Wife moved to protect her assets
Officials say Donisthorpe’s trust company clients lost millions
While state regulators were uncovering millions of dollars of apparent embezzlement at Desert State Life Management in recent months, Desert State CEO Paul Donisthorpe’s wife was allegedly hocking her Rolex watch, clearing out trailers of furnishings from an Angel Fire vacation home for quick consignment sale and severing property ties with her reportedly brain-damaged husband.
So says an affidavit, and other court records, filed last week by a board member of the nonprofit trust company who is asking a state District Court judge in Albuquerque to block any further liquidation of assets that may have been purchased through the wrongful diversion of $4 million belonging to dozens of Desert State Life Management clients, most of whom are either elderly or mentally or physically
disabled.
The state Financial Institutions Division’s May 31 petition to place Desert State into receivership is set for an initial court hearing on July 5 in Albuquerque. The FBI, meanwhile, on June 21 filed an amended civil forfeiture petition to include another of Donisthorpe’s properties, a 120-acre cattle ranch in Henderson County, Texas.
Federal authorities contend that about $100,000 in Desert State client funds were used in that Athens Ranch purchase in 2011. The FBI also alleges that client funds helped pay for Desert State’s Albuquerque office building and a “luxury lodge” in Angel Fire, which was put up for sale below appraised value in recent months.
The divorce of Donisthorpe and Liane Kerr, was meanwhile, completed last week in District Court in Sandoval County. Their settlement agreement made scant mention of Desert State, which Donisthorpe headed since 2006.
The new affidavit from Desert State board member and Albuquerque attorney L. Helen Bennett, supporting her separate request for a temporary restraining order against the Donisthorpes, offers a behindthe-scenes look at how Kerr, a criminal defense attorney, allegedly responded after state examiners launched an overdue examination of Desert State’s books.
Bennett, who is represented by attorney A. Blair Dunn, alleges that Kerr knew or should have known Donisthorpe didn’t earn sufficient money through legitimate enterprises to sustain their lifestyle of travel and luxury and “allow them to purchase, furnish, decorate and maintain multiple real estate properties, horses, expensive jewelry, art, vehicles and horse trailers.”
Kerr “benefited from or was complicit in the use of stolen, embezzled, or converted funds,” Bennett alleged, and “continued to use such funds and control the funds and assets so she could dispose of and liquidate them for cash, even though the assets were purchased with stolen funds.”
Efforts by the Journal to reach Donisthorpe and Kerr have been unsuccessful, and, as of Friday, they hadn’t formally responded to any of the legal actions involving
Desert State. A court filing by the state lists Kerr’s attorney as Paul Kennedy of Albuquerque. Kennedy didn’t return a phone or email message seeking comment, but Kerr told a state financial institutions attorney earlier this year that she had nothing to do with Desert State or its operations, court records show.
Bennett, along with Donisthorpe and Desert State, is being sued by Ayudando Guardians Inc., which represents seven clients with trust accounts at Desert State. Kerr is not a defendant.
In her response to the Ayudando lawsuit, Bennett denied any knowledge of the alleged fraud. She has been credited by state regulators with helping in their investigation.
Bennett, who has described herself as an unpaid volunteer board member, contended in her affidavit that her review of the company’s insurance policies and other information shows “there is not sufficient insurance coverage for DSLM to pay for all of the losses.”
Unless the court intervenes to prevent it, “properties and valuable chattels will be sold for cash to bona fide purchasers and the cash will not be accounted for in any future reckoning for (Desert State) clients,” Bennett’s request says.
State regulators say that as many as 70 Desert State clients may have lost some or all of their funds, which were typically set aside by their families for their future care or came from court settlements stemming from their injuries.
Friendship sours
Bennett, who said she once considered the Donisthorpes among her closest friends in New Mexico, recounted in her June 16 affidavit how everything changed on Feb. 21 when Kerr sent her an email calling off a social engagement at the Donisthorpes’ house because of a family emergency. State financial examiners had informed the company that they needed certain records by Feb. 21 and that the on-site exam would begin Feb. 28.
The family emergency turned out to be an attempted suicide by Donisthorpe, who was found unconscious after ingesting a large amount of prescription medication, Bennett’s affidavit says she was told by Kerr.
Donisthorpe, 61, was revived but “suffered serious brain damage that greatly impaired his memory,” Bennett quoted Kerr as saying.
In her affidavit, Bennett recounted subsequent telephone calls with Kerr that focused on the financial woes Kerr initially attributed to her husband’s “failure to file tax returns timely.”
Kerr told Bennett that she had sold her Rolex watch at a pawnshop and was liquidating assets to pay debts and liens on property she owned with Donisthorpe.
As the state financial inquiry deepened, Bennett had a March 26 telephone conversation with Kerr, “who told me she was ‘sick to her stomach’ about the revelations that Paul had apparently stolen money from the (Desert State) account. She was extremely angry at Paul and indicated she felt lied to and deceived by Paul,” the affidavit stated.
Bennett said Kerr went on to say that “she was worried she would lose her house and commercial building in Downtown Albuquerque and stated she was having Paul quit-claim, to her, his interest in any and all properties they owned together.” Court records show that Kerr two days earlier had filed for divorce from her husband of 32 years.
“She stated that it would have been better if Paul had been successful in his suicide attempt,” Bennett alleged in the affidavit. “She stated: ‘what happened to the Desert States people was horrible but she insisted that she was an ‘innocent spouse’ who had to protect her own interests in her properties and financial assets and she was not going to let Paul’s actions ruin her financial future.”
“Based on my conversation with Liane, I concluded that her focus was on protecting her financial and ownership interests, while mine was on recovering the assets it appeared had been stolen by her husband from Desert State clients and possibly used to purchase real or personal property that they used in their marriage.”
Donisthorpe’s physical condition isn’t clear from court filings, but their final
divorce settlement bears his signature dated a month earlier, on May 17.
Corrales mayor
The affidavit also provided new details about the role of businessman and Corrales Mayor Scott Kominiak in the controversy. Bennett said Kerr had asked Kominiak to meet with state auditors involving Desert State. State documents now describe him as acting CEO of the company. He hasn’t returned Journal requests for comment.
According to Bennett’s affidavit, Kominiak informed Bennett on March 22 that “he had just met with Liane and Paul and told them that it appeared that between $500,000 and $700,000 had been improperly transferred from client trust accounts held by (Desert State) to accounts controlled by Paul.” The siphoning of client accounts allegedly began in 2013, according to the court filing.
At least one of those Donisthorpe accounts involved the cattle company in Texas, the affidavit says, and Kominiak “indicated there was ‘liquidity’ in the form of cattle in Texas that were scheduled to be auctioned off between April and August 2017.”
Kominiak seemed confident that the amounts missing from client trust accounts could be replenished fully by the proceeds of the cattle sales, and he told Bennett he was working with the state financial examiners to arrange for repayment, her affidavit said.
“During our conversation, Mr. Kominiak stated that he could ‘hold things up’ by requiring subpoenas and formal requests from the auditors. I indicated that was unacceptable and that the authorities needed to be notified immediately of the full circumstances surrounding DSLM and the theft of client funds,” Bennett’s affidavit says.
Meanwhile, another affidavit from a woman named Lisa P. Ford was attached to Bennett’s request for a restraining order. Ford stated that she learned from Bennett that Kerr was going to liquidate assets and transfer assets jointly owned by the couple to Kerr’s name alone.
Ford said she found an Internet listing for the couple’s Angel Fire cabin, and saw from photos on the site that the rooms were decorated with different animal themes, such a wolf room, a bear room and a duck room.
After looking at the photographs, Ford said, “I immediately realized that I had recently seen many of the items (furniture, artwork, collectible items such as mallard ducks etc.) which were depicted in the photographs for the cabin listing for sale at a consignment store I frequent.” Bennett herself went to the store in Albuquerque and purchased a “distinctive picture” she identified as having come from the Angel Fire cabin.
The consignment store manager told Ford “a woman brought two large trailers’ worth of the stuff and was in a hurry to unload (sell) it all as quickly as possible.”
The real estate agent for the cabin, which by then had a lowered listing price of $725,000, told Ford the wife had recently sold all the contents of the cabin and said her husband was sick.
On June 12, the real estate agent left a phone message on Ford’s cellphone saying she could probably get the cabin for even less than its current listing price and added that she should move quickly before the cabin was “seized by the marshals.”