|To:||Appropriate Public Officials|
|From:||Douglas A. Schafer, Attorney|
|Subject:||Handling of Hoffman Estate by Grant L. Anderson and other Attorneys|
|Date:||February 29, 1996|
[This web-published copy has footnotes added to explain later evidence that exonerated certain persons about whom I initially had suspicions. D. Schafer. 12/12/99]
I believe that attorney Grant L. Anderson acted improperly in his handling of the Estate of Charles Hoffman, Deceased (DOD 3/7/89), both before he became a Pierce County Superior Court judge on January 11, 1993, and continuing after that date. Participating in that misconduct were Stephen W. Fisher and other attorneys in their firm, and possibly others, such as their CPA, Gary L. Frind, and now-retired Dept. of Licensing, Timeshare Section manager, Arnold F. Stoehr [footnote 1]. The nature of the recognized or suspected misconduct was self-dealing, judicial ethics violations, and, possibly, tax evasion.
The estate consisted principally of two wholly-owned corporations: Pacific Lanes, Inc. ("PLI"), which operated a Tacoma bowling/liquor/gambling business, and Hoffman-Stevenson, Inc. ("HSI"), which owned the bowling operation real estate, but principally was engaged since the 1970's in the development of Surfside Resort and timeshare condominiums on the tip of the Longbeach Peninsula in Pacific County, WA. Hoffman's will basically left 90% of his estate to the Pacific County Hospital District and 10% to his long lost son, neither of which were represented by watchful counsel during the 3-year/10-month pendency of the estate (or subsequently). Hoffman's former wife, Millie, was a potential beneficiary of the estate to the extent Anderson may have felt she needed support, but he didn't, and she died 1/22/93.
This memo is to briefly call your attention to several issues presented by the documentation I am providing with it. My 2/16/96 Declaration Under Penalty of Perjury memorializes relevant information that I was told by parties whom I contacted. My files that have been copied and provided to you are captioned "Hoffman Estate," "Pacific Lanes," "Surfside," "Condo 132," "Trendwest," "PDC Reports," "Financial," "Address Listing," "Pacific Rec. Enterp.," "Misc.," and "Handwritten Notes."
Tax Issues. Estate Tax. The Hoffman Estate Petition for Distribution filed 12/14/92 reports death taxes paid of $82,837. Mathematically, that indicated a reported taxable estate of $820,020. That appears an understatement. The 1992 sale of Pacific Lanes was for $1 million. Sales in 1992 of Surfside land and condos to Trendwest Resorts, Inc., and time share units ("TSUs") to Pacific Resorts, Inc. [actually Pacific Resorts International, Inc.] produced $850,000. The 1995 sale of the Surfside convention center to McHugh/Swenson produced $550,000. The estate file reflects an outstanding First Interstate Bank SBA loan of $443,000. There may have been other debt against Surfside, but I would have expected any institutional lender to have required Chuck Hoffman to personally guaranty it, as First Interstate did. Anderson retained attorney S. Alan Weaver of Eisenhour Carlson to prepare the IRS Form 706 (I have no reason to question Weaver's conduct). I've been unable to locate the estate's appraiser, James V. Latteri, through western Wash. directory assistance or through any appraiser professional organizations.
Personal Income Tax Issues. The Estate's Decree of Distribution signed by Commissioner Johnson 1/6/93 (5 days before Anderson became a judge) awarded $112,000 as a personal representative's fee to Grant Anderson, individually. The Petition for Decree of Distribution had stated that attorneys Fisher and Koppe "waived" their attorneys' fees. Anderson's PDC (Public Disclosure Commission) Form F-1 dated 4/4/94 for calendar year 1993 failed to report the PR fee (he reported law firm compensation as category E ($20,000-$49,999)). He may have also failed to report the $112,000 on his IRS Form 1040.
In December, 1992, several attorneys and staff members in Anderson's firm (and other "insiders" or friends of Anderson) were deeded by HSI Surfside Condo #132 TSUs at prices reported as $1,000 per TSU (a week). TSUs in Condo 132 (one of the six class B, 2-bedroom units) sold to retail buyers in October, 1992, for $3,625. Even if these insiders actually paid (which I question) $1,000 per TSU, the "bargain element" should have been reported as compensation by the employees of Anderson's firm. Of particular note are the deeds from HSI to Hoffman's "right hand gal" Loise Pagni on 11/19/91 for 4 TSUs for $4,000, and her 12/22/92 deed for those 4 TSUs to Anderson for $4,000. I also note that insider K. Leary, who got 2 TSUs from HSI on 12/1/92 for $2,000, sold those 2 TSUs to Swenson on 1/9/95 for $6,000.
In March, 1994, CPA Gary L. Frind was transferred a TSU in Condo 122 for reported consideration of $800 (papers in Misc. file). Its value was likely $2,000 to $3,000. This may have been an unreported exchange of property for accounting services.
My Perjury Declaration describes the basis for my suspicion that Anderson may have received some personal consideration in return for his bargain sale of Pacific Lanes to Hamilton. If so, I doubt that Anderson reported that consideration on his IRS Form 1040.
Anderson remained as President/CEO of HSI and PLI after he became a judge (contrary to judicial ethical rules), through sometime in November, 1993. He may have been taking compensation from those corporations, in cash or in kind, that may have been unreported.
While I have no documentation, I would not be surprised if Trendwest Resorts, Inc. or one of its officers or affiliates (Club Esprit, Worldmark, etc.) (collectively "Trendwest") [footnote 2] compensated Anderson and, possibly, Fisher. Trendwest bought the Surfside land and 25 of the 48 condos from Anderson/HSI (10 of those condos were actually bought from individuals [footnote 3] who may have been contractually controlled by Hoffman/Anderson/HSI) in late 1991 or early 1992. Trendwest and two of its officers, Peare and Needham, contributed to Anderson's 1992 superior court and 1994 supreme court election campaigns. It appears that Trendwest, with the controlling votes in the condo owners' association, supported the retention of Anderson and Fisher as the controlling persons in that organization.
That condo owners' association, created pursuant to RCW Ch. 64.32 and the 7/7/78 initial condominium declaration, was apparently (but probably not legally) reorganized into a Washington business corporation created 5/3/93 by Anderson, Fisher, and Trendwest. As a business corporation, it must have stockholders; and it may be that Anderson and Fisher received stock in it. It has been suggested to me that the 1/11/93 sale by Fisher, as trustee of the Hoffman Trust, of four lots next to the condos to the owners' association for $16,000 was at about half their fair value. Apparently, a swimming pool has now been build on those lots, since the existing pool was destroyed in the arson fire in early 1995.
Corporate Tax Issues. Given my assumptions about the integrity and competency of the individuals involved, I suspect that there may have been negligent or intentional errors in the reporting of federal tax by PLI and HSI. Presumably one or both of those corporations dividended to the estate the funds to pay the $83,000 in estate taxes and the $112,000 in Anderson's PR fee.
Surfside Development Issues. Based on comments I was given, I suspect that Hoffman was himself a "shady, wheeling-and-dealing" character. It appears that the Surfside development struggled from its opening in about 1979 onward. I question whether the parties who "owned" the 10 condos that all sold at the same price to Trendwest within a few months in late 1991, apparently at the "call" of Anderson, were bona fide owners. I question why HSI sold Condo #132 TSU G-4 to South for $1,500 on 9/7/88, having sold TSU B-4 to Wall for $4,235 on 6/17/88. All the TSUs are identical, each advances two weeks in the calendar in each year
I've heard that Surfside has had chronic and ongoing disputes with Washington taxing authorities, which I assume to be over property taxes but may be over B & O taxes or excise taxes.
As noted above, I suspect misconduct involving Trendwest. The Anderson firm's time entries in the Estate file show that they were dealing with Pacific Resorts International, Inc. ("PRII") on (by Anderson) 4/17/91 and from 7/31/91 to 8/22/91 and on (by Fontana) 4/3/91 about selling condos or TSUs. The title company reports no sales, however, to PRII until the bulk sale of 147 TSUs in 2/93. I wonder if Trendwest offered inappropriate inducements to usurp the sale the PRII. The "deal" with Trendwest was apparently "cut" in 9/91.
I just yesterday learned from owner James Schuler that the Washington corporation named "Pacific Resorts, Inc." had nothing ever to do with Surfside. I then determined that the corporation improperly referred to in various Surfside-related documents by that corporate name actually is the Washington corporation named "Pacific Resorts International, Inc." (d/b/a Resorts West, officed in Bellevue), and it recently was purchased by Frank Needham (formerly a Trendwest officer, who contributed, using a Mt. Shasta address, to Anderson's 1992 election campaign) from Paul Weitzell. Needham's phones are 206-454-6566 (Bellevue) and 360-681-2191 (Sequim). Robert Forbes (who signed the 2/93 deed from HSI as V.P. of PRII) has not been associated with PRII for several years.
My suspicions about Hoffman, Anderson, and Trendwest are heightened by the arson fire, in early 1995, of the Surfside Convention Center, that HSI sold in 1/95 to McHugh/Swenson for $550,000. Adding to my suspicion is the disappearance of the regulatory files from the Washington state office that regulates the selling of timeshares under RCW Ch. 64.36. The new program manager, Michael W. Schneider, of the Timeshare Section, Business and Professions Division, Dept. of Licensing (360-586-4575), tells me that his office has no record of HSI's Surfside Condominiums timeshare file. His predecessor, Arnold F. Stoehr [footnote 1], retired about three years ago. I later learned that Mr. Stoehr appears to have purchased two TSUs in Surfside from an Olympia private party in 4/93 for $3,800. While visiting Mr. Schneider, I noticed a thick file topped by Trendwest letterhead on his desk. The Anderson firm time sheet entries in the estate's court file are replete with many, many telephone calls, letters, and meetings with Mr. Stoehr from the opening of the estate through 2/92. (I was able to obtain from Mr. Schneider's office the 1987 regulatory file from Dencris, Inc., which had purchased Surfside Condo #212 from HSI and was offering 40 of its 48 TSUs for sale to the public, using a public offering statement that, presumably, duplicated much of HSI's then current offering statement.)
I also have undocumented suspicions about the involvement in Surfside by First Pacific Investment Co. (sometimes referred to as First Security Investments), apparently owned by Charles and D.D. McBain [footnote 4], who appears to have been represented by Tacoma attorney Alan Bowden. It appears that First Pacific may have been financing many of the TSU purchasers, and may have acquired many TSUs through informal foreclosures facilitated by HSI. First Pacific now owns 27 TSUs in assorted condos, and Bowden owns two TSUs in Condo 130 and two TSUs in Condo 114.
I note that the Surfside development initially appears to have been a joint project by Chuck Hoffman and Donald K. Medley, Sr. It appears that Medley Sr. (whose son Don Medley Jr. lives next door to Anderson's long-term law partner, David R. Tuell, Jr.), sold the Surfside ground (subject to the 130-year ground lease) to Hoffman in 1983. Medley Sr. died in 1985 with three adult children in Tacoma. His estate was probated by Wm. Hamilton (who later bought Pacific Lanes). Its inventory reported no Pacific County property, but did report an 87% participation in a $207,000 loan by Western Community Bank (of which Hamilton was CEO) to HSI.
A 1984 lawsuit against "Surfside Homeowners Association" (representing all lot owners of the massive "Surfside Estates" plat) by Medley, HSI, and "Surfside Inn Owners Association", apparently over the condo owners' assessments for the Surfside Estates' water system, was settled in 8/87. Attorney Grant Anderson represented Medley, HSI, and the condo owners; attorney James M. Finlay (who represents the Pacific County Hospital District when requested to do so) represented the Surfside Estates lot owners association. Jim Finlay told me, when I first contacted him about vindicating the hospital district's rights in the Hoffman Estate, that he personally knew Chuck Hoffman and Grant Anderson. (I noted that Ron and Emma Finlay in Des Moines own a TSU in Condo 126 and two TSUs in Condo 132, but I do not know if they are related to Jim Finlay.)
I tried from mid-December through mid-February to motivate the hospital district to retain me (I offered to help a no charge.) or another attorney to audit the Hoffman Estate and recover its damages
Indirect Anderson Compensation Issues. From my review of the Anderson firm's timesheet records filed in the estate's court file (showing significant time gaps with no time entries), and from Anderson's PDC Forms F-1 for 1991 and 1992 (showing lawfirm income from PLI and HSI), I expect that while the estate was open, Anderson's firm was directly billing PLI and HSI for services. While not necessarily improper, I submit that any such compensation should have been brought to the attention of the Court and estate beneficiaries. I also note that Anderson's law firm operated an escrow business known as "Legal Escrow," which was designated as the closing agent for the $1 million Pacific Lanes transaction. Any income Anderson derived from the estate's transactions through that escrow business should likewise have been disclosed.
Integrity Issues. I note that the estate's inventory signed by Anderson before a notary on 11/8/89, and filed in Court on 12/14/92, was prepared on 11/5/92 and 11/6/92 according to time sheet entries by attorneys Koppe and Fontana and paralegal Bradley.
Malpractice Issue. Anderson prepared Hoffman's will in March, 1985, leaving 90% of Hoffman's substantial estate to a hospital, preceding by a discretionary trust for Hoffman's ex-wife (who was financially secure and in chronic ill health). Anderson probably committed malpractice by not advising Hoffman about structuring his estate plan to qualify the amount exceeding $600,000 for the charitable deduction, thereby avoiding the $83,000 tax bill. Anderson apparently directed attorney Koppe to research the issue after Hoffman's death, from her time sheet entry on 5/16/89.
Judicial Ethics Issues. Though Anderson became a superior court judge on January 11, 1993, and ceased after January 6, 1993, having any judicially recognized interest in the then closed Hoffman Estate or the then opened Hoffman Trust (of which Fisher was the court-appointed trustee), Anderson remained through some time in November, 1993, as President/CEO of HSI and PLI. In those corporate capacities, he engaged in transactions with PLII, leased the Surfside resort's restaurant to K. Leary for $1/month, corresponded on HSI's behalf with the Wash.Liquor Control Board, participated in the negotiated, discounted payoff of Hamilton's purchase money debt to HSI and PLI for Pacific Lanes, and probably engaged in other HSI and PLI transactions that I've not yet identified through public documents. Judge Anderson's continuing involvement in the financial affairs of HSI and PLI violate the Code of Judicial Conduct ("CJC"), Canon 5(C)(3)(barring service as officer of a business) and, since Anderson's only relation to Hoffman's estate and trust was as a formal or de facto fidicuary, Canon 5(D)(barring service as a fiduciary except for a family member). Further, if the facts and apparent facts concerning Judge Anderson's handling of the Hoffman Estate become public (as I intend to make them if he seeks re-election this fall), public confidence in the integrity of the judiciary will be severely damaged by Anderson's activities, violating CJC Canons 1 and 2.
Additional Information. My Perjury Declaration mentions my conversation with Diane Anderson's divorce attorney, Camden Hall, of Foster, Pepper, and Sheffelman. The case file is Pierce County Sup. Ct. No. 95-3-03746-1. There may soon be property settlement papers filed in that divorce proceeding disclosing assets that previously have not been disclosed in PDC reports, such as Anderson's four TSUs in Surfside Condo 132.
[Footnotes added by D. Schafer on 12/12/99 to this web-published copy:
1. Mr. Arnold Stohr did nothing improper, and was helpful to me later when I located him. He had retired from Dept. of Licensing's Timeshare Registration office, disappointed that a new administration had essentially changed its mission from consumer protection to simple licensing. Incident to that change, his old files were microfilmed. He said the microfilm cards were there when he retired, but he was not surprised that his successor knew nothing of them. He had bought his own Surfside Resort timeshare weeks from another state employee in an ordinary private transaction.
2. Trendwest Resorts, Inc. and is officers and affiliates have not been found to have engaged in any wrongdoing of which I am aware, as of 12/12/99. Still, I continue to have now the same suspicions that I had in 1992. Trendwest held a public stock offering in August 1997, and is it's filings with the SEC are available.
3. The 10 condo apartment owners (who'd bought them years before Hoffman began selling timeshares) were not "straw men," as I suspected (but Hoffman truly had packed his condo-owners association board with his own "straw men" (e.g., Duncan McMillan) to whom he'd "loaned" title to several units.) The 10 condo owners all welcomed that opportunity to sell out when Anderson told them of Trendwest's offer, but some were still bitter in 1996 that Anderson had claimed and taken a 10% sales commission in their transactions.
4. The McBains and their affiliated organizations have done nothing wrong of which I am aware. I never attempted to probe into their dealings with Hoffman or with Anderson, and I am unaware if anybody else did so.]