Professor testifies that attorneys’ estate plan was ‘reasonable’

SANTA ANA -- A Loyola Law School professor testified Monday that the estate plan at the center of a family's fraud lawsuit against Buchalter APC, was "certainly reasonable" and accomplished the financial and tax savings goals as intended.

Joseph V. Sliskovich said the charitable reminder unit trusts, or CRUTs, the plan created were a fine solution to the family's "dirt rich but cash poor" situation.

"How do you make a commitment to charity, avoid income tax and throw off income to family members? The CRUT seemed like a legitimate and perfectly reasonable tool to accomplish those goals," Sliskovich said. Sliskovich was Buchalter's first defense witness, and his testimony attempted to refute plaintiffs' witnesses who described the plan as essentially a boondoggle intended to defraud the Stueve family, who are the heirs to the Alta-Dena Dairy fortune.

At issue is an estate plan created by the Stueves' longtime lawyer, sole practitioner Raymond "Ran" Novell, that said the family could owe $26 million in estate taxes for their $43 million estate upon the death of senior family members. Novell worked with veteran trusts attorney J. Wayne Allen, a Buchalter shareholder from 2007 to 2010, to implement the plan in 2001, and the two worked on it until 2010, when the family learned of missing assets and had Novell removed as trustee.

Buchalter ousted Allen in February 2010 for loaning himself money from the Stueves and lying to the firm about it. Novell agreed to a noncollectable judgment of $200 million shortly before trial began, and Allen settled for $1.25 million to be paid by an insurer. Berger Kahn LLP, where Allen worked before Buchalter, also settled. Stueve et al. v. Novell et al., 10-00411651 (Orange Super. Ct., filed Sept. 24, 2010).

Sliskovich testified Monday the initial tax estimate of $26 million wasn't as far-fetched as the plaintiffs' experts described. Rather, the sudden death of the senior Stueve under tax laws in 2000 or 2001, when the plan was created, would trigger huge estate tax obligations that "could easily have exceeded $20 million, under my assumptions," Sliskovich said.

"Meaning in the worst case scenario?" asked Buchalter's lawyer Alan A. Greenberg of Greenberg Gross LLP.

"Correct," Sliskovich answered.

Sliskovich said all trusts attorneys should consider the worst-case scenario.

"I know there was earlier testimony that the number should be much less than that, but it's about the assumptions," Sliskovich testified. He said trust attorneys "come in all sizes and shapes, and various degrees of sophistication and conservative versus aggressive advice. There is no one-size-fits-all."

"Ultimately, it's on the client to decide which way to go," Sliskovich added.

A big part of Buchalter's defense involves persuading jurors that the family knew about the transactions that their lawyer, Robert E. Barnes of Barnes Law LLP, argues were done in secret as acts of self-dealing or to mask self-dealing through circular transactions with entities Novell and Allen created.

Greenberg touched on that in his direct examination of Sliskovich by showing him a tax return from one of the plaintiffs, Jackie Arthur, in which she received a tax break after listing a sold property as a charitable donation because it had been transferred to a CRUT.

Arthur, whose father is one of three Stueve brothers who founded the dairy in 1945, also received a tax break for donating her interest in Stueve Bros. Farms to a CRUT, and she rolled over charitable donations to other years.

"Is that one of the reasons why people use CRUTs?" Greenberg asked.

"It is one reason, for sure," Sliskovich answered.

On cross examination, Robert E. Barnes of Barnes Law LLP emphasized that Sliskovich reviewed only parts of the case and did not consider the actions of Novell and Allen, including Novell's bill practices.

Greenberg, who is defending Buchalter with firm co-founding partner Wayne R. Gross and two associates, Stephanie S. Elder and Claire-Lise Y. Kutlay, also played for jurors excerpts from video depositions of John Stueve, a brother of the three founding Stueves who said he didn't think anything was wrong with Novell and Clark's work.

Testimony will resume Tuesday before Orange County Superior Court Judge William D. Claster.