Lawyer Resigns After Probe of Bequests : Law: James D. Gunderson, who allegedly was the beneficiary of millions of dollars from his Leisure World clients, had faced conflict-of-interest charges from the State Bar.

James D. Gunderson, the target of a State Bar investigation for allegedly making himself the beneficiary of millions of dollars in bequests from the estates of his elderly Leisure World clients, has surrendered his license to practice law, authorities said Monday.

State Bar prosecutors said Gunderson agreed to resign after they told him that they were prepared to file conflict-of-interest charges against him that could have led to his disbarment.

“In our profession, the worst (punishment) is to be disbarred, and a resignation with charges pending operates the same way,” said Robert Heflin, the State Bar’s chief trial counsel.

Heflin would not disclose details of the charges that were to be filed against Gunderson, citing state laws that protect the confidentiality of some disciplinary matters involving lawyers.

Gunderson’s attorneys issued a statement noting that Gunderson “is 69 years of age, and has long planned to retire at this point in time. For 38 years, his conduct has been unblemished and he has never before been disciplined,” said Allan H. Stokke, a Santa Ana lawyer who represented Gunderson during the State Bar investigation.

The resignation of the Laguna Hills lawyer came 14 months after The Times published articles detailing how Gunderson inherited millions of dollars in cash, stock and real estate from clients whose wills and trusts were prepared by him and other members of his law firm. The inheritances are still being investigated by the Orange County Sheriff’s Department.

News of Gunderson’s resignation was welcomed by an influential group of Orange County lawyers, as well as by the two California legislators who were prompted to introduce reform legislation in the wake of The Times’ disclosures.

Assemblymen Tom Umberg (D-Garden Grove) and Bill Morrow (R-Oceanside) co-sponsored legislation, which became law Jan. 1, generally prohibiting attorneys from preparing wills that made them beneficiaries of their clients’ estates, and also barred them from acting as trustees of trusts they create for clients.

Umberg called the resignation “the best for all concerned.”

Morrow was more blunt in his assessment, saying “Mr. Gunderson saw the handwriting on the wall.”

The Orange County Trial Lawyers Assn., a group of about 600 attorneys, also issued a strongly worded statement. “This should be a message to all professionals that they absolutely will be held accountable for their conduct and they are not above the law.”

Lawrence Eisenberg, the group’s president, said that if it can be established that some heirs were victimized, he hoped that they would seek “fair and just compensation for their losses.”

The resignation almost certainly ends Gunderson’s probate law career, which began 38 years ago when he established a practice in Long Beach. When Leisure World Laguna Hills opened in the early 1960s, Gunderson moved there to begin offering his services to the thousands of retirees who were then moving to the community.

A yearlong investigation by The Times revealed that Gunderson, who boasted of representing more than 7,000 elderly clients, had inherited substantial assets, in some cases where he or his law firm had arranged for the preparation of wills and trusts for the deceased.

Gunderson accepted the inheritances--including a $3.5 million bequest from the estate of Merrill A. Miller--despite a longstanding California Supreme Court ruling that says anything more than a “modest” gift from a client to that client’s attorney raises questions of impropriety.

In a lawsuit expected to go to trial soon in Orange County Superior Court, Miller’s relatives have accused Gunderson of taking advantage of 98-year-old Miller to secure the bequest.

Other heirs have made similar allegations in a case where Gunderson inherited $250,000 in AT & T stock from a Canadian woman who had been declared senile five months before Gunderson prepared her last will and testament, making himself the estate’s major beneficiary. The other heirs sued and Gunderson reached a confidential out-of-court settlement with them, which included a payment by Gunderson of $60,000.

Gunderson and his lawyers vigorously denied any wrongdoing in these cases and throughout the lengthy State Bar investigation. Gunderson defended the inheritances as freely offered gifts from clients who became friends over the usually long periods of time that he handled their affairs.

Time staff writer Kevin Johnson contributed to this report.