Financial Scam’s Victims Go After Lottery Winner’s Jackpot in Court : Lawsuit: They say ex-official of firm ignored or overlooked fraud. The defendant, who won $10.3 million, denies negligence or knowledge of wrongdoing.
In retrospect, Jan. 6, 1990, could be viewed as the luckiest, and possibly the unluckiest, day of A. Bernard Silver’s life.
It was on that otherwise quiet Sunday that the retired civil servant from Palm Springs won big in the California lottery, beating out 15.3 million other entries for $10.3 million, a sum that came to $415,200 a year, after taxes.
But today in Santa Monica Superior Court, a trial is scheduled to begin to determine whether Silver and his wife will be entitled to keep their riches.
At the time of his big jackpot, Silver was chief financial officer of the Marshall Plan, a now-closed Santa Monica-based investment group whose president was convicted last year of defrauding 200 investors of about $26 million. Silver, his wife and the company’s corporate secretary have been sued by investors seeking to reclaim losses of approximately $15 million.
Although attorneys for the investors say Silver did not overtly participate in fraudulent behavior, they argue that he either ignored, or chose to overlook, the longtime unscrupulous dealings of the group, which brokered mortgages and bought and sold trust deeds, and which preyed mainly on elderly investors. And that, say attorneys, makes Silver and other board members liable for the investors’ lost money.
“As the CFO, he was better positioned than anyone else to know what was going on in the company,” said attorney Eric Edmunds, who is representing the investors. “And he was alerted to a lot of signs. He should have known that it all smelled funny.”
Characterized by attorneys for both sides as a flamboyant figure who openly cultivated celebrities and politicians, the company’s president, Nell Marshall, cut a swath through Westside society with her high-profile lifestyle. According to Edmunds, Marshall’s world was one of lavish soirees, annual trips to Churchill Downs to watch the Kentucky Derby, and expensive homes in Beverly Hills and Marina del Rey. Silver, he said, accompanied her for the ride.
“He liked the lifestyle and he liked rubbing shoulders with the celebrities and politicians,” Edmunds said. “He went along with it.” Beginning in the mid-1980s, however, Marshall began to experience reversals resulting from the recession and bad investments. It was then, say attorneys from both sides, that she began taking investors’ money to settle corporate debts, as well as pay for personal expenses. In April, 1991, said Silver’s attorney, Eric Olson, Marshall suddenly dropped from sight, leaving control of the company in the hands of the board of directors, which included Silver.
In June, 1991, the state closed down the Marshall Plan, acting on complaints from investors that their dividend checks were bouncing. When the state investigated the group, officials found that company trust funds were depleted and that investors had walked off with company files to track down their investments, said Diedre Hill, one of the attorneys representing the investors.
Marshall surfaced in July, 1991, and last year was found guilty of five counts of grand theft and sentenced to seven years in state prison.
Olson said there is no evidence that Silver was negligent in his duties or knew of any wrongdoing. The attorney characterized Silver’s role in running the company as mostly ceremonial, given that he had retired from a civil service job and moved with his wife out of the Los Angeles area.
While investors are unclear about the role of Silver’s wife, Betty Jane, also a retired civil servant, they believe she was involved in running the company, Edmunds said.
“What you have is a pair of retired civil servants who happened to be living off the winnings from a lottery,” Olson said. “That the unpaid directors or officers of the company were doing this (illegal) stuff . . . is implausible.”
Olson also contends that Silver’s wealth should not be a factor in deciding whether he was culpable for any of the investors’ losses. Silver, he says, was himself an investor in the Marshall Plan.
While Edmunds declined to say that Silver’s wealth was the overriding motivation behind the suit, he did allow that it was a significant factor.
“It helps us to know that there’s a solvent defendant good for the damages we might get,” he said.
