TEXAS’ BEXAR COUNTY IN FRAUD SPOTLIGHT

Why Did Rickhoff Award Massive Estate to Marcus Rogers?

Attorneys battle over San Antonio real estate

tycoon’s estate:

By Patrick Danner/Expressnews.com

James F. Cotter’s estate the latest target of Bexar county’s probate court system. Photo: Joshua Boren /Sonshadow Multimedia

While the late real estate tycoon James F. Cotter may be resting in peace, tensions are running high over the multimillion-dollar estate he left behind.

MORE TROUBLE IN BEXAR COUNTY PROBATE:

Cotter’s eldest son, James Val Lee Cotter, alleges in a recently filed lawsuit that the independent administrator overseeing the estate has “grossly mismanaged” assets and has attempted to “enrich himself and his hand-picked colleagues” by charging the estate millions in commissions and legal fees.

FAMILY SAYS ATTORNEY MARCUS ROGERS SQUANDERS ASSETS
Val Cotter also accuses the administrator of shorting him more than $5 million in distributions from the estate.He wants a Bexar County Probate Court judge to remove San Antonio attorney Marcus Rogers as administrator and order him to give up the commissions and fees he’s been paid.
Rogers fired back last week in a court filing, calling Val Cotter’s claims “baseless.”“Rogers has served properly and faithfully over the affairs of an extraordinarily complex and financially troubled Estate,” the filing states. “There was value in the Estate when Rogers was appointed to serve as Administrator. There still is. But with that value came substantial debt and liabilities.”James F. Cotter’s estate has been dogged by bankruptcies, loan defaults, liens, lawsuits and other disputes involving lenders, suppliers and the Internal Revenue Service.
BEXAR’S JUDGE RICKHOFF AGAIN IN HEADLINES:

Judge Tom Rickhoff, Bexar County Texas probate & guardianship court

Cotter died of cardiac arrest on Jan. 25, 2017, at 83. He didn’t leave a valid will, fueling the disorder. Then Judge Tom Rickhoff appointed Rogers to chaperon the affairs. Rogers has called it “the case of a lifetime.”

The self-made Cotter came from “humble beginnings,” according to an obituary, to amass over several decades a real estate empire across multiple states.

The bulk of the estate, valued at $288 million 13 months before his death, comprised 66 properties — including offices, shopping centers, nursing homes, farms, undeveloped land and private residences in six states. Locally, it included the twin Alamo Towers along Northeast Loop 410 and the two Petroleum Towers just around the corner on Tesoro Drive. They were recently sold out of bankruptcy.

Val Cotter, 60, says in his lawsuit he had a hand in building his father’s real estate holdings. Not long after Rogers was appointed independent administrator, the suit adds, he ended Val Cotter’s role working for and providing construction services for the estate. The work was Val Cotter’s primary source of income.

Beside Val, James F. Cotter and his first wife, Loretta, had two daughters: Vivian Mueller, 62, and Valeri Zaharie Glauser, 54. The couple divorced in 1981 after 26 years of marriage.

Four years later, the then-53-year-old Cotter remarried to a woman more than half his age. The union lasted less than three years but produced two sons: James Adam Cotter, 32, and James Andrew Cotter, 31.

Cotter was married to his longtime companion, Ruth Cotter, 82, when he died. They wed in 2012.

MISSING MILLIONS RAISE RED-FLAGS FOR FRAUD

At the start of 2018, Val Cotter’s lawsuit says, Rogers calculated the gross value of the estate — before liabilities — at $166.3 million on a draft tax return for 2017. Each of Cotter’s five children stood to receive almost $8.1 million in distributions.

Just four months later, though, the gross value of the estate had fallen to $134.7 million on the final 2017 tax return, the suit says. The return estimated each of the Cotter children would receive $5.2 million — or $2.8 million less than previously projected.

MASSIVE ATTORNEY FEES AND COMMISSIONS TRIGGER BILLING-FRAUD ALARMS

Meanwhile, Rogers estimated he would pay himself a “whopping” $6.7 million in commissions, about $5 million in attorneys’ fees to various law firms, including his own, and about $766,000 in accounting fees, the suit says.

Rogers counters that he expects his allowable compensation will be capped at about $6.7 million — about 5 percent of the gross fair value of the estate. “He will have earned additional compensation, but it will be cut back to the cap amount,” his filing adds.

According to Val Cotter’s suit, last year Rogers circulated an “estate analysis” that dropped the distribution for each of the children to $2.5 million — or about $5.6 million less than originally estimated.

“The only ones currently reaping the benefits of Mr. Cotter’s life of hard work are Rogers and his hand-selected group of professionals — who are collectively claiming over $10 million from the Estate while Val — who helped his father build the Cotter Empire — has received less than 1% of that amount in distributions,” Val Cotter’s suit adds.

ATTORNEYS PROFIT FROM CHAOS

The Cotter enterprise was in disarray at the time of the founder’s death, Rogers says. Besides negative cash flow, loans had fallen into default, suppliers had filed liens and lawsuits, properties suffered from deferred maintenance and real estate taxes went unpaid on many properties.

“Val’s right to receive distributions is subordinate to the payment of the estate’s debts,” Rogers says in his reply to the lawsuit.

The estate had nearly $130 million in debt on the books, including at least $17.6 million owed to the IRS. Rogers has slashed “consensual debt” by $107 million to $13 million and paid down IRS tax bill by $8 million, he says in his response.

Rogers has sold 24 of the estate’s properties for $129 million, according to a court filing. And he saved three properties — including the San Antonio office properties Alamo Towers and Petroleum Towers — from foreclosure by putting them into bankruptcy, he adds. Val Cotter unsuccessfully tried to buy Alamo Towers.

ATTORNEY SOLD REAL ESTATE BELOW VALUE

Val Cotter says Rogers has “continued to squander Estate assets by selling valuable commercial and residential properties at cut-rate prices without any regard to the effect that his actions will have on the Estate’s beneficiaries, including Val Cotter — all the while generating more fees and commissions for Rogers.”

As an example, Val Cotter says Rogers sold the Harwin Plaza office building in Houston for $6 million, or $3 million below an appraised value. The buildings were bought by James Adam Cotter’s company, the lawsuit says. Rogers says the building’s appraised value was $6 million.

Val Cotter seeks a court order preventing Rogers from selling other properties in the estate, including the Castle Oaks Village Shopping Center at 8055 West Ave. in San Antonio.

James Adam Cotter and James Andrew Cotter, meanwhile, in May filed court papers revoking their consent to Rogers acting as the administrator on the grounds that Rogers has been selling properties at below market value.

“We’re concerned that his actions in selling properties will reduce the values, diminishing the beneficiaries’ share while being subjected to the administrator’s extensive compensation,” said the two brothers’ attorney, Ryan Reed of the law firm Pulman, Cappuccio & Pullen in San Antonio.

“The inheritance of Cotter’s children is negatively affected, owing to the need to pay estate taxes every time the administrator sells a property for the less than the appraised value at the time of Cotter’s death,” Reed added.

Rogers has not responded to the action. Rogers, the Cotter sons, and lawyers for all have been in mediation, which is expected to resume next week, Reed said.

Rogers was the first to sue the Cotter children in May over a dispute involving a “Family Settlement Agreement” reached in March with Val, Vivian and Valeri.

The administrator argues the daughters each gave up their 20 percent interests in the estate in exchange for a nursing home and some cash. Val claims his sisters’ each assigned their interests in the estate to him as part of the agreement, entitling him to receive 60 percent of the estate.

Rogers disputes that and wants Probate Judge Veronica Vasquez to declare that Vivian and Valeri relinquished their 20 percent interests and that Val, James Adam and James Andrew each own a 20 percent interest in the estate. The judge has yet to take up the request.

Rogers and one of his attorneys didn’t return calls.

Patrick Danner is a San Antonio-based staff writer covering banking and civil courts.

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