Attorneys for PNC Bank Monday defended the role of the financial giant, and of a Philadelphia law firm, in making decisions leading to the emptying of a trust fund at the request of the late Richard Mellon Scaife, who left nothing for his daughter and son.
Last month attorneys for Jennie Scaife, 52, of Palm Beach, Fla., and David Scaife, 49, of Shadyside, demanded around 200 documents they said were withheld from them by law firm Heckscher, Teillon, Terrill & Sager. That firm, retained by PNC beginning in 2000 to advise it regarding the disputed trust fund, had already turned over 2,400 documents.
The disclosed documents, according to the attorneys for the daughter and son, suggested that the children were kept in the dark regarding the details of the trust fund, created in 1935 to benefit their father but with the balance due to them upon his death. The fund was emptied of hundreds of millions of dollars, largely to subsidize the Tribune-Review newspapers published by Richard Mellon Scaife, prior to his death in July 2014.
PNC, in filings Monday, countered that attorneys for the daughter and son are misrepresenting “theoretical scenarios” discussed in Heckscher’s communications, and portraying them as actual events. For instance, Heckscher wrote of the need to provide an accounting of the trust transactions to the daughter and son when the trustees were considering whether to dissolve the fund in 2005. But since the fund was not dissolved, there was no need to provide the accounting, PNC’s attorneys wrote.
PNC also addressed the trustees’ request for an indemnification agreement with Mr. Scaife, to cover their decisions in regard to the 1935 trust. The children's attorneys have suggested that the trustees sought indemnification because they were concerned that their decisions were contrary to the trust's terms.
PNC wrote that it sought the agreement because it was concerned that if all of the trust’s funds were distributed according to Richard Mellon Scaife’s wishes, there wouldn’t be any money left to defend the trustees if they were sued. "The current litigation, by itself, demonstrates the legal purpose and necessity for the indemnification agreement,” PNC’s attorneys wrote.
The 200-plus documents now sought by the daughter and son are the law firm’s internal papers and electronic files that were never shared with PNC, weren’t used to make decisions regarding the trust, and so aren’t discoverable, the bank’s attorneys wrote.
They added that PNC’s acquiescence to Mr. Scaife’s requests to spend down the trust “were the product of a good faith exercise" of fiduciary duties and consistent with trust creator Sarah Mellon Scaife’s “intent to benefit her son, Richard M. Scaife, for any eventuality affecting his welfare."
The case of the 1935 trust is before Judge Kathleen A. Durkin of Allegheny County. The daughter and son seek a nine-figure sanction from the trustees, which are PNC, James M. Walton, and H. Yale Gutnick, who is board chairman of the Tribune-Review.
In a separate action in Westmoreland County, Jennie Scaife is challenging the validity of her father’s will, which mentioned neither her nor her brother.
Mr. Scaife’s will split control of more than $700 million in trust assets between the Sarah Scaife Foundation -- traditionally focused on national conservative causes -- and the Allegheny Foundation, which does most of its giving locally. Each of those foundations recently reported that to the IRS as a $364 million gift.
For the Allegheny Foundation, that increased its assets more than 10-fold, to a fair market value of $439 million. Its biggest grants in 2014 were to the $250,000 to the Manchester Bidwell Corp., $200,000 each to the Greater Pittsburgh Community Food Bank and to Mon Yough Community Services, and $150,000 each to the National Center for Arts and Technology, in Manchester, and to Grove City College’s Center for Vision and Values.
The Sarah Scaife Foundation’s assets swelled to $705 million in fair market value, due to the gift and the merger into it of The Carthage Foundation. Among the enlarged foundation’s biggest contributions: $2 million to the University of Kentucky, $600,000 to the Heritage Foundation and $400,000 each to the Social Philosophy and Policy Foundation and the Center for Strategic and Budgetary Assessments.
In 2014 the Sarah Scaife Foundation paid Michael W. Gleba, its president, $348,750, plus benefits valued at $41,000. Mr. Gleba also earned $87,188 and a $10,250 contribution to benefits from The Carthage Foundation.
The Allegheny Foundation paid its executive director Matthew A. Groll $184,701, plus a $30,750 contribution to his employee benefits. Mr. Groll, who was Mr. Scaife’s bodyguard, received another $56,200, plus a $10,250 benefits contribution, from the Sarah Scaife Foundation.
Rich Lord: rlord@post-gazette.com or 412-263-1542. Twitter: @richelord.
First Published: December 7, 2015, 4:46 p.m.
