Leisure World Lawyer Heir to Clients’ Millions : Estates: James D. Gunderson, who prepared wills for thousands of retirees, vigorously denies wrongdoing.

An Orange County lawyer who boasts of representing more than 7,000 Leisure World retirees has prepared numerous wills making himself the recipient of millions of dollars in cash, stock and real estate, a yearlong Times investigation has found.

Attorney James D. Gunderson, 67, has received the inheritances despite a longstanding California Supreme Court ruling that says accepting anything more than a “modest” gift from a client’s estate raises questions of impropriety.

In one recent case alone, Gunderson arranged for the execution of a will and trust that together bequeathed him stock valued at $3.5 million, and made the other beneficiaries liable for an estimated $2 million in inheritance taxes he normally would have incurred.

That will--the final version of which Gunderson’s blind, bedridden, 98-year-old client signed only six weeks before his death--included a “no contest” provision that would deprive any other beneficiary of his or her share of the man’s $18-million estate, if that person challenged any part of the will, including the bequest to Gunderson.

In another case, Gunderson persuaded a judge to name him guardian of a Canadian woman who was “suffering from . . . senile dementia”--a diagnosis supported by a doctor’s affidavit--and thus incapable of managing her assets. Once in control of her affairs, Gunderson drafted a new will that gave him the lion’s share of her estate--nearly $250,000 worth of American Telephone & Telegraph Co. stock.

One of the woman’s heirs, who lives in Canada, accused Gunderson in court documents of defrauding the rightful beneficiaries of their shares in the estate with a will that the woman--who is now dead--was obliged to sign against her wishes. The heir reluctantly abandoned her court challenge, however, when Gunderson offered her $60,000 for dropping the case.

The heir’s Canadian attorney, Donald Fjeldsted, said the anticipated cost of waging a court fight in far-off California was the only reason his client settled. “You have to realize the difficulty and cost of traveling to California,” he said.

“I was flabbergasted that something like this could go on,” said Fjeldsted.

Gunderson has acknowledged in court records that he has received gifts or bequests “on a very few occasions . . . from close friends who were also clients.” But he has vigorously denied any wrongdoing. He insisted that he has conducted his practice “with honor and dignity.”

Officials with the State Bar of California say there is no record of any disciplinary actions against Gunderson.

In an interview with The Times in August, James Gunderson declined to discuss details of the probate case that recently made him $3.5 million richer, or other, similarly questionable cases that turned up in a Times investigation that included interviewing more than 100 people and reviewing more than 100 court cases handled by the attorney.

In deflecting some questions, Gunderson invoked the attorney-client privilege, which commonly prohibits lawyers from discussing the confidential affairs of clients.

When Gunderson was interviewed in his penthouse office overlooking the Leisure World area, he spoke amiably and expansively about himself, an exotic bird collection he maintains and how his law practice flourished when he moved it in 1964 from Seal Beach into the sales office of the Leisure World at Laguna Hills, which grew into the world’s largest gated retirement community.

When the questions turned to the inheritances he had received, or the acquisitions he had made from the estates of his clients, he gave noncommittal answers.

“Older people rely more on professional people than younger people do,” Gunderson said. “They listen to a professional person and say, ‘That sounds good for me,’ and pretty soon they sign up for it.”

Some professional relationships with clients have turned into friendships, the lawyer said. “It’s very difficult to separate yourself from your client. You’re a pretty lousy person if you know someone for 40 years and not have some as personal friends. When you know some of them as long as I have, some of my clients are my best friends.”

Gunderson followed that encounter with a warning letter to The Times, and suggested that some of the information obtained by this newspaper had been stolen from his files during a burglary.

Law enforcement officials said they had no report of any burglary at his office. The Times investigation relied on public records in Probate Court files, private trust documents obtained by The Times and filings with county property recorders.

Absolute Authority Over Large Estates

The records and documents revealed that Gunderson has received, among other things:

The tax-free, $3.5-million bequest from Merrill A. Miller, a 98-year-old man whose relatives, in court documents, said “was blind and failing in his mental and physical faculties” at the time he signed a new will.

The AT&T; stock worth at least $225,000 from Emerald Mary Sully, who was diagnosed as having senile dementia five months before her new will was drafted.

Virtually all of a man named Martin Fisher’s $427,000 estate, including a 316-acre farm in Fresno County, a Leisure World condominium valued at $67,000 and $75,000 in cash savings that had been deposited in a Laguna Hills savings and loan founded by Gunderson across the street from Leisure World. The will Gunderson prepared for Fisher bequeathed only $2,000 to Fisher’s sole surviving relative, Richard B. Fisher, a brother who lived in Fort Worth. Richard Fisher’s daughter said her father died virtually penniless and heartbroken that he couldn’t even have some family keepsakes that had been in his brother’s possession.

A mortgage that ultimately gave Gunderson title to one square mile of land in San Bernardino County. The mortgage was originally held by Margaret Hough, one of Gunderson’s clients. A year after her death, Gunderson foreclosed on the property, and transferred it into his name. It is unclear how much, if anything, Gunderson paid to acquire the mortgage.

All of these transactions involving Gunderson’s clients are revealed in public records. Many of the estates he has handled are private trusts, which are neither public nor under the oversight of the probate courts.

In the Miller case, the will actually conveyed the deceased man’s entire estate to a private trust, which in turn gave Gunderson--outside the scrutiny of probate court--the $3.5-million bequest.

Gunderson’s daughter and law partner, Linda Gunderson, said her father “has never violated a profession rule of conduct that I’m aware of.”

She said the case in which other heirs are challenging the $3.5-million gift to her father is “all about a bunch of relatives who are greedy and slandering my father for their own gain.” She declined further comment, saying “it’s an ongoing litigation.”

Gunderson told The Times that he has drawn up trusts for more than half of his 7,000 Leisure World clients.

Several of those trusts, copies of which were obtained by The Times, gave Gunderson sole and absolute authority over estates valued in the hundreds of thousands of dollars. He was frequently empowered to dispose of their assets any way he chose, and he has often elected to pay large sums of money to parties with whom he was doing business, to his law partners for legal services to the estates in question, to various charities and to his alma mater.

In one case, Gunderson arranged to make a $5,000 donation on the condition that the money come back to a company owned and operated by members of his immediate family. According to officials of the Woodland Park Zoological Gardens in Seattle, Gunderson approached them with the offer to donate $5,000 from an estate he was handling if they would use the money to buy a pair of exotic African birds that were available for sale from a California company. Unmentioned was the fact that Gunderson’s son and daughter ran the company.

Passion for Exotic Birds and a Top-Flight Aviary

People who know Gunderson well say that he has a consuming passion for exotic birds. A personalized license plate that adorns his Mercedes-Benz sedan reads BIRDS 7. He boasts one of the West Coast’s most extensive private collections, one that rivals even that of the world-famous San Diego Zoo, which says it has bought from or bartered with Gunderson for at least 200 rare birds over the years.

He and his agents travel the world over in search of rare specimens. One of his bird safaris to Africa resulted in the acquisition of several hundred exotic species from Tanzania.

Gunderson’s hilltop home has a back-yard aviary that is a regular destination for local schoolchildren being taken on field trips. The aviary, built by the same firm that constructed the San Diego Zoo’s, houses hundreds of birds, including toucans, hornbills, rollers, quail, hummingbirds, partridge and pheasants--some that come from as far away as the frozen foothills of the Himalayas, the Amazon jungle or South Pacific islands.

But Leisure World residents know Gunderson as one of the community’s prominent attorneys, who was willing to even make house calls in the early days of his practice.

One practice employed by Gunderson has been formally condemned by the American Bar Assn., whose guidelines specifically prohibit lawyers from preparing trusts or wills in which they are beneficiaries.

Those guidelines have been adopted in 38 states--though not in California--as the lawyers’ code of conduct, and lawyers can be disbarred for violating them. California, which has more lawyers per capita than any other state in a nation that far and away leads the world, is not among the 38 states that have adopted the ABA Model Codes.

“A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer . . . any substantial gift from a client, including a testamentary gift,” the ABA’s Model Code reads.

The California State Bar’s Rules of Professional Conduct simply state that “a member (lawyer) may accept a gift from a member’s client, subject to general standards of fairness and absence of undue influence.” The rules add that California lawyers “shall not induce a client to make a substantial gift” to them or to their relatives.

The most authoritative interpretation of the California rule is contained in an oft-quoted 1962 California Supreme Court decision, Magee vs. the State Bar of California.

In that decision, the state Supreme Court held “there is no rule that attorneys should never draw wills in which they receive gifts.” But the high court judges went on to say that “if the gift to the attorney is a modest one . . . there is nothing improper in drawing wills for close friends or for clients.”

And the justices then noted that the $21,000 inheritance involved in the case before them was a “substantial gift,” and that San Francisco lawyer Edward Howard Magee consequently lost his claim to the money.

“Even though an attorney may be acting only to carry out the wishes of his client in drawing a will containing a gift to himself,” the Supreme Court declared, “he should send the client to another lawyer when the circumstances would support an inference of wrongdoing.”

Legal Experts Question Ethics of Inheritances

After being told about Gunderson’s inheritances, Orange County Superior Court Judge Tully H. Seymour, the sitting probate judge in Santa Ana, said he could “envision it happening once, where it’s a special relationship, and the attorney becomes a surrogate relative, particularly where there aren’t other close relations. But for (an attorney to inherit from a client) many other times, it’s highly unusual. I’m concerned,” he said.

Martin L. Levine, a law professor at USC and founder of the National Senior Citizens Law Center, said he has “never heard of a lawyer who’s had so many grateful clients. It suggests this is the most wonderful lawyer, or there is something questionable going on.”

Nancy Coleman, director of the ABA’s Washington-based Commission on Legal Problems of the Elderly, said there has been a growing national consensus against attorneys preparing wills in which they or their relatives benefit.

Coleman noted that the Supreme Court of Wisconsin disbarred a lawyer for drafting a will that left a $10,000 bequest--not to herself, but to her sister. In that 1972 case, State vs. Gulbankian , the language used by the Wisconsin Supreme Court echoed, almost word for word, the language that California’s high court justices had used a decade earlier in the Magee ruling. “A lawyer may draft a will in which he is beneficiary only when . . . he receives no more than would be received by law in the absences of a will,” the judgment states. “We extend this concept to the drafting of a will in which a close relative is a beneficiary, such as a sister. . . . “

Legal ethicists say California courts are becoming increasingly mindful of how attorneys can abuse relationships with their clients by exercising “undue influence” over the elderly, who are frequently lonesome and rely on their attorneys for more than just legal advice.

They point to a 1989 case, The Estate of Margaret H. Lind , where the 2nd District Court of Appeal noted that “such exercises of undue influence by attorneys are especially egregious, and require the closest scrutiny” by a probate court, which shouldn’t wait for someone to challenge a will but “should, upon its own motion, raise the presumption of undue influence and require the attorney to rebut the presumption” in suspect cases.

Gunderson was the first attorney to set up shop in Leisure World when the Laguna Hills retirement community opened in 1964. In a recent interview, he recalled how real estate developer Ross Cortese allowed him to use Leisure World’s sales office as his own, so that new residents would have a lawyer on hand to draw up their legal documents.

That was when the community had fewer than 2,000 residents. Today, it is the nation’s largest gated retirement community and home to 21,000 senior men and women.

Many of them are flush with cash because they have sold their homes or businesses before retiring here; brokers estimate the average resident’s estate at $300,000 to $400,000.

Gunderson has seen his own fortunes rise over the years. His office is perched on the top floor of a five-story glass building that is among a row of banks, brokerage houses, insurance companies and other money handlers who have found Leisure World’s residents a gold mine for investment cash.

From the early days, when his clients were the newly retired looking forward to rounds of golf and community activities, Gunderson’s law practice has changed as the ravages of aging have altered the lives of clients who are victims of Parkinson’s disease, Alzheimer’s disease and senile dementia. The lawyer said one-fifth of his practice involves frail and feeble retirees who can no longer care for themselves or manage their assets.

Gunderson is one of a handful of Orange County lawyers who file court documents in such cases seeking appointments as conservators, or legal guardians, of their clients. Records show that he almost always employs his law partner as his attorney, thereby guaranteeing that his law firm receives separate fees for acting as conservator and as attorney for the conservator.

As conservator, Gunderson is empowered to take charge of his clients’ bank accounts, to handle their investments and even to make critical medical decisions. But he has also used his power as conservator and executor of some clients’ estates to benefit organizations and businesses connected to him--particularly a savings and loan association and a bank that he founded, some charities and his family’s bird business.

In the August interview with The Times, Gunderson said he has only acted in his clients’ best interests: “If the people weren’t sure that I’d carry out their wishes,” he said. “They would never tell me to do it.”

Since then, Gunderson has repeatedly declined to be interviewed on these and other issues, even though a Times reporter made dozens of telephone requests and sent the lawyer a certified letter seeking his comments. Santa Ana attorney Barry Michaelson, who is representing Gunderson, said that he has advised his client not to comment.

In the case where Gunderson extracted a quid pro quo for the $5,000 bequest, the executive director of the Woodland Park Zoological Gardens in Seattle said Gunderson contacted zoo officials in 1985, asking if they were interested in making a deal: The lawyer would donate $5,000 from the estate of the late Anne Clay, of Leisure World, if the zoo used the money to buy a pair of Tanzanian kori bustards from a company called Bellbird.

‘Quid Pro Quo’ Pays for Bird With Estate Funds

Unbeknown to Woodland Park officials, the company shared the same office address as Gunderson’s law firm. Gunderson’s son, Douglas, was listed as the company president, and his daughter and law partner, Linda, was listed as Bellbird’s registered agent.

Linda Gunderson said she prepared the legal documents to incorporate the company in 1985, and insisted that was her only association with the firm.

But documents obtained by The Times reveal that James D. Gunderson himself was deeply involved in the operations of the company, and financed the company’s acquisitions of exotic birds from around the world with his personal funds.

Bob Davidson, executive director of Woodland Park, said the zoo’s bird curators did not know that Gunderson was connected to the company that sold them the birds. “The notion that one would receive a bequest to pay for a purchase is very odd,” Davidson said. “It was a quid pro quo. . . . Had they known (about the connection), they would have asked a few more questions.”

Gunderson has donated tens of thousands of dollars from some of his clients’ estates to other bird groups and zoos that buy or trade rare exotic birds with him.

Take for example the case of Clay, who died in 1984, leaving an estate valued at almost $600,000. Clay said in her will that her wish was that, after certain bequests were made, some of the residue “might be used to provide help for the American Indians.” But the document gave Gunderson the power to distribute the estate’s residue--$271,000--to charitable organizations chosen by him.

Gunderson donated $45,000 from that amount to three American Indian organizations. The remainder went to Woodland Park Zoological Gardens and four other avian organizations with which Gunderson had business dealings: The San Diego Zoo and the World Pheasant Assn. of USA Inc. received $45,000 each, the Los Angeles Zoo received $20,000 and the avian sciences department of UC Davis got $2,000. Gunderson also gave $5,000 each to his alma mater, Augsburg College in Minneapolis, and his daughter’s alma mater, the McGeorge School of Law Alumni Fund.

Gunderson regularly trades exotic birds with the San Diego and Los Angeles zoos, and he is listed as a director, agent and attorney for the World Pheasant Assn.

Records filed with the state attorney general’s Registry of Charitable Trusts revealed that the $45,000 donation to the World Pheasant Assn. from Clay’s estate represented virtually all of the money the association raised from the public in 1984 and 1985.

The association was suspended by the state Franchise Tax Board in 1987 for failing to file documents showing how they spent those public contributions for the two previous years.

In 1988, the state attorney general’s office wrote Gunderson, warning that the directors of the pheasant group “were responsible for a substantial amount of charitable assets and an accounting of your stewardship is required for the public record.”

The records still have not been filed, officials say.

Don Tucker, a Hacienda Heights resident who is the new president of the association, said in an interview with The Times that he could not say how the $45,000 was spent. He said the group was working to get its tax-exempt status reinstated, but he declined to answer further questions.

Linda Gunderson said her father received no benefits from the contributions to the pheasants’ association, zoos and other charities. She said James Gunderson selected those charities only when he was given the sole authority to distribute the residue of estates.

“It seems natural that one would donate money to causes that one is familiar with,” Linda Gunderson said.

James Gunderson’s alma mater and the San Diego Zoo, which received a total of $50,000 from Clay’s estate, also benefited from Gunderson’s generosity in the case of another estate.

Gunderson gave the two groups $50,000 each from the estate of Lulu Berniece Thompson, a Leisure World widow who died last year at the age of 99, leaving an estate valued at almost $1 million.

A document filed in probate court said that Thompson, whose affairs had been managed by Gunderson as her legal guardian since 1982, wanted her entire estate to fund medical scholarships. In 1983, an independent attorney who was asked by a judge to interview Thompson reported that the nonagenarian told her that she had no beneficiaries and that her estate “will be left to UCI Medical Center for scholarships.”

But a will dated June, 1989, left not a dime to UCI, or for scholarships. Instead, it bequeathed half of Thompson’s estate--$461,000--to Gunderson’s then-secretary, Margaret Perez, 52, who told The Times that she planned to use the money to provide for her retirement.

Perez, who is now employed as a secretary for probate lawyer Sallie T. Reynolds, Gunderson’s former law partner, said Thompson never mentioned that she wanted to endow medical scholarships with her estate.

Perez said she first met Thompson in Gunderson’s office in 1976 and “somehow we clicked.” Their friendship developed to the point where “she considered me family,” she said.

“She was lonesome,” Perez said. “In the last days, she lost hope in everything.”

Gunderson did not receive a direct gift from the estate, but records show that his law firm collected $109,264.19 in conservator and attorney fees from the estate between May, 1983, and August, 1991.

Gunderson’s law firm prepared Thompson’s will after Gunderson was appointed her legal guardian. He also witnessed her signature on the document, which named him executor and empowered him to distribute 37% of the estate--$341,000--to charities designated by him.

An official at Augsburg College, the lawyer’s alma mater, said the school received $50,000 from Thompson’s estate shortly after he visited Gunderson’s San Juan Capistrano home to ask for his help with the school’s fund-raising efforts.

“We had asked him to keep his eyes open for people who want to make donations,” said Thomas Benson, director of the college’s fund-raising program. “As far as I know, he’s never asked anyone to give money to Augsburg. He’s been administrator of estates where there’s (no blood heir and) the estate asked him to pick out one or two other charities. He gets a lot of satisfaction out of helping” charities.

Officials at the San Diego Zoo acknowledged receiving at least two bequests from estates handled by Gunderson, but said that Gunderson received no special considerations in their business dealings in return.

“We’ve never cut him a deal,” said spokesman Jeff Jouett, after noting that Gunderson has sold and traded up to 200 birds with the zoo’s aviary over a number of years. “We’ve traded with him at market value, we never gave him a break.”

Gunderson and his wife, Marjorie, have been members of the Zoological Society of San Diego since 1977, Jouett said. He acknowledged that Gunderson specified how the bequests from the Thompson and Clay estates should be spent: on projects involving exotic birds at the zoo and its Wild Animal Park.

In the past, Gunderson also engaged in the practice of depositing his clients’ trust funds in financial institutions in which he had an ownership interest. “I’m amazed that this could happen,” said Richard C. Solomon, a law professor who teaches legal ethics at Southwestern University in Los Angeles. “He cannot look out for his clients and fulfill his obligations to his bank. He can’t serve two masters.”

Probate records revealed that on numerous occasions Gunderson kept his clients’ funds, first in an S&L; he founded, and later in a bank he controlled before its collapse.

Gunderson was an organizer, director and substantial shareholder in Saddleback Savings & Loan, which was eventually sold to Coast Savings & Loan in 1980.

Three years after that sale, Gunderson became founder and chairman of Saddleback National Bank, which he also located near his law practice, just across the street from the main gate at Leisure World. In 1986, federal regulators closed Saddleback, declaring that high operating costs and bad loans had made the bank insolvent.

While the bank was still in business, Gunderson sometimes used his authority as sole executor of his clients’ estates to deposit their funds there. Often, the deposits exceeded the $100,000 amount insured by the Federal Deposit Insurance Corp.

For example, Gunderson deposited $250,000 from the estate of Anne Clay in his bank in 1985, more than a year after her death.

As conservator of the estates of Sully and Thompson, he also kept sums of $100,000 or more in Saddleback.

And records show that Gunderson held $75,102 in a joint certificate of deposit in Saddleback Savings & Loan Assn. with Martin Fisher, whose 316-acre Fresno farm he inherited.

The Rules of Professional Conduct in force at the time said that lawyers in California should avoid such conflict-of-interest situations unless they have the express written consent of the client. It was unclear whether Gunderson disclosed to his clients that he had business and professional relationships with financial institutions in which some of their funds were deposited.

In a longstanding case on the administration of estates, The Estate of Joseph Louis Gilmaker, the California Supreme Court has held that even without the absence of sufficient instructions from clients, administrators of estates are “under the duty to place the funds in various institutions where they would be fully” covered by federal deposit insurance.

Ron Talmo, dean of the Irvine campus of Western State University College of Law, concurred with Solomon’s view that Gunderson could not properly safeguard both his own and his clients’ interests in such cases. Talmo, who is a specialist in professional responsibility, said he too was puzzled that any attorney could acquire millions of dollars from his clients.

“Clients bake pies for you, they might offer to build your bookcases, but when it comes to leaving sums of money or land for you in a will, it’s not common. Normally, people leave their things to their relatives, not to their lawyers.”

Times staff librarian Sheila A. Kern contributed to the research for this report.

Glossary of Legal Terms

Affidavit--A declaration or written statement made voluntarily and taken under oath by an officer of the court or a notary public.

Beneficiary--One who benefits from an estate. For example, a person named in a will or trust to receive property.

Bequest--A gift from an estate through a will or a trust.

Conservator-Someone appointed by a judge to manage the affairs and estate of a person who has been ruled incompetent.

Estate--All that a person owns.

Heir--One who inherits property from an estate upon someone’s death.

Inheritance--Property that passes to an heir from an estate.

Inheritance tax--A tax on the transfer or passing of property. The tax is not on the property itself, but on the right to acquire it through a will or a trust.

Probate court--Where a judge oversees the proper disposition of a will or trust when someone dies. The court also monitors the administration of estates and is empowered to appoint conservators, or guardians.

Quid pro quo--A Latin term used in law when there is an exchange of one valuable thing for another.

Trust--A trust is a legal entity that avoids probate by holding title to the owner’s home, car, bank accounts, real estate, stocks, bonds and other major assets. The contents of a trust are not recorded so the public may not know who is the beneficiary after the creator of the trust dies, or what assets are included.

Will-A legal instrument by which people dispose of or hand down their property, to take effect after death.

Source: Black’s and Barron law dictionaries and Times staff reports