Heiress Duke’s Ex-Butler Ousted as Estate’s Executor : Probate: Judge cites his ‘substance abuse’ and waste of assets from the $1.2-billion fund. Bank is also replaced.
In a scathing decision affecting the future of one of the nation’s largest charitable foundations, a judge Monday ordered the immediate removal of former butler Bernard Lafferty as chief executor of the $1.2-billion estate of tobacco heiress Doris Duke.
In replacing Lafferty with a leading New York lawyer, Manhattan Surrogate’s Court Judge Eve M. Preminger cited several “classic grounds” for his removal, including waste of assets and “substance abuse.” Preminger lambasted the “basically illiterate” former butler for such excesses as crashing Duke’s Cadillac then having the estate provide him with a new one--along with a chauffeur--and using estate funds to spruce up her gated Los Angeles estate, Falcon Lair, where he continues to live.
The judge also replaced the New York bank that had been managing the daily affairs of Duke’s estate as Lafferty’s co-executor since her 1993 death, at 80, in Falcon Lair. Preminger chastised U.S. Trust Co. of New York for failing to rein in Lafferty’s spending and instead giving him more than $825,000 in loans to “appease” him.
The decision follows a barrage of allegations from challengers to Duke’s will, who in recent months have questioned the circumstances of her death and the capabilities of Lafferty, a ponytailed Irish immigrant who has but a grade school education.
Preminger did not rule Monday on several of the controversies, including whether Duke was coerced into signing her last will in a Los Angeles hospital bed in April, 1993, or whether overdoses of morphine hastened her death six months later.
But, citing “the potential for harm to the estate,” she ordered “immediate removal” of both Lafferty and U.S. Trust, replacing the bank with Morgan Guaranty Trust Co. of New York.
“There is nothing ordinary about this estate,” Preminger said in an 18-page decision. “Ms. Duke intended that her assets create one of the largest vehicles for dispensing charity in the world. The court has the responsibility to assure that [her] determination to benefit the public be fulfilled and that the estate is administered without waste or mismanagement.”
Attorneys for Lafferty and U.S. Trust vowed to “vigorously” appeal the decision.
“The removal of Doris Duke’s personal choice as co-executor of her estate without a hearing is an outrageous abuse of judicial discretion,” said Howard Weitzman, who represents both Lafferty and the Duke estate. He said the damaging findings described by Preminger as uncontested were, in fact, “totally disputed. . . . She’s just wrong.”
If Preminger’s ruling stands, Alexander D. Forger, 72, will serve as temporary administrator of the estate until courts in New York determine the legitimacy of a series of wills and codicils signed by Duke in her final years. Forger is currently president of the U.S. Legal Services Corp. and has represented the likes of David Rockefeller and one of Duke’s longtime friends, Jacqueline Kennedy Onassis--whose estate he administered as well.
Forger, also chairman of the American Bar Assn.’s Commission on Legal Problems of the Elderly, “is uniquely qualified” to oversee the Duke estate, the judge said.
Though Duke died in California, her will was filed for probate in New York, where she maintained one of her five homes. In January, Preminger appointed a special investigator to look into “a number of serious and startling allegations” arising during legal challenges to the will.
Basing her decision largely on the report issued last month by the investigator, Richard H. Kuh, the judge said “undisputed facts” call for the removal of Lafferty on four grounds: commingling of estate and personal assets, waste of assets, improvidence and want of understanding, and substance abuse. Among her specific findings:
* That Lafferty used estate funds “to establish a profligate lifestyle. He uses Duke’s residences as his homes, living in her California and New Jersey bedroom suites. He authorized renovations to his California living quarters, at estate expense, including enlarging the area of glass bedroom doors facing a private garden . . . and installing in the private bath a spa bathtub and marble flooring.”
* That he continued to draw a $100,000 annual salary as Duke’s “executive assistant,” even after her death, but nevertheless was insolvent and had “undertaken massive debt,” running up $89,000 in unpaid credit card charges and borrowing $825,000 from U.S. Trust.
* That he had “not only a lack of appreciation of the most basic financial matters, but a cavalier attitude toward money in general,” evidenced by his estimate that he bought $60,000 in antiques during 1994, when their actual value was $650,000.
* That he is “an admitted alcoholic” who has gone on binges even after being named Duke’s chief executor, “including at least one instance where he became combative and violent.”
In calling for the removal of U.S. Trust, Preminger faulted it for “acquiescence in the misconduct” of Lafferty. The judge suggested that the bank was trying to keep him happy because, under Duke’s will, he had the power to remove it from a co-executor’s role that brought U.S. Trust millions of dollars in fees.
“If ever there was a need for a corporate fiduciary to rein in the excesses of an unsophisticated and unknowledgeable individual co-fiduciary, it exists in this estate,” Preminger wrote.
In court papers filed earlier this month, attorneys for Lafferty sought to head off such criticisms by offering to relinquish his power to remove the bank or trustees of the new Doris Duke Charitable Foundation, which was created by her will. Lafferty appointed its board, which includes actress Elizabeth Taylor and New Jersey Gov. Christine Todd Whitman.
Lafferty’s lawyers also argued that Duke, whose closest blood relative was a half nephew, was competent when she named him her chief executor, saying their relationship was “like that of a mother and son.”
The lawyers said that Lafferty’s personal spending has not affected his performance as a preliminary co-executor, and that his “troubles with alcohol” do not hamper his abilities to discharge his responsibilities, because U.S. Trust handles the estate’s “complex financial matters.”
They also told the judge that the $825,000 the bank loaned Lafferty was “not imprudent” from a business standpoint because he will inherit $500,000 a year under Duke’s will, and receive a $5-million executor’s commission.
Duke’s final will is being challenged by Dr. Harry B. Demopoulos, a former physician to the heiress who was named as her co-executor in an earlier will. The will also was contested by Chandi Heffner, who at 35 was adopted by Duke and later disavowed, but she dropped her challenge after reaching a reported $65-million settlement with the estate--a deal that now could unravel with the appointment of new administrators.
A hearing is scheduled next week on Demopoulos’ bid for standing to challenge the will.
“We are obviously very pleased and relieved,” one of his lawyers, Suzelle Smith, said after Preminger’s ruling.
She said Demopoulos will ask for a jury trial on his claim that Duke’s last will was “clearly a product of fraud and undue influence.”
Duke, long known as “the richest girl in the world,” inherited the Gilded Age fortune of her “Tobacco King” father, James (Buck) Duke, who founded the American Tobacco Co. For decades, she was the object of public fascination, but became an eccentric recluse in later years.
Veteran trust lawyers said Monday that it is not unusual for individual executors to be removed by the courts for a variety of causes. They noted, however, that it was highly unusual for an entire bank to be dismissed.
“This is an enormous blow to the bank,” said Ray Dowd, who is representing three former Duke employees in a lawsuit against U.S. Trust and the estate’s lawyers.
Forger, the new temporary administrator of the estate, said in a statement that he welcomed the opportunity to “assist in the implementation of Doris Duke’s many charitable interests and lifelong devotion to improving the quality of life in the community at large.”
He said he would concentrate on resolving conflicts and on implementing the charitable purposes directed by Duke’s will.
The heiress was an active philanthropist during her lifetime, maintaining a foundation that gave out grants reflecting her longstanding passion for animal rights, support for the arts and the restoration of Newport, R.I., where she kept a majestic home, Rough Point. She also gave tens of thousands of dollars to spiritual advisers and yoga and meditation teachers.
At the same time, Duke contributed tens of thousands of dollars to police and fire departments and rescue squads near her various estates.
She also spread gifts over museums, libraries, and organizations fighting breast cancer and conducting research to prevent blindness. In 1992, the year before her death, the heiress gave “cash on various dates” totaling $755,000, according to records filed with the Internal Revenue Service.
But her will elevated her giving to a new level, leaving more than $1 billion to fund the Doris Duke Charitable Foundation, placing it among the top 20 American foundations.
Though Preminger removed Lafferty from the lucrative chief executor’s role, he still could collect the $500,000 annual bequest provided under her will if it is eventually approved.
“It should not need repeating that the hallmark of a fiduciary is not technical expertise, specialized knowledge or professional reputation,” the judge said in replacing both Lafferty and the bank. “It is integrity and attention to ethical considerations that sets a fiduciary apart.”
”. . . No one could read this sorry record and conclude that the Duke estate has been provided with the loyal and honorable service that the law demands,” Preminger added.
