|To:||Appropriate Public Officials|
|From:||Douglas A. Schafer, Attorney|
|Subject:||Judge Grant L. Anderson Matter|
|Date:||April 8, 1996|
This Memo is to provide each of you additional documentation and analysis concerning this matter.
Secret Profits; Disloyally Seizing Corporate/Estate Opportunity. My memo to you of March 7, 1996, described by conversation with Ian McMillan concerning the 10% "real estate commission" that Grant Anderson had charged to him for selling his two Surfside units to Trendwest in December, 1991.
Enclosed are copies of the closing papers that Ian McMillan sent to me, confirming that Anderson's law firm, Tuell, Anderson, Fisher & Koppe was designated as the "listing agent" and that it received a 10% real estate commission at the closing of the sale of the McMillans' two apartment units to Trendwest's affiliate, Club Esprit. The Purchase and Sale Agreement, at Paragraph 30, indicates that the commission was to be paid "in accordance with a listing agreement." Mr. McMillan did not send me a copy of his listing agreement; he may have lost it. However, his transactions were closed by the escrow department of Pacific County Title Company, and Lisa Mullen, Asst. Manager of that firm, informed me this morning that they preserve escrow transaction documents "forever," so it could be obtained.
I also spoke recently with Charlene Oberbillig about the December, 1991, sale of her unit, Surfside Inn Condo # 206, to Trendwest. She also reported that Grant Anderson had telephoned her in the fall of 1991 about selling her unit, that he did so, and that he received a 10% commission from the transaction. In response to my request that she send me all the papers she could find relating to her sale, she sent me only the enclosed papers: (1) Grant Anderson's letter to her of October 7, 1991, reporting that he had "worked long and hard at developing a market for these units" and he had "put together an attractive package for a cash purchase by a willing buyer;" and (2) a "Listing Agreement" granting to Tuell, Anderson, Fisher & Koppe the exclusive right to sell Ms. Oberbillig's unit for $40,000, with a right to a 10% sales commission. Please note that Paragraph 10 of the Listing Agreement states, "If a court should find that a conflict of interest existed, Seller agrees not to hold Attorney liable because of such conflict."
Enclosed also are my letter of March 8, 1996, hand delivered to attorney Alan D. Macpherson of Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, P.L.L.C., requesting similar documents from the files of the Estate of Margaret Shipley, and the March 25, 1996, faxed preliminary response from attorney Eileen S. Peterson of that firm indicating that the firm might, at some indefinite time in the future, respond to my request. It has not happened yet.
I also spoke to Ian McMillan's son, Duncan McMillan (Home: 206-858-xxxx; Business: 206-473-xxxx) about Surfside Inn. He said that he is a friend of Grant Anderson. Duncan said that he had known Chuck Hoffman, and that Hoffman years ago had titled 6 timeshare units of Hoffman's condo (Condo # 132) in Duncan's name so that Duncan could qualify to serve on the Board of the condo owners' association, along with Hoffman's friend Don Medley. When Medley died, Duncan said that Grant Anderson essentially took Medley's place.
I asked Duncan why he sold his 6 TSUs in Condo # 132 for $14,100 to Hoffman-Stevenson, Inc. (HSI) immediately following Hoffman's death. He said that he just signed the deed, and is quite sure that he received no payment for doing so--certainly not the $14,100 that I told him was implicit from the amount of excise tax reportedly paid.
I discussed with Duncan his father's resentment about the 10% commissions that Anderson charged for selling his two units to Trendwest. The course of our subsequent conversation, Duncan reported that as part of his purchase in March, 1995, of two TSUs in Surfside Condo # 308 for $4,500, the Surfside Condominium Owners' Association charged a 10% sales commission, which Duncan seemed to consider a bit odd. Duncan did not say, nor did I ask, whether any commission was charged incident to his December, 1995, purchase of four additional TSUs in Condo # 308 for $5,000; but I think he may have dealt directly with the selling parties on that transaction.
When I spoke this morning with Lisa Mullen of Pacific Title Ins. Co., she said she could not voluntarily inform me of whether her escrow department had closed the ten transactions that Anderson had arranged with Trendwest, nor give me any information about them. She previously had informed me, however, that when a deed is stamped "Filed at the Request of Pacific County Title Company," that her escrow department normally would have been the closing agent. All ten of the deeds for the 1991-92 third party condo sales to Trendwest arranged by Anderson are stamped with that stamp. Accordingly, the closing papers from each of those transactions should be available through that firm.
Financial Summary. If the facts are that Anderson's law firm charged and received a 10% commission for "listing" and selling to Trendwest the 10 Surfside condos owned by private parties other than Hoffman's estate (through HSI), then the firm secretly profited by $43,000. [Eight 1-bedroom units at $40,000 each; two 2-bedroom units at $55,000 each; aggregate sales price of $430,000.)
Duty of Loyalty. Anderson's only proper role in the business and affairs of Surfside Inn and HSI following Hoffman's death was as a "fiduciary," whether he was acting as personal representative of Hoffman's estate, as President/CEO of HSI, or as attorney for either. He had no personal investment or economic interest in those entities--at least none that he had rightfully acquired. As a fiduciary, whether as the estate's personal representative or as an officer of the estate's wholly-owned corporation, Anderson's conduct should have met the standards of conduct required of trustees, in particular, the duty of loyalty. That duty required Anderson to place the interests of his principal, the Hoffman estate and its corporation, HSI, ahead of his own, and not to use his principal's property or opportunities to gain secret, personal profits.
Enclosed are selected reference materials discussing a fiduciary's duty of loyalty, including that of corporate officers. The case law is well developed concerning the all-too-frequent event in which a corporate officer wrongfully takes advantage of a corporate financial opportunity for himself, instead of for the benefit of the corporation which he serves.
It could be questioned whether HSI could have claimed any right to the $43,000 in sales commissions that Anderson's firm appears to have claimed for itself. However, Duncan McMillan asserts that the Condominium Owners' Association (which is a business corporation, just like HSI) now is claiming 10% sales commissions on condo transactions; so, if it can, so could HSI. Additionally, even if HSI could not have lawfully claimed the sales commission directly, Anderson possibly could have remitted the $43,000 to HSI anyway. He was, after all, being compensated by the Hoffman Estate (and possibly also by HSI) for his "long and hard" work in negotiating with Trendwest. At the very least, he could and should have disclosed this secret profit to Pierce County Superior Court Commissioner David Johnson on January 6, 1993, when Anderson appeared and requested approval of his $112,000 fee for serving as personal representative of the Hoffman Estate.
Real Estate Licensing Issue. RCW 18.85.340 declares it a gross misdemeanor for a person to act as a real estate broker or salesman without a license from the Department of Licensing. RCW 18.85.110 exempts from the licensing requirement the real estate related activities by "an attorney at law in the performance of his duties," but that exemption appears to me inapplicable to the Anderson law firm's solicitation, listing, and sale of the ten third-party owned condo units to Trendwest. Anderson and/or members of his firm may have been licensed as timeshare salespersons under RCW 64.36.070, but that would not, I believe, have permitted them to act a listing brokers/salesmen for the sale of entire condominium units for $40,000 or $55,000.
I called the real estate licensing office this morning, and was put in touch with attorney Bob Hale [Haenke], Manager of the Legal Support Section, Business and Professions Division, Dept. of Licensing (360-753-7479). He basically invited me to submit any papers I had with an explanation, and the disciplinary staff of the real estate licensing office would look into the licensing issue. He said to direct the papers to: Karen Jarvis, Disciplinary Program Manager, Real Estate Program, Dept. of Licensing, P.O. Box 9015, Olympia, WA 98507 (her phone is 360-586-4602). I have not done so, and will leave it to any of you to pursue, if you are interested.
[End of memo.]