Desert State Life no-show at hearing

Judge suggests restraining order to protect trust funds of company clients

The first court hearing Wednesday in the state Financial Institutions Division’s two-month effort to take receivership of the Desert State Life Management company for allegedly draining millions from client trust accounts wasn’t much of a hearing at all.

The man at the center of the controversy, Desert State CEO Paul Donisthorpe, was a no-show. In fact, no one appeared to defend the nonprofit company that manages trust accounts for more than 70 incapacitated, elderly or otherwise vulnerable clients.

Chief District Judge Nan Nash set an Aug. 3 date for the receivership hearing.

But visibly concerned about the allegations, the judge said she wanted a more immediate remedy to try to preserve whatever trust funds remain at Desert State.

“A TRO (temporary restraining order) would be appropriate in this case,” Nash said.

The order, which is expected to be signed in the coming days, would be worded to protect trust funds but still allow Desert State clients to receive their monthly Social Security or other regular IRA

or annuity checks through Desert State, which acts as the representative payee for about 14 people.

Donisthorpe, according to court records, reportedly suffered brain damage and now has impaired memory after attempting suicide by taking prescription drugs just days before state FID examiners were to make an on-site visit to look at the trust company’s books in February.

Businessman and Corrales Mayor Scott Kominiak was described Wednesday in court as the “de facto CEO” for Desert State, but he also didn’t attend.

The state filed a motion on May 31 for an expedited hearing on whether the company should be placed in receivership. Wednesday’s hearing on that motion only set a future hearing date.

Kevin Graham, senior enforcement counsel for the FID, told the judge on Wednesday that when officials from his agency attempted to find Donisthorpe to serve him notice of the hearing, they were told he is now divorced and wasn’t living at his home in the North Valley.

“They don’t know where he is, maybe in Farmington, maybe staying with other family; we don’t know. We sent notice to every location we had for him,” Graham said.

His wife, criminal defense attorney Liane Kerr, filed for divorce in February, and last month a Sandoval County judge approved the divorce settlement splitting up the couple’s property and vehicles. The U.S. Attorney’s Office has filed a forfeiture action to seize three of Donisthorpe’s properties, but no hearing date has been set.

Albuquerque attorney Scott Fuqua addressed the court on behalf of one of Donisthorpe’s business partners, Darrell Pitchford, who has a cattle operation in Athens, Texas, with Donisthorpe.

“Mr. Pitchford learned about the allegations at the same time everyone else did and it has turned his life upside down,” Fuqua told Nash.

After discussions with Kominiak in April, Pitchford sold about $40,000 worth of cattle to try to help replenish Desert State trust accounts, court records show. The FID contends that Donisthorpe funneled some client trust funds from Desert State into the cattle company partnership.

Pitchford had no idea of any improprieties involving Donisthorpe “and still doesn’t know what happened,” Fuqua said.