"NY Atty, Judge Accused Of Stealing Over $4M From Trusts"
"Law360 (February 23, 2018, 9:08 PM EST) --
A judge in upstate New York and an attorney have been arrested for allegedly stealing more than $4 million from the family trusts they were responsible for overseeing, the New York state attorney general announced Friday.
Richard J. Sherwood, 57, who is an attorney with an Albany law firm and part-time judge for the town of Guilderland, and Thomas K. Lagan, 59, who is an attorney and former financial adviser, were each charged in a felony complaint filed in Albany City Court with various counts of grand larceny, criminal possession of stolen property and scheme to defraud.
“As we allege, the defendants orchestrated a complex scheme to steal millions from trusts they were responsible for protecting,” Attorney General Eric T. Schneiderman said in a statement.
“We have zero tolerance for those who try to game the system and violate the public trust in order to line their own pockets.”
According to the complaint, Sherwood and Lagan provided estate planning services to former General Electric Co. executive Warren Bruggeman, his wife Pauline Bruggeman and her sister Anne S. Urban starting in at least 2006.
It was in that year, the complaint alleged, that the Bruggemans — who by then were elderly and had a reputation for philanthropy in the Albany region — each set up trusts for themselves that also housed sub-trusts intended to benefit Urban and Julia Rentz, Pauline and Anne’s sister.
Warren Bruggeman died in April 2009, leaving his assets to flow through his trust and on to his wife Pauline, who died in August 2011, leaving behind assets in her trust and elsewhere of more than $19.8 million, the complaint said.
Upon their deaths, the complaint alleged, the trust terms called for Urban and Rentz to each get about $2 million from one of the sub-trusts and for Urban to get another $4 million, half of which was to go into another sub-trust specifically for her “health, education, maintenance and support.”
Once Urban died, the remaining money from that sub-trust was supposed to revert back to her sister Pauline’s trust, the funds from which were then to be divvied up among six charities.
Urban in September 2011 signed paperwork putting Sherwood and Lagan in charge of her sister Pauline’s trust and estate, and two months later, Urban approved the creation of another trust in her name that Sherwood and Lagan were also in control of, the complaint said.
The trust documents allegedly specified that the trustee had free rein to parcel out the trust assets to anyone, as long as the trustee had the successor trustee’s approval.
Given that Sherwood and Lagan were designated as trustee and successor trustee, respectively, the two men were in a position to use the trust to their own benefit, the complaint said.
The complaint alleged that Sherwood then moved $4 million out of the Pauline Bruggeman trust and into the new Urban trust’s bank account, while people close to Rentz — who was suffering from dementia — later sent another $2.9 million to the trust after Sherwood allegedly led them to believe the money was destined for the charities benefited by the Pauline Bruggeman trust.
After Urban died in February 2013, the complaint said, the charities did receive some distributions from Pauline Bruggeman’s trust but didn’t get any of what they were supposed to get from the money that had been set aside for Urban’s care.
That money was in fact being disposed of through the Urban trust that Sherwood and Lagan controlled, according to the complaint.
The two men set up another trust, the Empire Capital Trust, for their benefit in 2014 and funded it with money wired from the Urban trust, the complaint said.
Sherwood also allegedly authorized transfers of more than $6 million in Urban trust money to bank accounts in his and Lagan’s names in January 2015.
The complaint said that an investigator with the attorney general’s office interviewed Sherwood this week at his firm, where he subsequently admitted to conspiring with Lagan to get the more than $2 million from Rentz.
“He also admitted that the [Urban trust] was a mechanism used to steal the estate funds and that he and Lagan divided the proceeds of this scheme in roughly even amounts,” the complaint said.
“Sherwood also stated that the scheme, including the wording of the trusts, was devised by Lagan but that he, Sherwood, drafted the documents in order to effectuate it.”
Contact information for Sherwood and Lagan was not immediately available late Friday.
The prosecution is being handled by Assistant Attorneys General Christopher Baynes and Matthew Peluso of the Attorney General’s Public Integrity Bureau, under the supervision of Bureau Chief Daniel G. Cort and Deputy Bureau Chief Stacy Aronowitz.
Counsel information for Sherwood and Lagan was not immediately available late Friday.
The case is People of the State of New York v. Sherwood, et al., case number unavailable, in the Albany City Court. "
--Editing by Joe Phalon.