Tennessee Courts OK Fraud

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BIG CHANGES IN TENNESSEE’S FIDUCIARY RULES

Special to www.stopprobatefraud.com

This is Part 2 of the “Anatomy of Fraud” series about family, finance and fraud in Tennessee.

Recap of Part 1: During the breach of fiduciary duty trial of an executor in Tennessee, the record details how the executor of the estate hired the law firm of Lassiter, Tidwell, Davis, Keller & Hogan (now known as Farmer, Purcell, Lassiter & White) to hide and destroy the legal and financial records of the estate they were administering.

James Martin III; Tennessee Judge

In a massive shift from all other states in the USA, Williamson County Judge James Martin III ruled that in Tennessee this was neither obstruction of justice, fraud or a breach of fiduciary duty. Martin’s ruling was appealed  but upheld in Tennessee’s appeals court. 

While the ruling makes Tennessee the only state in America to allow these actions, the case provides good examples of the techniques used by fraudsters to target people in probates, trusts, guardianships and estates in other states.

If you missed Part 1 you can read it in full here: http://www.stopprobatefraud.com/blog/2018/10/26/big-changes-to-tennessee-probate/

 In Part 2 of the series, we detail some of the specific details of the case.

PART 2: RED FLAGS FOR FRAUD

After her husband’s death, his surviving wife called “Miss Cherry Lane” in trial records was named executor of his estate.  An executor (or administrator) is a “deputy” of the court and  given the power of the court and sole access to the legal and financial records of the person who died.  It’s an event that happens over a million times a year in the United States.

While the executor began work on the estate accountings, the trustees of the estate, (and its beneficiaries) met with their lawyer, Randle S. Davis. Davis was an attorney at Lassiter, Tidwell, Davis, Keller and Hogan, which now is called Farmer Purcell Lassiter & White, the business home to Nashville’s former mayor, Bill Purcell.

Attorney William Lassiter had met the family at a social event in the early ’90’s. Lassiter had referred them to the tax and estate attorney at his firm named Randle S. Davis. For nearly 20 years, Davis had done the tax and estate planning work for three generations of the family including both trustees, their parents and grandparents.

Nashville Attorney Randle S. Davis

At the “breach of fiduciary duty” trial before Williamson County Judge James Martin III, Davis described himself as the “senior managing partner” of his firm and an expert in estates with scores of clients.

Court transcripts show that attorney Davis testified that the trustees met with Davis after their father’s death and Davis assured them that their father’s affairs were “cut and dried.’

Davis had been paid to write Mr. Darken’s portion of the pre-nuptial agreement that had been signed by he and his widow, the executor. Davis told the trustees he had a copy of their father’s pre-nuptial in his files, and he would give it to them.

The trustees never had been involved in an estate accounting, and Davis told them that the next step in the process was for them to go to their father’s farm, meet with “Miss Cherry Lane”  and get their family’s trust, legal and financial records. The trustees did as Davis asked.

ACCESS DENIED: 

Case transcripts detail that the trustees drove together to their father’s farm in Leiper’s Fork expecting a cordial meeting, a review of her work on the estate, and to get the records Davis had told them to retrieve.

But they were met by an executrix who not only denied them access to their father’s office, she refused to give them pre-nuptial, the legal and securities records used by their father to run the family’s investments.

ACCOUNTING HIDDEN=RED FLAGS FOR FRAUD:

The trustees left the meeting empty handed. The estate that Davis had said was “cut and dried ” had just triggered a red flag for fraud. They immediately informed the firm that the executor was hiding their father’s records and was making a claim for more assets than had been agreed on in the pre-nuptial.

According to the Association of Certified Fraud Examiners, red-flags for fraud are triggered when records are missing or concealed. The ACFE is the world’s largest professional organization dedicated to fraud prevention, detection and recovery. Based in Austin, Texas the group has 80,000 members worldwide.

Mandy Moody is a certified fraud examiner. Writing in ACFE’s “Insights” magazine, Moody says that people involved in fraud “…often exhibit certain behavioral traits or warning signs associated with their illegal activity.” In their “Report to The Nations” the ACFE found that one of the top five behaviors of fraudsters is “excessive control issues or unwillingness to share duties.”

Jodi Chavez is the author of the “Top Ten Red Flag Warnings of Fraud.” Chavez is the president of Randstad Professionals in charge of staffing accounting and financial professionals in Newport Beach, CA. She writes that the No. 1 thing on her list of triggers for fraud is “missing documents…,” which, she says, “should raise suspicion and may require a more in-depth examination.”

BIG CHANGES IN TENNESSEE LAW:

At the trial, Davis testified that boxes of trust, legal and financial files had been hidden from the trustees who had made  repeated requests for the records over the course of two years.  Records show that executrix had worked with her law firm to conceal the records for over two and a half years, until Judge Easter ordered the firm to them them over to the trustees.

But Judge James Martin III reversed Easter’s order and ruled that in Tennessee, it’s no longer fraud or even a “breach of fiduciary duty” when a court officer or fiduciary hides trust, legal and financial records from principals.

Trustees appealed Martin’s findings, but the Tennessee court of appeals upheld Martin’s ruling.

The ruling is a seismic change from long-established “black letter” law. It makes Tennessee the only state in the union where it is legal for attorneys and officers of the court to hide legal and financial records from principals of a case or financial transaction.

Thousands of legal and financial professionals in the Volunteer State are directly impacted by the change in Tennessee’s laws. Included in this group are agents and managers in the music business, student-loan brokers and families trying to plan their estates.

The editors contacted the press office of jTennessee’s Attorney General Herbert Slaterly, III. They did not comment on the ruling. We also contacted Davis’ firm, but received no reply.

To learn more about spotting and stopping fraud in probate, trusts, estates and guardianships, visit www.stopprobatefraud.com or contact the volunteers at stopprobatefraud@gmailcom.

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About Edmund Burke 87 Articles
Volunteers working to help people spot, stop and recover from fraud and corruption in probate, trusts, estates & guardianships.