Reply to Opposition to
Petition to Set Aside Accountings
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Note: A number of errors apeared in the June 30, 2005 Reply to Opposition. An Errata was filed on July 5, 2005. The text below reflects the changes made in the Errata. |
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CODE: 3790 Patrick Christopher Lear 1805 North Carson Street #120 Carson City, Nevada 89701 Phone: 775-721-9643 Fax: 775-884-4211 In Propria Persona
IN THE SECOND JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA IN AND FOR THE COUNTY OF WASHOE
REPLY TO OPPOSITION TO PETITION TO SET ASIDE ACCOUNTINGS COMES NOW Patrick Christopher Lear, Petitioner, as named heir in the Estate of William Powell Lear and vested remainderman beneficiary of the The William P. Lear and the Moya Olsen Lear Family Trust Agreement (LFT) dated March 9, 1978 and submits this Reply to Opposition to Petition to Set Aside Accountings. REPLY TO OPPOSITION WITH POINTS AND AUTHORITIES 4) BAD FAITH AND MISREPRESENTATIONS OF FACT AND LAW a) Opposition to Petition to Set Aside Accountings 5) PETITIONER'S RIGHTS v. RESPONDENTS' OBLIGATIONS a) Generally - Failure to Comply b) Misrepresentation of Applicable Law c) Limitations - Allocation of Principal and Income d) August 13, 1982 Court Order 7) SILVER LAKE WATER DISTRIBUTION COMPANY 8) ACCOUNTING METHODS AND BOOKKEEPING c) Assets Not Properly Accounted For e) Riverhouse and Rubens Paintings f) Estate Tax and Related Accountings g) Barnard, Vogler & Co. Audit 9) NO CONTEST CLAUSE - TRUSTEES' FRAUD & MISMANAGEMENT
JUDICIAL NOTICEJudicial notice of adjudicatory fact and objection related to the document entitled and designated as "Affidavit of James L. Murphy" dated May 20, 2005 and attached to Opposition to Petition to Set Aside Accountings as filed by Respondents LFT Trustees Tommy L. Tucker, James L. Murphy, Grant Thornton, LLP accountant James L. Murphy and joindered by Grant Thornton, LLP (GT) on June 7, 2005 is not an affidavit and does not meet the legal requirements of an affidavit. Said document contains conclusions and assertions that are not of James L. Murphy's personal knowledge, contains speculation, bare assertions and is not notarized as required by law and Petitioner objects to it being recognized or treated as a valid affidavit by the Court or in the proceedings. NRCP 56(g). Affidavits (NRS 53.045.1) submitted in support of motions must be made on personal knowledge, demonstrate that the witness is competent to testify and must otherwise conform to the requirements of NRCP 56(e). Nevada Civil Practice Manual (NCPM) §11.12. Let the record show that the aforementioned document does not meet the requirements of law for affidavits and that it is taken as such for the purposes of the Court in the proceeding and is hereinafter referred to as the "affidavit". The document designated as "affidavit" is properly stricken pursuant to NRS §53.045, NRS §53.010 and NRCP 56(e). BACKGROUNDOn April 26, 2005, Petitioner filed with this Court a Petition To Set Aside Accountings (Set Aside), and thereafter caused LFT Trustees, James L. Murphy and Tommy L. Tucker to be served with the Petition To Set Aside and a Summons. On May 23, 2005 co-Trustees James L. Murphy and Tommy L. Tucker filed their Opposition to Petition to Set Aside Accountings (Opposition). On May 24, 2005 James L. Murphy and Tommy L. Tucker by and through David J. Reese, Esq., filed a Request for Submission of Petition to Set Aside Accountings in violation of the Rules of Court. On May 31, 2005, Petitioner filed an Objection to Request for Submission. On June 7, 2005, de facto LFT Trustee Grant Thornton, LLP joindered in the Opposition. Co-Trustees, James L. Murphy and Tommy L. Tucker and de facto Trustee Grant Thornton, LLP's (collectively, Respondents) Opposition is specifically and generally unresponsive. Respondents' Opposition makes unsupported, incoherent, frivolous and meritless statements which are apparently intended to confuse and confound the issues presented and to cause further undue costs in litigation to Petitioner and to the LFT. Respondents misrepresent facts and law, continuously conclude this Petitioner doesn't understand the accounting practices used by Respondents but completely fail to explain what standards were used or to provide any evidence to rebut Petitioner's complaint and evidence. By moving to dismiss the Petition to Set Aside, Respondents admit that they did not use standard accounting procedures, and that the accountings as presented to this Court for confirmation cannot be understood by beneficiaries or others not privy to the insider dealings and management of the LFT. The failure of Respondents to specifically deny the allegations made in the Set Aside provides sufficient grounds for this Court to summarily grant this Petitioner's prayer for relief and Order a true, correct, complete and accurate accounting of the LFT. Notice will also be taken that On June 9, 2005 Petitioner filed an Affidavit of Disqualification for Bias, Prejudice and Conflict of Interest for the recusal of Judge Peter I. Breen due to his bias and prejudice against this Petitioner and his close relationship with Respondent Grant Thornton's managing partner, Brian Wallace. This probable bias and prejudice was further aggravated by the fact that Judge Peter I. Breen had sat on the case of the LFT for numerous years and openly declined to review the LFT proceedings, management and accountings even though he was continually informed that this Petitioner was not served with legal processs, accountings, or other information regarding the LFT for decades. Judge Breen was also recused upon grounds that he knew and was informed of the fact that the Trustees, their attorney, David J. Reese, Esq., LFT beneficiary Pat Lear, Esq., and other beneficiaries had covert and secret ex-parte communications with the Judge and had advised other beneficiaries not to participate in the proceedings and process, and refused to hold the Trustees and Trust attorney to any professional or ethical standards or to hold the Trustees and Trust attorney to specific performance under the LFT and laws of the State of Nevada. Judge Peter I. Breen was duly served with the Affidavit of Disqualification on June 10, 2005, and failed, neglected or otherwise refused to respond. OVERVIEWPetitioner's Set Aside presents a myriad of issues, regarding untrue, incorrect, incomplete, and inaccurate accountings, untrue, incorrect, incomplete and inaccurate audit, breach of fiduciary duties, disloyalty, mismangement, waste, double and inappropriate billings, etc., all of which are relevant to the LFT and provide sound reasons for this Court to grant Petitioner's prayer: Petitioner has shown that (1) accountings are deficient and deceptive (2) Trustees and their attorney have failed, neglected and refused to execute their respective and interrelated duties within the framework of the LFT and as required by contract, court order and by law (3) Respondents did not use accounting standards as they have been adopted by the Nevada Board of Accountancy and to which Respondents as Trustees and accountants are bound to perform, (4) there are substantial irregularities and unaccounted for properties, (5) there have been substantial misallocations of funds in contravention to the intent of WPLSr as reflected in the Last Will and Testament of WPLSr and in the LFT, (6) James L. Murphy did and assumed to act as LFT Trustee, as the negotiator, seller and buyer of very valuable Trust property, he acted as Grant Thornton partner and accountant for the LFT, as well as a substantial member and controller of the audit team which failed and neglected to provide a true, correct, complete and accurate audit of the LFT, to name only a few. On November 10, 2004, November 23, 2004 and April 29, 2005, Judge Peter I. Breen expressed his bias and prejudice when he stated his unwillingness to review any accounts prior to 2000, most of which were produced by Respondents Grant Thornton, LLP and James L. Murphy, as CPAs who were collectively acting as de facto Trustees. This usurpation and mismanagement is aggravated by the fact that Respondents cannot overcome the numerous violations of Petitioner's fundamental right to due process and to equal protection of the law. Respondents cannot overcome their own discriminatory and hostile pattern of conduct or their collective gross negligence in abiding by and enforcing NRS §163.180, NRS §165.180 and NRS §165.100. Respondents failed and refused to give proper notice to an entire class of beneficiaries, namely, the remaindermen beneficiaries of the LFT. The Respondents' Opposition does not provide any authority for failing and refusing to file with this Court or to provide the accounts to the LFT beneficiaries in a timely manner for the years 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1993, 1995, 1996, 1997, 1998, 1999, 2000 2001, 2002, 2003 or 2004 as required in part by NRS 165.040(2) . The Respondents' Opposition does not provide any valid authority for violating this Petitioner's right to legal notice regarding any litigation or Court filing, or for violating Petitioner's guaranteed right to due process and equal protection of the law. See Set Aside §3 & §4. Notice is fundamental to the right to due process and is mandatory in the State of Nevada. Orders and judgments without notice to the interested parties are properly set aside and vacated. See:Clark County Sports Enterprises, Inc. v. Kaighn, 93 Nev. 395, 566 P.2d 411 (1977);Monroe, Ltd. v. Central Telephone Co., 91 Nev. 450, 538 P.2d 152 (1975). The Respondents' Opposition admits that Trustees don't have a written instrument properly executed by this Petitioner, excusing them from performing their duties and obligations. See Petition to Set Aside Accountings §5, NRS §163.170 and NRS §165.170. The Respondents' Opposition admits that Trustees and their attorneys have (1) a legal duty to perform under and enforce the Last Will and Testament of WPLSr, (2) a legal obligation to perform under and enforce the terms and conditions of the LFT as they existed at the time of the death of WPLSr, (3) a legal duty to execute and manage the Trust in accordance with lawful Court Orders (4) a legal obligation to abide by the laws and Constitution for the State of Nevada and the laws and Constitution for the United States of America, (5) a legal obligation to provide timely legal notice to this Petitioner regarding any litigation or hearing with regard to the LFT and to timely and accurately describe the rights and interests affected, (6) a legal duty and obligation to timely provide true, correct, complete and accurate accountings of the LFT and to provide LFT beneficiaries access to trust records and papers for the purpose of verifying the validity of Trustees' accountings, (7) a legal duty and obligation of the highest degree to perform in good faith, with due care, loyalty and ethical integrity, (8) a legal duty and obligation to perform and manage the Trust under the "prudent man" rule (9) a duty and obligation to manage the trust to the benefit of all beneficiaries without hostility, deceit, discrimination or preference, (10) a legal duty and obligation to adhere to accounting standards as adopted by the Nevada Board of Accountancy and accounting standards as enacted by the Nevada legislature and imposed upon the LFT Trustees, accountants and (11) a legal duty and obligation to adhere to standards of Professional Conduct as enacted by the legislature and adopted by the Supreme Court and imposed on attorneys practicing in the State of Nevada. Set Aside, §§6, 7, 8, 9, 10, 11, 12, 13, 14, 15. This Petitioner has detailed and evidenced how the above duties and obligations have been evaded, grossly neglected and violated. The Trustees have failed and neglected to refute or rebut Petitioner's allegations of (1) mismanagement, (2) misaccountings, (3) missing or unaccounted for LFT property, (4) incorrect, incomplete and inaccurate Charge and Discharge Statements, compilations, which do not adhere to any recognized standard, (5) violations of due process of law, (6) violations of equal protection of the law, (7) violations of fiduciary duties and obligations, (8) hostility toward certain beneficiaries, (9) attorney malpractice, and (10) attorney breach of contract, all of which effectively amount to nonfeasance, misfeasance and malfeasance, which has adversely affected Petitioner's rights and interests in and to the LFT. Further, Respondents Opposition presents no evidence or argument which would be sufficient to deny this Petitioner's Set Aside. To the contrary, Respondents introduced new evidence which raises even more cause for an Order in favor of Petitioner. SUMMARYBurden of proof shifted to Respondents to show their compliance with their fiduciary duties and obligations after Petitioner established his prima facie case demonstrating Respondents' breach of fiduciary duty. 76 Am Jur 2d §627; Gemstar, Ltd. v. Ernst & Young, 917 P2d 222 (Ariz. 1996); Confederated Tribes of Warm Springs v. U.S., 248 F3d 1365 (2001). In their Opposition, Respondents have failed and neglected to prove that they performed their fiduciary duties as required by the Last Will and Testament of WPLSr, the LFT and under the laws and Constitution of the State of Nevada thereby admitting said breach. LFT Trustees are liable for mismanagment, imprudence, fraud, and other acts of nonfeasance, misfeasance and malfeasance. NRS §163.115, NRS §165.180, NRS §165.200. LFT Trustee, James L. Murphy had far more than one hat to wear in this matter and shifted colors back and forth like a cameleon. LFT Trustee, Murphy even billed the Trust for his $400 lunch as a partner and accountant for Grant Thornton. The accountings of the LFT are subject to a petition to set aside pursuant to NRS §165.120 and NRS §163.115(1)(f) and the accounting firm Grant Thornton and partner and accountant are subject to suit pursuant to NRS §11.2075. Respondents' made numerous misrepresentations of fact and numerous vague and unsubstantiated claims in their Opposition. Since March 18, 2004, this Petitioner has been able to obtain certain papers, books, records and documents from LFT Trustees but only after and pursuant to the Court Order of November 10, 2004. All other discovery which this Petitioner has attempted to obtain regarding the LFT and its management and accountings has been obstructed by Respondents. In their Opposition, Respondents attempt to shift the blame for their failure and neglect to provide notice to this Petitioner on Petitioner without having been excused by this Petitioner from performing their duties and obligations toward Petitioner. NRS 163.170 and NRS 165.170. Set Aside Section 1.1, page 6, lines 7-10. However, consistently, over the last two centuries, the American Courts have ruled that Justice is served only when the parties are given adequate notice and an opportunity to respond in open court and Orders entered by Court without the appropriate notice are jurisidictional nullities and therefore all accountings submitted to this Court for approval since August 24, 1983 remain open for set aside and review. Clark County Sports Enterprises, Inc. v. Kaighn, supra, Monroe, Ltd. v. Central Telephone Co., supra. Respondents' claim compliance with their fiduciary obligations, applicable standards and claim to have acted within the wide scope of powers granted to them under the LFT. However, said statements are made after misrepresenting the law, omitting certain relevant Court Orders which confirm the restriction on their powers and particularly misquote the tenor of the LFT. These vague inuendos and misrepresentations are for self-serving and improper purposes. In their Opposition, Respondents' again present their self-serving misrepresentation, that a conflict of interest existed between Trustees Dayton and Murphy with the buyer of Silver Lake Water Co (SILVERLAKE), Sierra Pacific Power Company (SPPC) when Dayton and Murphy sat on the Board of Directors of Sierra Pacific Power Co., and that this conflict was disclosed to all parties. The affirmation under oath of July 28, 2000 which was made a part of the 13th Intermediate Annual Accounting and was presented to this Court and to a very limited number and kind of LFT beneficiaries is contrary to the facts. Neither this Petitioner nor his brother were given any such notice of conflict and were not even informed of the nature and extent of this substantial transaction that affected their rights and interests in the LFT corpus. Respondents failed and neglected to answer and address the issues raised with regards to the true nature, terms and conditions of the sale of SILVERLAKE to SPPC and the subsequent distribution of the proceeds from the below market value sale. However, the schedule of SILVERLAKE assets sold by Respondents to SPPC reveals that the largest and most valuable asset was 732 acre-feet of water rights whose value is estimated, by very conservative standards, to be worth at least $7.3 million or over three times more than the total amount received for all assets of SILVERLAKE from SPPC in 1999 and as much as $35 million or sixteen-times more than the total amount received for all assets of SILVERLAKE from SPPC. The sale of SILVERLAKE caused a significant damage to this Petitioner and other LFT beneficiaries. Respondents made the unsubstantiated statement that their accounts are true, correct, complete and accurate for each of the 17 Intermediate Annual Accountings (some of which comprise more than one year) however, the evidence provides a very different factual basis. Several instances highlight the fallacy of Respondents' bare assertions. The selection of a few of the many instances are as follows: (1) The first example is in relation to the Capistrano Industrial Park, Ltd. (CP) partnership (see "Section 6.10.3 Write-offs exceed value of assets" in Set Aside). This Petitioner clearly complained that the 1991 Charge and Discharge statement reported a write-off which exceeded the reported value of the Capistrano Partnership (CP) investment. Significant and material differences and irregularities exist between the CP financial statements and those reported in the LFT's accountings. This in turn raises new questions about the accuracy, completeness and correctness of BV's audit which was directly supervised and structured by LFT Trustee and Grant Thornton accountant James L. Murphy and was effected under the oversight and counsel of Trust attorney David J. Reese. See Section 8 (d) entitled "Inaccurate Writeoffs" herein. (2) LFT Trustee and accountant James L. Murphy's affidavit and Exhibit E attached thereto and as related to the Estate and related accountings raise new questions which if accepted as true, cause a new unaccounted for amount to appear and disappear in the sum of $2,523,292. (3) Another example relates to the unaccounted for Riverhouse and the unaccounted for Peter Paul Rubens paintings as the Respondents have failed and neglected to recognize that Riverhouse was exchanged by Moya Lear for a life estate and transferred into the LFT at the creation of the LFT. Respondents have continuously failed and refused to produce Schedules A & B of the LFT which would also corroborate this Petitioner's substantiated complaint that two very valuable Peter Paul Rubens paintings belonged to WPLSr at the time of his death and that the paintings were not and are not accounted for. Trustees were and are in breach of their fiduciary obligation by converting said paintings to third parties and failing to report and account for these transactions and the corpus of the Trust. Respondents hostile attempt at subjecting this Petitioner to Article Ninth of the LFT, thereby wholly alienating him from any rights and interests in the Trust by perverting and intentionally misrepresenting facts related to management and accounting of the LFT is not only lacking in merit it is an attempt to further conceal and evade their nonfeasance, misfeasance and malfeasance. The Opposition is frivolous, lacks merit and was presented for improper purposes thereby establishing the necessity cause and order a complete and accurate financial, compliance and performance audit of the LFT as requested in Petitioner's Set Aside. The arguments submitted by Respondents in an attempt to justify their gross mismanagement of the LFT, breach of fiduciary duties and obligations and malfeasance are non responsive, impertinent, unsupported by fact and were made in bad faith. REPLY TO OPPOSITION WITH POINTS AND AUTHORITIES1) DUE PROCESSPetitioner, Patrick Christopher Lear, was and is a known beneficiary in the LFT. As such, this Petitioner has rights and interests in the property held in trust and as specifically designated by Testator, WPLSr. LFT Trustees, in collusion with Trust attorney David J. Reese have failed and refused to provide this Petitioner with due and timely notices regarding the management and accounting of the LFT and did not notify or otherwise provide Petitioner with due process regarding other litigation which affected the LFT and Petitioner's rights and interests therein. The failure to afford Petitioner with due process of law is sufficient grounds to set aside Court Orders, Judgments and other covert and secretive dispositions of Trust corpus and income. Clark County Sports Enterprise v. Kaighn, 93 Nev. 395, 566 P.2d 411 (1977) The Judges presiding over the continuing LFT action were "deprived of authority to proceed to enter the Orders" when this interested party and others were not given notice. Monroe, Ltd. v. Central Telephone Co., 91 Nev. 450, 454, 538 P.2d 152 (1975). There is no written statement that has been given to the LFT Trustees by this Petitioner which would authorize any LFT Trustees to deviate from or evade any of the provisions of the LFT or to avoid, evade or violate any of the provisions of the Constitution or laws of the State of Nevada. NRS §163.170, NRS §165.170, see also Set Aside Section 1.1. The 14th Amendment to the Constitution for the United States of America is also applicable to the right to fundamental due process and to the acts and omissions of those acting under color of State law, i.e., notice and opportunity to be heard in a full, fair and impartial manner. 2) RIGHT OF ACTIONThis Petitioner filed a Motion for Declaratory Relief on June 14, 2004. This Court has declined and failed to determine and declare the rights and relationships of the parties. On April 26, 2005, this Petitioner filed a Petition to Set Aside Accountings (Set Aside). The Set Aside action was commenced by Petitioner as an heir in the Estate of WPLSr and as a beneficiary in the Lear Family Trust (LFT). NRS §163.115, NRS §164.010 and NRS §164.015 are clear and unambiguous. Any beneficiary of a Trust may commence an action to set aside accountings of a Trust in the State District Court where the Trust is located. The Court has jurisdiction to set aside prior orders and judgments of the Court and has jurisdiction over the accountings of the Trust and those who participated in their making and their presentations to the Court for confirmation. Petitioner has made claims against the LFT Trustees, James L. Murphy, Harold P. Dayton (deceased) Richard B. Rowley (deceased) and Thomas L. Tucker who were and are required by law to file annual accountings by March 2nd of each year. Petitioner alleges that LFT Trustees did not timely file each and every annual accounting in a timely manner, did not use or otherwise demand that generally accepted accounting standards and methods be used to account for the LFT, did not truthfully, correctly, completely, and accurately account for the LFT and did not give Petitioner notice of the accountings and management of the LFT for a period exceeding 20 years. Trustees accepted payment from the LFT for services they did not render or properly perform. Petitioner has made claims against the LFT Trustees, Grant Thornton, LLP, the accounting firm, and Grant Thornton Partner and accountant, James L. Murphy, who compiled and made the LFT accountings and failed, neglected and refused to use accepted accounting standards and methods, failed to timely produce accountings of the LFT, did not use generally accepted accounting standards and methods when compiling, making and accounting for the LFT; 3) BURDEN OF PROOFPetitioner has presented and extensively documented Respondents Grant Thornton, LLP (GT), LFT Trustees, David J. Reese, Esq. and CR&R's breach of trust and duty by showing that Respondents, failed and refused to timely provide this Petitioner LFT notices and accountings as required by Court Order, by contract and by NRS §165.030 through NRS §165.120, and when they were produced in multi-year fashion, did not provide true, correct, complete and accurate accountings. This failure and refusal to provide due and timely notice of proper accountings joined with the failure and refusal to give due and timely notice of other legal actions affecting the LFT, changing the terms and conditions of the LFT without notice to Petitioner, covertly and secretly taking and disposing of trust corpus, double billing the Trust, gross imprudence, is the basis for damage to this Petitioner, and constitutes ground to believe and know that fraud, mismanagement, nonfeasance, misfeasance and malfeasance were rampant. Respondents Harold P. Dayton, James L. Murphy, Richard B. Rowley, Tommy L. Tucker and Dunham Trust Company as LFT Trustees are fiduciaries and are bound and held to perform the duties and obligations of Trustees under the express terms and conditions of the LFT Agreement and as required by law. Respondents Cooke, Roberts and Reese, Ltd and David J. Reese, Esq. as attorneys for LFT Trustees are fiduciaries and are bound and held to perform the duties and obligations of Trustees under the express terms and conditions of the LFT Agreement and as required by law since when an attorney represents a trustee in his or her capacity as trustee, that attorney assumes a duty of care and fiduciary duties toward the beneficiaries as a matter of law. Charleson v. Hardesty, 108 Nev. 878, 882-883, 839 P.2d 1303 (1992). As evidenced by Petitioner in his Set Aside, including but not limited to paragraphs 121 through 141 and exhibit 44, Grant Thornton is the de facto trustee of the LFT by performing and receiving remuneration for the performance of trustee duties through its partner, James L. Murphy, and is therefore a fiduciary in that capacity. Grant Thornton is also a fiduciary by the nature of their engagement with the LFT. Grant Thornton prepares the LFT's tax returns, financial statements, and including but not limited to, performs "miscellaneous services related to property sales and other related matter", engages in "meetings on other sales and land development projects" etc. Set Aside, exhibit 44, pp.372 & 376. The Restatement (Second) of Torts §874 (comment a) provides that a fiduciary relationship will be held to exist between two persons when one of them is under a duty to act or give advice for the benefit of another upon matters within the scope of the relation. In Gemstar v. Ernst & Young, 917 P.2d 222 (Ariz. 1996), the accountants were initially hired to prepare the corporations' tax returns and financial statements. The accountants then involved themselves in property sales for their client. At the close of evidence, plaintiffs moved for a directed verdict that the accountants were fiduciaries as a matter of law. The court granted plaintiff's motion and gave this instruction to the jury: "An accountant must act with utmost loyalty, good faith and disclosure for his client. This special relationship is sometimes referred to as a fiduciary relationship. As fiduciaries, defendants stood in a trust relationship with plaintiffs. Defendants have the burden of proving full compliance with all of their fiduciary duties. If the defendants failed to prove this full compliance, then the fiduciary relationship has been breached." [Bold added] Gemstar v. Ernst & Young, supra, at 233
Based on expert testimony that the accountants owed fiduciary duties, the Supreme Court of Arizona found that the trial court's directed verdict was proper and that the jury instruction was not erroneous. In Confederated Tribes of Warm Springs v. U.S., 248 F.3d 1365 (2001), the court held "Under trust law principles, if a trustee fails to keep proper accounts, "all doubts will be resolved against him and not in his favor." William F. Fratcher, Scott on Trusts, §172 (4th ed. 1987); see also Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264, 66 S.Ct. 574, 90 L.Ed. 652 (1946) ("[t]he most elementary conceptions of justice and public policy require that the wrongdoer shall bear the risk of the uncertainty which his own wrong has created."). More generally, as the Second Circuit stated in Donovan v. Bierwirth, 754 F.2d at 1058 (quoting Nedd v. United Mine Workers, 556 F.2d 190, 210 (3d Cir.1977)) "once the beneficiaries have established their prima facie case by demonstrating the trustees' breach of fiduciary duty, "the burden of explanation or justification ... shifts to the fiduciaries.""" [emphasis added]
Respondents LFT Trustees Harold P. Dayton, Richard B. Rowley, Tommy L. Tucker, James L. Murphy and Grant Thornton accountant James L. Murphy and Grant Thornton have failed to meet their of burden of proof by defaulting on the Set Aside, and by filing their Opposition, LFT Trustee Tommy L. Tucker, James L. Murphy, Grant Thornton accountant James L. Murphy and Grant Thornton attempt to evade their fiduciary obligations and the risk associated with their continued breach. In an action brought by a beneficiary charging a breach of trust, the beneficiary bears the burden to prove in what respects the trustee beached that duty. While the beneficiary has the initial burden of proving the existence of the fiduciary duty and the trustee's failure to perform it, once the trust beneficiary has established a prima facie case by demonstrating the trustees' breach of fiduciary duty, the burden of the explanation or justification shifts to the fiduciaries. The trustee must show the use of due care, diligence and skill with respect to trust investments and in the prudent management of the Trust. In short, the trustees must prove that they acted with the utmost good faith toward the beneficiary and made full disclosure of all facts related to the transactions at issue. 76 Am Jur 2d Trusts §627. The only showing of Respondents Grant Thornton, accountant Murphy, Trustee Murphy, Trustee Tommy L. Tucker, Dunham Trust Company, David J. Reese, Esq. and CR&R was that of a conspiracy against this Petitioner's rights and interests to and under the LFT. This was done through a conspiracy of silence and by maintaining a hostile, vindictive and malicious manner in order to evade the duties and obligations that they undertook for compensation and to assume the risk and liabilities for multiple breaches of trust, nonfeasance, misfeasance and malfeasance. 4) BAD FAITH AND MISREPRESENTATIONS OF FACT AND LAWThe indicia for "bad faith" include "that the claims [or defenses or propositions] advanced were meritless, that the counsel [and/or client] knew or should have known this, and that the motive for filing...was for an improper purpose such as harassment." Smith v. Detroit Federation of Teachers Local No. 231, 829 F.2d 1370, 1375 (6th Cir. 1987). When bad faith is found to exist the Court may preclude defenses and evidence and enter such other orders or sanctions as are appropriate. Titus v. Mercedes-Benz of North America, 695 F.2d 746, 749 n. 6 (3rd Cir. 1982) a) Opposition to Petition to Set Aside AccountingsContrary to the continuing misrepresentation of Trustees' attorney David J. Reese, Esq., Judge Peter I. Breen directed only that this Petitioner supply a supplemental summary of the Set Aside. See: Opposition page 8, lines 25-27. This Petitioner purposely incorporated and reiterated his Petition to Set Aside Accountings in his Supplemental Summary to Petition to Set Aside Accountings (Summary) for the purpose of compelling the Respondents to answer in a timely, constructive and truthful manner rather than in vague generalities and frivolous ramblings. The maxim Dolus versatur in generalibus - fraud lurks in generalities, applies in the case presented and to Respondents' Opposition. To this should be added the maxims that "once a fraud always a fraud" and "fraud taints everything it touches." Petitioner's Supplemental Summary was provided for the convenience of the parties only. This Petitioner's objective with the filing of his Set Aside is to obtain true, correct, complete and accurate audit and accounting of the LFT without engaging in lengthy and costly litigation with Trustees who have continually breached long recognized fiduciary duties and the law in collusion with their attorney who has openly engaged in malpratice in and out of court. Respondents know or should know that accounting is a precise and rigorous discipline that is intended to provide the client(s) with a clear and accurate picture of their fiscal condition. Respondents not only failed to produce timely accountings as required by law, Respondents willfully and knowingly produced, filed and served untruthful, incorrect, inaccurate and incomplete accountings. Other beneficiaries of the LFT were aware of and knew that the LFT Trustees, and in particular, James L. Murphy, mismanaged the Trust and provided intentionally vague and deceptive accounting summaries to conceal the mismanagement. Respondents made numerous vague statements in their Opposition such as: "The Petition to Set Aside Accountings is an obvious effort to harass the Lear Trustees and unduly burden the Court with a mammoth "fugitive document" consisting of unsupported, untrue and outrageous allegations, and a newly devised and unauthorized change of caption. Hundreds of pages of unsupported, and often, incomplete, irrelevant or immaterial exhibits are attached to the Petition."
Nowhere in the Respondents' Opposition is there any substantiation to these empty and unsupported inuendos. Respondents could not substantiate their allegations since they are blatant misrepresentations of the facts and merely are inserted in the text, along with many other such misrepresentations of fact and law for the improper purpose of causing unnecessary delays and excessive costs in litigation. Petitioner did not include some evidentiary exhibits in their entirety for the sake of brevity and only included the relevant document pages and clearly labeled these partial exhibits in the Table of Exhibits on pages 170, 171, 172 and 173 of the Set Aside. This Petitioner attached each and every exhibit for the specific purpose of providing relevant, pertinent, material and irrefutable evidence of the Respondents' fraudulent mismanagement of the LFT. Respondents' do not refute the documentary evidence submitted which clearly shows that Respondents' bare and vague assertions are unsupported by substantive evidence and are misrepresentations of fact that were craftily designed to deceive and cloud the issues presented in the Set Aside. LFT Trustees and their attorney, David Reese were fully aware that the effort at this time is to clean up the entire LFT for two (2) newly appointed Trustees to replace deceased Respondents Rowley and Dayton. Trust attorney David Reese has previously engaged in unethical misconduct and malpractice in relation to the LFT and LFT Trustees and is charged with such in the Set Aside. The Opposition of LFT Trustees James L. Murphy, Tommy L. Tucker, Grant Thornton accountant James L. Murphy and Grant Thornton, as craftily drawn and filed by Reese, was presented for the improper purpose of evasion and causing unnecessary delays and excessive costs in litigation to the Petitioner and to the LFT. b) Respondents' ObstructionSince March 2004, LFT Trustees, James L. Murphy, Richard B. Rowley, Harold P. Dayton, Tommy L. Tucker, Dunham Trust Company, Grant Thornton, Grant Thornton accountant James L. Murphy, and David J. Reese, Esq. and/or CR&R have engaged in a conspiracy of silence and have obstructed virtually every effort by this Petitioner from obtaining any information from them about the dealings and management of the LFT. On April 1, 2004, Respondents offered to meet with this Petitioner and his brother to discuss his concerns and this Petitioner accepted the offer, however, after Respondents produced the documents requested. See Petitioner's March 31, 2004 letter - Exhibit 7. Respondents are always asserting that they are willing to "discuss." Petitioner was subjected to such a "discussion" on October 28, 2004, when this Court Ordered Petitioner and his brother into a room with Respondent's agents and other beneficiaries who knew or reasonably should have known that the Trust was mismanaged, and where threats and intimidation against this Petitioner were the only things that were espoused and presented. Petitioner had to get a Court Order to have Trustees produce any Trust records at all. Quite to the contrary of Respondents' bare and baseless assertions, Respondents have failed, neglected, refused to timely respond to discovery, have advised others not to participate in the proceedings, and have generally and secretly used their best efforts to obstruct and delay the discovery process, a true, correct accurate and complete audit and the instant litigation. On January 15, 2005, Petitioner sent and served the LFT Trustees James L. Murphy, Harold P. Dayton and Richard B. Rowley with a set of interrogatories pursuant to NRCP 33 regarding the unaccounted for Rubens paintings and provided the Trustees with the recorded bill of sale of said paintings to WPLSr, as filed with the Washoe County recorder's office. Exhibit 4. See also Set Aside, exhibit 1, pages 2-4 of 646. Respondents Trustees failed and refused to provide an answer or respond to the interrogatories within the time allowed and still refuse to respond. On February 28, 2005, Respondent Grant Thornton's legal representatives caused a letter to be mailed to Petitioner threatening him with sanctions if Petitioner made any further requests for information from Grant Thornton. Trustee James L. Murphy is a partner and accountant for Grant Thornton and the LFT accountings were compiled and done by Grant Thornton and Grant Thornton was paid by the Trust for its accounting services as well as billing and being paid for other acts such as paying $400 for Murphy's lunch and taking other actions that were properly and dutifully the responsibility of the LFT Trustees. On May 5, 2005, Petitioner mailed a Request for Production of Documents pursuant to NRCP Rule 34 to LFT Trustee and Grant Thornton accountant James L. Murphy. Petitioner telephoned James L. Murphy on May 20, 2005 to confirm his appointment to pick-up the requested documents whereupon James L. Murphy told him that "there are no documents" and later added "your request is fake" thereby continuing the pattern of hostility and obstruction. See Affidavit attached hereto as Exhibit 5. On June 7, 2004 Grant Thornton filed a Motion for Sanctions against Petitioner along with a Motion for Protective Order to deny Petitioner any access to LFT documents, records, books, papers and information and thereby misapplied the threat made in their February 28, 2005 letter to Petitioner which improperly threatened Petitioner if Petitioner persisted in his discovery. Since January 15, 2005, this Petitioner has diligently attempted to obtain relevant discovery from Respondents and others, in the form of interrogatories to trace unaccounted for property, in the form of Requests for production of documents, in the form of admissions and confessions all for the purpose of revealing the nature of the relationships between the parties. Grant Thornton's Motion for Sanctions and Motion for Protective Order are merely a continuation of Respondents policy to obstruct and prevent this petitioner from obtaining any papers, books, records, documents and information. Respondent Grant Thornton knew or should have known that by knowingly having participated in the breach of duty of LFT Trustees, Grant Thornton became a joint tortfeasor with the LFT Trustees and is liable as such. Hendricks v. Grant Thornton, 973 S.W.2d 348 (1998); Laventhol, Krekstein, Horwath & Horwath v. Tuckman, 372 A.2d 168 (1976); Restatement of Torts (Second) §876. Petitioner's Opposition to Grant Thornton's Motion for Sanctions and Petitioner's Opposition to Motion for Protective Order are reiterated and incorporated herein in their entirety. Respondents' assertion in their Opposition, that "a simple inquiry of the Trustees or their accountants would have explained these matters to the Petitioner". [emphasis added] Opposition, p.17 lines 3-4 is made in bad faith and is false as is made clear by the Grant Thornton threats and motions to prevent this Petitioner access to any meaningful and relevant evidence. The repeated statements by Respondents that a simple question to Trustee, Murphy, would have provided the answer is false, made in bad faith and is contrary to every act performed by Respondents during the last fifteen months. See Affidavit James L. Murphy, May 20, 2005, p.3, numbered para. 8 lines 16-17. 5) PETITIONER'S RIGHTS v. RESPONDENTS' OBLIGATIONS1987, 1988 & 1989 Correspondence Petitioner attempted to obtain information pertaining to the LFT during the years 1987, 1988 and 1989. All of Petitioner's requests at that time were met with polite but empty replies from acting de facto Trustees, Respondent Grant Thornton, LLP as shown by the April 3, 1989 communication from Respondent Grant Thornton Partner, James L. Murphy. See: Opposition, Exhibit C to affidavit. The written response communication from Grant Thornton and accountant Murphy refused to provide any information to Petitioner, including the LFT accountings and other public court filings while misrepresenting that said documents are "confidential and personal". Judicial notice shall be taken that on November 27, 2002 Patrick James Martin, Esq. reported in a written communication to LFT beneficiaries: "I spoke with Mr. Reese yesterday and he advised me that the Trustees intended to serve only those beneficiaries who have always been served over the years." Exhibit 2, page 1. At all times relevant, LFT Trustees had a duty to produce and provide annual LFT accountings and Trust information to beneficiaries, including remaindermen. August 13, 1982, Court Order; NRS §165.045; NRCP 5, Baker Boyer National Bank v. Garver, 719 P2d 583 (1986), Waits v. Hamlin, 776 P2d 1003 (1989), In Re Marriage of Petrie, 19 P3d 443 (2001), 90A CJS Trusts §331. This unethical and discriminatory practice has continued to the damage of this Petitioner. Respondents' agree with this Petitioner and admit that no notice or accountings were provided to anyone but the income and outright LFT beneficiaries. See Set Aside Exhibit 59. This Court will note that NRS §165.040 does not distinguish between classes of beneficiaries and NRS §165.020 specifically includes remaindermen beneficiaries in the definition of the word "beneficiary" or "beneficiaries". Respondents' argument is once again made in bad faith and for an improper purpose. Respondents persist on calling this Petitioner a "contingent remainderman," when the LFT's income tax returns filed with the IRS for the years 2000, 2001, 2002 and 2003 show that LFT remaindermen beneficiaries are "skip persons" or in legal parlance, "vested". Comerica Bank, N.A. v. U.S., 93 F.3d 225 (6th Cir. 1996). This continued misrepresentation is at variance with evidence that has been provided to this Court and is contrary to both law and fact. Further, this Petitioner has on numerous occasions since June 14, 2004 pointed out the fallacy of Respondents' attempt at twisting Nevada State law so as to allow the Respondents to differentiate and discriminate against one class of beneficiaries, the remaindermen, and this Petitioner has continuously supported his claims with legal authorities, which include but are not limited to, NRS 165.020 and the expert opinion by Robert Whitman on numerous occasions. Respondents have not addressed nor rebutted Petitioner's allegations, evidence or given any valid reason why the law should be changed. Set Aside, exhibit 63 p.486 - 489 of 646. By stating in their Opposition that "if PCL [Petitioner] disagreed with the Trustees' position regarding notice of accountings, he should have taken action long before 2005, over seventeen (17) years later" See: Opposition, page 7, lines 22-24. Respondents know or should know the Opposition and affidavit of James L. Murphy were presented in bad faith. See Opposition, affidavit of James L. Murphy. Not only did Respondents know of their legal obligation to provide said accountings in a timely manner to Petitioner since 1978 and in accordance with the LFT, in compliance with this Court's Orders confirming Respondent LFT Trustees' and directing them to specific performance and pursuant to the Constitution and laws of the State of Nevada. There is no valid excuse or defense for Respondents. Respondents David J. Reese, Esq. and CR&R were specifically engaged by the LFT Trustees to assist them in ensuring compliance with NRS §165.030 - §165.120, which includes the timely filings of annual accountings with the Court and the service of the same upon this Petitioner pursuant to NRS §165.045. Set Aside, Exhibit 12, page 84 of 646. The weight of evidence, the facts, and Respondents' own statements and respresentations show the breach, mismanagement and malpractice. The 17 years of breach of legal duty to perform and provide due process to all LFT beneficiaries provides these Respondents with no defense whatever. By knowingly refusing to provide any accountings to Petitioner pursuant to NRS §165.045 or to provide other trust information for a period exceeding two decades, David J. Reese, Esq. and CR&R knew or should have known that they had breached their contract with LFT Trustees and engaged in and are liable for malpractice and breach of fiduciary duties for their nonfeasance as well as their misfeasance and malfeasance. Laventhol, Krekstein, Horwath & Horwath v. Tuckman, supra; Avianca, Inc. v. Corriea, 705 F.Supp. 666 (1989). Petitioner never provided Respondents LFT Trustees, Grant Thornton, accountant James L. Murphy, David J. Reese or CR&R a written waiver relieving or excusing said Respondents from performing any of the duties and obligations imposed upon them under Nevada State law or the LFT. Petitioner did not exempt any of the Respondents from liability for their failure to perform any of the duties imposed upon them by State law or the LFT. NRS §163.170, NRS §165.170. This Petitioner requires and demands specific performance and has not waived his right to pursue the Respondents for breach. Respondents statements that "the claims of the Petitioner are barred by the doctrine of res judicata or are otherwise, void of substance or merit" are unsupported by fact, are vague and made in bad faith. (Opposition, p.19, lines 8-11). While citing Valley Bank v. Neuhoff, 102 Nev. 579 (1986), Respondents omit a central tenet of our legal system, the concept of fundamental notice and hearing. Contrary to Petitioner, appellants in Valley Bank v. Neuhoff, supra, received legal notice and participated in the proceedings before the court. The case of Clark County Sports Enterprises, Inc. v. Kaighn, supra, is more on point. The failure of one of the parties to serve a judgement upon another interested party voided the ex-parte Order and it was set aside. Respondents knew or reasonably should have known that due process requires "timely" notice. In the case at bar, as repeatedly stated by this Petitioner on numerous occasions and as recognized by this Court on March 18, 2004, there are "some serious questions about ... notice here and opportunity to be heard." See Court Transcript, March 18, 2004, p.5 lines 21-23. The accountings of the LFT, the acts of the Trustees and Orders of this Court since the end of August, 1983 cannot meet the definition of res judicata when the rights of this Petitioner and others to due process and equal protection of the law have been violated for a period exceeding two decades. The ex parte proceedings have continued for the last year under the undue and unethical influence of Patricia Lear Esq., David J. Reese and others such as the managing partner of Grant Thornton, Brian Wallace who was engaged in business with Judge Peter I. Breen. The Orders issued by this Court between August 24, 1983 and March 18, 2004 are properly ex-parte orders and void ab initio. Respondents had an affirmative duty to provide Petitioner with notice and service of process. NRS §155.010; NRCP 5. In the instant case the August 13, 1982 Court Order makes the LFT subject to NRS 165.045 which specifies the manner in which notice is to be given to LFT beneficiaries but Respondents have, in bad faith, refused to recognize their obligations as Ordered by this Court. In Luc v. Oceanic Steamship Company, 84 Nev. 576 (1968), the court stated: "The giving of notice is a jurisdictional requirement, and where a rule or statute prescribes the manner in which notice is to be given, that mode must be complied with or the proceeding will be a jurisdictional nullity."
This Court did not have any power to enter any Orders or approve any accountings during the period of August 24, 1983 through February 27, 2004. In Pratt v. Rice, 7 Nev. 123 (1871), the court stated "if on a motion there is not good cause for haste or concealment, and facts are to be found in the ascertainment of which the opposite party is deeply interested, such party has a right to notice and an opportunity to be heard. ... There is no reason in favor of the course pursued, and many against it; on its face, and unobjected to, it is, to say the least, extraordinary and irregular; and when objected to, it must be set aside." [Emphasis added]
As stated in Clark County Sports Enterprises v. Kaighn, 93 Nev. 395 (1977) and in Maheu v. District Court, 88 Nev. 26, 493 P.2d 709 (1972): "a central tenet of our legal system is the concept of notice and hearing. Justice is served only when parties are given adequate notice and an appropriate opportunity to respond in open court. This court has reiterated this concept over and over - as long ago as 1871 ...". Maheu v. District Court, supra
In Turner v. Saka, 90 Nev. 55 (1974), the court held "it is also fundamental that although an order's subject matter would lie within the court's jurisdiction if properly applied for, it is void if entered without required notice." [Emphasis added]
In Matthews v. District Court, 91 Nev.96, 531 P.2d 852 (1975), the court stated "an ex-parte order improperly granted is void - deemed to be a product of an act in excess of the court's jurisdiction."
And: "we need not consider the validity of these excuses; for the respondent court, having manifestly acted without notice where notice was required, thereby acted without or in excess of its jurisdiction. [cases omitted]."
In Monroe, Ltd v. Central Telephone Co, 91 Nev. 450 (1975), the Supreme Court stated: "NRCP 7(b)(1) requires that a motion shall be in writing unless made during a hearing or trial, and NRCP 5(a) mandates that every written motion other than one that may be heard ex parte shall be served upon each of the parties. ... The requirement of a written motion stating the grounds with particularity is intended to guarantee that the adverse party be informed not only of its pendency, but also the basis upon which the movant seeks the order. ... Failure to comply with court rules is a valid ground for vacating an order. See In the Matter of the Estate of Powell, 62 Nev. 10, 135 P.2d 435 (1943)." [Emphasis added]
Respondents LFT Trustees, David J. Reese, CR&R knew or should have known of the legal requirement to provide this Petitioner with notice of LFT accountings, as prescribed by statute under NRS §165.045. Rule 5, NRCP, requires that every written motion, other than one which may be heard ex-parte, shall be served upon each of the parties. This Court also had an obligation to make such provision for service of notice upon Petitioner and representation on the LFT accountings pursuant to NRS §165.100. In other words, each and every Order or other determination which the Respondents have pursued and obtained from this Court or any other Court without notice to this Petitioner are jurisdictional nullities, this includes each and every accounting submitted to this Court between August 24, 1983 through February 27, 2004. Pursuant to NRS §15.050, an order made out of court without notice to the adverse party, may be vacated or modified without notice by the judge who made it. Respondents' statement that "there is no showing of fraud or wrongdoing by the Trustees, their accountants, or their attorneys" is self-serving, unsupported by fact, is vague, unresponsive and is made in bad faith. (Opposition, p.19, lines 7-8). Valuable property is missing from the LFT without accounting, self-serving dealings were made by Trustees, significant sums were distributed without regards for and outside of the terms and conditions of the LFT, significant sums were imprudently wasted, double billings were made against the LFT, unethical misconduct and malpractice were rampant, untruthful, incorrect, incomplete and inaccurate accountings were craftily, vaguely and deceitfully drafted and presented as true, correct, accurate and complete and an untruthful, incorrect, incomplete, inaccurate and vague audit was done at the expense of the LFT and was presented as good and sufficient when the audit was not. See Section 8(d), particularly, page 49, lines 18-22 and Section 8(g) in its entirety, herein. In view of the many irregularities and unaccounted for assets and property, the LFT accountings since 1978 to 2003 should be set aside. NRS §165.120. Failure to provide notice vitiates any prior approval by this Court. Respondents' argument that Petitioner should have taken action upon the absolute silence by Respondents LFT Trustees to his inquiries, when taken in the light of the refusal by Grant Thornton Partner James L. Murphy to provide documentation to this Petitioner, is made in bad faith and is frivolous and wholly insufficient to shift the burden of Respondents to show there was no nonfeasance, misfeasance, malfeasance or malpractice. Respondents James L. Murphy, Harold P. Dayton and /or Richard B. Rowley failed, neglected and refused to respond to any communication by this Petitioner until March 2004 as admitted by them in their letter of March 10, 2004 which states: "These statements are being sent for the first time to the contingent beneficiaries, i.e. the remaindermen. Our attorney has advised us Nevada Statutes were changed to encourage, if not require, that contingent beneficiaries be advised periodically of a trust's status" March 10, 2004 letter to beneficiaries by James L. Murphy, Harold P. Dayton and Richard B. Rowley [Emphasis added]
As clearly shown on Exhibit C of the affidavit contained in the Opposition, de facto Trustee Grant Thornton, LLP did respond to Petitioner on April 3, 1989 as evidenced by the signature: "GRANT THORNTON, James L. Murphy, Partner." However the April 3, 1989 and the previous correspondence from Grant Thornton, LLP, was also non-responsive, misrepresented facts and law and was made for the purpose of increasing the cost of managing the LFT by offering to "discuss" any "questions of a general nature" presumably at Grant Thornton, LLP partner level billing rates as illustrated in Set Aside §121-141 and Set Aside Exhibit 44. The April 3, 1989 letter by Grant Thornton, LLP states a refusal to provide this Petitioner with any information about the LFT except if Grant Thornton, LLP "should [we] receive permission to do so from William P. Lear, Jr." There are no provisions of law or of the LFT and there is no Court Order which allows or directs a Trustee to render the interests of a remainderman beneficiary subservient to and subject to the permission of an income beneficiary. In other words, Respondents are using their own double-billing scheme, misrepresentations of fact and law to excuse their dereliction of duty and thereby defraud remaindermen beneficiaries. Whether this LFT remainderman beneficiary had pursued the matter in 1987, 1988, 1989 or since is immaterial to the matter before the Court. Respondents cannot be relieved from their duties by a beneficiary, except explicitly and in writing and this Petitioner has already repeatedly stated that he has not relieved the Respondents of any of their duties and obligations but to the contrary requires specific performance. NRS §163.170 and NRS §165.170. NRS 163.170 and NRS 165.170 unambiguously declare that Trustee must administer the Trust with the Terms and Conditions of the Trust unless a written waiver is obtained. Respondents make further bad faith arguments, once again showing their attempt at unjust enrichment by offering to "discuss" and requiring the consent of William P. Lear, Jr. before providing information while at the same time arguing that the information was public and was available for this Petitioner from the Court. Whether this Petitioner was able to do so is immaterial to the issue before the Court. This Petitioner has alleged that there is substantial unaccounted property and fraud and whether this Petitioner would have become aware of this or not prior to 2004 is immaterial and requires speculation that neither this Court nor the Trustees are capable of answering objectively. There is no statute of limitation on fraud. Maxim of law: fraud taints everything it touches. The mismanagement and misaccounting of the LFT was not discovered until after the Court ordered the LFT Trustees to produce records. The Respondents and their attorney David J. Reese misrepresent that "the 2000 accounting has been noticed to all beneficiaries". On or about March 10, 2004 LFT Trustees caused a written communication to be mailed to this Petitioner admitting to the first ever contact with LFT remaindermen beneficiaries thus illustrating another misrepresentation of fact in Respondent's Opposition. Respondents state this Court has considerable authority to approve acts of Trustees and relieving them of duties and restrictions. Neither NRS 163.180 nor its legislative history provide for or authorize such a broad and unrestrained discharge of trustees from their breaches of duties and / or malpractice nor from what William Powell Lear, Sr. (WPLSr) had in mind when he wrote his last will and testament and trust. Only a beneficiary can relieve a Trustee of duties and obligations owed to him or her as clearly evidenced by NRS 163.170 and NRS 165.170. This Petitioner has not relieved and will not relieve the LFT Trustees of their duties and obligations and the LFT Trustees have provided no evidence which would support an opposing view. LFT remaindermen beneficiaries have been systematically alienated and deprived of the use and benefit of a significant portion of their rights and interest in the LFT and in contravention of the will of WPLSr and law. For instance, let us compare the shares of this Petitioner and of Jacqueline Lear who has outwardly expressed much hostility toward this Petitioner for attempting to claim and secure his rights: At the present time, both Jacqueline Lear and this Petitioner are beneficiaries of corpus of the LFT in the amount of 2.5% each, however, and for the purpose of illustration only, if this Petitioner had received distribution of his share at the end of 2003, the value of his share would have been less than half what Jacqueline Lear has received from the LFT to date, or more specifically, for every dollar received by Jacqueline Lear, this Petitioner would have received $0.47, forgetting for a moment inflation and the continuing depreciation of Petitioner's purchasing power of the thing or things that the LFT property was converted into and exchanged for. The systematic deprivation and disparity arises from the fact that the corpus of the LFT has been raided and stripped of valuable and productive property and converted and distributed to those who were not entitled to it. Such alienation and disparity in the rights and interests of the beneficiaries are unjust, inequitable and contrary to the intent of WPLSr. Petitioner has reason to believe and is informed that Respondents have no intention of leaving anything in the LFT. This was clearly stated by Jacqueline Lear in her hostile telephone conversation of April 7, 2005 with Christian William Lear and voicemail of May 4, 2005 both of which make nearly identical statements: "there isn't going to be anything left anyway." See Set Aside Exhibit 83. 6) TRUSTEES' MANAGEMENTa) Generally - Failure to ComplyRespondents' statement that James L. Murphy, Harold P. Dayton and Richard B. Rowley were to administer the Trust in accordance with all of the powers duties and responsibilities as set forth in the LFT, is at best a half-truth because it leaves out any and all lawfully issued Court Orders which directed the LFT Trustees to administer the Trust in a particular manner and it leaves out what the law requires. This is part of a continuing pattern of misrepresentation by Trustees' attorney David J. Reese, Esq. who alternately chooses to evade or abide by the LFT, this Court's orders and the laws as best suits the Trustees interests and agenda and to the damage of the LFT and the rights and interests of the LFT beneficiaries. This and other matters before the Court shows a continuing pattern of breach of fiduciary duty and a willful and callous disregard for the rights and interests of beneficiaries. b) Misrepresentation of Applicable LawIn a further and continuing pattern of contradictions, page 5, lines 25-26 and page 6, lines 1-2 of the Opposition are diametrically opposed and at variance to the statement made by Respondents and their attorney on page 6, lines 20-26 and again in contradiction with page 7, lines 1-6. By alternately pleading that the LFT is bound by NRS 165.030 through 165.120 and then pleading that the LFT is bound under NRS 165.135 is nonsensical, contradictory, at variance with the truth, was made in bad faith and is a waste of time and resources for all parties involved. Respondents were bound to manage the Trust pursuant to NRS 165.030 through NRS 165.120. LFT Trustees' attorneys COOKE, ROBERTS AND REESE, LTD (CR&R) and David J. Reese, Esq. contracted with the LFT to provide competent legal services in accordance with NRS 165.030 through NRS 165.120. See Set Aside, Exhibit 12, p.84-85 of 646. Since August 13, 1982, the Uniform Trustees' Accounting Act, NRS 165.030 through NRS 165.120, has required Respondents to produce and serve the LFT annual accountings to Petitioner and other remaindermen beneficiaries. The argument made by Respondents or their attorneys that the Court never instructed Respondents to provide notice to LFT remaindermen beneficiaries or that the LFT is subject to NRS 165.135 is a misrepresentation of facts, is frivolous, is contrary to the records of this Court, is contrary to the attorney contract, and is made in bad faith. The Opposition does not refute David J. Reese's and CR&R's malpractice and breach of contract in neglecting, failing and refusing to provide competent legal service regarding annual accountings to this Court, to Petitioner and to other LFT remaindermen beneficiaries pursuant to the terms of his engagement contract and law. Respondents' Opposition effectively admits to the breach of contract, breach of trust and malpractice complained of. c) Limitations - Allocation of Principal and IncomeRespondents once again misrepresent that they have absolute discretion in determining principal and income and that their "considerable powers" are provided for under the LFT's Article SIXTH (c). See Opposition pg. 9 lines 12-23. The purpose of Article SIXTH (c) is to permit Respondents to withhold income from distribution to certain eligible recipient beneficiaries. Considering that the LFT was set up to take advantage of the generation skipping tax (GST), should the need arise, the Respondents would have to be able to withhold income from distribution - for the protection of the LFT - for the purpose of enabling the Respondents to operate the Trust within the requirements of the GST, i.e., without distributing corpus to income beneficiaries. Respondents state that they "have exercised their discretionary power in a fair and impartial effort to carry out the intent of the Trustors" but this bare assertion is conclusory and unsupported by fact. This same conclusory and unsupported assertion is contrary to the evidence which not only shows the hostility and the continued attempt to disqualify any beneficiary who questions the mismanagement of the LFT, it clearly shows the arbitrary misallocations of principal and income and the unfair and discriminatory pratices of LFT Trustees and their attorney.. Respondents continue their misrepresentations by stating that: "This power is granted notwithstanding the provisions of the Uniform Principal and Income Act (NRS 164.140-164.370)". Opposition, page 18, lines 1-2.
Article SIXTH (c) states, in pertinent part: Notwithstanding the provisions of that certain act passed by the Legislature of the State of Nevada, known as the Revised Uniform Principal and Income Act, N.R.S. 164.140 - 164.370, inclusive, to the contrary, the Trustees shall have the power ... [emphasis added]
The Uniform Principle and Income Act does apply to the LFT. Trustees have certain limited powers, but the exercise of the powers cannot be contrary to the Act. Judicial notice shall be taken that Article SIXTH (c) includes the words "to the contrary". Therefore, Respondents statement in their Opposition, page 18, lines 1-2 should correctly read: "This power may be exercised but not contrary to the provisions of the Uniform Principal and Income Act (NRS 164.140-164.370)". Respondents are bound in fiduciary duty and obligation under Article SIXTH (c) and by the Uniform Principal and Income Act (NRS 164.140-164.370) d) August 13, 1982 Court OrderOn August 13, 1982, this Court entered an Order approving a June 30, 1981 Agreement, the founding document creating Trust "B", directing LFT Trustees to manage the Trust in accordance with and pursuant to NRS Chapters 163 and 164, without exception, evasion or exclusion. Set Aside, exhibit 5, p.29 of 646 and exhibit 8, p.48 of 646. Respondents, were never granted the discretion to allocate principal and income without regards to the provisions of NRS Chapter 164 and were bound by the terms of the LFT and by Order of the Court to administer the LFT in accordance with the provisions of NRS Chapter 164. In their Opposition (p.9, line 23.5-27.5 and p.10 line 1), Respondents' statement that "in an abundance of caution, the Trustees sought instructions from the Court and obtained Court approval for some of the more significant Trust business, such as the settlement of the Bombardier royalty claim and the settlement of the contamination litigation involving the Stead property"
is a deceptive twisting of words. Respondents willful violations of this Court's Orders, Respondents willful refusal to provide notice to LFT remaindermen beneficiaries, and Respondents CR&R willful breach of contract and, continued evasion of law, to name only three, cannot by any stretch of the imagination be deemed to be "cautious". The deceit and vagueness used to obtain "Court approval" also taints the factual basis of this bare assertion. In an exploit of bad faith and twisted logic, David J. Reese states that: "Court approval of the methodology of distribution did not amount to an amendment of the Trust, as charged by PCL, but it was a Court clarification of the Trustees' power of discretion regarding income, principal and allocation of Trust expenses."
In fact, as admitted by Respondents LFT Trustees in their October 22, 1991 report to beneficiaries, the Bombardier royalties were a wasting asset and to be treated at a maximum of 5% as income. Respondents LFT Trustees proposed to allocate these same royalties as 20% income and stated they "realize this may be somewhat arbitrary"[1], while requesting the input and waiver of only the income beneficiaries on the matter for determination. See Set Aside, Exhibit 19, p.127 of 646. The LFT income beneficiaries replied with a request to treat these same royalties as 40% income and Respondents sought a Court Order, without notice to and to the damage of the LFT remaindermen. This so called "Court approval" to ratify the admittedly "arbitrary" allocation scheme was designed and intended to defraud the LFT remaindermen beneficiaries without their knowledge and consent. The LFT does not provide Respondents LFT Trustees with any arbitrary powers or the authority to commit fraud. The issue raised by this Petitioner in his Set Aside and on many occasions previously is precisely that Respondents LFT Trustees, David J. Reese, Esq. and CR&R knew or should have known that they violated Petitioner's right to due process and equal protection of the law when seeking to change the terms and conditions of the LFT without providing any legal notice to or obtaining the written permission of those at whose expense and damage these changes were made, i.e., the LFT remaindermen beneficiaries and who were intentionally excluded. When confronted with their nonfeasance, misfeasance, and malfeasance Respondents vindictively and unjustly claim that this Petitioner has violated the in terrorem clause of the LFT, Article NINTH. Respondents failed to provide any legal authority for their fraudulent acts which are therefore admitted. Petitioner is justified in seeking a Court Order appointing a Receiver, setting aside all LFT accountings and prior Court orders, for seeking a true, correct, complete and accurate forensic audit of the LFT ab initio, and for seeking recovery and damages from the Respondents for any and all nonfeasance, misfeasance and malfeasance regarding the LFT. Seeking and obtaining a Court Order declaring the Bombardier royalties to be 40% income and call this arbitrary change of the LFT a "clarification" and not an arbitrary and ex-parte amendment to the allocation of interests in the LFT is a gross twisting of language and a gross misrepresentation of fact and constitutes malpractice. The admitted "arbitrary" act was in clear and continuing violation of the intent of WPLSr, the spirit and letter of WPLSr' Last Will and Testament, the LFT and the Constitution and laws of the State of Nevada. David J. Reese, Esq. knew or should have known that no Order issued by this Court or any other Court could have been "fair, impartial, and equitable" when the remaindermen were defrauded of their rights in and under the LFT without notice and written permission. These unlawful and unauthorized amendments to the LFT were and remain unfair, unjust, fraudulent, in breach of trust, breach of contract, and rubber stamped by a Court without jurisdiction and authority. This Court was also prohibited from effecting changes to the intent of WPLSr as stated in several motions or replies by this Petitioner or Petitioner's brother, Christian William Lear. 90A CJS §318, §347. Judge Peter I. Breen's attempted ratification of these unlawful and unauthorized changes is no more or less than a concealment of this Court's role in these continued ex parte acts and omissions and is properly considered as a gross violation of the powers granted to the Court and a gross violation of this Petitioner's rights to due process which resulted in Petitioner being defrauded of his lawful rights and interests in and under the LFT. Fraud is not a judicial function. Yates v. Village of Hoffman Estates, 209 F.Supp.757 (1962). Due to the numerous misrepresentations of law and material fact in violation of the Supreme Court Rules of Professional Conduct as well as the empiric gimmickry and malpractice performed by David J. Reese over the course of the last fifteen months and this Petitioner's observation that these continued misrepresentations and exhibitions of moral turpitude are increasing over time, this Petitioner intends to move this Court to Order a psychological examination and screening of David J. Reese, Esq. as this Petitioner has reason to believe that David J. Reese lacks basic morals and cognitive abilities and may not be competent to represent the LFT, give valid testimony, or to stand trial for his complicity. 7) SILVER LAKE WATER DISTRIBUTION COMPANYThe Respondents misrepresent the facts. LFT Trustees did not sell the LFT's partnership interest in Silver Lake Water Distribution Company (SLWDC / SILVERLAKE), rather they sold the LFT's share of the assets of said company. See Opposition pg. 14, lines 14-15. In his Set Aside, Petitioner alleged incomprehensible accountings of the Silver Lake transaction due to the three (3) different and conflicting sale price figures between the accountings and a "Letter to Beneficiaries." In their Opposition, Respondents failed and refused to address, explain and disclose (1) the sums actually received by the LFT for the sale of the assets of the SLWDC (2) the arbitrary allocation of only 15.34% of the proceeds of the sale to the LFT remaindermen beneficiaries who have a 72% interest in the corpus of the LFT, and in bad faith state "a simple question to Trustee, Murphy, would have provided the answer." Affidavit James L. Murphy, May 20, 2005, p.3, numbered para. 8 lines 16-17. LFT Trustees and LFT attorney Reese did not intend to give timely notices and had no intentions on providing other relevant information regarding the LFT to the remaindermen beneficiaries. It was not until this Court Ordered the Trustees to disclose LFT records that Petitioner got his first real glimpse of the gross and arbitrary mismanagement of the Trust. The numerous issues raised by Petitioner in his Set Aside stand, gross mismanagement occurred and continues to occur, the accountings and audit are deficient, incomplete, untrue, incorrect and inaccurate, Respondents were paid for their individual and collective nonfeasance, misfeasance and malfeasance by the LFT, and Petitioner has been damaged by the acts and omissions of the Respondents.. Respondents' Opposition is unresponsive and insufficient to support any order in their favor. This Petitioner has previously stated, no document appears in the record of this Court with respect to the approval of the sale of the assets of SLWDC that discloses the conflict of interest of Murphy and Dayton who effectively acted as seller, negotiator and buyer. Trustee Rowley was at a minimum grossly negligent in not objecting and reporting this significant conflict and what Murphy and Dayton intended to do with the corpus of the LFT. Respondents Opposition is unsupported by evidence and the bare assertions are made in bad faith. As proof of Respondent Trustees' bad faith pleading and misrepresentation of fact, Respondents LFT Trustees affirmed in pertinent part in their 13th Annual Intermediate Accountings: "That neither any seller to, nor buyer from, the Trustees of Trust property during the accounting period was at the time of sale or purchase, a relative, partner, employer, employee or business associate of any of the Trustees." Thirteenth Intermediate Accounting of Trustees of Lear Family Trust "B", filed July 31, 2000 p.2, lines 24-27; Set Aside, Exhibit 43, page #277
Trutees Murphy and Dayton (sellers) were sitting on the Board of Directors of Sierra Pacific Power Co., when the LFT corpus property was sold to Sierra Pacific for below market value. The assets sold by the LFT and the Moya Olsen Lear Trust to Sierra Pacific Power Company include but are not limited to land, wells, pump houses, water tanks, over 21 miles of pipeline, misc. equipment including software and customer files, pipeline easements, a Sierra Pacific Power Co. water contract, and most importantly, 732 acre feet of water rights. See Figure 1 below. Figure 1
Recent research in water rights shows that in 2003, in the Stead area, water rights were worth approximately $10,000 per acre foot and have recently sold for as much as $40,000 per acre foot. For the purpose of argument, a price of $10,000 per acre-foot multiplied by 732 acre-feet, the amount of acre-feet of water sold by the Trustees Murphy and Dayton to Sierra Pacific in 1999, equals $7,320,000 just for water rights and does not include infrastructure or customer base. The fair market value of the water rights alone accruing to the LFT (excluding but not limited to a 50% interest in 3 million gallon water tank storage capacity, 21+ miles of pipelines, pipeline easements, water meters, pump houses, and others, all of which were assets of SLWDC) conservatively exceeds $3,660,000 (50% of $7,320,000 due the LFT) is over three times more, for the water rights alone, than what Trustees stated all of SILVERLAKE's assets sold for in the 1999 Charge and Discharge Statement. See Petition to Set Aside Accountings, page 88, para. 316. This is not just imprudence, it is self dealing and gross mismanagement. Respondents barren assertions that "the Sierra Pacific Power Company offer was substantially higher than other offers received by the Trustees" does not have or hold water. Respondents' bare and unsubstantiated assertions are insufficient to form a valid defense and provide no grounds for the relief requested. Even if this bare assertion were taken as true, everyone else is forced to assume that the LFT was under an obligation to divest itself of these highly valuable assets at a time when a prudent man would not have divested himself of this property at grossly discounted prices, and especially when such a conflict of interest and self dealing was present. The aforementioned misrepresentations made under oath in the 13th Intermediate Accounting with regard to the nature of the relationship between Trustees and Sierra Pacific and the continuing misrepresentations are one of the many reasons why this Petitioner has prayed this Court to remove the Respondent Trustees and is good and sufficient reason to grant said removal and to place Trust records in the care and custody of an impartial and independent Court appointed receiver. Ledbetter v. First State Bank & Trust Co., 85 F.3d 1537 (1996). Trustees' failure to deny that they participated in the discussions that led to the sale and transfer of SILVERLAKE to Sierra Pacific Power Company admits that they participated in these discussions and that the sale was not an arms-length transaction and this is confirmed by the deeply discounted price paid by Sierra Pacific Power Company to the LFT for the purchase and acquisition of SILVERLAKE assets. Further, Judicial Notice shall be taken that when Respondents filed a Petition for Confirmation of the sale of SILVERLAKE with this Court, the public document which is attached hereto as Exhibit 1, known as the Silver Lake Water Asset Purchase Agreement was provided to the Court under seal and the LFT beneficiaries who received notice of the sale were informed that they would only be able to review said public document at the offices of McDonald, Carano, Wilson, LLP or its predecessor(s). Respondents attempted to mislead and conceal the contents of the purchase agreement from the LFT income and outright beneficiaries. See Set Aside §310 pp.87-88 & Set Aside Exhibit 39. The self dealing sale of SILVERLAKE defrauded all of the LFT's beneficiaries of significant sums and of a substantial corpus asset. 8) ACCOUNTING METHODS AND BOOKKEEPINGa) GenerallyIn a continuing pattern of vague, frivolous and unsubstantiated generalities, Respondents state that they have managed the LFT "in accordance with its [LFT] terms and the Court orders regarding its administration" and that the accounts "are professionally prepared, are true, correct, complete and accurate to the best of the Trustees' knowledge". However, there is substantial evidence in Petitioner's Set Aside to show that Respondents evaded or violated the LFT, this Court's Orders, the laws of the State of Nevada, the Professional Code of Ethics for Accountants, that their attorneys violated the Professional Rules of Conduct, that the Respondents violated the spirit and letter of WPLSr's Last Will and Testament, that the LFT was breached and violated, that Trustees are deceitfully using this Court's Orders, when convenient, for the purpose of presenting an aura of legitimacy to otherwise wholly unauthorized and/or illegal transactions, that the accountings do not meet any recognized standard of accounting practice and finally that the Respondents have willfully and wantonly made misrepresentations on the LFT's income tax returns, all of which remain unrebutted and are therefore admitted. // As reported in Petitioner's Set Aside, other LFT beneficiaries including but not limited to William P. Lear, JuniorL, and Jacqueline Lear are aware of some of Respondents' violations. Since April 26, 2005, Petitioner has received further and similar communications. In her written communication to Petitioner of June 15, 2005, the eldest beneficiary of the LFT, Rev. Mary Louise Ellenberger stated: "I am certainly aware that there have been errors made in the process of executing my father's will over the past 27 years." Exhibit 6. This Petitioner has requested copies of all the accounts approved by the surviving grantor as discussed in Article TENTH of the LFT. Respondents' have failed and refused to produce any such accounts and approvals, leaving this Petitioner, the Court and other LFT beneficiaries with only one conclusion: they do not exist. Respondents' two paragraphs mentioning Article TENTH without providing any accountings performed thereunder, illustrate how Trustees' attorney David J. Reese craftily padded his Opposition with irrelevant, immaterial and impertinent statements. Respondents' argument that they could not provide any accountings to this Court or to the beneficiaries due to the prior LFT Trustees failing to provide accountings in a timely manner are made in bad faith and imply that Respondents did not know the property or funds that they had received and held in Trust. thereby justifying this Petitioner's prayer for the immediate removal of the Trustees and the entire trust being assigned to a competent and independent receiver appointed by this Court. b) Two Sets of BooksIn their Opposition to Petitioner's allegation that there are two set of books, Respondents state "The simple explanation for this fact is that there are 'timing' differences" as to when such amounts are reported to the Internal Revenue and when they appear in annual accountings to the Court." Respondents' claim is in contradiction with the accounts submitted to this Court and to LFT beneficiaries, namely that the accountings presented are on the "income tax basis" and are therefore presumed to be on the same time schedule. Both the intermediate annual accountings and the LFT tax returns are on the prior year calendar year basis. Of no less importance, Respondents misrepresent that this difference is because the amounts disclosed as distributions to LFT beneficiaries in the charge and discharge statement for the years 2000, 2001, 2002 and 2003 are significantly more than those disclosed to the IRS in the LFT's tax returns for those same years. Petitioner has reason to believe that the discrepancy is due to unauthorized conversion and distributions of corpus which are prohibited in a Trust taking advantage of the GST and therefore the numbers must be "massaged" and falsified for the purpose of not arousing suspicions by the IRS. In any case, the difference does exist for the same accounting year which ended on the last day of December of each year. The annual accounting of the LFT is due on March 1st following the close of the prior accounting year. The amount distributed to income beneficiaries during the prior accounting year should not be different from those reported on LFT tax returns which are due on April 15th, forty five days later. The Respondents' assertion is not factually rational and it does not properly explain these significant annual differences in any manner which could be understood. Simply stated, if the amounts distributed to income beneficiaries from the LFT from January 1, 2001 to December 31, 2001, total $100,000, then the annual accounting due on March 1st and the tax return due on April 15th should reflect $100,000. In Respondents' vague scenario, there is a miraculous change that must necessarily occur between March 1st and April 15th. On numerous occasions throughout their Opposition, and in James L. Murphy unverified and conclusory statement that is improperly called and designated as an "affidavit" and was attached to the Opposition, Respondents claim that this Petitioner does not understand the Charge and Discharge Statements or the accountings as presented by Respondents but in no event attempt to explain these accounts or rebut this Petitioner's allegation that the accountings do not meet any recognized standard and therefore admits that the accountings as presented to this Court and the LFT beneficiaries are of no use to the LFT beneficiaries. There is no standard accounting procedure to use and apply to the LFT, Grant Thornton, James L. Murphy accountings. Respondents effectively admit the validity of this Petitioner's allegations as set forth in the Petition to Set Aside Accountings. // As is made clear in the Set Aside paragraphs 272 to 286 inclusive which are incorporated and reiterated herein, the accountings provided by Respondents are not clear, don't comply with any recognized standard and raise more questions than they answer and as such this Petitioner cannot understand the Charge and Discharge Statements. This inability to understand the LFT accountings goes far beyond just this Petitioner. Petitioner consulted several other experienced accountants and recognized authorities in the field of trust management who could not decipher or understand the same LFT Charge and Discharge Statements. Not only do the accountings presented by Respondents fail to meet with any recognized standard of accounting they are in violation of the requirements as set forth under NRS 165.040, to which the LFT is bound. Further, the Respondents themselves recognize that the accountings as presented for the year 2003 are not intended for those who are not informed in matters of accountings therefore their argument is made in bad faith and is at best deceitful and self-serving. This Petitioner is not an accountant but this does not excuse the Respondents from producing vague summary accountings which are not understandable by a beneficiary of average intelligence or even his accountant. This vague and empiric methodology reeks of the hostile and arbitrary pattern of conduct of the Respondents who devised and implemented a scheme to conceal the management and true condition of the LFT. c) Assets Not Properly Accounted ForIn the Petition to Set Aside Accountings, Petitioner alleged that certain notes receivable secured by real estate were listed in the Inventory of Assets schedules through January 1, 2002 and then seemed to disappear from the Inventories of Assets until that category reappeared in the December 31, 2003 schedule. In response, Respondent LFT Trustee and accountant Murphy addressed this issue in his unverified and improper affidavit of May 20, 2005 and referred the reader to Exhibit D of said affidavit for an explanation which raises new questions and compounds the violations of standards made by Respondent in the accountings presented to this Court and to the LFT beneficiaries for approval. A careful review of Exhibit D reveals it to be deficient in several key areas. First, there is no heading on the exhibit so one cannot be certain of exactly what elements are reported. Second, there are a myriad of undefined abbreviations for each of the three years on the schedule so that one does not know the source of the transactions reported. Third, the column entitled "ADD" is without explanation so one cannot be certain the source of these apparent increases - in fact, the column includes one negative number for one transaction followed by a positive number of identical magnitude for another transaction with no explanation. Fourth, the third column entitled "PAID" is without explanation and one is not certain who paid whom. By carefully reading the footnotes to this schedule, one can assume that these notes receivable were reported as "Notes Receivable - Secured by Real Estate" through January 1, 2002 and as "Other Equities" thereafter. Investments are generally classified as debt (instruments that are liabilities of the issuing party)[2] or equity (ownership of the issuing party)[3] and these instruments are undoubtedly of the debt classification. Thus, their inclusion as "Other Equities" is totally inappropriate and in violation of generally accepted accounting principles. In addition, the change of classification of this major asset violates the pervasive accounting principle of consistency . . . "Consistency in applying accounting methods over a span of time has always been regarded as an important quality that makes accounting numbers more useful."[4] Trustee James Murphy has violated the consistency principle by changing the method of disclosure without notice or justification. In fact, his footnote 3 in Exhibit D is incorrect. He declares in that footnote that the notes receivable are shown as "Other Equities" in the December 31, 2003 inventory. In fact, in that inventory, he has reverted to showing this asset as "Notes Receivable - Secured by Real Estate." Again the change is without notice or justification. Thus, for the years 2002 and 2003, Trustee James Murphy is not even consistent on the accounting methodology on the beginning and ending inventory reports for the same year. In summary, in attempting to justify this confusing
situation within his statements, Respondents only make bare and unsupported assertions in defense of the unaccounted for property, stating principally that this Petitioner does not understand the accountings in an effort to place the blame and burden for this problem upon this Petitioner when the Respondents have the burden of proof to show that their accounts meet the accounting and legal requirements to which the accountants and Trustees are subject. For this reason, the Respondents are presumed to have breached their fiduciary duties and obligations and the accounts are incorrect, inaccurate and deficient. The accountings presented by Respondents to LFT beneficiaries and to this Court must stand on their own without necessitating numerous questions to Respondents which compound the double-billing and self-serving scheme developed and implemented by Respondents in conspiracy with each other and in derogation of their fiduciary duties and obligations. Further, the audit performed by BV was not independent, as Grant Thornton accountant James L. Murphy was an integral part of the audit team and maintained substantial oversight over the audit process and outcome See Section 8(g) herein. This Petitioner also has reason to believe that the auditor maintained a conflict of interest with a party adverse to the LFT and ought to have disqualified itself for this reason from performing the audit. Respondents Trustees completely fail and neglect to rebut any of the allegations made by this Petitioner regarding the lack of standards of the LFT's accounts. In particular, if the accounts are deficient, the audit is itself automatically deficient when it fails and neglects to raise and address this important issue. d) Inaccurate Write-OffsThe reporting for the Capistrano Industrial Park, Ltd., Partnership (CP) by the Trustees has raised serious questions about the veracity of the information contained in the Trustees' financial statements distributed to selected LFT beneficiaries and filed with the court. The CP was initially included in the LFT statements in 1991 as one of the assets transferred from the William P. Lear Estate and is designated "Investment in Capistrano Industrial Park, Ltd. Partnership (5.25% interest)." There is no explanation in the William P. Lear Estate financial statements as to why this asset is recorded at no value even though the partnership has shown consistent earnings/loss amounts and distributions to partners. Without further explanation the LFT statement for 1991 includes among other Equity Adjustments "Record tax basis of Capistrano Industrial Park Partnership - (52,968.20)". This negative tax basis is thus the beginning value for CP for the LFT wherein CP reported income is added to the value and cash disbursements from CP are deducted from the reported value. This method is referred to as the "equity method" and is appropriate for reporting on the tax basis. However, in the Grant Thornton, LLP (GT) compilation report accompanying this statement, Grant Thornton reports "The Trust's policy is to prepare its statement on the basis of cash receipts and cash disbursements;" While Grant Thornton states that the compilations are on cash basis of accounting, this equity adjustment and the consequent treatment in 1991 and later years undeniably report this asset on the modified cash basis (wherein revenue and expenses are reported on the cash basis but certain liabilities and assets can be reported on the accrual or tax basis). This incorrect disclosure of the reporting basis is an obvious violation of SSARS 1 and consequently a violation of the Nevada Board of Public Accountancy and the American Institute of CPA's Code of Professional Ethics (CPE) Rules 102-1 and 201. Thus, the question on the source of the (52,968.20) is unanswered and, further, the question of the inaccurate description of the basis for accounting on the compilation statement is also unanswered. For the years 1992 through 1998 the LFT statements show that CP is accounted for in a manner consistent with the equity method or the tax method of accounting for investees and the arithmetic for these transactions appears accurate within the statements for this period. However, when the amounts reported on the LFT statements are compared with the partnerships statements for CP for this period, disturbing questions arise. In each case, the amount of cash disbursement on the LFT statements is 5.25% of the total cash disbursed by CP to its partners. However, in none of these years is the amount of reported tax income on the LFT statements equal to 5.25% of the tax net income reported on the CP statements. See Table 1 below. In each year 5.25% of the CP reported tax income is different from the CP income as reported on the LFT statements. Further, except for 1997, the difference between the two income numbers is substantial and material. These differences are unexplained by any information available to users of the LFT's Charge and Discharge statements, the three categories of LFT beneficiaries. The cash distributions reported on the LFT statements are consistent with the cash distributions reported in the CP statements while the income reported on the LFT statements are not consistent with the CP statements. It should be pointed out that the distributions made by CP have flowed through an independent third party, the transferring bank while the income reported by the LFT cannot be verified by an outside third party.
TABLE 1
Numerous serious questions arise in the final year of LFT statements in which CP appears, 1999. This is the year in which the CP investment is sold. During that year, the book value of the investment is increased by $431,463 from ($61,862.20) to $369,600.80 the book value used in reporting the sale of CP. There is absolutely no explanation for this dramatic increase in the value of CP except as described below. The first question regarding the sale of LFT's interest in CP is that the LFT statements report $8,332 in income from CP. In previous years (1992 through 1998) such income was added to the carrying value of CP. However, in 1999 this income was not added to that book value and there is no explanation for this significant change in accounting policy by the trustees of the LFT. The second question arises from the Statement of Funds Provided and Used in the 1999 LFT statement. Under the heading "Funds were used as follows:" is the entry "Income applicable of Capistrano that reduced recorded book value - 431, 463." In spite of the nature of the description of the entry as a book value adjustment, this entry is undeniably included in the category of "Funds were used as follows:" It is ludicrous to conclude that this entry actually represents the transfer of funds from the LFT to CP in the amount of $431,463, as required under the cash basis method of accounting. There is no other evidence in the statements of such a transfer and, in fact, that transfer of funds in these circumstances simply does not make sense. Thus, the question can be asked: why is this entry included in the category of "Funds Used" when the transaction undoubtedly involves no such transfer of funds? The third question that arises from this transaction is the caption of the transaction in the Statement of Funds Provided and Used. Consider that the book value as reported in the sale of CP is $431,463 higher than the beginning reported book value of CP. This increase in value would require a debit to the book value of CP with the offsetting credit to income as reported by CP. While the Trustees do report this as "income" the transaction is described as reducing the book value of CP when, in fact, such a transaction would have increased the book value of CP. This third question is then in two parts: (1) Why is a transaction that is obviously an accrual adjustment included in the category of "Funds were used as follows:" (a cash basis caption)? and (2) why is a transaction that plainly would increase book value under the equity method of accounting reported as decreasing the book value of that investment? The fourth question on this entry is the source of the $431,463 adjustment. Research into the financial statements of both the William P. Lear Estate and CP yields absolutely no basis or explanation for this adjustment. There is, of course, no explanation provided by the Trustees in the LFT statements and LFT beneficiaries are left with the question: What is the source for this $431,463 equity adjustment? The final question on this issue concerns the distribution of cash from the proceeds of the sale of CP. In the Schedule of Major Asset Sales, the Trustees of LFT report that $102,298.14 of the $254,625 sales proceeds is allocated to the Remaindermen. However, an analysis of the schedule Remaindermen Account Transactions reveals no entry which could have contained the transfer of this $102,298.14 to the Remaindermen Account. What was the disposition of the $102,298.14 which was allocated to the Remaindermen? Consider the breadth and depth of the unanswered questions relations to this single investment: (1) Why was the initial transfer from the William P. Lear Estate of CP recorded at no value when there was a full history of transactions related to this asset? (2) What was the source for the 1991 unexplained adjustment to the book value of CP of ($52,968.20) made by the Trustees for the LFT? (3) Why do the Trustee for the LFT and Grant Thornton describe the accounting method for CP as "cash basis" when the method is undeniably the "equity method" as used in tax basis accounting? (4) Why is the amount of income for the CP as reported by the Trustees in the LFT statements significantly at variance with 5.25% of the reported tax income by CP when the cash distributions for the CP as reported by the Trustees in the LFT statements are consistent with 5.25% of the reported distributions to partners by CP? (5) Why was the income from CP in 1999 not added to the book value of the investment as was the income for the years 1992 through 1998? (6) Why was the adjustment to the CP account in 1999 of $431,463 reported as a use of funds on the Funds Provided and Used statement? (7) Why is an obvious accrual adjustment included in the category of "Funds were used as follows:"? (8) Why was an accrual adjustment that increased the carrying value of the CP asset shown as an adjustment that reduced the carrying value of that asset? (9) What is the source of the $431,463 adjustment? (10) Why is the allocation of $102,298.14 proceeds allocated to the Remaindermen not included in the Statement of Remaindermen Account Transactions? When LFT Trustee and Grant Thornton accountant James L. Murphy responded to the Set Aside, he simply demonstrated the arithmetic of the equity method with absolutely no explanation that in any way addresses a single one of the ten questions just enumerated. In fact, his explanation contains three source numbers. The first (beginning book value of the CP of ($52,968.20)) is an amount that simply appears with no explanation and is not consistent with the data from the William P. Lear Estate statements. The second (CP income of $10,377) is at significant and material variance with 5.25% of the reported CP tax income for that year. The third (cash received from CP of $5,250) is consistent with the CP statements and, by coincidence, subject to confirmation by bank records. LFT Trustee and Grant Thornton accountant James L. Murphy still has ten remaining unanswered questions relating to the CP investment and this highlights the gross deficiencies in the accountings as they have been presented to this Court and the LFT beneficiaries over the years. Respondent Grant Thornton, LFT Trustee and Grant Thornton accountant James L. Murphy have eliminated all footnotes from the LFT financial statements and Grant Thornton also eliminates them in their compilation without making the required reference in their compilation report. Respondents Grant Thornton, LFT Trustee and Grant Thornton accountant James L. Murphy are required to disclose material omissions from their accountings. The third Fiduciary Accounting Principle states that: "A fiduciary account shall contain sufficient information to put the interested parties on notice as to all significant transactions affecting administration during the accounting period."
NRS 165.040 (1)(c) requires each intermediate account to include: "In a separate schedule, additions to trust principle during the accounting period with the dates and sources of acquisition, investments collected, sold or charged off during the accounting period, investments made during the accounting period, with the date, source and cost of each, deductions from principal during the accounting period, with the date and purpose of each, and the trust principal, invested or uninvested, on hand at the end of the accounting period, reflecting the approximate market value thereof:"
The near total lack of disclosure on the transactions surrounding CP and the explanations and sources for those transactions is a blatant violation of the third Fiduciary Accounting Principle and NRS 165.040 (1)(c). In addition, these errors and omissions by LFT Trustee and Grant Thornton accountant James L. Murphy and Grant Thornton appear to be inconsistent with the Code of Professional Ethics rules 102-1, 201-B, 202, 501, and 501-4. Judicial notice will be taken that Petitioner based his analysis of CP on the papers, records and documents which had been in Barnard, Vogler & Co.'s possession for the performance of their audit and while having this information at their disposal, Barnard, Vogler & Co. failed and neglected to raise the inconsistencies in accounting standards and the Code of Professional Ethics rules 102-1, 201-B, 202, 501 and 501-4 as discussed above. Finally, while it appears that CP's current value basis at the time of sale (1999) was $254,625.00, the derived net amount transferred to the LFT as a result of the sale of its interest in CP is approximately $25,000. Over the years, CP made numerous distributions of capital to the LFT, thereby reducing the LFT's net equity in CP to approximately $25,000.00. Upon the sale of the CP interest, Respondents distributed the sums of $66,304.35 to the "Principal beneficiaries" and $68,198.76 to the "Income beneficiaries, totaling $134,503.11. Petitioner has reason to believe that the approximate sum received by and transferred to the LFT as a result of the sale of its interest in CP was $25,000.00 and that Respondents distributed LFT corpus properly belonging to the LFT remaindermen to the LFT's income and outright beneficiaries and distributed no funds to and to the damage of the LFT remaindermen beneficiaries. The 1999 Charge and Discharge Statement shows no actual CP distribution to the LFT remaindermen. Set Aside, exhibit 43, page 287 of 646. In their Opposition, Respondents failed and refused to explain how the ($52,968.20) figure was derived and said figure appears to be either arbitrary or an "ANTB" entry (Amount Needed To Balance). In bad faith, Respondent James L. Murphy stated in an affidavit dated May 20, 2005: "a simple question to Trustee, Murphy, would have provided the answer." However, in their Opposition, Respondents refuse to address, answer, clarify and provide evidence to any question raised by Petitioner and merely state that Petitioner "does not understand" the various issues. The evidence provided in this case very clearly illustrates the obfuscation, obstruction, refusals and unresponsiveness of Respondents Grant Thornton, LFT Trustees, David J. Reese, Esq. and CR&R, and their hostile and dilatory practices, their vindictive, not impartial, disloyal and fraudulent administration of the LFT. Judicial notice will be taken that Respondents did not rebut or refute Petitioner's allegation with regard to the inaccurate write-off of $145,333.77 on the 1991 Charge and Discharge Statements and these are therefore admitted. e) Riverhouse and Rubens PaintingsThe Opposition as much as admits to the Respondents' failure and neglect to perform due diligence and their dereliction of duty with regard to the property received from the Estate or from the previous Trustees. To wit, Riverhouse was specifically included in the LFT by way of Article FOURTH (g). This Petitioner has reason to believe that said Riverhouse and the two Peter Paul Rubens paintings are included on one or both of the Schedules which were attached to the LFT at Article THIRD. However, the Respondents have openly refused to produce said schedules despite Petitioner's numerous requests since March 2004. This Petitioner also has reason to believe that Respondents are deliberately refusing to produce the aforementioned LFT Schedules as they would provide concrete evidence of their bad faith pleading, mismanagement and malfeasance, and will probably show other unaccounted for property, in addition to Riverhouse and the two Peter Paul Rubens paintings. Respondents make a lengthy argument about WPLSr's quitclaim of Riverhouse to Moya Olsen Lear but, in bad faith, fail to address the fact that Moya Olsen Lear exchanged and committed Riverhouse into the LFT for the right to enjoy its use for the rest of her life. The LFT Article FOURTH (g) and Moya Olsen Lear being named as beneficiary of the estate and Trust of WPLSr in the Petition for Letters Testamentary are prima facie evidence of this exchange. Set Aside, exhibit 3, p.12 of 646 & exhibit 4, p.25 of 646. Petitioner's allegation and evidence stand. Respondents know that the legal owner of said two Peter Paul Rubens paintings is WPLSr or properly his estate and the LFT, but in a continuance of bad faith and misrepresentations state "[T]he Seventeen Annual Accountings submitted to the Court by the Trustees of Lear Trust B ... are true, correct, complete and accurate to the best of the Trustees' knowledge and belief." Opposition, p.9 lines 8-11. The very valuable Rubens paintings are missing from the LFT corpus and have never been accounted for by Respondents. Petitioner has reason to believe that the Rubens paintings were unlawfully and fraudulently converted and sold and that the proceeds from the unlawful and fraudulent sale were not returned to the LFT. f) Estate Tax and Related AccountingsIn their Opposition, Respondents allege that this Petitioner doesn't understand the accountings as presented by Respondents. James L. Murphy, in his affidavit dated May 20, 2005 and in bad faith claims that the Estate tax "is clearly a matter related to the probate estate of W. P. Lear and of the Lear Family Trust B" but fails to explain why he discusses this matter at length in his letter to beneficiaries of July 25, 1991 and why the Estate's tax liability further appears in the accountings of the LFT for the years 1991 and 1992 and in his Exhibit E to Respondents Opposition. At issue in Petitioner's Petition to Set Aside Accountings and the LFT Trustees' Opposition is the $3,251,662 in IRS and State of Nevada interest on estate taxes as reported in the July 25, 1991 letter from LFT Trustee and Grant Thornton accountant James L. Murphy and the other trustees to selected LFT beneficiaries. James Murphy identifies estate taxes paid by the Estate and the LFT of $5,014,902 including interest (federal and state) of $3,251,662. There is no indication in the LFT financial statements through 1991 that reconciles to these numbers and there is no indication of any interest paid by the LFT. In the Trustees' Opposition LFT Trustee and Grant Thornton accountant James L. Murphy includes a one page explanation attached to the Opposition as Exhibit E. Consistent with the other explanations of Trustee James Murphy, the Opposition and Exhibit E thereto raise more questions and provide no additional insight the previous questions raised. On April 10, 1991, the Estate of William P. Lear and the IRS entered into a Stipulation that was affirmed by the United States Tax Court. The April 10, 1991 Order declares that as of that date, "There is no deficiency in Estate tax due from, nor overpayment due to, the petitioner." The stipulation shows a total tax liability, after overassessments and State of Nevada credits of $2,663,531 of which $1,747,244 had been paid on that date leaving $915,996 not paid. This document was agreed to by both the representatives of the Estate, including Grant Thornton, LLP and Trustee and Grant Thornton accountant James Murphy, representatives of the IRS, and the Tax Court. Thus the numbers in this document can be accepted as uncontested. In light of Exhibit E and for the purpose of argument, this Petitioner assumes that this stipulation addresses only the tax liability issue and does not include interest on unpaid taxes. It is important to determine if the data presented by LFT Trustee and Grant Thornton accountant James Murphy in his Exhibit E are consistent with the stipulation. Both the stipulation and Exhibit E arrive at a tax due (excluding interest) of $2,663,531. However, Exhibit E does so using numbers that do not reconcile to the stipulation. The stipulation shows an additional IRS tax assessment on July 12, 1982 of $173,579 and an overassessment (with State of Nevada credit) of $2,830,073. In Exhibit E, LFT Trustee and Grant Thornton accountant James L. Murphy declares the 1982 assessment was $6,995,515 and the settlement, for which James Murphy credits Grant Thornton and himself, to be $9,234,467. For comparison sake, these numbers are presented in the table below. TABLE 2
Nowhere in the Opposition, in LFT Trustee and Grant Thornton partner and accountant James Murphy's affidavit or in his Exhibit E are the differences highlighted in Table 2 addressed. Certainly, LFT Trustee and Grant Thornton partner and accountant James Murphy had access to the stipulation and, by taking credit for the settlement, was, himself, a party to that settlement. Why, then, are Murphy's numbers at such a large variance from the numbers on the Stipulation? Again, in attempting to answer questions, LFT Trustee and Grant Thornton accountant James L. Murphy is simply raising more unanswered questions. The data on payments of taxes in the Stipulation and data on payments of taxes and interest in Exhibit E can be reconciled. However, it is first necessary to establish the timing of the payments of the $3,251,662 in interest. In Exhibit E, Murphy refers to the $3,251,662 in interest as ". . . amounts owed as of March 31, 1991." In his July 21, 1991 letter certain beneficiaries, he describes this same amount as "Total payments made are as follows:" Thus, according to his own declarations, the $3,251,662 in interest was paid between March 31, 1991 and July 21, 1991. Therefore, all payments referenced in the stipulation were for tax liability and none were applied to interest. In Exhibit E, he shows total payments made between April 1, 1991 and May 30, 1991 of $2,634,712 (all but $134,712 paid from Estate funds). In addition, he shows in that document total payments and credits to the State of Nevada of $643,052 and payments from land sales, on which the IRS had placed liens, of $920,000. Thus the total payments and credits in that statement are $4,167,658. The sum of the unpaid interest ($3,251,662) and the non-paid amount from the stipulation ($915,996) also totals $4,167,658. The table below shows the source of tax and interest liability and the source of payments of that liability. TABLE 3
The following conclusions stem from this analysis. First, the taxes and interest for the Estate were fully paid by the end of 1991. Second, the payment of $134,712 was the only LFT payment identified Exhibit E. The following analysis addresses the source of the remaining payments: a) The payment with the tax return ($834,194) and the payment on January 21, 1979 ($117,550) were clearly made by the Estate. b) An analysis of the Charge and Discharge Statements of the LFT for the years 1979 through 1991 show no proceeds for any land sale that were distributed to the IRS in settlement of a tax lien. If any LFT property were subject to a tax lien and if the proceeds of the sale of any LFT property were distributed in escrow to the IRS to release those liens, these facts are of such importance to the beneficiaries that they should have been disclosed in the appropriate Charge and Discharge Statements. To not disclose such facts would have been in violation of the Third Fiduciary Accounting Standard[5] and NRS 165.040 (1)(c)[6]. Absent these required disclosures, one must assume that the proceeds from the sale of land subject to IRS lien were from Estate transactions and not from LFT transactions. c) In the same manner, had the LFT made the payment of interest to the State of Nevada, the Third Fiduciary Accounting Standard and NRS 165.040(1)(c) would have required disclosure in the LFT Charge and Discharge Statement. Absent these required disclosures, one must assume that the proceeds from the payment of State of Nevada tax interest was from Estate transactions and not from LFT transactions. d) The payments of $2,500,000 form April 1, 1991 through May 30, 1991 are identified as payments from the Estate of W. P. Lear and even include check numbers[7]. e) The only remaining payment is the May 30, 1991 from the LFT for $134,712. Thus, LFT Trustee and Grant Thornton accountant James L. Murphy has demonstrated with his own statements and computations that only $134,712 of the total Estate tax and interest obligations were paid by the LFT. His presentation in Exhibit E is somewhat oblique, indirect, and circuitous but it is, without question, consistent with the stipulation and the conclusion that all payments except for the $134,712 were from assets of the Estate. f) However, the conclusion that all payments except for the $134,712 were from assets of the Estate is not consistent with the data as presented in the LFT financial statements as compiled by Grant Thornton, LLP under the direction of Trustee and accountant James Murphy from source documents prepared by Trustee James Murphy. An analysis of the LFT Charge and Discharge Statements show the following payments by the LFT on behalf of the Estate of William P. Lear. Table 4
The facts are clear. LFT Trustee and Grant Thornton accountant James L. Murphy demonstrated without question in Exhibit E that all but $134,712 of the Estate tax and interest payments was made from Estate assets. However, the 1985 through 1991 LFT Charge and Discharge statements with source data generated by LFT Trustee and Grant Thornton accountant James L. Murphy and compiled by Grant Thornton, LLP (compilation by Grant Thornton, LLP as of May 1, 1987) with the assistance of Mr. Murphy show without question Estate tax payments that exceed by $2,523,292 the $134,712 as reported in Trustee James Murphy's own analysis in Exhibit E. Notice shall be taken that Respondents' Exhibit E fails to disclose the payor and/or payee of funds as for instance, "Estate of W.P. Lear, check 361, April 1, 1991 - 1,000,000" or "Paid from land sale proceeds: Lien released May 15, 1991 from escrow - 800,000". Exhibit E. Notice shall also be taken that Grant Thornton, LLP performed the compilation of the Charge and Discharge Statements for the Estate of William P. Lear, Sr. as of May 1, 1990 through the final accounting of the Estate of William P. Lear, Sr. on December 31, 1991, concurrently with the accountings for the LFT which Grant Thornton had been performing from May 1, 1987 to date. Since the unaccounted for amounts are so significant, Petitioner requests that the Court order LFT Trustee and Grant Thornton accountant James L. Murphy to produce the cancelled checks and any other related source documents associated with the $2,658,004 of LFT payments on behalf of Estate taxes so that the serious questions raised can be finally answered. g) Barnard, Vogler & Co. AuditOn August 11, 2003, this Court ordered an independent audit of the LFT and on November 4, 2003 determined that the audit of the LFT was to cover the five years 1996 through 2000. LFT Trustee Richard B. Rowley and LFT Trustee and Grant Thornton accountant James L. Murphy, engaged the firm of Barnard Vogler & Co. (BV) on December 1, 2003 to audit the five Charge and Discharge Statements for the years 1996 through 2000. In their Opposition, Respondents state that: "As further assurance that the Trustees have properly accounted, the Court and the beneficiaries have the benefit of an independent audit performed by the independent auditing firm of Barnard and Volger for the accountings from 1996 through 2000. The independent auditor found no "discrepancies" such as are suggested by the Petitioner." Opposition to Petition to Set Aside Accountings, page 17, lines 9 - 14 [Emphasis added]
Numerous "errors" become apparent when Petitioner closely reviewed the BV audit. These errors lead the careful examiner who is mindful of the standards of accounting to conclude, among others things, and at best, that BV failed to maintain independence in appearance. On July 28, 2004 BV issued its audit report on those statements and on August 30, 2004 released the statements to the Trustees. There is no explanation for the 33 day delay between the issuance of the audit report and its release to the Respondents. BV made a number of very serious material omissions from the audited statements and made a number of other serious errors in reporting violations of the Auditing Standards: First, the BV audit statements cover a single five year period beginning January 1, 1996 and ending December 31, 2000. The Charge and Discharge Summary Statement, the Statement of Income, and the Statement of General Expenses are for this five year period with no accounting for the individual five years within the period. While the statements do include Inventory of Assets as of January 1, 1996 and December 31, 2000, they do not include such inventories for December 31 for the years 1996, 1997, 1998, or 1999. NRS § 165.040 requires the trustees to file reports with the court within 60 days of the end of each calendar year.[9] Thus there is an unquestioned statutory requirement for annual reports to be filed each year with the Court and on or before March 1st. BV knew or should have known of this requirement and should have insisted on reporting on five complete individual annual reports rather than the single and cumulative five year statement that it included in its report. By issuing the audit report on the five year summary report instead of audit reports on five individual annual reports, BV has wantonly disregarded the clear requirements of NRS § 165.040. Second, the financial statements as reported by BV have total dollar amounts that are identical to the five individual Charge and Discharge Statements as compiled by Grant Thornton and submitted to the Court by LFT Trustee and Grant Thornton accountant James L. Murphy. Consequently, any errors, misstatements, and other improper accounting treatments in those individual statements are continued in the summary statement as audited by BV. Consider, for example, the numerous problems associated with the sale of the Capistrano Partnership in 1999 as stated and shown above. The errors with regard to that sale as reported in LFT Trustee and Grant Thornton accountant James L. Murphy's 1999 Charge and Discharge Statement were carried forward in the summary statement as audited by BV. In other words, by not making a single adjustment to the five individual statements as filed by LFT Trustee and Grant Thornton accountant James L. Murphy, BV failed to correct the many errors, misstatements, and other improper accounting treatments as documented above and erroneously issued an unqualified audit report on the inaccurate, incomplete and defective summary statements. Third, while BV does point out in its management letter to the Trustees the lack of reporting on the interest of the individual groups of beneficiaries, the improper omission of fair market values of assets, the lack of notice in the compilation report of the elimination of footnotes, the lack of segregation of duties resulting in a severe weakness in internal controls for the LFT, and the use of outdated terminology, BV fails to point out the improper identification of the "cash basis" as the basis for the LFT statements. In fact, the LFT statements use cash basis for income and expenses but most assets are accounted for on the tax basis and receivables and payables are accounted for on the accrual basis. This combination of accounting bases is generally referred to as the "modified cash basis" of accounting. Yet, BV does not correct this error in its audit report and, in fact, in footnote 1 to the financial statements, describes the method of accounting as the "cash basis." It is disturbing that Respondents Grant Thornton and LFT Trustee and Grant Thornton accountant James L. Murphy continually identified their compiled statements as being on the "cash basis" and even more disturbing that BV continued this error in its audit of these same statements. Fourth, the statements as audited by BV dramatically fail to provide sufficient information on transactions as required by the third Fiduciary Accounting Principle[10] and by NRS § 165.040[11]. In summary, these promulgated and statutory requirements address the need for adequate information on all significant transactions to fully inform the users, the Court and the LFT beneficiaries, of the financial statements. By combining income and expense transactions for all five years, BV failed to give the annual details on income and expense transactions that would have been useful to the users of the statements. The many cases of inadequate disclosure described above in the compiled statements have been carried through to the five year summary statements audited by BV. Finally, the audited statements contain schedule 3 "Major Asset Sales" in which all major asset sales are summarized by year. In these transactions, essential to the statements users, BV not only repeats the lack of disclosure in the compiled statements but exacerbates the problem by commingling numerous major asset sales in each individual year to a single disclosed number. Therefore, BV has violated these provisions for the third Fiduciary Accounting Principle and NRS § 165.040 in an even more egregious fashion than have Respondents Grant Thornton and LFT Trustee and Grant Thornton accountant James L. Murphy in their compiled statements. Fifth, there are two very serious concerns with the sale of the Silver Lake Water Distribution Company as reported in the 1999 compiled statement and included in the summary of the audited statements. 1. The first serious concern with the sale of the Silver Lake Water Distribution Company is the level of proceeds received for this asset. According to the 1999 compiled statement, the LFT received $289,000 for the notes receivable associated with the company and $599,484.34 for the remaining assets. The fair market value of these assets, primarily the 732 acre feet of water and physical storage and transmission assets, would have been at least $7,000,000 (seven million dollars) in 1999. Consequently, the sale of these assets to Sierra Pacific Power Company (SPPC) was made at a small fraction of the market value of those assets. This fact would have been of extreme interest to the users of the statements and should have been included in the statements. BV knew, or should have known that the fair market value of this major asset was substantially greater than the proceeds received for those assets and should have required disclosure of this fact in the audited financial statements. 2. The second concern is the relationship of two of the LFT Trustees, Harold P. Dayton and James L. Murphy with SPPC at the time of the sale. During 1999, LFT Trustees James Murphy and Harold Dayton were members of the Board of Directors of SPPC and each owned material amounts of SPPC stock. There can be no question that Trustees Murphy and Dayton were related parties to this transaction because they were members of the management of both buyer and seller for that transaction and, because of their ownership of SPPC stock were in a position to personally benefit from a sale that was grossly advantageous to SPPC. Statement of Financial Accounting Standards (SFAS) is the Authoritative pronouncement of the Financial Accounting Standards Board. The Code of Professional Conduct as adopted by the Nevada Board of Accountancy requires accountants and auditors in Nevada to follow all promulgated rules of the FASB. If an accountant includes comprehensive footnotes to the finanacial statements, as BV did in its audit of the LFT, the SFAS No. 57 pronouncement describes the required disclosures for related parties under generally accepted accounting principles. SFAS No. 57 defines related parties to include the management of either party. (SFAS 57, ¶ 24(f)). The standard further specifically defines management to include members of the Board of Directors. (SFAS 57, ¶ 24(f)). In the Opposition to the Petition to Set Aside Accountings, LFT Trustee and Grant Thornton accountant James L. Murphy, argues that he and Trustee Harold Dayton were excluded from any meeting of the SPPC Board of Directors in which the sale was discussed. However, SFAS 57 defines a related party as a member of the Board of Directors, not just Directors who attend certain meetings. Presumably the influence of Directors extends to relationships with other Directors and to communications that take place outside specific meetings. In addition, these two LFT Trustees continued to hold their stock in SPPC during the entire negotiation period of the sale of the Silver Lake Water Distribution Company. There can be no doubt that both of these Trustees meet the SFAS definition of related parties for this transaction. SFAS 57 further requires that for any transaction between related parties, the appropriate financial statements will include disclosures of: "a. The nature of the relationship(s) involved b. A description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements c. The dollar amounts of the transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period d. Amounts due from or to related parties as of the date of each balance sheet presented, and if not otherwise apparent, the terms and manner of settlement." (SFAS 57 ¶ 2).
The BV audited statement does list three related party situations including the fact that the Silver Lake Water Distribution Company is owned in part by the LFT and in part by Moya Lear and Moya Corporation. However, these statements fail completely to disclose the related party affiliation between the LFT and the SPPC because two of the Trustees of LFT are also members of the Board of Directors of SPPC and own material amounts of SPPC stock. This is a clear violation of SFAS 57. Further, the BV audited statement summarized the major asset sales for 1999 and does not make the specific disclosures required by SFAS 57 ¶ 2. Thus, the BV audited statements not only fail to disclose the related party affiliation but fail to make the required transaction disclosures from a transaction between those related parties. BV did in fact make this fundamental error in their audit of these statements. BV was certainly aware of the related party requirements in SFAS 57 as they identified three other related party situations in the statements. BV certainly knew or should have known the full facts of one of the largest transactions in the period under audit. One explanation would be that they were essentially appointed by one of the related parties in the Silver Lake transaction LFT Trustee and Grant Thornton accountant James L. Murphy and thus failed to maintain independence in appearance. There can be no more serious transgression by an auditor than for that auditor to express an opinion on financial statements of a client with whom the auditor does not have independence. For this reason alone, the BV audited financial statements should be set aside by the Court. The other problems with the BV audited statements cited above only serve to reinforce this conclusion and that BV's audit was untrue, incorrect, incomplete and inaccurate and was tainted by the acts and omissions of Grant Thornton and Grant Thornton accountant, James L. Murphy who maintained substantial control and influence over the audit and its outcome. 9) NO CONTEST CLAUSE - TRUSTEES' FRAUD & MISMANAGEMENTTrustees allege that this Petitioner has violated the in terrorem clause of the LFT, also known as Article NINTH effectively claiming that a beneficiary who questions the honesty and integrity of the Trustees is subject to Article NINTH, validating previous statements by Shanda Lear-Baylor that Trustees, particularly Grant Thornton's James L. Murphy, operated the LFT as an "iron-fisted dictatorship". Exhibit 3. Respondents Trustees, David J. Reese, Esq. and CR&R have, by their mismanagement, nonfeasance, misfeasance and malfeasance become so enmeshed with the LFT that they are unable to separate their own interests from that of the Trust and its beneficiaries and entertain an antagonistic and hostile attitude toward LFT beneficiaries thereby justifying their removal from the LFT. For instance, the Trustees misrepresent this Petitioner's opposition to James L. Murphy appointing two other trustees as the evidence of Petitioner's challenge. Petitioner challenged the authority of Murphy to appoint another Trustee by himself, and requested information as to the background, knowledge and experience of the candidate. Respondents' claim fails for lack of a provision allowing one LFT Trustee to appoint two other Trustees and this Petitioner explained this at length in his Joinder with regard to this matter. Petitioner's Joinder is incorporated and reiterated herein in its entirety for the purpose of illustrating the fallacy of Respondents' intentional misrepresentations that are clearly evidenced by the Court records themselves. Respondents unsupported assertions are a waste of Court time and resources as well as a further waste of LFT resources. Further, this Petitioner has never questioned the Respondents' authority to legitimately and prudently settle claims against the Trust. However, this Petitioner does strenuously object to the Respondents violating his rights to due process and then entering into settlements with third parties which are not in the best interests of this and other LFT beneficiaries' interests. The provisions in the LFT which grant Trustees significant power to settle matters and resolve disputes assumes that LFT Trustees will act with prudence, due diligence and in the best interests of the LFT beneficiaries. This Petitioner has stated and continues to state herein that Respondents have and are continuing to act primarily in a manner which discriminates against and is to the detriment of LFT remaindermen beneficiaries. Respondents' violation of their fiduciary duties and obligations and malpractice are in issue in the case at bar and the Respondents' argument assumes facts not in evidence, i.e., their good faith attempts to manage the LFT in the best interests of all beneficiaries without bias or prejudice toward one class of LFT beneficiaries, the LFT remaindermen. Respondents have not acted in good faith, and quite to the contrary, have continually acted in violation of the rights of others and have exhibited imprudence, negligence, mismanagement, discrimination and hostilities unbecoming fiduciaries. This Petitioner has clearly questioned and contested the Respondents' twisted interpretation of their power and authority to determine what is Trust income and what is Trust principal. This complaint and challenge is legitimate, supported by valid evidence and arguments and is not prohibited under the LFT and is allowed by law.. Judicial notice will be taken that the cases provided by Respondents in support of their attempt to alienate Petitioner from his rights to and under the LFT are only relevant to show the validity of an in terrorem clause in a Trust. Further, if the LFT were to grant such vast and unlimited power to determine what is principal and what is income, the intent of the Trustor, WPLSr to grant the income to his children and the principal to his grand-children could be completely subverted, simply on the whim of the LFT Respondents deciding that the entirety of the LFT was income. Such an interpretation would also render WPLSr's intent as specified in his Last Will and Testament and in the LFT, null and void, since it would grant to Respondents the power to do as they wished with the assets of the trust at any time and in any manner. Respondents know that an interpretation of granting Respondents with unlimited and absolute power over the LFT is completely contrary to the Trust and the law itself. Respondents' Opposition cannot be sustained under any pretense and stands as evidence that the Respondents have assumed utter disdain for the Trust, the law and certain beneficiaries who stand in the way of their gross mismanagement and arrogance. The Opposition is nothing more and nothing less than an extension of Respondents' conspiratorial scheme and ill-gotten ex-parte Court Orders starting on December 2, 1991, whereby Respondents assumed the power to distribute 40% of LFT corpus to income beneficiaries when such distribution is not authorized and is effectively prohibited by the LFT itself. All this was done while Murphy double billed the LFT for services as both a Trustee and as the primary Grant Thornton accountant for the LFT, took lunch breaks at up to $400 at the expense of the LFT, engaged in self-dealing with Trust corpus, and kept the books in a manner in which no one else can decipher and understand. An interpretation of the LFT granting Trustees unlimited and absolute power of the LFT is contrary to reason, to the LFT itself, and to the Last Will and Testament of WPLSr and grossly misrepresents both the fact and law. Not only is such an interpretation self-serving in the extreme, it would allow the Trustees to violate their agreement with the IRS, thereby permitting the Respondents to subvert the intent of WPLSr, which even this Court is powerless to change. In effect, Respondents show their intent to completely nullify and pervert the LFT into a mere alter-ego for the benefit of the Trustee and the income and outright beneficiaries while making blatant misrepresentations about the nature of the LFT on the tax returns, every year, since the time when the Respondents first made this self-serving and unfounded and "arbitrary" claim. This reason alone should be sufficient reason to sever and separate the LFT from the gross mismanagement of the Respondents and place it in the hands of an independent receiver appointed by this Court. This reason alone should be sufficient to completely audit the LFT and to completely set aside the accountings and to hold Respondents liable for mismanagement and for damages that they caused to the LFT and to its beneficiaries. In effect, Respondents are claiming their own infamy and perversions in support of their attempt to subject this Petitioner to Article NINTH of the LFT. Judicial notice will be taken that Respondents have not only failed, neglected and refused to provide legal notice for a period exceeding two decades, but since March 2004 they have failed, neglected and refused to produce any books, records, documents, papers or information regarding the LFT without first forcing this Petitioner to obtain a Court Order, engaged in unethical conduct and malpractice to obtruct this Petitioner's access to LFT books, records, documents and subsequently managed, via undue influence of a Nevada State District Court Judge to disqualify Petitioner's brother and now are attempting to compound these violations, in a self-serving scheme to cover up and conceal their own nonfeasance, misfeasance and malfeasance by maliciously and vindictively claiming that this Petitioner is before the Court in violation of Article NINTH of the LFT. In light of Judge Peter I. Breen's covert and snug relationship with Grant Thornton, LLP's managing partner and accountant, Brian Wallace, it is no surprise to this LFT remainderman that Respondents believe they are impervious to any type of litigation against any of their numerous breaches of fiduciary duties and obligations and malpractice. As stated by LFT outright beneficiary Jacqueline Lear in relationship to the hostility and abuse by Respondents: "I know they [the LFT Trustees] are violating the law ... there isn't going to be anything left anyway so just let it go, ... it's not like we had to work for this money anyway." When Christian William Lear asked Jacqueline to put her concerns in writing, Jacqueline answered "f__k off". See Set Aside, Exhibit 83. LFT outright beneficiary Mary Louise Ellenberger recently stated in a written communication to Petitioner: "I am certainly aware that there have been errors made in the process of executing my father's will over the past 27 years." Exhibit 6. William Powell Lear, Senior was not tolerant of the type of abuse engaged in by Respondents and certain LFT income and outright beneficiaries and did take extraordinary measures to prevent the subversion of his will and the perversion of the LFT by incorporating Article NINTH, an in terrorem clause in the LFT. Respondents are proposing to continue their perversion of WPLSr's Will and of the LFT by threatening Petitioner with Article NINTH and for the improper purpose of preventing beneficiaries from requiring specific performance from the Respondents and for calling the Respondents to account for their nonfeasance, misfeasance and malfeasance. 10) ISSUES NOT ADDRESSEDTrustees failed to deny any and all allegations made by this Petitioner in his Set Aside with regard to: (1) the Bombardier Settlement Agreement, (2) Inaccurate Write-Offs, (3) failure to adhere to accounting standards, (4) maintaining oversight of the Barnard, Vogler & Co. audit, (5) invasion of Trust Corpus, (6) distribution of LFT remaindermen assets to third parties or to income and outright beneficiaries in violation of the LFT and this Court's Orders. Respondents neglected, failed and refused to address or rebut receiving a "hold harmless" agreement from the LFT outright and income beneficiaries, as set forth in §89 of the Set Aside and receipt of such "hold harmless" agreement by Respondents is therefore admitted. Set Aside, Exhibit 14, p.91-94 of 646. Pursuant to their December 5, 1985 request, Respondents LFT Trustees obtained said "hold harmless" agreement from the LFT outright and income beneficiaries, to "protect us [LFT Trustees] from trust management related law suits initiated by Lear beneficiaries", relieving the LFT Trustees as to those beneficiaries from any or all of the duties, restrictions and liabilities which would otherwise be imposed on the LFT Trustees under the LFT, the laws of the State of Nevada and the Orders of this Court. Set Aside, exhibit 14, p.91-92 of 646. Respondents managed the LFT with carte blanche and compromised and corrupted these same beneficiaries at the expense of and to the damage of Petitioner and other LFT beneficiaries similarly situated, possibly making the LFT outright and income beneficiaries accomplices to Respondents' fraud and mismanagement. A number of LFT outright and income beneficiaries have written ex-parte letters to the Judge Breen to influence his decisions against Petitioner, engaged in hostility, interference with Petitioner's rights to and under the LFT, and obstruction of Petitioner's discovery process. Set Aside, exhibits 67, 69, 76 & 83. 11) RESERVATION OF RIGHTSPetitioner reserves the right to seek and obtain Orders vacating determinations and Court Orders which were obtained and issued without notice to this LFT remainderman beneficiary, at a later date, if he deems it necessary. Petitioner reserves the right to take such further action as necessary. CONCLUSIONTrustees have engaged in a continuing conspiracy of silence starting in 1983 to date by failing and neglecting to provide this Petitioner with any legal notice and with continues with Trustees' Opposition which fails and neglects to refute or rebut this Petitioner's Set Aside with supporting evidence and documentation and thereby admits the allegations of mismanagement and fraud alleged herein, and is proper grounds for appointing a independent receiver and ordering a forensic audit of the LFT. Respondents' hostile attempt to alienate Petitioner from his substantive rights to and under the LFT for exposing their mismanagement, fraud, breaches, violations and malpractice and their improper and wrongful misuse and abuse of their position, authority and power as trustees and fiduciaries to their own use and advantage at the expense of and to the detriment and damage of Petitioner is further proof of Respondents' "iron-fisted dictatorship over the financial lives of Mr. Lear's children and grandchildren", in derogation of William P. Lear, Senior's intent, including but not limited to his Last Will and Testament, the LFT, and in violation of the Constitution and laws of the State of Nevada. See Exhibit 3, p.1, line 22-23, Set Aside, exhibits 2 & 3. Respondents have willfully, knowingly, and continually breached legal duties and moral obligations imposed upon them by the LFT, Court Orders and the law. Respondents' Opposition was craftily and deceitfully drawn for the improper purposes of influencing this Court, causing unnecessary delays and costs in litigation. Respondents' Oppostition is frivolous, presented in bad faith, and is insufficient in fact and law to support an Order in Respondents' favor and to grant Respondents any relief. The primary objective of the Court at the present time is to clean up the entire LFT for new replacement Trustees so that they can start with a clean slate. Petitioner's Petition to Set Aside Accountings is consistent with that objective. Petitioner has standing as a matter of law, has a right of action against the Respondents, has a good and sufficient cause of action, and his prayer for relief should be granted in its entirety. PRAYERWHEREFORE, this Petitioner respectfully petitions this Court for the following: a) Deny LFT Trustees' Opposition to Petition to Set Aside Accountings; b) Deny Grant Thornton, LLP's Joinder in Trustees' Opposition to Petition to Set Aside Accountings. c) Order that all the LFT accounts since 1978 be set aside and more particularly from January 1983 to the present pursuant to NRS §165.120 and NRS §163.115; d) Due to the amount of alleged fraud, the disappearance of valuable property from the LFT and the continual failure to produce, file and serve true, correct, complete and accurate accountings for a period exceeding 20 years, and under the circumstances the risk that Trust records may be impaired or destroyed, this Petitioner hereby petitions this Court to Order all books, papers and records, documents, notes, telephone records, time sheets, work-products, computers and any and all other related documents or information whether stored on paper or in electronic, magnetic or optical format, pertaining to the LFT, its accountings and the audit of BV be taken immediately and without delay into the possession of an independent receiver appointed by this Court and that the independent Court appointed receiver take control of all bank accounts, property and assets of any kind or nature in which the LFT has any right, title, claim or interest; e) Order a true, correct, complete and accurate forensic audit of the LFT from March 9, 1978 to the present, by an independent, disinterested, impartial, qualified and bonded auditing company licensed to do business in Nevada and that it be entirely billed and charged against the respondents, individually and severally if any negligence, unethical conduct, fraud, or unlawful acts be found that were proximately caused by the Respondents; f) Order LFT Trustees James L. Murphy, Harold P. Dayton, Richard B. Rowley, Dunham Trust Company and Tommy L. Tucker to post with this Court their performance bonds or other errors and omissions insurance to stand as surety for any acts, omissions, negligence or maladministration of the LFT; g) Order COOKE, ROBERTS & REESE, LTD, and David J. Reese, Esq., to post their errors and omissions insurance with this Court to stand as surety for any acts, omissions, negligence, breach of contract, violations of the laws of the State of Nevada and damages to the LFT and its beneficiaries; h) Order GRANT THORNTON, LLP, and accountant James L. Murphy to post their bond or errors and omissions insurance with this Court; i) Order any distributions to LFT outright beneficiaries frozen from the present up to and including August 30, 2005 or until a true, correct, complete and accurate forensic audit of the LFT is completed and approved by a Court of competent jurisdiction, whichever occurs later; j) Impose sanctions upon and against Trust Attorney David J. Reese for engaging in unethical conduct and bad-faith pleading and in counseling and advising the LFT Trustees to engage in breaches of obligations, violations of fiduciary duties, disloyalty, violations of the LFT agreement, violations of State law, abuse and misuse of Trust funds while violating Petitioner's rights to due process and equal protection of the law; k) Order the removal of COOKE, ROBERTS AND REESE, LTD and David J. Reese, Esq. as LFT Trustees' attorney; l) Order the disbarment of David J. Reese, Esq; m) Order that COOKE, ROBERTS AND REESE, LTD's license be revoked; n) Order the disbarment of Patricia Lear, Esq; o) Order the removal of LFT Trustee James L. Murphy as LFT Trustee; p) Order the removal of LFT Trustee DUNHAM TRUST COMPANY and Tommy L. Tucker as LFT Trustee; q) Order LFT Trustees and Trust attorney David J. Reese and Grant Thornton to personally and privately pay Petitioner for any and all costs, fees, and expenditures caused by or accrued during this litigation; r) Order LFT Trustees and Trust attorney David J. Reese to personally and privately pay Petitioner for any and all costs incurred by Petitioner in commencing and prosecuting this action; and, s) for such other relief this Court deems just and proper and according to right, interest and law; DATED this ___________ day of ________________, 2005
Patrick Christopher Lear 1805 North Carson Street #120 Carson City, Nev. 89701 Tel: 775-721-9643 Fax: 775-884-4211 TABLE OF EXHIBITS
[1] Black's Law Dictionary, Sixth Edition defines "Arbitrary" as: In an unreasonable manner, as fixed or done capriciously or at pleasure. ... Ordinarily, "arbitrary" is synonymous with bad faith or failure to exercise honest judgment and an arbitrary act would be one performed without adequate determination of principle and one not founded in nature of things. Huey v. Davis, Tex.Civ.App., 556 SW.2d 860, 865 [2] See Statement of Financial Accounting Concepts 3, ¶ 28-29. The SFAC are promulgated by the Financial Accounting Standards Board and establish the theoretical framework for generally accepted accounting principles and their application to financial statements. [3] See Statement of Financial Accounting Concepts 3, ¶ 43-44. [4] See Statement of Financial Accounting Concepts 2, ¶ 120. [5] The third Fiduciary Accounting Principle states that "A fiduciary account shall contain sufficient information to put the interested parties on notice as to all significant transactions affecting administration during the accounting period." [6] NRS 165.040 (1)(c) requires each intermediate account to include: "In a separate schedule, additions to trust principle during the accounting period with the dates and sources of acquisition, investments collected, sold or charged off during the accounting period, investments made during the accounting period, with the date, source and cost of each, deductions from principal during the accounting period, with the date and purpose of each, and the trust principal, invested or uninvested, on hand at the end of the accounting period, reflecting the approximate market value thereof:" [7] Interestingly, no check number is included for the payment from LFT on May 30, 1991.
[8] The December 31, 1988 Inventory of Assets statement on the 1989 statement mistakenly shows the cumulative LFT payments to the IRS on behalf of the Estate as $625,000 instead of $705,000. The December 31, 1988 Inventory of Assets statement on the 1988 statement does show the correct amount of $705,000. This is but one more example of obvious error in the collection of LFT statements in contradiction to statement by trustees and is in violation of SSARS 1 contrary to statements. [9] For the 1998 and earlier years, the requirement was for the report to be filed within 75 days after the end of the calendar year. [10] The third Fiduciary Accounting Principle states that "A fiduciary account shall contain sufficient information to put the interested parties on notice as to all significant transactions affecting administration during the accounting period."
[11] NRS 165.040 (1)(c) requires each intermediate account to include: "In a separate schedule, additions to trust principle during the accounting period with the dates and sources of acquisition, investments collected, sold or charged off during the accounting period, investments made during the accounting period, with the date, source and cost of each, deductions from principal during the accounting period, with the date and purpose of each, and the trust principal, invested or uninvested, on hand at the end of the accounting period, reflecting the approximate market value thereof:" | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
