FBI probes $17 million missing from Santa Clara County trusts

Editor's note:  FBI, the Tyler, Sykes and Gore cases amount over $17 million and are loaded with fraud by the Probate Court of Cook County and its minions.  Lucius Verenus, Schoolmaster, ProbateSharks.com


FBI probes $17 million missing from Santa Clara County trusts


By Karen de Sá





kdesa@mercurynews.commercurynews.com



Posted: 07/09/2012 06:28:25 AM PDT

July 9, 2012 1:28 PM GMTUpdated: 07/09/2012 06:28:30 AM PDT





Related Stories

Jul 3:

California legislator wants conservator fees capped throughout stateJul 2:

Santa Clara County judges vow limits on conservator fees within weeksJuly 3 Readers' lettersJul 1:

Santa Clara County lacks rules to rein in fees of court-appointed conservatorsJun 30:

Santa Clara County's court-appointed personal and estate managers are handing out costly and questionable billsOnline discussion: How to avoid conservatorships, July 2 at noonSanta Clara County court-appointed estate manager quits case after questions about fees, judgmentMercury News editorial: County judges must impose tighter rules for managing vulnerable residents' estatesThe FBI is investigating how $17.3 million has vanished from the trust funds of dozens of people who relied on a Silicon Valley money manager to oversee their life savings.



A love betrayed and an alleged embezzlement scheme are emerging as the storylines behind this latest chapter exposing he vulnerability of trust funds and estates.



Santa Clara County probate court records show the case centers on the office of Christine Backhouse, who administers more than $104 million in assets -- and lacked sufficient insurance to make up for the theft.



While she is responsible for the money, Backhouse claims she was the victim of an unscrupulous boyfriend who, court records allege, secretly wired millions of dollars out of the trusts.



The scandal is unfolding shortly after this newspaper published "Loss of Trust," an investigation that revealed how some of Santa Clara County's estate and care managers charge exorbitant fees to handle the money and affairs of dependent adults under the probate court's watch.



The vast majority of Backhouse's cases were private arrangements with no judicial oversight of either her fees for service, or the process by which the Campbell money manager accounted for and invested her clients' funds.



But taken together, both examples underscore the vulnerability of elderly and often incapacitated people who rely on private business people to oversee their assets.



The FBI probe focuses on Backhouse's


longtime personal and professional partner, Leo Kennedy, who worked as controller in her office. Kennedy is linked in probate court records with unauthorized wire transfers of $17.3 million from 35 individual trust accounts.



Attorneys familiar with the missing money would say little about the victims but note trusts are often established for the elderly and for families to protect their assets for the children.



Now, desperate to recoup the vanished funds, Backhouse is working with white-collar fraud experts at a global law firm to track down the money.



"Ms. Backhouse remains devastated that someone she trusted for so many years could cause so much damage to clients who have reposed trust and confidence in her," Backhouse's attorney Andrew Watters stated in an email. "As soon as Ms. Backhouse learned of the wrongful activity, she terminated both her professional and personal relationship with Mr. Kennedy and reported the loss of $17.3 million to the appropriate federal and state authorities, as well as to the affected clients."



Watters added that his client is innocent: "Until the discovery of the misappropriations, there was no indication to Ms. Backhouse that Mr. Kennedy was not trustworthy. Ms. Backhouse is deeply sorry that these losses happened and she is doing everything she can to make the beneficiaries whole."



FBI spokeswoman Julianne Sohn confirmed that her agency "is looking into allegations that an individual stole funds from Backhouse Fiduciary Services," but said there have been no related arrests.



The Silicon Valley case comes shortly after allegations of two other unusual Bay Area thefts from elderly people's estates. In one instance, an Alameda County Superior Court judge is free on more than $500,000 bail after being arrested on suspicion of stealing his neighbors' belongings that he oversaw through a durable power of attorney. And in a second case revealed in June, two San Mateo County public employees face federal charges that they stole from the assets of deceased people whose estates they administered.



The Backhouse case began unraveling Feb. 7, when Backhouse found a curious mismatch between the balances in her office's internal record-keeping program and her master account at Heritage Bank. That same day, court records show, she called the bank, which then produced 49 one-page wire transfer forms signed by Kennedy. Attorneys say he was sending money to Washington state between May 2010 and December 2011.



Backhouse says the same day she discovered the wire transfers, she confronted Kennedy about the missing funds. Court records claim Kennedy then fled the area.



Attorney Phil Gregory, of the law firm Cotchett, Pitre & McCarthy, is beginning its work on behalf of the gutted trusts to track down the missing money.



The firm will be investigating whether banks and others associated with Kennedy failed to closely monitor what was happening and should bear some responsibility.



Gregory also complained about federal law enforcement officials, who have not apprehended Kennedy. He said his office was easily able to locate Kennedy through family in the East Bay. The FBI had no comment.



"It sure would be a lot easier for these victims if the people investigating Mr. Kennedy would step up the effort and bring him in," Gregory said.



Meanwhile, Backhouse's fiduciary license remains intact while the criminal probe proceeds. And local elder law attorneys remain reflective about the case.



"Whenever you have somebody responsible for large sums of money they have to be extraordinarily careful about the management and security of those assets," said Michael Gilfix, a Palo Alto elder law attorney who is unfamiliar with the specifics of the Backhouse case but noted its clear lessons. "I'm sure she feels even more horrible than you or I can imagine," he said, "but it's often a thankless task and a very challenging business -- you have to be really careful."



Contact Karen de Sá at 408-920-5781.




http://www.mercurynews.com/crime-courts/ci_21031651/fbi-probes-17-million-missing-from-santa-clara

KawamotoDragon.com