe the plaintiffs about $94 million in compensatory and punitive damages and prejudgment and postjudgment interest by the end of the year, Samuel Krane of Krane & Smith in Encino, the plaintiff’s lead trial attorney, told the MetNews.
Attorneys for Kadisha could not be reached yesterday for comment.
A news account three years ago reported the net worth of Kadisha, a principal of Omninet Capital Group and former director of Qualcomm, Inc., as over $900 million. Several wealthy individuals pledged their net worth as sureties on the judgment, so no supersedeas bond had to be posted, Krane explained.
Justice Walter Croskey, writing for the Court of Appeal, cited numerous instances of self-dealing by Kadisha, who agreed to assist then-28-year-old Dafna Uzyel, who had a 10th grade education and spoke little English, after her 40-year-old husband died unexpectedly. Rafael Uzyel had emigrated from Israel with his wife and two children and had a successful export-import business.
Kadisha, a friend of the family, “was no more than a common thief,” retired Los Angeles Superior Court Judge Henry W. Shatford said Judge Shatford in his decision. “[His] defenses rest beyond denials but upon a grossly contrived conception that a thief can steal money and keep the benefits.”
Shatford tried the case over more than 200 court days, covering a period of about four years, and issued his ruling in 2006.
Kadisha argued, among other things, that many of the challenged transactions, such as a sale of Qualcomm stock in 1992 at the time the investment was properly classified as risky, were in the trusts’ best interests. But a trustee cannot enter into a transaction solely for his personal benefit, even if it makes economic sense from the trust’s point of view, Croskey wrote.
Citing legal treatises and the 3d Restatement of Trusts, the jurist wrote:
“A trustee is strictly prohibited from administering the trust with the motive or purpose of serving interests other than those of the beneficiaries....A trustee also is strictly prohibited from engaging in transactions in which the trustee’s personal interests may conflict with those of the beneficiaries without the express authorization of either the trust instrument, the court, or the beneficiaries....It is no defense that the trustee acted in good faith, that the terms of the transaction were fair, or that the trust suffered no loss or the trustee received no profit. This is known as the no further inquiry rule...Such a transaction is voidable at the election of the beneficiaries, and other remedies may be available, including an award of profits that the trust would have made if not for the breach of trust.”
Croskey said the additional prejudgment interest, which the trial judge denied as a matter of equity, had to be added to the award under Probate Code provisions setting forth remedies for breach of trust.
The case is Uzyel v. Kadisha, 10 S.O.S. 5529.
Copyright 2010, Metropolitan News Company