Family Feud Results In $11M Judgment
Photo/Courtesy
Gary Matsko, an attorney with Boston firm Davis, Malm & D'Agostine.
Early last month, Worcester Superior Court Judge James R. Lemire awarded $11 million in damages to the plaintiff in a family dispute that offers lessons on how not to fund a business and had attorneys wondering why siblings can’t simply be nice to one another.
The $11 million award was one of the largest damages awards ever issued in Worcester County, and the way that sum was calculated should give pause to small business owners and family fund trustees alike.
Broken Trust
The case in question involves the Pantazis family of Worcester. One sibling, Paul G. Pantazis, sued two of his four siblings — Alice Tsourides and John Pantazis — alleging that they had improperly borrowed from the family’s trust, which had been established by their parents, Grigorios and Sofia Pantazis.
“The court’s conclusion was that if you are a trustee, and responsible for taking care of, and ideally growing, someone else’s money, it is inappropriate to invest it on your own behalf, and it’s heads you lose, tails the beneficiaries win,” said Josh Grossman, an attorney with Boston firm Davis, Malm & D’Agostine, which represented the plaintiff, Paul Pantazis.
According to court documents in the case, Alice Tsourides had on several occasions beginning in 1990, borrowed against the family’s New Deal Realty Trust to support her business, Worcester-based Marine USA.
Judge Lemire ordered that Tsourides put profits gained directly by the investments she made using New Deal Realty Trust money back into the trust plus interest. He further ordered the trust to be dissolved and its assets to be distributed among the five siblings.
Included in the $11 million award is $472,519 for cash diverted from the trust to Tsourides and the New Deal’s other trustee, John Pantazis. The court also ordered that they pay $106,260 in trust income they owed and half of all profits earned by Marine USA between 1990 and 2006, which, including interest, totaled more than $9.9 million.
Gary Matsko, another of the three Davis Malm attorneys who represented Paul Pantazis, said the abuse of trusts by trustees is neither very common, nor entirely uncommon. This case was unusual because of the amount of risk Tsourides was willing to take with trust assets.
“It’s interesting in how trust assets were used, and it was a risky choice,” Matsko said. “The business did well, so it didn’t become a problem.”
The Findings
The judge’s decision found that Tsourides used trust assets as collateral to get business loans for Marine USA for a period of eight years. During those eight years, she claimed that all trust beneficiaries had consented to using the trust in that way and put the trust on the hook for more than $1 million.
The trust never saw any gain from its position in Tsourides’ investments, even as Marine USA grew and became more and more profitable.
In the meantime, the court found that John Pantazis had used trust assets to buy a house in Worcester, allowed his girlfriend and daughter to live in the house and paid no rent to the trust. He paid all the costs and expenses of the home with trust funds.
To top it all off, Matsko said Tsourides had destroyed trust records, which was the most challenging part of the case.
“The most interesting challenge was the development of evidence,” he said. “The claim was that the boat company had benefited and that the trust was an investor and should’ve shared in the profits and we had to reconstruct what the trust assets had contributed to the business.”
Document Destruction
Matsko said Tsourides had wiped out several years of trust records in an attempt to cover her tracks. “Whether money was missing from the trust, we had to try to reconstruct from public records and tax returns how much money should’ve been in the trust,” he said. “The records that should’ve told how much money the trust had at the time of trial didn’t exist.”
The family’s trust was started by Grigorios and Sofia Pantazis in 1983. Through the trust, they left commercial real estate at 666 Park Ave., 668 Park Ave. and 18-20 Lakewood St. in Worcester, as well as the family home at 104 Coolidge Rd., to their five children. The trust made money over the years by buying, selling and investing in commercial real estate.
That’s a lot of effort to be jeopardized by the trustees, but such abuse is rather uncommon, Grossman said.
“This was an unusual situation,” he said. “I don’t think most siblings act this way. We see it happen more in closely-held corporations, where there’s a struggle between family factions — and one side of the family that’s responsible for management and control of the entity works hard and feels entitled to something more than their salary — than in just a family trust.”
In that regard, there’s not a whole lot the founder of a trust can do to ensure that a situation similar to the New Deal Realty Trust’s doesn’t happen.
“Pick someone you trust,” Grossman said.
Alice Tsourides’ son Mark Tsourides said his family did not want to comment for this story.
John Pantazis did not return phone calls seeking comment.
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