December 20th, 2012 4:15 pm | by NIGEL JAQUISS News | Posted In: Business, Cops and Courts

Judge Finds Schlesinger Brothers Engaged in Self-Dealing

Scales of Justice
A bitter lawsuit that pitted Jessica Schlesinger against her father and two uncles in one of Portland's leading real-estate families moved closer to final resolution last week.

At issue is the handling of the estate of the family matriarch, Bernice Schlesinger, who died in 2000, leaving an estate of just under $13 million. Jessica Schlesinger, a beneficiary of her grandmother's estate, alleged that her father, Paul Schlesinger, and her uncles, Mark and Barry Schlesinger, transferred money out of the estate at the expense of other heirs.

After more than three years in court, there's finally a judgment: In an 87-page ruling, Multnomah County Court Judge Diana Stuart found extensive fault with the defendants and awarded Jessica Schlesinger, nearly $1 million in damages.

The Schlesingers are currently seeking to develop a 600-room hotel adjacent to the Oregon Convention Center. Their holdings include Star Park garages and the Oregon National Building.

In her Dec. 10 ruling, Judge Stuart described numerous transactions that Mark Schlesinger, as personal representative of his late mother's estate, made at the expense of Jessica Schlesinger and her six cousins, who are not party to the lawsuit.

Those transactions included the transfer of more than $1.6 million to the Schlesinger brothers' Star Park, which the judge says lost $2.9 million over the past decade; and borrowing money against a million-dollar Gearhart beach house for the benefit of business dealings that did not include Jessica Schlesinger or other beneficiaries.

"Mark has decreased the value of the Beach House Trust's sole asset, the beach house, by placing a lien on property that was previously unencumbered, and improperly using a portion of the funds in furtherance of business ventures in which neither the Estate nor the Trust held an interest," Judge Stuart wrote.

Judge Stuart found insufficient or nonexistent documentation in a variety of other transfers of money from the Bernice Schlesinger estate.

"The court has found in Plaintiff [Jessica Schlesinger]'s favor as to the bulk of the concerns she has raised concerning the proper administration of the Estate and Trusts," Judge Stuart wrote. "An award of attorney fees and costs is appropriate."

In addition to ordering the defendants to pay Jessica Schlesinger's unspecified but undoubtedly large attorney fees, Judge Stuart ordered the defendants to pay her $884,000 to reimburse for improper transfers from the estate that would have otherwise benefited her.

In summarizing her conclusions, Judge Stuart reiterated a statement she'd made earlier at the request of the defendants.

"I found no evidence at trial to establish any dishonest or illegal business transactions conducted by the defendants," she wrote. "Additionally, I did not find evidence at trial that Barry, Mark or Paul Schlesinger undertook the business transactions at issue due to motivations of greed. The findings of the court herein need to be viewed in the context of a complex business organization and in the context of complicated family dynamics."

Having said that, the judge still took strong issue with the "failures of the Defendants to meet their fiduciary duties to the estate, the Trusts and the beneficiaries of those entities."

"As to their dealings within the context of the conduct towards the Plaintiff, the Estate and the Trusts herein, the Court has repeatedly found the Defendants to be acting in bad faith by way of their self-dealing and failure to meet their fiduciary duties to the plaintiff."

A spokesmen for the Schlesinger defendants, Greg Peden of the Gallatin Group, said the only comment they would make on the case is the following statement:

“This is a complicated and family matter. While we do not agree with the court findings and will object and ultimately appeal, Jessica is a member of our family and we therefore remain united in our hope for a fair resolution for all involved.”
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