Corrupt Professional Fiduciaries Bureau

How lawyers and judges conspired to create a FAKE FRONT called the Professional Fiduciaries Bureau

 

OUR VISION
Safeguarding the well-being of consumers who receive professional fiduciary services.

OUR MISSION
To protect consumers through licensing, education, and enforcement of the Professional Fiduciaries Act by promoting and upholding competency and ethical standards across the profession.

SCOTT was the Adolf Hitler of Fiduciaries in California, destroying lives, robbing seniors blind this monster and criminal should be on death row or serve life in prison for her crimes and abuse


SUMMARY
Complainant seeks to impose discipline upon respondent’s professional fiduciary license for alleged misconduct related to respondent’s administration of the A’Yana McDonald Special Needs Trust (McDonald trust), as well as respondent’s failure to comply with continuing education requirements.
Clear and convincing evidence established respondent failed to read the trust
instrument until 2012, when she was required by the probate court to provide an accounting; follow terms contained in the trust that required her to file annual accountings with the court; and obtain court approval before paying herself fees from the trust. Respondent violated standards of care incumbent upon licensed professional fiduciaries. Clear and convincing evidence also established that respondent failed to provide the bureau with appropriate proof
of her completion of required continuing education courses, including ethics courses.
Complainant established cause to impose discipline on respondent’s professional fiduciary
license and revoke her probation.
Respondent’s primary defense to the substantive charges was that the beneficiary of
the trust did not suffer harm as a result of any wrongdoing. Concerning all charges,
respondent asserted the bureau was engaged in a “witch-hunt” designed to punish her
unfairly. Respondent argued the evidence of her misconduct, if any, did not justify the
suspension or revocation of her license.
Respondent’s evidence in explanation, mitigation, and rehabilitation was not compelling.
The revocation of respondent’s license is warranted on this record and will protect the public.
FACTUAL FINDINGS
Respondent’s License Background
1 . On April 9, 2008, respondent submitted to the bureau an application for the
issuance of a professional fiduciary license. The bureau denied respondent’s application, and respondent requested an administrative hearing.
On January 29, 2010, an administrative law judge (ALJ) issued a proposed decision finding cause to deny respondent’s application under Business and Professions Code section 6584, subdivision (h), as a result of respondent for acting as a professional fiduciary without a license. The proposed decision granted respondent a professional fiduciary license, revoked the license, stayed the revocation, and placed the license on probation for three years under terms and conditions.
Following the department’s order of nonadoption of the ALJ’s proposed decision, the department issued a decision denying respondent’s application. Respondent appealed from the decision by filing a writ of mandate in the superior court.
On January 14, 2011, the Superior Court of California, Sacramento County, issued a preemptory writ directing the department to vacate its decision after nonadoption and adopt the ALJ’s decision. The superior court’s order was stayed pending the department’s appeal.
On May 5, 2011, the Court of Appeal, Third Appellate District, lifted the stay and affirmed the Superior Court’s order directing the department vacate its decision, and issue a professional fiduciary license to respondent under the terms and conditions imposed in the ALJ’s January 29, 2010, proposed decision.
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On May 10, 2011, the department issued respondent a professional fiduciary license and placed the license on probation under the terms and conditions set forth in the ALJ’s January 29, 2010, proposed decision.
Relevant Conditions of Respondent’s Probation
2. Condition No. 1 of the probationary order provided in relevant part:
OBEY ALL LAWS: Respondent shall obey all federal, state and local laws, and all rules and regulations governing the practice of a professional fiduciary in California . .. .
Jurisdictional Matters
3. On September 11, 2015, complainant signed the first amended accusation and petition to revoke probation. Complainant alleged respondent was subject to disciplinary
action for incompetence, unprofessional conduct, failure to obey laws and regulations, and failure to complete and provide proof of continuing education. Complainant alleged these violations violated condition number 1 of respondent’s probation.
The A’Yana McDonald Special Needs Trust
4. On December 8, 2004, in connection with a malpractice settlement, the Superior Court of California, Riverside County, authorized the establishment of a Special Needs Trust (SNT) for A’Yana Mcdonald, a disabled minor, in accordance with Probate Code sections 3604 and 3605. The court appointed respondent as trustee. Respondent executed the trust instrument and $221,423.40 was deposited in the trust.
5. The trust instrument provided in part:
The intent and purpose of this trust is to provide a discretionary, spendthrift trust, to supplement public resources and benefits when such resources and benefits are unavailable or insufficient to provide for the Special Needs of the Beneficiary. As used in this instrument, the term “Special Needs” means the requisites
for maintaining the Beneficiary’s good health, safety, and welfare when in the discretion of the Trustee, such requisites are not being provided by any public agency . .. . Special Needs
include without limitation special equipment, programs of training, education and habitation, travel needs, and recreation, which are related to and made reasonably necessary by this Beneficiary’s disabilities. This is not a trust for the support of the Beneficiary. All payments made under this Trust must be reasonably necessary in providing for this Beneficiary’s special
needs, as defined herein.
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The McDonald trust was subject to the continuing jurisdiction of the superior court. The trust required annual accountings be filed with the probate department of the Riverside County Superior Court, and required that copies of all accountings and notices be filed with the Director of Health Services. The trust permitted respondent to receive reasonable compensation in an amount determined by the court.
6. Respondent administered the McDonald trust until 2012, when the probate department ordered her to file an accounting. On July 18, 2012, respondent, in pro per, filed a “First and Final Account and Report of Trustee (Probate Code sections 17200) and Petition for its Settlement and Termination of Trust with Uneconomically Low Principal (Probate
Code section 15408)” in the Riverside County Superior Court, in the case of In re the matter
of A’Yana Mcdonald, Special Needs Trust. The court appointed an attorney to represent the beneficiary. The beneficiary objected to the accounting. The matter went to a contested probate court hearing, where respondent was represented by attorney David Horspool.
Respondent testified in the probate court hearing. She testified she could not remember having a copy of the trust instrument before filing the first and final accounting. However, she assumed she had a copy of the trust document because she signed it and would have needed it to open a bank account for the trust. She had no recollection reading the trust document. Consequently, she was unaware the trust required court supervision. Her custom was to review the terms of a SNT with counsel; however, she did not do so with the McDonald trust. She could not explain why she did not review this trust with counsel. She testified she did not refer to the terms of the trust document in making decisions concerning the McDonald trust because it was a “cookie-cutter” SNT.
On June 23, 2014, the superior court issued a statement of decision suspending respondent as trustee and surcharging her $93,036.75. In the decision, the court found respondent breached her fiduciary duties in multiple respects. The court did not identify the breaches, but cited the beneficiary’s closing argument and stated that the beneficiary met her burden in establishing a breach in each respect. Additionally, the court found respondent breached her fiduciary duty by failing to notify the court that she was unlicensed from 2008 to 2010. The court reviewed respondent’s expenditures from the Mcdonald trust and assessed surcharges for several items. The court noted that had respondent filed regular accountings for court approval as required, she could have avoided further liability. The court addressed respondent’s inquiry concerning whether any breeches caused actual loss to the beneficiary and whether respondent profited from such breaches. The court found there was actual loss because respondent expended funds without sufficient care or justification and without reference to the text or purpose of the trust. The court found respondent profited because she placated the beneficiary’s mother by acceding to her requests for money, thereby providing respondent with “an open road” to charge substantial fees without the mother’s objection. Finally, the court denied respondent’s request for fees. The court maintained
jurisdiction over the case. The case remains pending on appeal.
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The Bureau’s Investigation
7. In November 2012, as required by her probation with the bureau, respondent submitted to her probation monitor, Investigator Dave Thornton, a copy of the amended objections to respondent’s first and final accounting in the McDonald matter. Following the superior court’s decision, Investigator Thornton requested an expert consultant review the
superior court case to determine whether respondent violated any laws, rules, or regulations governing the practice of a professional fiduciary.
Testimony and Report of Marilyn Kriebel
8. Marilyn Kriebel is a licensed professional fiduciary in California. The bureau requested she review respondent’s handling of the Mcdonald trust.
Ms. Kriebel has been a professional fiduciary since 1984. She completed a paralegal
program at University of California San Diego, specializing in estates, trusts, and wills. As a professional fiduciary she has been involved in probate proceedings, guardianships, conservatorships, and trusts, including SNTs. She has provided services in more than 500 cases. She currently has assets exceeding $160 million under her management. She has testified as expert witness regarding breaches of duty by a fiduciary. Ms. Kriebel was well qualified to render expert opinions concerning respondent’s handling of the Mcdonald trust.
According to Ms. Kriebel, a trustee’s failure to comply with the professional fiduciary’s code of ethics and the professional fiduciary standard of care constitutes unprofessional conduct. Ms. Kriebel defined incompetence as a lack of knowledge and skill
required to perform the duties of a professional fiduciary.
Mr. Kriebel offered opinions related to respondent’s handling of the Mcdonald trust. In reaching her conclusions, she reviewed the court order creating the trust; the trust document; the accounting report and objections thereto; closing arguments; the superior court’s statement of decision; and trial transcripts. Ms. Kriebel testified in this hearing and her report was received as evidence. Ms. Kriebel was familiar with the standard of care incumbent upon a professional fiduciary and the professional fiduciary code of ethics. Her conclusions follow.
A SNT is created to set aside funds for a beneficiary who is receiving public benefits. The purpose of the trust is to cover certain expenses without compromising the beneficiary’s ability to receive public benefits. The standard of care requires a professional fiduciary appointed as the trustee of a SNT to read and understand the trust document. A professional fiduciary should possess a copy of the trust document in order to refer to the document’s terms. A trustee determines his or her authorities or powers from the trust document itself. The standard of care requires a trustee follow the terms of a trust document so long as its
The Professional Fiduciary Code of Ethics is codified at California Code of Regulations, title 16, sections 4470 through 4484.
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terms do not conflict with public policy or law. Ms. Kriebel testified it is a breach of
fiduciary duty for a professional fiduciary to fail to possess a copy of the trust document and to fail to consult the trust document when making decisions related to the administration of the trust. Mr. Kriebel testified such omissions constitute incompetence and unprofessional conduct.
Under the Probate Code and the terms of the Mcdonald trust, respondent was required to file an annual accounting with the court. The Probate Code also required an annual accounting be provided to the beneficiary. According to Ms. Kriebel, respondent’s failure to file accountings with the court for the first seven years she served as the trustee of the McDonald trust was a breach of her fiduciary duties. Respondent’s failure to file annual accountings violated the court order and Probate Code section 3604 and 3605. Ms. Kriebel believed these violations constituted unprofessional conduct and incompetence.
Ms. Kriebel did not believe respondent filed annual accountings to the beneficiary as required by the trust. This omission also violated Probate Code section 16062, constituted a breach of respondent’s fiduciary duty, involved unprofessional conduct, and demonstrated incompetence.
Ms. Kriebel believed respondent improperly terminated the trust by distributing the
remaining balance of approximately $15,574.85 to the beneficiary’s mother for purchase of a modular home. Ms. Kriebel believed respondent neither sought nor obtained court authority before terminating the trust. Under the terms of the trust, termination could only occur upon the death of the beneficiary or exhaustion of trust assets. In Ms. Kriebel’s opinion, when the beneficiary has not died, termination could occur only when all of the funds held in trust were depleted. Before that, the trustee was required to petition the court for authority to disperse any funds remaining in trust. Respondent was required to file a petition seeking authorization from the court for the final distribution of funds, and to provide state agencies with a copy of that petition to enable the agencies to make a claim on the remaining funds held in trust under Probate Code 3605. Court approval was required to terminate the trust.
Ms. Kriebel believed respondent failed to provide notice to state agencies before she
terminated the trust. According to Ms. Kriebel, this omission involved a breach of respondent’s fiduciary duties, a violation of Probate Code section 3605, a violation of the terms of the trust, unprofessional conduct, and incompetence. Further, respondent’s failure to obtain court approval before terminating the trust and disbursitising funds held
in trust involved a breach of respondent’s fiduciary duty, a violation of the Probate Code, a violation of the terms of the trust, unprofessional conduct, and incompetence.
Respondent failed to comply with Probate Code 15410 when she disbursed the remaining trust funds to the beneficiary’s mother. The terms of the trust did not authorize the distribution of the remaining funds the beneficiary’s mother. By disbursit remaining funds to the beneficiary’s mother, respondent breached her fiduciary duty, violated the Probate Code, violated the terms of the trust, committed unprofessional conduct, and was incompetent, according to Ms. Kriebel.
During the seven years that respondent served as trustee for the McDonald trust, she paid fees to herself without first seeking court approval. Under the terms of the trust,
respondent was allowed compensation, but only upon court approval. Respondent never
obtained court approval. Respondent’s failure to obtain court approval before paying herself
fees involved a breach of her fiduciary duty, a breach of the terms of the trust, unprofessional conduct, and demonstrated incompetence, according to Ms. Kriebel.
Ms. Kriebel testified it was “inexcusable” for respondent not to have read and retained a copy of the trust document, and to have distributed the remainder of the trust funds to the beneficiary’s mother without providing notice to public agencies.
On cross-examination, Ms. Kriebel testified she did not know of respondent or her
reputation. Ms. Kriebel was not aware whether an accounting was sent to the Department of Health Care Services (DHCS). Ms. Kriebel believed respondent was required to provide notice to public agencies before exhausting the funds held in trust. Ms. Kriebel believed respondent was incompetent even if there were no damages to the beneficiary. From the
material she reviewed, Ms. Kriebel believed the beneficiary’s mother never received accountings in the first seven years respondent administered the Mcdonald trust. Ms.
Kriebel thought respondent frustrated the purpose of the trust by disburse the remainder of
the funds held in trust to the beneficiary’s mother to purchase a modular home.
Testimony of J. David Horspool
9 . Respondent offered the testimony of J. David Horspool, a licensed California attorney, as an expert witness in trust and probate law.
Mr. Horspool holds a master’s degree in accounting and an inactive Certified Public Accountant license. He is a certified by the California State Bar as a specialist in estate planning and probate trust law. He has practiced in area of conservatorships for more than 30 years. He has handled trust, probate, and SNT administration cases. He has represented over one thousand clients in probate matters. He taught courses to professional fiduciaries. He has represented fiduciaries, but has never been a fiduciary himself. Mr. Horspool represented respondent in the Mcdonald matter before probate court.
According to Mr. Horspool, trust distributions and payments must be consistent with the terms of a SNT. He testified a SNT provides the trustee with a large amount of discretion. Expenditures are subject to the court’s review to determine whether they are reasonable. He believed a distribution for a modular home purchase could be legitimate SNT expenditure.
Mr. Horspool frequently represents fiduciaries who file late accountings. In his opinion, failing to file an accounting in a timely manner does not violate the standard of care incumbent upon a professional fiduciary; instead, he testified it was simply “bad practice.” Professional fiduciaries sometimes get busy and forget to timely file accountings. Mr. Horspool believed the standard of care of upon an attorney was similar to that of a
professional fiduciary: they both owe a duty to a third party to use utmost skill and care to
assist the third party.
Mr. Horspool testified the Mcdonald trust case was currently on appeal. He said the
superior court did not find that respondent engaged in fraud. He believed respondent provided notice to the DHCS of the termination of the SNT. He said DHCS could have objected to respondent’s accounting, but did not do so. According to Mr. Horspool, respondent provided the beneficiary’s mother with yearly accountings. Mr. Horspool believed the beneficiary was not harmed. He opined that if respondent had filed accountings with the court on a regular basis, the court would have approved the expenditures.
Mr. Horspool said the Mcdonald case was the first time he had known respondent to have been surcharged. He was not aware of respondent ever having been removed as a trustee. He described respondent’s representation of clients as “stellar.” He believed respondent had a good reputation as a professional fiduciary. He said respondent had the reputation of taking cases that required managing difficult parties. In terms of SNTs, he said “there was no greater protector” than respondent.
Mr. Horspool admitted that except for rare occasions, he had not worked as a fiduciary. He believed the standard of care required a professional fiduciary to prevent harm. The fiduciary is required to act in the “highest faith.” Mr. Horspool was not familiar with the professional fiduciary code of ethics. He did not believe it was unprofessional conduct for a trustee to fail to read a SNT instrument. He classified respondent’s omission as “an oversight or mistake.” When improper conduct does not result in harm, that conduct cannot constitute unprofessional conduct. Mr. Horspool testified special needs trusts were substantially “boilerplate.” He said they generally have the same purpose, and although respondent might not have read the Mcdonald trust document, she had read many others that were similar. Since there was no harm to the beneficiary, respondent did not violate her
fiduciary duties.
Mr. Horspool was “shocked” to hear that harm was not an element of the standard of care. Mr. Horspool conceded respondent “should have” petitioned the court before taking fees, otherwise she ran the risk of the court not approving the fees.
Mr. Horspool said it would be a violation of a trustee’s fiduciary duty to never file an accounting, but filing an accounting late did not violate any standard of care. Mr. Horspool said the preferred practice required a fiduciary to read the terms of the trust; but if the beneficiary was not harmed, there was no violation of any standard of care in failing to do so. Mr. Horspool believed respondent properly noticed DHCS of the termination of the trust.
Testimony of Daniel G. Stubbs
10. Daniel Stubbs has worked as a fiduciary for the past 31 years. He is licensed
by the bureau as a professional fiduciary. He was an instructor in fiduciary services at California State University Fullerton and University of California at Berkeley. He served on
the board of directors of the National Guardianship Association for nine years. From 2008 to 2012, he served on the bureau’s Advisory Committee as a member and chair. He has served
as a trustee for 35 SNTs. .
Based on his experience, Mr. Stubbs was well qualified to render an expert opinion in this matter.
Mr. Stubbs and respondent were charter members of Professional Fiduciaries Association of California (PFAC). Mr. Stubbs testified on behalf of respondent as an expert witness in the Mcdonald hearing, where he opined that respondent’s disbursements were reasonable. Mr. Stubbs testified that SNT documents have certain factors that are in
common, but some can “be rather complicated.” He was familiar with respondent’s
activities as a SNT trustee. He testified that serving as a SNT trustee is a specialized area of
expertise within the professional fiduciary community.
Respondent asked Mr. Stubbs whether her failure to file accountings with the court deviated from the standard of care of a professional fiduciary. In response, Mr. Stubbs stated the standard of care involves “taking care of the individual client.” Mr. Stubbs testified the filing accountings with the court was a different matter and the simple failure to file an
accounting with the court would not violate the standard of care.
Mr. Stubbs said that he taught students to review a trust document before agreeing to become a trustee. He said compliance with the code of ethics was part of the standard of care of a professional fiduciary. He said complying with the probate code and terms of the trust were also a part of the standard of care.
Mr. Stubbs personally maintains a copy of the trust document for the trusts he
administers. Mr. Stubbs was asked whether respondent’s failure to maintain a copy and read
the trust document breached a professional fiduciary’s standard of care. Mr. Stubbs said it
“was extremely unwise,” but the standard of care “involves the treatment of a client.” He said he could not determine whether respondent engaged in unprofessional conduct by failing to read a trust document because, although doing so was “incredibly unwise,” a violation of the standard of care depended on the treatment and care of the beneficiary.
Mr. Stubbs stated that failing to file accountings with the court as required by the
SNT “could be considered” a breach of respondent’s fiduciary duty. Mr. Stubbs testified that a trustee’s failure to notify appropriate state agencies before terminating the SNT might constitute a breach of a professional fiduciary duty. Mr. Stubbs testified that under the terms of the McDonald trust, court approval was required in order for respondent to be paid fees. Mr. Stubbs believed that respondent’s payment of fees to herself without first obtaining court approval violated her duty to comply with the terms of the trust.
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Testimony of Bryan Hartnell
11. Bryan Hartnell has been licensed as an attorney since 1975. He is a certified
specialist in the areas of estate planning, trust, and probate law. He served on the advisory commission for estate planning, trust, and probate law. He served on the state board for legal specialization for eight years. He is trustee for two trusts at court recommendation. Based on his education, training, and experience, Mr. Hartnell was qualified to render expert
opinions in the area of estate planning, trusts, and probate law.
Mr. Hartnell believed respondent did not engage in unprofessional conduct because filing an accounting late was a question of degree and dependent on whether the beneficiary was harmed by any delay. Mr. Hartnell noted that the Mcdonald trust was never transferred from the civil court to the probate court. He said a trustee would have had to file a petition in probate court in order to get a probate case number. Ultimately, this was the trustee’s responsibility, but he did not believe that failure to do so constituted a breach of a fiduciary
duty.
Mr. Hartnell did not believe that the superior court applied the appropriate standard in
disallowing respondent’s distributions. Mr. Hartnell did not believe respondent breached her
fiduciary responsibility by not filing accountings in probate court. Mr. Hartnell believed
whether there was a breach of a fiduciary duty depended on whether there was harm to the
beneficiary.
Mr. Hartnell was familiar with respondent’s career as a professional fiduciary. He had no knowledge of respondent engaging in any misconduct or any instances where she was surcharged other than the McDonald matter. He believed respondent’s handling of the McDonald trust was an aberration. Mr. Hartnell believed the standard of care required a professional fiduciary to protect the estate from harm and provide optimum care for the
beneficiary.
Respondent’s Testimony
12. Respondent is 58 years old. She graduated from college in 1980. In 1982 she undertook her first case as a fiduciary and has worked in the field since. She has two adult children.
Respondent admitted she failed to timely file an accounting with the court as required
by the terms of the McDonald trust. She managed the McDonald trust the same manner as
she managed all other court-monitored SNTs. The beneficiary never lost any benefits and
was not harmed by the failure to file accountings.
Although the probate court disagreed with certain expenditures respondent made, she believed those expenditures were reasonable, and she is appealing the court’s decision. She stated her handling of the McDonald trust was an anomaly. She had never before failed to make herself fully aware of the contents of a trust document.
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She believed there were mitigating circumstances. She explained she was appointed
trustee at the end of 2004, and in 2005, a negative article was published about her in the Los
Angeles Times that caused her business to plummet. However, regardless of her financial
hardships, her clients never suffered. She has never been surcharged, and the only time she
was removed as a trustee was when she was fighting to obtain her professional fiduciary
license. She has handled hundreds of cases without incident. Her “heart and soul” are
geared toward the care of her clients. She takes cases no other professional fiduciary will
take. She believed she has been punished already because of the surcharge imposed in the
McDonald matter and the cost to hire counsel for appeal. She does not believe she is a threat
to the community.
Respondent testified about her role as a respected member of the professional
fiduciary community. She believes she “fell out” of the bureau’s favor. She said she was
“throwing herself under the bus” by admitting her failure to file an accounting. However,
she believed the beneficiary of the McDonald trust had a “good run” when she was trustee,
and there was no objection to her failure to provide an accounting other than that made by
the beneficiary’s court-appointed counsel. Respondent did not believe the beneficiary was
harmed.
Respondent has handled approximately 10 to 20 SNTs during her career. Before
appointment in the McDonald trust, respondent handled less than approximately five SNTs.
She now considers herself an expert in SNTs. Respondent said she did not recall ever
reading the trust document for the Mcdonald trust. Respondent explained the Mcdonald
trust was a “cookie-cutter” trust because it was very similar to other SNTs. However, when
she was assigned the trust in 2004, she did not read the trust. She said she administered the
trust by providing the beneficiary with support while preserving the beneficiary’s public
benefits. Respondent said she retained counsel for the other SNTs she handled, but did not
do so for the Mcdonald trust. She did not explain why she did not retain counsel for the
McDonald trust. Respondent was not sure whether she had a copy of the trust document
until she was ordered to file an accounting in 2012. Respondent admitted she received fees
for her services in the Mcdonald matter before obtaining court approval. Respondent
admitted she exhausted the trust without first obtaining court approval. Her intent was to
terminate the trust when she distributed the remaining $15,574.85 to the beneficiary’s
mother. Respondent did not believe that the beneficiary was harmed when she disbursed the
remaining trust funds to the beneficiary’s mother to enable her to purchase a modular home.
Respondent said the standard of care of a professional fiduciary is intended to ensure
the client is cared for and expenses are appropriate. Respondent was familiar with the
professional fiduciary’s code of ethics, adding “I think I helped write it.” Respondent said
she made an error by not filing an accounting, but it was a harmless error because the
beneficiary did not lose benefits. Respondent believed unprofessional conduct required
action that resulted in harm to a client. Respondent testified she notified state agencies about
the termination of the trust by mailing her final accounting to the agencies. Respondent
testified a trust would not terminate until a court enters an order. Thus, she believed she
gave proper notice to state agencies as required under the Probate Code.
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In conclusion, respondent admitted that she made mistakes, but the mistakes did not involve violations of any standard of care because there was no harm to the client. She thought it was unwise to have represented herself. She believed the trust at issue required her fees be approved by the court, not that the court approve the fees in advance. She believed personal hardships clouded her judgment, including a difficult divorce. She has since become much more careful in her review of files.
Respondent said the bureau was on a “witch-hunt” against her and she had been singled-out for particularly harsh treatment. She said revocation was not an appropriate sanction for her “inadvertent failure to file an accounting.” Respondent said when the court
of appeal overturns the superior court’s decision, this proceeding “will have been moot.”
Respondent’s Continuing Education
13. On April 13, 2013, respondent signed and submitted to the bureau an
application for license renewal. In the application, respondent certified she had completed 15 hours of continuing education within the last year.
14. Angela Cuadra” has been a program analyst with the bureau since 2009. In February 2014, she was tasked with performing the bureau’s first audit of continuing
education for professional fiduciaries who renewed their licenses in 2013. Ms. Cuadra received from the bureau’s IT department a list of 35 active licensees. That list was randomly generated and contained five percent of active licensee.
On February 6, 2014, Ms. Cuadra sent a letter to respondent that advised respondent had been randomly selected for the bureau’s audit of continuing education. The letter requested respondent submit “proof of completion” of at least 15 hours of continuing education for the period of May 18, 2011 through April 13, 2013. The letter requested respondent submit documentation no later than March 8, 2014.
On February 28, 2014, the bureau received respondent’s response. Respondent wrote,
I am convinced I completed all fifteen hours for the 2011, 2012,
and 2013 years in question, however, I cannot locate all of the necessary paperwork. I have attended Inland Empire PFAC meetings, University of Redlands sessions, San Bernardino County Probate Bar brown bag lunch meetings, interned with Dr. Lalas at Loma Linda University Behavior Medical Center,
extensively researched, conferred on legal and ethical issues in preparation to serve as a consultant/expert witness in fiduciary matters.
In 2013 Ms. Cuadra went by the name Angela Bigelow.
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Additionally, respondent represented she had completed more than 20 hours as a participant in a “trial run” of a program called “Retrain Your Brain,” a program provided by the University of Alabama Birmingham. She represented she met with Dr. Lalas, a psychiatrist, implementing a training program for individuals with traumatic brain injuries.
Respondent enclosed documents she “was able to locate” relating to her completed education hours. Respondent submitted three attendance records from the San Bernardino County Bar Association establishing three hours of credit. Only two documents were signed by respondent that indicated she participated in the activity and was entitled to receive California MCLE hours. Respondent submitted an email invitation for a San Bernardino probate section meeting offering one hour of MCLE credit. Respondent also submitted a flyer for a Professional Fiduciaries Association Inland Empire Chapter meeting. None of the documents respondent submitted identified courses in ethics.
On March 24, 2014, Investigator Thornton emailed respondent. The e-mail outlined the courses respondent identified as qualifying for CE. In the email, Investigator Thornton stated the hours with Loma Linda Behavior Health Institute would not be accepted because Loma Linda was not an approved CE provider and the content of the “trial run” was not considered CE. For other courses, Investigator Thornton stated the bureau would accept them as credit for CE only upon proof of attendance indicating the number of CE hours received. The email noted that one of the courses respondent attended and claimed credit for predated the audit window. Investigator Thornton claimed the documentation respondent submitted qualified for one hour of CE. Investigator Thornton requested respondent provide additional proof of completion of 15 hours of CE by March 28, 2014, of which two hours was required in the area of ethics. Investigator Thornton warned that failure to comply would result in referral to the Office of the Attorney General.
Respondent emailed Investigator Thornton on March 21, 2014. She stated it was her understanding that the bureau had the authority to require her attend more CE courses and extend her probation as a “sanction.” She said she would attempt to obtain signatures by the deadline. She also represented that she believed that PFAC sent proof of attendance at its trainings directly to the bureau.
On July 18, 2014, Investigator Thornton emailed respondent indicating that he
received from her a certificate of completion for a 15 hour course in palliative care and pain management. The bureau accepted the course for 15 hours of CE. From this course, the bureau credited respondent 12 hours of CE for the audit period of May 18, 2011 to April 30, 2013, even though the course was completed in 2014. However, Investigator Thornton’s letter noted respondent still needed to complete two hours of CE in ethics for that period.
. Respondent testified she had “plenty” of hours of CE. She admitted she had trouble gathering the paperwork but said her clients came first. She said she tried to explain her hardship to the bureau and provide the bureau with the required information. She said she gathered the information, but the bureau suspended her. Because of the suspension, she lost professional credibility and suffered a loss in business. Respondent believed the bureau
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had remedies other than pursuing revocation and was treating her unfairly compared to
treatment of others who had engaged far more egregious misconduct.
. Respondent noted this was the first CE audit the bureau conducted. She said
one hour of CE was rejected by the bureau because she did not sign the form indicating she
had completed the course. Respondent said some of the training she attended did not provide
forms that enabled her to demonstrate completion. Respondent believed signing the renewal
application under perjury was sufficient to document her completion of the required CE
courses. She said the bureau failed to instruct professional fiduciaries what was required.
She said “none of us knew” what kind of documentation the bureau wanted. She said PFAC
did not provide any documentation for courses she completed. She described the Loma
Linda program as a “study” to create a course on traumatic brain injuries.
Cost Recovery
17. Complainant submitted certifications of costs and requested cost recovery
under Business and Professions Code section 125.3. Complainant submitted a certification
of investigative costs in the amount of $3, 798.72. However, the certification did not describe
the general tasks performed by the investigator or expert consultant as required by California
Code of Regulations, title 1, section 1042, subdivision (b). The certification did not include
a bill, invoice or similar supporting documentation to support the court transcript costs.
Therefore, no investigative costs are awarded.
The certification by the deputy attorney general contained information related to
services provided by the Office of the Attorney General and included costs of prosecution in
the amount of $16,347.50. The evidence established those costs were reasonably incurred.
The certification complied with the requirements of California Code of Regulations, title 1,
section 1042, subdivision (b).
Respondent testified that she could not afford to pay costs. She testified she lives
“hand to mouth.” She has no savings and no retirement. She has spent large amounts of
money in defending this administrative action on her professional fiduciary license denial
case and in the appeal of the Mcdonald trust legal action.
LEGAL CONCLUSIONS
Burden and Standards of Proof
1 . The standard of proof in an administrative action seeking to suspend or revoke
a professional license is “clear and convincing evidence.” (Ettinger v. Board of Medical
Quality Assurance (1982) 135 Cal.App.3d 853, 856.) Clear and convincing evidence
requires a finding of high probability, or evidence so clear as to leave no substantial doubt; it
requires sufficiently strong evidence to command the unhesitating assent of every reasonable
mind. (Katie V. v. Superior Court (2005) 130 Cal.App.4th 586, 594.)
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2. In a petition to revoke probation, the standard of proof is preponderante of the evidence. (Sandarg v. Dental Bad. of California (2010) 184 Cal.App.4th 1434, 1441-1442.)
Relevant Statutes and Regulations
3. Business and Professions Code section 6584 provides that a professional fiduciary license may be disciplined for the following:
(d) Fraud, dishonesty, corruption, willful violation of duty, gross
negligence or incompetence in practice, or unprofessional conduct in, or related to, the practice of a professional fiduciary. For purposes of this section, unprofessional conduct includes, but is not limited to, acts contrary to professional standards
concerning any provision of law substantially related to the duties of a professional fiduciary.
(h) Violation of this chapter or of the applicable provisions of Division 4 (commencing with Section 1400), Division 4.5
(commencing with Section 4000), Division 4.7 (commencing with Section 4600), or Division 5 (commencing with Section 5000) of the Probate Code or of any of the statutes, rules, or regulations pertaining to duties or functions of a professional
fiduciary.
4.
Business and Professions Code section 6580 authorizes the bureau to investigate the actions of a professional fiduciary and impose sanctions, including license revocation, upon a finding of a violation or a breach of fiduciary duty.
5. Probate Code section 16000 provides:
On acceptance of the trust, the trustee has a duty to administer
the trust according to the trust instrument and, except to the extent the trust instrument provides otherwise, according to this division.”
5, Probate Code section 3604 provides:
(a) (1) If a court makes an order under Section 3602 or 3611 that money of a minor or person with a disability be paid to a special needs trust, the terms of the trust shall be reviewed and approved by the court and shall satisfy the requirements of this
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section. The trust is subject to continuing jurisdiction of the
court, and is subject to court supervision to the extent determined by the court. The court may transfer jurisdiction to the court in the proper county for commencement of a
proceeding as determined under Section 17005
7. Probate Code section 3605 provides in pertinent part:
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. . . []
(b)
While the special needs trust is in existence, the statute of
limitations otherwise applicable to claims of the State Department of Health Care Services, the State Department of State Hospitals, the State Department of Developmental Services, and any county or city and county in this state is tolled. Notwithstanding any provision in the trust instrument, at the death of the special needs trust beneficiary or on termination of the trust, the trust property is subject to claims of the State Department of Health Care Services, the State Department of State Hospitals, the State Department of Developmental Services, and any county or city and county in this state to the extent authorized by law as if the trust property is owned by the
beneficiary or is part of the beneficiary’s estate
(c) At the death of the special needs trust beneficiary or on
termination of the trust, the trustee shall give notice of the beneficiary’s death or the trust termination, in the manner provided in Section 1215, to all of the following:
(1) The State Department of Health Care Services, the State Department of State Hospitals, and the State Department of Developmental Services, addressed to the director of that department at the Sacramento office of the director . . . .
8.
Probate Code section 16062, subdivision (a), requires a trustee to provide annual accountings to the beneficiary.
9.
Probate Code section 15410 outlines the disposition to trust property upon termination of the trust.
10. California Code of Regulations, title 16, section 4470 provides in part:
(a)
A licensee’s fiduciary duties recognized under this Article are based upon the fiduciary relationship established with the consumer as follows:
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190
. . . [
(4)
A licensee’s relationship to a beneficiary when acting as a trustee.
(b)
The licensee shall comply with all local, state, and federal laws, regulations, and requirements developed by the courts and the Judicial Council as a minimum guide for the fulfillment of the fiduciary duties recognized under this Article . . . .
11. California Code of Regulations, title 16, section 4442 provides:
(a)
Annual time requirements.
(1)
To renew a license, a licensee shall earn during each annual renewal period a minimum of fifteen (15) hours of continuing education credit from approved education courses as defined in Section 4444 subject to the conditions of this Article.
(2)
Courses qualifying for continuing education credit must be
completed following licensure and within the one-year renewal period each cycle. . . .
(b)
Annual subject topic requirements.
(1)
Continuing education credit shall be earned by taking approved education courses in at least one of the subject topics as provided for in Section 4444.
(2)
At least 2 hours of continuing education credits each year shall be in ethics for fiduciaries.
12. California Code of Regulations, title 16, section 4444 provides:
(a) Eligible education courses, as defined in subdivision (b), offered or approved by an approved education provider listed in Section 4446, are approved education courses that meet the
prelicensing and continuing education requirements of this Article.
(b) Programs, seminars, and courses of study that are relevant to
fiduciary responsibilities of estate management or of fiduciary
responsibilities of the person for at least one of the subject
topics as specified in subdivision (e), that address the areas of
proficiency, competency, and performance of a fiduciary, and
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impart knowledge and increase understanding of the fiduciary profession or of the California judiciary or the legal process as it relates to the administration of fiduciary responsibilities are eligible education courses. . . .
13. California Code of Regulations, title 16, section 4452 provides:
Each applicant is responsible for ensuring compliance with the continuing education requirements of this Article.
(a) To demonstrate compliance a licensee shall sign under penalty of perjury on an annual renewal application form provided by the Bureau that they have completed fifteen (15)
hours of approved continuing education courses.
(b)
A licensee shall maintain documentation of completion of continuing education courses for a period of at least three years from the date of renewal.
(c)
Each licensee shall provide any information requested by the Bureau within ten (10) business days of the request, to determine compliance with the continuing education
requirements for license renewal.
Unprofessional Conduct
14. Complainant alleged that respondent’s license is subject to disciplinary action under Business and Professions Code section 6584, subdivision (d), for failing to meet the standards of conduct of a professional fiduciary in her handling of the Mcdonald trust as follows:
a.
Respondent failed to read the SNT instrument and failed to refer to the SNT’s terms prior to taking action as the Trustee.
b.
Respondent failed to refer to pertinent Probate Code sections and took numerous actions which were contrary to the specific terms of the trust instrument as well as the laws of the State of
California.
c.
Respondent failed to follow the terms of the SNT and the laws of the State of California which resulted in a loss to the beneficiary for whom the SNT was established.
d.
Respondent failed to administer the SNT pursuant to its terms.
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e.
Respondent failed to seek court authority prior to compensating herself as Trustee.
f.
Respondent failed to file accountings with the court as required under the SNT.
g.
Respondent failed to seek court authority prior to electing to terminate the SNT.
h.
Respondent failed to distribute the remaining SNT assets as set forth in the SNT.
i.
Respondent failed to give notice to health agencies that had
provided benefits to the Beneficiary that she was terminating the SNT.
15. As defined in the code, unprofessional conduct “includes, but is not limited to,
acts contrary to professional standards concerning any provision of law substantially related to the duties of a professional fiduciary.” (Bus. & Prof. Code, $ 6584, subd. (d).)
Respondent was appointed trustee for the Mcdonald trust in late 2004. It is undisputed that respondent failed to read the Mcdonald trust instrument until 2012, when she was ordered by the probate court to provide an accounting. Ms. Kriebel testified that respondent’s failure to read and understand the McDonald trust instrument was contrary to the professional standards of a professional fiduciary and violated respondent’s fiduciary duties to the beneficiary. Ms. Kriebel understood the definition of professional conduct to require compliance with the laws and regulations of a professional fiduciary.
Respondent’s experts believed that respondent’s actions were “unwise,” but did not believe that she committed unprofessional conduct. Of respondent’s experts, Mr. Stubbs, a professional fiduciary, had the clearest understanding of what constituted unprofessional conduct. However, all of respondent’s experts believed unprofessional conduct was
contingent upon a client being harmed. In their view, since the beneficiary was not harmed, respondent’s failure to appreciate that the trust was court supervised did not involve a breach of her fiduciary duty or unprofessional conduct.
In resolving any conflict in the testimony of expert witnesses, the opinion of one expert should be weighed against that of another. Consideration should be given to the qualifications and believability of each witness, the reasons for each opinion, and the matter
upon which it is based. (BAJI 2.41.) California courts have repeatedly underscored that an expert’s opinion is only as good as the facts and reason upon which that opinion is based. (Kennemur v. State of California (1982) 133 Cal.App.3d 907, 924.)
Respondent’s experts categorized respondent’s actions as “unwise” or “a mistake,” but did not believe this constituted unprofessional conduct because they opined that the
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beneficiary was not harmed. The opinion expressed by respondent’s experts – actual harm must be shown to conclude a licensed individual has engaged in unprofessional conduct – is
simply incorrect. (Griffiths v. Superior Court (2002) 96 Cal.App.4th 757, 772.)
Ms. Kriebel’s testimony was more persuasive as she had the clearest understanding that unprofessional conduct does not require harm, but rather requires a departure from the standards of conduct of a professional fiduciary.
16.
Expert testimony was not required to reach the conclusion that professional standards require a professional fiduciary read and understand a trust instrument before administering a trust. This concept is such so fundamental that the failure to do so cannot be anything but unprofessional conduct. Even if a professional fiduciary were to believe that the trust was “cookie-cutter,” in that it was similar to other trusts, the failure to read a trust instrument is such a clear departure from professional standards that no reasonable factfinder could conclude otherwise. Respondent’s failure to read and understand the Mcdonald trust instrument constituted unprofessional conduct.
17.
Because respondent failed to read the trust instrument, she was unaware that the trust was court supervised. As such, she failed to follow the terms of the trust, which required her to file annual accountings with the court and public agencies and to obtain court approval for trustee fees. Her failure to administer the Mcdonald trust pursuant to the terms of the trust violated Probate Code section 16000 and constituted unprofessional conduct.
18.
Complainant alleged respondent failed to seek court authority before electing to terminate the trust. Although respondent depleted the trust by distributing the remaining $15,574.85 to the beneficiary’s mother for the purchase of a modular home, respondent filed a petition with the court to terminate the trust with uneconomically low principal under Probate Code section 15408. Respondent served this petition on the Department of Health Care Services and the Department of Developmental Services. Since only the superior court had authority to terminate the trust, the evidence did not establish that respondent failed to seek court authority prior to terminating the trust. She in fact sought court approval, which the court denied and instead surcharged respondent. The evidence did not establish that respondent failed to give notice to public agencies that she was terminating the trust.
19. Finally, complainant alleged respondent failed to distribute the remaining trust
assets as required by the trust instrument. Complainant alleged respondent’s failure to follow
the terms of the trust resulted in a loss to the beneficiary. In response to respondent’s first
and final accounting and the objections lodged by the beneficiary’s counsel, the court
disallowed many of respondent’s distributions, including the final $15,574.85 distribution.
The court ordered that respondent reimburse the trust in the amount of $93,036.75. In surcharging respondent, the court found respondent breached her fiduciary duties and made inappropriate distributions, thereby causing harm to the beneficiary. Ms. Kriebel believed
that respondent’s final distribution was inconsistent with the intent and purpose of the trust, and circumvented the public entities’ right to file a claim against the trust. Respondent believed her distributions were appropriate and disagreed with the probate court’s ruling.
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She testified that final distribution to the mother for purchase of a new home was an
appropriate expenditure.
Although the court’s findings that respondent made inappropriate distributions are
given deference, the court’s decision did not provide sufficient detail to support its rationale for disallowing certain expenditures. Thus, the weight of the evidence did not establish these distributions constituted unprofessional conduct. The trickier question was whether the final distribution enabling the beneficiary’s mother to purchase a modular home conformed to the purpose and intent of the trust. Although the court and Ms. Kriebel did not believe this was
the case, there was insufficient evidence to establish this disbursement was contrary to professional standards or law. On the record in this matter, it cannot be concluded that
respondent’s disbursements constituted unprofessional conduct.
Incompetence
20.
Complainant alleged that respondent was incompetent because her conduct demonstrated a lack of knowledge or ability to perform her professional obligations.
21.
The technical term “incompetency” is used in a variety of factual contexts to indicate an absence of qualification, ability or fitness to perform a prescribed duty or function. It is commonly defined to mean a general lack of present ability to perform a given duty as distinguished from inability to perform such duty as a result of mere neglect or omission. Such an interpretation is totally consistent with the declared legislative objective of public protection by requiring a minimum standard of professional conduct on the part of
those licensed to engage in regulated activities. (Pollak v. Kinder (1978) 85 Cal.App.3d 833, 837-838.) The Pollack court concluded: “While it is conceivable that a single act of misconduct under certain circumstances may be sufficient to reveal a general lack of ability to perform the licensed duties, thereby supporting a finding of incompetency under the statute, we reject the notion that a single, honest failing in performing those duties — without more — constitutes the functional equivalent of incompetency justifying statutory sanctions.”
Pollak, supra, at p. 839, italics in original.)
22. By failing to read the trust instrument, respondent failed to comply with the
terms of the trust instrument and the Probate Code. Respondent testified that her handling of the trust was an anomaly and did not reflect her normal practice. There is no question that respondent’s failure to read the trust instrument deviated from the standard of care on a
professional fiduciary. Although not alleged, respondent’s actions likely constituted gross negligence, i.e., an extreme departure from the standard of care. However, it cannot be determined that respondent’s misconduct was so pervasive as to establish she lacked the qualification, ability, and fitness to act as a professional fiduciary. Respondent has served as a professional fiduciary for over 30 years. There was no evidence that she has ever been surcharged or removed as a trustee based on a lack of fitness other than in the Mcdonald matter. Her handling of the McDonald trust demonstrated carelessness but not incompetence. This allegation is dismissed.
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Violation of State Law and Regulations
23.
Complainant alleged that respondent failed to comply with Probate Code section 16000 by failing to administer the McDonald trust in accordance with its terms. As previously held, the evidence established respondent violated Probate Code section 16000.
24.
Complainant alleged that respondent failed to provide annual accountings to the beneficiary as required under Probate Code section 16062. Respondent testified she provided the beneficiary annual accounting. There was no indication in the probate court’s decision or hearing transcript that respondent did not provide required beneficiary annual accountings. The evidence did not establish a violation of Probate Code section 16062.
25.
Complainant alleged that respondent failed to comply with Probate Code section 3605 by failing to provide notice of her intention to terminate the trust to state public service agencies. As previously discussed, respondent did notify these agencies when she filed her petition for termination with the probate court. The evidence did not establish a violation of law.
26. Complainant alleged that respondent failed to distribute the remaining trust
principal in accordance with Probate Code section 15410 and the terms of the SNT. Section 15410 outlines the distribution of funds upon termination of the trust. However, the trust had not been terminated by court order when respondent disbursed the remaining principal. Although the court ordered respondent to reimburse the trust for the final disbursement, there was insufficient evidence to establish there was a violation of the Probate Code.
27. Finally, complainant alleged respondent failed to comply with California Code of Regulations, title, 16, section 4482, by failing to protect the assets of the trust and causing a loss to the beneficiary. Section 4482 applies to management of an estate, not trust, and is
inapplicable to respondent’s handling of the trust. No violation was established.
Continuing Education
28. Complaint alleged respondent failed to complete 15 hours of approved
continuing education (CE) courses and failed to maintain documentation of completion of these hours. Whether respondent actually completed 15 hours of approved CE during the required renewal period is debatable. Certainly, respondent completed several courses the bureau agreed would satisfy CE requirements had respondent submitted proof of completion. The bureau ended up crediting respondent with an additional 12 CE hours for the audit period for the course she completed in palliative care and pain management. As a result of the bureau’s retroactively crediting her with these hours, respondent established she completed 13 hours of CE. Although the bureau did not credit respondent for the one hour
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CE offered by the San Bernardino Bar Association, where respondent did not sign the form, the evidence established she attended this course and is entitled to the one hour credit.
However, respondent was still required to have completed two hours of CE in ethics for fiduciaries. (Cal. Code Regs., tit. 16, $ 4442, subd. (b)(2).) Respondent failed to establish she completed two CE hours in ethics during her renewal period. As such, respondent failed to comply with her CE requirements.
29. Additionally, respondent failed to maintain documentation establishing proof of completion of CE courses as required by California Code of Regulations, title 16, section 4452, subdivision (b). The documentation respondent provided was insufficient to establish completion of her required CE credit. The regulations required respondent maintain proof of completion of CE for a period of three years. Although “proof of completion” is not defined by regulation, it can be reasonably be defined as any document establishing attendance at an approved CE course. The invitations respondent submitted were not proof of her attendance at these courses. Respondent’s belief that because CE was new to professional fiduciaries, and she did not know what documents the bureau would accept, did not excuse her from the record-keeping requirement. Nor was her belief that her attestation in the renewal was sufficient, by itself, to establish proof of completion. Respondent’s failure to timely provide the bureau with proof of completion of CE violated the regulations. (Cal. Code Regs., tit. 16,
$ 4452, subd. (c).).
Cause Exists to Revoke Respondent’s License and Revoke Respondent’s Probation
30.
Cause exists to revoke respondent’s license and revoke respondent’s probation on the grounds that respondent committed unprofessional conduct in her handling of the McDonald trust. (Bus. & Prof. Code, $ 6584, subd. (d.).) Respondent’s misconduct violated Probation Condition No. 1, requiring respondent to obey all laws and regulations.
31.
Cause exists to revoke respondent’s license and revoke respondent’s probation on the grounds that respondent failed to comply with state laws governing a professional fiduciary. (Bus. & Prof. Code, $ 6584, subd. (h).) Respondent violated Probation Condition No. 1, in that respondent failed to obey all laws and regulations.
32.
Cause exists to revoke respondent’s license and revoke respondent’s probation on the grounds that respondent failed to comply with the continuing education requirements established in California Code of Regulations, title 16, section 4442 and 4452. (Bus. & Prof. Code, $8 6538, subd. (h) & 6580, subd. (b).) This failure to comply with such continuing
education requirements constituted a violation of Probation Condition No. 1, that respondent obey all laws and regulations.
The bureau did not credit the course because respondent did not sign the certification. However, the certification was that the participant was entitled to MCLE credit. As respondent was not entitled to MCLE as a non-attorney, her signature was not required to establish completion of the course.
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33. Cause does not exist to discipline respondent’s license or revoke her probation
on the grounds that she was incompetent. (Bus. & Prof. Code, $ 6584, subd. (d).) The evidence did not establish respondent was incompetent.
Measure of Discipline
34. Respondent repeatedly emphasized that her handling of the McDonald trust was an anomaly and did not represent how she handled hundreds of other trusts during her career. Respondent and her witnesses believed that respondent did not violate her duty to the
beneficiary because the beneficiary was not harmed by her actions. The probate court clearly found harm and surcharged respondent in the amount $93,036.75. Respondent’s focus on her perceived lack of harm to the beneficiary reflects a misunderstanding of what is required
to impose license discipline; specific harm is not required.
35. Protection of the public is the highest priority for the bureau in exercising its licensing, regulatory, and disciplinary functions. Whenever the protection of the public is
inconsistent with other interests sought to be promoted, the protection of the public shall be paramount. (Bus. & Prof. Code, $ 6516.) Of critical importance is whether respondent has sufficiently learned from her misconduct to the extent that there is little chance that the same behavior will be repeated. Rehabilitation is a “state of mind” and the law looks with favor
upon rewarding with the opportunity to serve, one who has achieved “reformation and
regeneration.” (Pacheco v. State Bar (1987) 43 Cal.3d 1041, 1058.) Fully acknowledging
the wrongfulness of past actions is an essential step towards rehabilitation. (Seide v. Committee of Bar Examiners (1989) 49 Cal.3d 933, 940.)
36. Respondent believed that the bureau was conducting a “witch-hunt” against her. She repeatedly expressed the belief that she was unfairly targeted; by seeking revocation of her license, the bureau was exacting an inappropriately harsh sanction, compared to others who committed far greater misconduct. While respondent is correct in that she did not steal or misappropriate her client’s funds, this does mean that she does not pose a danger to the public.
Respondent repeatedly stated the only mistake she made was in “filing an accounting
late.” Respondent expressed remorse for this and admitted wrongdoing, stating it would
never happen again. However, the far greater concern is that respondent administered a SNT
for seven years without having read the trust document. Instead of recognizing this as the
problem, respondent asserted there was no harm to the beneficiary; stated that she “had a
good run”; and expressed her belief the probate court’s decision will be overturned on
appeal. While many trust instruments are undoubtedly similar, boilerplate, or “cookie-
cutter,” respondent did not simply miss a small detail buried in the trust document – she
completely failed to recognize the McDonald trust was subject to court monitoring.
Finally, respondent suggested that her mistake was representing herself in the proceedings. Respondent testified it was her custom to obtain legal counsel, which she did not do when she was appointed trustee. Of course, once respondent was ordered to provide
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an accounting, she represented herself because she had already exhausted the trust’s funds and would not be able to seek reimbursement for legal fees.
37. Respondent’s failure to read the trust document and follow the terms of the trust was a serious violation for a professional fiduciary, whose main job is to execute the trust in accordance with the terms of the trust and law. Respondent repeatedly deflected responsibility for her actions. By casting the issue as her “failure to timely file an accounting,” respondent failed to appreciate the seriousness of her actions. Furthermore, her failure to understand why the bureau would seek disciplinary action against her for this misconduct reflected a complete lack of understanding of the bureau’s role in protecting the public. Respondent has been on probation since she became licensed. Regardless of respondent’s resentment over how she became licensed or the board’s actions since she became licensed, she was still subject to terms and conditions of probation.
As for her continuing education violations, respondent again failed to accept responsibility. Her testimony came across as indignant that the bureau would not have credited her with the continuing education credits she claimed to have completed or provide her more time to produce documentation. All respondent had to do was attend 15 hours of CE (2 in the area of ethics), retain proof of completion for three years, and provide the documentation to the bureau within 10 days of request. Instead of complying with her professional obligations, she blamed the bureau for “not knowing what it wants” in terms of proof of completion. This attitude reflected a complete lack of acceptance of responsibility
for her professional obligations and constituted a violation of her probation. The bureau was under no obligation to provide her more time to submit the documentation or consider her personal hardships. Nonetheless, the bureau credited her with 12 credits retroactively.
38. The mere expression of remorse does not demonstrate rehabilitation. A truer indication of rehabilitation will be presented if a petitioner can demonstrate by sustained conduct over an extended period of time that he is rehabilitated and fit to practice. (In re Menna (1995) 11 Cal.4th 975, 987, 991.) The evidentiary significance of an applicant’s misconduct is greatly diminished by the passage of time and by the absence of similar, more
recent misconduct. (Kwasnik v. State Bar (1990) 50 Cal.3d 1061, 1070.)
Respondent was on probation during the time she administered the Mcdonald trust. Simply extending respondent’s probation in this case would not adequately protect the public. Respondent’s inability to appreciate the seriousness of her misconduct and her deflection of responsibility for the misconduct demonstrates that the public would not be adequately protected should respondent’s probation be extended. As such, revocation is the only measure of discipline that will protect the public.
Costs of Investigation and Enforcement
39. Complainant is seeking recovery of the reasonable costs of prosecution. The California Supreme Court in Zuckerman v. State Board of Chiropractic Examiners (2002) 29 Cal.4th 32 held that a regulation imposing costs for investigation and enforcement under
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California Code of Regulations, title 16, section 317.5, which is similar to Business and
Professions Code section 125.3, did not violate due process. But it was incumbent on the board in that case to exercise discretion to reduce or eliminate cost awards in a manner such
that costs imposed did not “deter [licensees] with potentially meritorious claims or defenses from exercising their right to a hearing.”
The Supreme Court set forth four factors to consider in deciding whether to reduce or eliminate costs: whether the licensee used the hearing process to obtain dismissal of other charges or a reduction in the severity of the discipline imposed; whether the licensee had a “subjective” good faith belief in the merits of his or her position; whether the licensee raised a”colorable challenge” to the proposed discipline; and whether the licensee had the financial ability to make payments. The reasoning of Zuckerman must be applied to Business and Professions Code section 125.3 since the language in the cost recovery regulation at issue in
Zuckerman and section 125.3 are substantially the same.
Applying the Zuckerman criteria, respondent did not receive a reduction in the severity of the discipline imposed. Respondent had a good faith belief in the merits of her position, but she did not raise a “colorable challenge” to the proposed discipline given the
violations and the fact that she was on probation. Respondent’s ability to pay costs is
directly related to her ability to continue work as a professional fiduciary. Therefore, she
will not be ordered to pay costs at this time. It is determined that respondent should pay $7,000 in costs in a manner determined by the bureau as a condition precedent to respondent reapplying for a license.
ORDER
The order staying the revocation of respondent’s license in Case No. Al-2008-01 is vacated. Professional Fiduciary license number 545 issued to Melodie Jo Scott is revoked.
If respondent applies for a new license as a professional fiduciary, respondent shall pay to the bureau $7,000 in costs as a precondition (or condition precedent) to licensure, or as otherwise directed by the bureau.
DATED: March 9, 2016
-DocuSigned by.
– 19DED24770604FB.,.
ADAM L. BERG Administrative Law Judge Office of Administrative Hearings


Matter of the First Amended Accusation and Petition to Revoke Probation Against Case No PF 2013 83 MELODIE JO SCOTT OAH No 2014070519 Professional Fiduciary License No PF 545

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Last Updated on 08/11/2021 by Fly

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