Even as late billionaire publisher Richard Mellon Scaife sought a payout from a $400 million trust fund nearly a decade before he died, one of its three trustees privately raised questions about how to handle the request and expressed suspicion about another trustee, newly released court documents show.
“Do trustees have to be exercising discretion and not just mechanically honoring the beneficiary’s demand?” PNC Bank attorney Martha Zatezalo wrote in a May 27, 2005, memo as she prepared to discuss with other lawyers “how [trustee] PNC wishes to handle Dick’s request ...”
Additionally, attorneys for the publisher’s children, who are angry that they did not get a cent from the fund and are fighting for recompense, claim that the siblings “were intentionally kept in the dark and not told about the 1935 trust ...,” according to a filing Thursday by attorneys for David and Jennie Scaife in Allegheny County Orphans’ Court.
The publisher’s children have accused PNC Bank and co-trustees H. Yale Gutnick and James M. Walton of “improper actions” in allowing Mr. Scaife to drain the trust — established in 1935 for his welfare by his mother, Sarah Mellon Scaife — to prop up the Pittsburgh Tribune-Review newspaper.
Jennie Scaife’s attorneys have said that her father “received a personal lottery fund through the hands and actions of Gutnick by raiding the trust intended to carry over to his children.”
There were questions as far back as 2005 about how much Mr. Gutnick knew -— and how much he was sharing with PNC. In the 2005 memo, Ms. Zatezalo wrote, “If Yale knows more than he will tell us and if what we know is not enough do we acquire any protection if minutes reflect our efforts to extract info from Yale without success?”
The filing contains some inflammatory allegations and provides insight into the high-stakes strategizing that occurred behind the scenes as PNC consulted with its own attorneys — Heckscher Teillon Terrill & Sager, P.C. — on the best way to deal with the money request by Mr. Scaife and to protect itself from potential liability.
One of Heckscher Teillon’s suggestions to PNC if Mr. Scaife persisted in asking for the balance of the 1935 fund: Have the publisher put aside $100 million for indemnification.
It is not clear from the exhibits how much Mr. Scaife was asking for, but the children’s attorneys claim it was “the entire principal balance.”
Mr. Scaife’s request came against a backdrop of talk about moving the considerable wealth in the fund from PNC to another bank. Ms. Zatezalo wondered in her memo whether PNC needed to know what Mr. Scaife wanted to use the money for “at a time when he is moving his business from us (whether there is some sinister connection— like leaving us holding a bag big enough to hurt us)?”
The latest court filing is a petition by the Scaife children asking the court to force Heckscher Teillon Terrill & Sager to turn over notes and records about advice given to PNC. After poring over 2,400 documents released by the law firm, the children’s attorneys have identified 197 documents that were withheld, and which they want. These handwritten notes and records documenting phone calls, the attorneys claim, are crucial to pressing their case.
So far, the attorneys claim in the petition, the records have shown three key things. First, that information about the fund was kept from Jennie and David Scaife. Second, that PNC’s own lawyers had questions and concerns about the distributions to Mr. Scaife. And third, that Mr. Gutnick was “not forthcoming with information PNC believed it needed to know...”
The Scaife children’s attorneys point to a 2004 letter from Mr. Gutnick’s attorney and law partner, E.J. Strassburger, to a senior vice president at Hawthorn, a PNC arm that provides family wealth investment management and consulting. The letter refers to requests by David Scaife for monthly statements for three trusts. “Please be careful that the 1935 Trust is not accidentally included in your direction,” Mr. Strassburger wrote.
As well, the attorneys noted that a 2005 memo to PNC from Heckscher Teillon, described as a “crib sheet” for an upcoming call with Mr. Gutnick and Mr. Strassburger, outlined “several directions this matter could take.” In one scenario, the law firm told PNC that the children “must be notified that the trustees plan to terminate the 1935 trust.” But the children were never told, their attorneys say.
Jonathan D. Silver: jsilver@post-gazette.com, 412-263-1962 or on Twitter @jsilverpg.
First Published: November 6, 2015, 5:00 a.m.
