Judge vows to fight for clients who lost trust funds

Albuquerque Journal - - METRO & NM - BY COLLEEN HEILD JOUR­NAL IN­VES­TIGA­TIVE REPORTER

The civil case of Ayu­dando Guardians Inc. v. Desert State Life Man­age­ment in­volves two com­pa­nies ac­cused of si­phon­ing client ac­counts for per­sonal gain.

With their own­ers ab­sent for an ini­tial hear­ing in the law­suit Wed­nes­day, a state district judge heard from those who are pick­ing up the pieces after the shock­ing col­lapse this sum­mer of the two New Mex­ico non­profit com­pa­nies that for more than a decade spe­cial­ized in serv­ing de­vel­op­men­tally dis­abled, el­derly and oth­er­wise vul­ner­a­ble clients.

In the au­di­ence were lawyers from the U.S. At­tor­ney’s Of­fice, which is pros­e­cut­ing Ayu­dando Guardians and its two prin­ci­pals on crim­i­nal charges of em­bez­zling at least $4 mil­lion in client funds; and Liane Kerr, whose for­mer hus­band Paul Don­isthorpe has been ac­cused by state and fed­eral au­thor­i­ties of em­bez­zling $4 mil­lion from his clients’ ac­counts at Desert State. He hasn’t been crim­i­nally charged.

At is­sue Wed­nes­day was how to pro­ceed with the law­suit filed by Ayu­dando Guardians on June 6 seek­ing dam­ages from Desert State on be­half of seven clients. Those clients en­trusted their funds for Desert State

to man­age, the law­suit states.

That case was filed a month be­fore Ayu­dando’s two prin­ci­pals, Su­san Har­ris and Sharon Moore, and the com­pany it­self, were in­dicted July 11 by a fed­eral grand jury for em­bez­zling more than $4 mil­lion from their clients. The U.S. Mar­shals of­fice has been run­ning Ayu­dando since then, with the prospect of a shut­down of the com­pany im­mi­nent. Har­ris and Moore have pleaded not guilty.

Don­isthorpe didn’t at­tend Wed­nes­day’s hear­ing. He hasn’t re­sponded to re­quests for com­ment and is re­port­edly brain dam­aged from a botched sui­cide at­tempt.

His wife of 31 years, Kerr, filed for di­vorce in March after state fi­nan­cial ex­am­in­ers be­gan to look into Desert State’s books. She ap­peared in court with her at­tor­ney Wed­nes­day, but didn’t com­ment. In court records, Kerr has de­nied any in­volve­ment in the al­leged em­bez­zle­ment scheme or the trust com­pany busi­ness.

Both com­pa­nies are be­ing dis­man­tled by gov­ern­ment agen­cies in light of the fraud and em­bez­zle­ment al­le­ga­tions.

Judge Alan Malott on Wed­nes­day de­nied a mo­tion to dis­miss Ayu­dando’s claims against Desert State, vow­ing to make sure the seven Ayu­dando clients who may have lost trust funds at Desert State “don’t fall through the cracks” be­cause their guardian is un­der fed­eral in­dict­ment.

“There may be noth­ing left, but I’m go­ing to try to get as close to the penny as I can get,”said Malott.

Desert State in early Au­gust was placed into the re­ceiver­ship of the state Fi­nan­cial In­sti­tu­tions Divi­sion.

An es­ti­mated 70 peo­ple who were clients of Desert State have lost some or all of their trust money, state of­fi­cials say. Malott, dur­ing the hear­ing, said state district judges are in “cri­sis man­age­ment” mode try­ing to find re­place­ment guardians for Ayu­dando’s clients.

State FID at­tor­ney Kevin Gra­ham told Malott that fam­i­lies and in­di­vid­u­als, some with “lim­ited” abil­ity to un­der­stand “what’s go­ing on in the case,” have con­tacted the state to find lawyers to help re­cover their miss­ing trust funds.

Mean­while, the state Pub­lic Ac­coun­tancy Board last week re­voked Don­isthorpe’s CPA li­cense.

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