Dairy heiress in Buchalter fraud trial describes lawyer’s influence

SANTA ANA -- An heiress to a dairy fortune at the center of a $200 million fraud and negligent hiring case against Buchalter APC told jurors Tuesday she was "very impressed" by the attorney handling their estate, including during a 2009 meeting at the firm's Orange County office in which he assured her the family fortune was well-managed.

"He was intelligent, knowledgeable, had obviously had good training. And he was personable -- nice, round face," Jacqueline "Jackie" Arthur said of J. Wayne Allen, who was a Buchalter shareholder from 2007 to 2010.

Arthur, whose father, Edgar Stueve, started Alta-Dena Dairy in 1945 with his two brothers, detailed how her trust in Buchalter and Allen vanished in 2010 after a family matriarch died and her life insurance benefits were nowhere to be found. Months earlier, Allen assured already suspicious family members they had no reason to worry, she testified.

Arthur met Allen through the Stueves' longtime lawyer, sole practitioner Raymond "Ran" Novell, whom Arthur met in kindergarten. The family loved having someone so close to them as their lawyer, but Novell was a general practitioner with no tax and trust law expertise, so the family relied on Allen's experience to guide their estate plan, she told the jury.

"I was so glad he was there behind Ran because I knew Ran didn't have the expertise and sometimes could get sloppy," Arthur said during direct examination from plaintiff's attorney Robert E. Barnes of Barnes Law LLP, who represents Arthur and her family in the eight-year-old lawsuit.

"He had expertise in explaining to us in a detail that Ran could not have done," Arthur said. "He was very persuasive that this was a good place to go with somebody who knew what they were doing."

Arthur said Allen and Novell's accounting methods concerned her mother, Vera "Bee" Stueve, but they didn't realize anything was amiss until after she died when Arthur and her sister received $1 million in life insurance proceeds instead of the $2 million they were expecting. Arthur said Novell visited her dying mother in the hospital several times and "had her sign things."

"My sister and I were perplexed," she said.

So they hired another lawyer, Steve L. Hogan of Lurie, Zepeda, Schmalz, Hogan & Martin, who drafted a letter to Novell that said the family had discovered "disturbing information" about their trust.

"Given our long and trusting relationship and because we wish to resolve any issues or potential disputes peacefully and in a respectful manner, we write to you now," according to the letter, which was displayed for jurors.

The letter prompted an all-day meeting at Buchalter's Irvine office in 2009 in which Allen and Novell explained the estate with a complicated PowerPoint presentation and complex documents the family now believes were intended to mask years of self-dealing and circular transactions that turned their estate into a Ponzi scheme. Arthur said Novell and Allen encouraged her to skip sections and sign anyway.

"Those skipped sections were what we had signed giving away our rights, our property, our assets, everything. We skipped everything," Arthur said.

"Were you made aware that Mr. Allen had recommended to Mr. Novell that your insurance proceeds be invested with another client of his? Did he mention that?" Barnes asked.

"No," Arthur answered.

"Did you keep Mr. Novell after the Buchalter meeting as trustee?" Barnes asked.

"We did," Arthur answered.

"And did you keep him because of the information Mr. Allen gave you at that meeting?" Barnes asked.

"Mr. J. Wayne Allen strongly validated Ran at the meeting. When he would say something, I regularly looked over at J. Wayne Allen. ... I believed everything that was presented to us at that time," Arthur answered.

A few months later, a family patriarch died, and Novell told the widow he had no life insurance proceeds to distribute. The Stueves then sought to remove Novell and Allen from their estate, and Allen soon resigned at the request of Buchalter leadership. The family sued the next year.

During cross-examination, Wayne R. Gross of Greenberg Gross LLP focused on rifts between the deceased Stueves and their children over religion, charitable donations and inheritance amounts as well as a video deposition from Arthur in which she said she was explained the details of the estate but said she "moved into that clarity and out of that clarity as to what was actually happening."

Gross emphasized the estate plan regularly paid Arthur as it was intended to, and he ended by referencing Novell's $200 million, non-collectable settlement. Allen's $1.25 million settlement will be paid by an insurer.

Another former defendant, Allen's previous employer Berger Kahn LLP, has not publicly disclosed its settlement amount. Stueve et al. v. Novell et al., 10-00411651 (Orange Super. Ct., filed Sept. 24, 2010).

"Now you're seeking to go after Buchalter for what Mr. Novell did long before you ever knew what Buchalter was, correct?" Gross asked.

"Wayne Allen was part and parcel of this from the beginning, and when he was working at Buchalter, it continued. ... [Buchalter] not taking responsibility and not being our advocate and not coming to us is part of why we're here today," Arthur told the jury.