Find a
Nursing Home
Residential Care
/ Assisted Living
CCRCs Medi-Cal for
Long Term Care
Elder Abuse
/ Financial Abuse
Find an Elder Law Attorney

"Elderly couple win financial-abuse case"

Monterey Herald

Lawyer from Legal Services for Seniors takes down trio in retirement investment scheme

Posted on Sun, Mar. 19, 2006
Herald Staff Writer

When Wanda and James Stark invested their life savings with church acquaintance Leigh Fiske and Steve Blumenthal, they were told the annuity fund was a sure bet with a 20 percent return, according to court records.

The couple, retired teachers, thought the fund would ensure their retirement security. But after their quarterly payments stopped coming two years later, they learned their life savings were likely gone. And they would have been, were it not for the persistence of Kellie Morgantini, a lawyer with Legal Services for Seniors, who spent five years fighting for a court judgment against the men who took the Starks' money.

Morgantini took the case from Monterey County Superior Court to federal bankruptcy court -- her first foray into federal court -- and then back to Monterey, where she recently won a $665,000 judgment against Blumenthal, Fiske and Michael Egan, the alleged masterminds of what Morgantini described as "a really evil Tupperware or Amway scheme,... a classic Ponzi scheme" in which initial investors were paid off with new investments until the fund ran dry.

The win is bittersweet for Wanda Stark. In the intervening years, her husband died thinking he left her with nothing more than her teacher's retirement.

And there is still the matter of getting the defendants to pay the award. In an e-mail and in interviews with The Herald, Blumenthal denied involvement with the Starks' investment, saying Fiske was an independent contractor in his office.

Fiske's whereabouts are unknown, and Egan is awaiting federal trial for alleged money laundering and mail fraud. All three men subscribe to an unusual school of legal thought that claims supremacy of common law and rejects the jurisdiction of state and federal courts.

Nevertheless, the investment could have been lost completely to the pyramid scheme and bankruptcy had the Starks not turned to Morgantini. The lawyer hopes the Starks' story will encourage other seniors -- who are often too embarrassed and fearful to report their financial abuse -- to turn to Legal Services for Seniors.

The pitch|

In 1997, according to court records, the Starks were approached by Fiske, an acquaintance from church and a former Wells Fargo Bank employee who was working with Blumenthal. Fiske told the Starks he had a safe investment that would give them a much higher return on the money they had deposited at Wells Fargo.

According to a lawsuit that Morgantini would later file on the Starks' behalf, Fiske promoted Philanthropic Charities Inc. as an annuity fund that would fund charitable Christian activities and was insured by an overseas bank.

"With defendant Fiske's assurances of better returns and continued security," the lawsuit states, the Starks "transferred their retirement funds into defendant Fiske's private investment organization."

According to court records, James Stark deposited $43,000 with a promise of quarterly interest distributions and a payout of $77,400 at the end of the contract in 2002. Wanda Stark invested $42,700 with a promise of quarterly distributions and a payoff of $89,000.

As is common in pyramid schemes, the payments were regular for awhile. Then the money dried up. Finally, according to court records, the Starks were told they had no funds in their account.

"They got paid for a year like clockwork, then they started getting excuses," Morgantini said. "They had invested literally their life savings and, I believe, within days it was gone."

What the Starks did not know is that Fiske and Blumenthal had been pitched the Philanthropic Charities investment by Michael Egan, a shadowy investment banker from the Sacramento area, according to court records.

Egan was arrested in South Carolina in December 2003 after he allegedly fled California. He is now awaiting a May trial date on federal charges of money laundering and mail fraud.

Lawsuit filed|

The Starks were not the only seniors taken in by the scam. Shortly after Egan's arrest and indictment, Assistant U.S. Attorney Benjamin Wagner said $8 million was invested in the program and the net loss was in the millions. Some of it allegedly was used to build a house for Egan, Wagner said, and some was diverted to bank accounts in the Bahamas.

Another local investment counselor, Larry T. Balentine, pleaded guilty to aiding Egan in the scheme by investing $10,000 of his own money to prop up the fund when his clients' investments started to disappear. He has agreed to testify against Egan in the trial.

Assistant U.S. Attorney Robert Tice-Raskin, who is now handling the case, declined to comment when asked if his office is considering criminal charges against Fiske and Blumenthal.

The charges against Egan came two years after the Starks realized their money was gone. In desperation, they turned to Morgantini, an attorney with the nonprofit Legal Services for Seniors.

"It was heartbreaking. They're asking 'Do you think we can get some of our money back?' and you're thinking 'It's probably sitting in a nice safe bank in the Bahamas somewhere.'"

Morgantini filed suit against Fiske, Blumenthal and Egan in 2001, alleging breach of contract, fraud, negligent misrepresentation, conspiracy, fiduciary abuse of an elder and unfair business practices.

It turned out to be the biggest case she would ever handle, Morgantini said, and far from run-of-the-mill.
Complicating the case was that the three defendants are proponents of a legal school of thought that contends the only valid constitutional law is common law. The group maintains that federal and state courts have no legal jurisdiction because, for example, they fly gold-fringed "admiralty" flags and spell defendants' names in all capital letters.

At Egan's extradition hearing after his arrest in South Carolina, Egan claimed he was not the same Michael Egan named in the indictment because that person's name was spelled in capital letters.

Fiske and Blumenthal sign their names with a colon between their first and last names, also a common tenet of the group.

The men essentially refused to participate in the court proceedings. Given that, Monterey County Judge Robert O'Farrell eventually entered a default judgment against the pair and ordered them to repay the Starks. Before the judgment could be enforced, Leigh Fiske filed for bankruptcy in federal court, which stayed the lower courts ruling.

Two wins|

It was not a move Morgantini expected, especially given Fiske's contention that the courts had no jurisdiction over him. At the time, Morgantini was a rookie attorney with Legal Services for Seniors. She had started with the nonprofit agency as a law student at the Monterey College of Law in 1996 and had never been in federal court.

Determined to retrieve the Starks' money, she steeled herself and filed what she thought was a long shot, a motion to block protection of the Fiske's debt based on the argument that it was gained through fraud.

She won.

"It was my first visit to federal court. It was scary. We won exactly as we won in state court, and he really dressed Leigh Fiske down," she said, referring to Judge James Grube. "He said, 'What you did was despicable. You were fraudulent and you did this on purpose. You took their life savings and I am finding for the plaintiffs.'"

Last month, Morgantini returned to Monterey County court with her federal-court win. O'Farrell lifted the stay and imposed the $655,000 judgement against Fiske, Blumenthal and Egan. The judgment awards Wanda Stark her and her late husband's original investments and triples punitive damages because the case involved elder financial abuse.

Morgantini said an "especially tasty" element of the ruling, once it becomes final in a few weeks, is an injunction against the three defendants prohibiting them from selling insurance, annuities, bonds and the like for 10 years.

Blumenthal, who still practices in Salinas, said Friday he was confident the ruling will be reversed. He maintains that he never met the Starks and placed the blame at the feet of Egan, who "had problems I am not privy to that affected his ability to pay as promised."

"I had nothing to do with the situation," he wrote in an e-mail. Morgantini "decided to include me because I provided Mr. Fiske with my insurance and financial planning expertise and products. (Fiske) was an independent contractor... (and) is innocent of all the ridiculous allegations made by this corrupt lawyer who cares not what the facts are.

"Be advised, the case is far from over and the default judgment will be removed," he wrote. "I still have many documents to be filed in court."

Other victims|

In other documents Blumenthal has filed in the case, he has claimed to be a "flesh and blood natural man... a Man of the Land in Monterey County... (whose) law is my family Bible."

In a letter to the court after O'Farrell's Feb. 6 ruling, he rejected the court's jurisdiction.

"I do not give you license to make any legal determinations for me," he wrote.

O'Farrell instructed court clerks not to file the letter in the official case file.

"Judgment was entered against these individuals on Feb. 6, 2006," O'Farrell wrote. "No response to their letters is necessary (or appropriate)."

Morgantini is confident the ruling will stand. She is also confident she will win the same results for another victim in the case, 85-year-old Bertha Pitchford, who lost $25,000 in the investment scheme. That case is set for trial in Monterey.

Pitchford and the Starks are just three of hundreds of thousands of senior citizens who are victimized by investment fraud and other forms of financial elder abuse each year. The state Attorney General's Office estimates that less than one in five cases is reported to authorities.

Morgantini said many seniors are too ashamed of falling for a scam to seek help. Others are afraid they will lose their independence when their families interpret the victimization as a sign of incompetence.

She said one client pursued a fraud loss for years and then gave up a $10,000 court judgment rather than ask a relative for a ride to court and reveal the loss.

Wanda Stark, now in her 80s, declined to be interviewed for this report, partly out of embarrassment, Morgantini said.

Effects of abuse|

For senior citizens, Morgantini said, a sense of self-sufficiency can affect their physical well-being.
"If you can say you're young, you stay young," she said. "When you're sitting in front of an attorney saying everything you did with this situation was all wrong, all that tells you is you're old and stupid. You're afraid your kids will send you away to a home.

"That's what these people, Blumenthal and Leigh Fiske and Egan, have done. They made them feel old and stupid and incapable."

Morgantini has spent her legal career helping victims of financial abuse at Legal Services for Seniors, a nonprofit agency that helps Monterey County senior citizens with a variety of legal issues free of charge.
She hopes highlighting what happened to the Starks and Pitchford will encourage other seniors to come forward when they are abused, either physically or financially.

She said Wanda Stark is pleased with her win. The two had lunch together recently and celebrated with chocolate cake.

And, still, the victory is bittersweet.

"Her husband's life would have been much different for the couple of years before he died if this had not happened," Morgantini said.

"This wasn't a get-rich-quick scheme" in the Starks' minds, she said. "This was a couple who worked really hard educating people in Monterey County and for their life savings to be gone... (James Stark) went to his grave literally believing he lost his and his wife's life savings.

While the court's judgment made her "very much glad I was an attorney," Morgantini said, "it will never be enough to take care of what he went through before he died."

Signs of Adult Financial Abuse

  • Unusual bank activity, including large, unexplained withdrawals, frequent transfers between accounts or ATM withdrawls
  • Unpaid bills, eviction notices or discontinued utilities
  • Implausible explanations about an elder or dependent adult's finances by a relative or caregiver
  • Changes in spending patterns often accompanied by the appearance of a new "best friend" — Source: California Attorney General's Office