Trusts for mentally retarded neglected
Funds tapped for fees, not for their needs; Lawyers, courts fall short on oversight
In 2006, close to $50,000 sat in a trust fund that was intended to make Paul Riley's lot in life more bearable. No fortune, but enough to supplement the necessities he receives in a North Andover group home he shares with other mentally retarded men.
But over 22 years, not a dime was ever spent on Riley. Instead, the account has been tapped to pay $17,000 in legal fees, annual investment management charges of nearly 2 percent of assets, and court fees.
For Riley and many of the 910 other mentally retarded adults for whom the trust funds were created a generation ago, little of the estimated $30 million in the accounts is ever spent on their behalf. Instead, the money has been siphoned off for bank management charges and legal bills. And for fees charged by the Massachusetts Probate and Family Court system, which has long neglected its obligation to ensure the funds are expended for the benefit of some of the state's most helpless citizens.
A Globe investigation found serious failures at every level of the system. In most probate courts there has been scant oversight of the trust funds. The bank trustees, who manage investments for the funds, failed, in many cases, to file required financial reports for several years. And most of the personal trustees - the individuals who decide when to tap the trusts for people like Riley, and who almost always stand to inherit leftover funds - did not spend anything for their mentally retarded wards.
Responding to the Globe's findings, Paula M. Carey, the probate court system's new chief justice, acknowledged that the problems are "systemic." In April, she began taking steps to upgrade court supervision of the trusts.
For years, probate judges had ample opportunity to step in on behalf of the trust beneficiaries, but did not. In Riley's case, for instance, judges three times appointed lawyers to review his trust's spending. Yet neither the attorneys nor judges who received their reports ever noted that Riley received no benefits from his trust fund.
The probate courts have been so inattentive to their oversight responsibilities that early this year, it took many weeks for the courts to even locate the 911 files.
The Client Trust Funds were created in the late 1970s and early 1980s with the best of intentions. At the time, the state's Department of Mental Retardation was shifting patients from state institutions to group homes, making them eligible for Medicaid.
Legislation was enacted to protect the modest assets many of them had accumulated from being used to pay for medical care. The statute created trust funds that were to be spent for their other needs. In each case, a bank trustee oversees the investments and a personal trustee, almost always a relative, is responsible for spending the funds.
The Globe conducted examinations of records in 123 trust funds that had many years of financial filings. Of the 123, there were only 15 cases in which the personal trustee regularly spent funds for the care and comfort of the mentally retarded relative. In 55 cases, there was no evidence that any funds had ever been spent.
So oblivious was the court that David Duncan, who lived at the Paul Dever State School in Taunton, was left without a personal trustee for 17 years. That trustee, his mother Olga, died in 1985, and it was not until 2002 that the court appointed a replacement.
Carey, who became chief justice late last year, expressed chagrin at the court's longtime disregard of the trust accounts, and at the Globe's findings.
She has asked each court to order bank trustees to file missing reports and to appoint lawyers to ensure that the funds are being properly spent. More than 200 attorneys - and the court's judges - are being briefed on how to administer the funds. The courts plan to order some personal trustees to spend necessary funds and to replace the trustees if they do not.
"The system is inadequate. . . . We haven't given these cases the oversight that we should have," Carey said.
One major shortcoming: Judges, Carey among them when she sat as a Norfolk County probate judge, appointed lawyers to review the accounts. But the lawyers' reports were warehoused without being read.
Until 2004,
The bank also defended its practice of waiting years to file batches of annual reports as a way to keep its charges lower.
Yiannacopoulos said Bank of America "fully supports" the changes that Carey has ordered, and will comply with court directives to file missing annual reports.
The issue is the second public embarrassment for the probate courts this year.
In January, Carey ordered a series of new safeguards for the elderly to rectify another shortcoming in the probate system. Those changes came after a Globe report in January that some Suffolk County probate judges had routinely declared elderly hospital patients mentally ill and stripped them of their right to make decisions for themselves without requiring sufficient medical documentation. In April, Carey instituted safeguards to protect the rights of elders in those cases.
Unlike the elder guardianship issue, the Client Trust Funds involve substantial amounts of money, an estimated $30 million or more. The average account is believed to hold about $40,000, according to lawyers involved in the system and the Globe's examination of the accounts.
The funds were designed to alleviate what, for most of the 911, is a Spartan existence in a group home. Typically, the funds are intended to be spent for such things as clothing, specialized furniture, therapeutic massage, personal attendants, daytrips, vacations, and other forms of entertainment.
But the spending seldom occurs as envisioned. Lawyers who are familiar with the system point to one major impediment: The personal trustees stand to inherit the funds if they choose not to spend them.
"These trust funds were meant to be spent while people were living. They weren't meant to be an inheritance for siblings or grand siblings. They were meant to improve the lives of the most vulnerable people in our society," Frederick M. Misilo, an attorney and former deputy commissioner at the state's Department of Mental Retardation said.
But from the start, things went awry. Personal trustees receive no formal instruction, and are often confused about the spending requirements. According to documents in the file and interviews with some trustees, the bank trustees who manage the funds have in some cases discouraged spending. And Department of Mental Retardation officials said they have not paid sufficient attention.
An estimated 600 of the original 1,500 clients for whom the trusts were created have since died. The court's record-keeping system, however, is so chaotic that court officials say it would be virtually impossible to locate the 600 records, much less learn how much of those funds were inherited by trustees.
The Globe's inquiry found that the judges took little note of clear warning signals that the system was in a shambles. In 1996, WCVB-TV reporter Brian Leary, who is now a lawyer in private practice, spotlighted the potential conflict faced by personal trustees, and reported that financial reports were seldom filed.
Then in 2004, Carey's predecessor as chief justice, Sean M. Dunphy, issued an order that court-appointed lawyers - known as guardians ad litem - be appointed to report to the court "whether the assets of the trusts are being utilized to meet the needs of the mentally retarded individuals for whom the trusts were originally established."
But not much changed. The court "did not properly follow through after that memorandum at pretty much all levels," Carey said. Dunphy did not respond to several telephone messages seeking comment.
The records reviewed by the Globe in Norfolk, Middlesex, Suffolk, and Plymouth counties show that guardians ad litem were appointed to review scores of cases, especially in Norfolk and Middlesex counties. In most of those cases, however, the lawyers certified that the annual accounting was in order - but rarely raised concerns about little or no money was being spent for the intended beneficiaries. In some cases, the legal bills alone took a substantial bite out of the assets.
For instance, in 2006 Judge Carey appointed Boston lawyer Sally R. Gaglini to review seven years of spending reports for the trust of Robert Blood, 63, who lives in a group home at a Wrentham mental retardation department facility. Gaglini charged the trust $2,200 for a report that concluded that, "Those funds expended for the ward were relatively negligible but consistent with the trust's purposes."
According to the files, only $125 was spent on Blood during the seven years.
In a recent interview, Gaglini said that it was not her responsibility to determine whether the trust's funds were being spent for Blood. In a subsequent response through a spokeswoman, Michal Regunberg, Gaglini said that her role in 2006 was restricted to certifying the accuracy of the accounting.
In an e-mail to the Globe, Chief Justice Carey acknowledged that orders issued in the past to court-appointed lawyers were "unclear."
Even so, Carey said she believes those lawyers "have always had the responsibility to bring to the court's attention" cases where there was no spending or the mentally retarded person's needs were unmet.
"The past practice in many counties where guardians ad litem assented to mathematically accurate accounts even if expenditures were not being made - with minimal court oversight - was and is unacceptable and is no longer permitted," Carey said.
In 2006, legal fees alone drained 18 percent of the assets in Blood's trust, which had assets of just over $25,000. In addition to Gaglini's $2,200 bill, his account was also dunned for $2,353.74 by US Trust's law firm, Schlossberg & Associates, for its work in submitting the seven years of overdue accounts. Yiannacopoulos, the Bank of America spokesman, said that Schlossberg's fee's are standard for such work.
The Globe found 29 other cases in which the court-appointed lawyers sounded the alarm that the needs of the mentally retarded men and women were going unmet. But, almost without exception, judges paid no heed to the reports.
In one case, attorney John S. Tuohy wrote in a report to Carey that, "The purposes of this Trust are not being fulfilled as a result of the Personal Trustee not making recommendations for payments or expenditures."
But, his objections aside, Tuohy - like Gaglini in the Blood case - filed no formal objection to the accounting. So it wasn't flagged for Carey's attention, and she never read it; her initials were affixed to the report by a case manager. Indeed, the Globe found no evidence that most judges ever reviewed reports by the lawyers they appointed to review these case.
Said Carey: "The system was flawed. That case should have been flagged, it was not."
Edward M. Ginsburg, a retired judge who served in Middlesex Probate Court for 25 years, said that judges who are saddled with contentious cases, including time-consuming divorce and custody battles, seldom have time to pay attention to reports from lawyers who review the Client Trust Funds.
"Nobody in an urban eastern county for 100 years has read" those reports, Ginsburg said.
Ginsburg recalled that he once signed off on 81 such reports in a single session, without reading any of them. "The day after I signed the 81, I looked at the court officer, and said, 'This is insanity.' "
Over time, many of the accounts have grown to approach $100,000. And in the cases reviewed by the Globe, about one in 10 had assets between $100,000 and $200,000.
Initially, the trust funds were created with money accumulated by each of the mentally retarded adults, but the law prohibited the infusion of new funds - except for investment returns generated by the stocks and bonds that were purchased for the funds. In each of more than 20 accounts reviewed by the Globe, the annual fee charged by the bank trustee was 1.86 percent of assets. Additional fees are charged by the bank's law firms.
Some of the reports by court-appointed lawyers, who charged between $200 and $300 an hour for their services, used boilerplate language in reporting their findings. Or, in the case of Worcester attorney Christine Anthony, identical language.
In a 2006 report to the court about Maureen Corkery, Anthony wrote, "In reviewing the accounts, there were no beneficiary distributions made outside the scope of the authority of the trust. In fact, the only disbursements were for legal fees and trustee fees."
In at least seven other cases, Anthony used identical language in her conclusion. In a telephone interview, she said she recycled the language as a way to avoid charging large legal fees on trust accounts with modest balances.
"I don't think any of us feel the need to reinvent the wheel every time we write a report," she said.
In a handful of cases, personal trustees reported that they were discouraged from spending money by the corporate trustee. Yiannacopoulos said he could not discuss individual cases. But he said the bank trustee would object only if the proposed expenditures were inappropriate.
In one of those cases, John L. Harrington, the former chief executive officer of the Boston Red Sox, told a court-appointed lawyer in 2004 that the bank trustee, State Street, informed him that it would be improper for him to buy a recliner for his wife's sister, Geraldine Fitzgibbon, whose trust held about $60,000.
In 2007, another guardian ad litem, Morton Glazer, reported that Harrington and his wife had ceased using the trust and were spending their own funds for the benefit of Fitzgibbon, who lives in a group home at a state facility in Wrentham. In his report, which does not appear to have been read by any judge, Glazer noted that Harrington's "major gripe" is that the bank gets fees "for just parking the money in the account and letting it sit there."
Through a spokesman, Harrington declined to be interviewed for this story.
After one trust beneficiary, David Resnick, died in 2006, his brother and personal trustee Martin Resnick inherited the trust's assets, $124,227. Financial records show that only twice in two decades did Martin Resnick spend money for his brother's care.
Resnick said he used the inheritance to pay down his debts. He said he visited his brother monthly, but spent little because, he said, the bank trustee, State Street, told him the trust funds could be spent only for emergencies.
"To me, that seemed perfectly reasonable," Resnick said. "I just didn't think it was my money to use. . . . He could have had more. . . . He could have got more personal attention."
This article was reported for a course in investigative reporting at Northeastern University by Megan McKee, Jeff Miranda, Sarah Metcalf, and Derek Hawkins, in addition to Peters. Their work was overseen and this article was edited by Northeastern journalism professor Walter V. Robinson, former editor of the Globe Spotlight Team. Robinson's e-mail address is wrobinson@globe.com. Confidential messages can be left at 617-929-3334. 