O.C. Attorney Gunderson Quits the Law

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 possibly 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 attorney, Allan Stokke, a Santa Ana lawyer who represented him during the State Bar investigation, 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.”

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 by The Times’ disclosures to introduce reform legislation.

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 barring 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 powerful group of about 600 attorneys, also issued a strongly worded statement, saying, “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 S. Eisenberg, the group’s president, said that if it can be established that some heirs were victimized, he hoped they would seek “fair and just compensation for their losses.”

After The Times articles appeared, State Bar officials in November, 1992, assigned three attorneys and one investigator to look into Gunderson’s actions. Before Gunderson submitted his resignation, they were planning to file charges against him involving conflict of interest and “inappropriate business arrangements with clients,” Heflin said, declining to elaborate.

Gunderson, a San Juan Capistrano resident, cannot be reinstated to practice law in California until those disciplinary matters are resolved, Heflin said, adding that 100 of the 600 lawyers disciplined by the State Bar in 1993 resigned with charges pending.

Heflin said the State Bar historically has received few complaints about probate lawyers, but “this investigation has taught us that we cannot get complacent.”

Stokke, Gunderson’s attorney, noted that no formal charges were filed by the State Bar. “There was no focus or allegation that money had been stolen,” he said, “rather the investigation focused primarily on hypertechnical violations akin to accounting errors as opposed to ethical conduct.”

But Gunderson’s legal troubles are far from over.

In March, a civil trial begins in Orange County Superior Court in a case where relatives of a 98-year-old Leisure World man, Merrill A. Miller, allege that Gunderson used fraud and undue influence to obtain a $3.5-million, tax-free bequest.

Gunderson’s lawyers say they are ready to defend him on those allegations.

“Jim’s practice was a model for the way attorneys should treat their elderly clients,” said Steven L. Weinberg, a Los Angeles attorney who is representing Gunderson in the Miller matter. “I know it is hard to swallow at this point, but wait till the trial and that will be clearly supported.”

John H. Westover, a Phoenix attorney who is representing the contesting heirs, laughed aloud when he heard Weinberg’s comments.

“I would hope that no attorney would use this conduct as a model,” Westover said. “The public deserves better attorneys who would subordinate their own interest to the interests of their clients.”

Westover said Gunderson resigned because he realized that “disbarment was a foregone conclusion. The best thing he could do was resign and stop the State Bar’s investigation.”

The resignation almost certainly ends Gunderson’s probate law career, which began 38 years ago when he first 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 flocking to the retirement 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 the $3.5-million bequest from the estate of 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 propriety. Miller’s relatives have accused Gunderson of taking advantage of Miller to secure the bequest.

Other heirs have made similar allegations in a case in which 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.

Throughout the lengthy State Bar investigation, Gunderson and his lawyers vigorously denied any wrongdoing in these cases.

Gunderson’s law firm also prepared trusts that gave Gunderson authority over estates valued in the hundreds of thousands of dollars. He often elected to donate large sums of money to parties with whom he was doing business, to his law partners for legal services to the estates in question, and to his alma mater.

Superior Court Judge Tully H. Seymour, the supervising probate court judge who ordered an investigation into Gunderson’s practice in November, 1992, said Monday that he wished he “could believe that this (resignation has) closed the chapter on the disturbing set of circumstances. Unfortunately, there are probably other attorneys in Orange County who have taken unfair advantage of the elderly.”

Times staff writer Kevin Johnson contributed to this report.

Gunderson Reforms

The Gunderson case has spawned some changes in how attorneys treat the writing of wills and creation of trusts:

* Bill by Assemblymen Tom Umberg and Bill Morrow, effective Jan. 1, invalidates most bequests to attorneys who prepared wills or trusts giving them gifts.

* New law also prohibits attorneys from acting as trustees of trusts they create for clients, or the payment of attorney fees to law partners or family members of conservators.

* California State Bar is working toward the adoption of a new rule making lawyers subject to disbarment for preparing wills or trusts that bequeath them gifts.

What’s Next?

* Gunderson’s resignation expected to go to the California Supreme Court for routine approval next month.

* Orange County district attorney’s office expected soon to review a Sheriff’s Department investigation into Gunderson’s inheritances.

* State Bar’s board of governors will give final review to a proposed rule making lawyers subject to disbarment for writing themselves into wills or trusts, then submit the rule to the state Supreme Court later this year for final approval.

* Civil trial involving a controversial, $3.5-million, tax-free bequest that Gunderson received from client Merrill A. Miller, expected to begin in March in Orange County Superior Court.

How Gunderson Came to Grief

* Nov. 22, 1992: The Times reveals how Gunderson received millions of dollars in cash, stock and real estate from the estates of elderly clients despite California Supreme Court ruling that says accepting anything more than a “modest” gift from a client raises questions of propriety.

* Nov. 23: Orange County Sheriff’s Department, Orange County Bar Assn. and Tully H. Seymour, supervising probate court judge of the Orange County Superior Court, all launch investigations into Gunderson’s activities.

* Nov. 24: California State Bar announces it is also investigating Gunderson.

* Feb. 3, 1993: State Bar formally proposes a strict new rule forbidding lawyers to prepare wills or trusts that bequeath them gifts.

* Feb. 25: California Assembly votes 67 to 0 to approve bill by Assemblymen Tom Umberg (D-Garden Grove) and Bill Morrow (R-Oceanside) restricting attorneys from making themselves beneficiaries of their clients’ estates.

* June 24: The Times reports Gunderson’s agreement to settle lawsuit involving Leisure World widow Gladys Grove, whose relatives claim Gunderson caused her to lose in excess of $500,000 from her estate. Settlement is kept confidential.

* Aug. 1: Gov. Pete Wilson signs the Umberg/Morrow bill, making it law effective Jan. 1.

* Jan. 10, 1994: State Bar announces Gunderson has resigned from the Bar as prosecutors prepare to file charges against him in State Bar court.

Source: Times reports

Researched by DAVAN MAHARAJ / Los Angeles Times