K. Kay Shearin

“ Paragraph 23 A trustee is a person who has agreed to hold or manage property for someone else's benefit, and anything to do with trusts is within the equity court's jurisdiction. The idea of a corporation is that its directors are trustees for its stockholders, managing the money they paid for their shares for their benefit, so any litigation over corporate affairs is a chancery case. ”

“ Many of the lawyers in Delaware are employed in companies other than law firms, so they're not available for hire by other clients; many of the lawyers working in banks or other companies are not admitted to the Delaware bar, so they couldn't go into private practice anyhow. Unlike many states, Delaware no longer cuts lawyers from other states any slack in getting into the Delaware bar, and every candidate for admission has to take the same bar exam and perform the same clerkship, no matter how long the person may have been a lawyer (or even a judge) elsewhere. ”

“ Paragraph 37 The complexity of the record-keeping and tax-reporting is a large part of the reason fiduciaries get paid such juicy trustees' fees, but somehow that concept had escaped the rocket scientists at Hutton, too. Another reason for the fees is that trustees have to make some hard decisions about distributing money from trusts: Many trust documents give the trustees a lot of discretion about making both investments and pay-outs, and if you've ever been in the middle of a family squabble over a legacy you can appreciate that trustees earn their fees. ”

“ Paragraph 29 Remembering the definition of "honest politician" as one who, once he's bought, stays bought, Carper seems to be an honest politician, and the facts that he's a Democrat and Hutton is a Republican bastion merely reflect the reality that in Delaware party labels don't count for anything, and the Establishment is the only party that does count. ”

“ A trustee is required by law to keep track of the trust's capital and income separately, because the trust's beneficiaries have different interests, with the income beneficiaries entitled to the income and the remaindermen entitled to the capital. The fiduciary accounting is worse than the London 'Sunday Times' crossword puzzle, and it's absolutely impossible without the records, but Hitchcock hadn't activated the required data fields in SEI, and neither he nor any of his clerks knew how to keep the records. ”

“ Paragraph 24 The federal District Courts have both legal and equitable jurisdiction, but only in cases where there is federal jurisdiction over the subject matter, of course, and most states have similarly combined the two courts into one, although some states maintain a distinction between the law division and equity division of the court. In Delaware the Superior Court has jurisdiction over cases that are legal only and the Chancery Court has jurisdiction over every case where either the subject matter or the relief sought includes any equitable component. ”

“ Paragraph 10 Although there is a big Air Force base in Dover, the federal government is a relatively minor economic force, so federal pork barrels don't influence Delaware politics much. State and local governments don't employ a lot of people, and many government employees, even some of the highest elected officials, are allowed to have private employment at the same time, so political pigs have access to slop from other sources, not just the public trough. ”

“ No matter how bogus the suits are, a lawyer who files enough of them will sometimes hit the jackpot; defendants often settle for nuisance value to avoid the humongous legal expenses they will incur even if they end up winning, and it doesn't cost plaintiffs anything to sue, so if they lose they're not out anything, and if they win they come out ahead.
1: Paragraph 22 In Delaware it's not like that. The big-ticket legal cases here are not over personal injuries but over corporation law, and we have a special court for litigating corporation cases, the Chancery Court. ”

“ A plaintiff in a personal injury suit sues whoever did the injury, but in effect the suit is usually against an insurance company — in a car accident case, it's the auto insurance; in a medical malpractice case, its the doctor's professional insurance; in a product liability or slip-and-fall case, it's the casualty insurance; and in tender-offer cases, it's the directors' E&O insurance — so insurance companies pay the lawyers in many cases. ”

“ Paragraph 21 In many places, the lawyers who make the most money are the ones who do personal injury litigation — that's why you see so many commercials for that kind of business wherever lawyers are allowed to advertise on television. PI lawyers usually work for a contingency fee (often a third of the amount recovered) , meaning they get paid only if they win, and the plaintiff doesn't pay any up-front legal fees. ”

“ Paragraph 9 What's surprising is that anybody like him could make a living as a salesman, but that he managed to make such a good living selling proves a person can overcome really huge handicaps. At one meeting in Abbes's office in January 1985, which may have been the first time I met Clark in person, we were sitting at a small, round table discussing the trust, when Clark suddenly looked at me and asked, apropos of absolutely nothing, "Are you married?" ”

“ Paragraph 32 The United States was founded on the idea of individuals' rights, but in Delaware corporations count for more than people do now. Take the top state officials: The governor and lieutenant governor are elected separately, so we can, and recently did, have a governor who was a Republican and a lieutenant who was a Democrat. The governor appoints the Secretary of State, who regulates corporations — entities that contribute lots of money to campaigns but can't vote and usually aren't in Delaware anyhow. ”

“ Paragraph 34 A second aspect of the problem was that Hutton Trust had about a dozen "collective funds" that were like mutual funds in that the assets from a lot of separate pension plans would be pooled and invested, and the profits would be prorated among the participating plans. Those were perfectly legal entities, authorized by the Internal Revenue Code and called "pooled income funds," and they're tax-exempt, but they have to file information tax returns every year so the IRS can make sure they're complying with all the applicable ERISA and tax laws. ”

“ When securities were bought or sold in the brokerage account, Hutton Trust would usually get notice of the trade, and Hitchcock's clerks would keyboard that information into the SEI account. But if assets other than securities were sold, there was no way for the Trust Company to know, because that didn't go through the brokerage firm's computer, so the assets wouldn't be removed from the SEI account ”

“ He's not a lawyer, and he doesn't drive anymore. His platform was to do away with the Federal Reserve Bank, but he never explained how Delaware's AG could affect the Federal Reserve; he has himself told me all the federal courts in the country are illegal because they're supposed to be the judicial branch, but they've gone over to the executive branch, as evidenced by the fact that they all have U. S. flags with gold fringes around them, and only the executive branch is allowed to have gold fringes on its flags. ”

“ For some reason, every few months the two Burchard trusts would pop up as exceptions in another internal audit, and I'd get a phone call from some Hutton employee somewhere in the country, and I'd explain what happened, and that person wouldn't bother me about it again. Then one day I got a phone call from a bank officer at the Illinois bank whose stock they'd owned; when the bank had gone to hold its annual stockholders' meeting, the Burchards hadn't voted the stock, and without it the bank didn't have a quorum, because between them they'd owned the majority of the stock. ”

“ Paragraph 1 A people gets the kind of government it deserves and deserves the kind of government it gets. If you believe in karma, you have to wonder what evil deeds Delawareans committed in former lives to deserve the kind of government they've got. ”

“ Paragraph 12 What happens in many companies is that a few, usually senior management, employees are the trustees for the fund, so they make the investment decisions, and the fund has a broker who buys and sells as directed by the trustees. ”

“ Hutton Group was interviewing people to replace Abbes and Hitchcock as CEO and president, and several of us vp's, especially Ron Hatton and I, were maneuvering to move up in the shuffle. On 8 October I took a business trip to the Alexandria VA brokerage office, and while I was gone there was a flap about a friend of Hatton's applying for the job of CEO — Abbes had found out Hatton had told his friend, an officer at a bank in, I think, Pennsylvania, about the opening, and Hutton in New York had interviewed him. ”

“ Paragraph 16 Then Hutton hired the Wilmington office of Skadden, Arps, Slate, Meagher & Flom, by some measures the biggest law firm in the country, and certainly preeminent in corporation law. Two of Skadden's senior partners were Rodman Ward Jr. and Irving S. Shapiro. Ward is a formidable lawyer who coauthors one of the leading treatises on corporation law; he's also an interesting person, but he's so smart he sees what's coming so many moves ahead of where you are that it's scary sometimes. ”

“ The Chancery Court would never have made a ruling like that, and the lawyers here are hopping and howling at the prospect of losing the chance to be local counsel in some of those cases — they're trying to get the legislature to pass a law guaranteeing the "right" of a Delaware corporation to drag defendants into Delaware courts whenever they want to.
1: Paragraph 31 Remember that most Delaware lawyers want to be local counsel in corporate cases, and a lawyer who goes up against corporations will be blacklisted and never be hired to represent corporations. ”

“ Paragraph 20 In the grand tradition of Delaware politics, where the Establishment closes ranks against outsiders of any political persuasion, Oberly played both ends against the middle by cutting deals with both the Democrats and the Republicans to get re-elected. ”

“ Kaiser's children appeared to need the money more than he did, especially as we found in the computer about four brokerage accounts in his name with substantial stock holdings in them, but the AE kept paying Kaiser all the income, and Abbes and Hitchcock kept letting him, although I kept putting memos in the file saying that was wrong, and the bank examiners kept saying in their audit reports it was wrong. In February 1986 one of Kaiser's children wrote to Hutton Group's then-CEO threatening to sue for the mishandling of the trust, but I never heard how that came out, either. ”

“ Paragraph 14 The defendants stuck with the PD are often worse off than if they had no lawyer at all, because they rely on the bum advice they get from a lawyer who gets paid the same salary no matter how much or little time he spends on their case and resents taking the time away from his private practice, where he can bill by the hour. ”

“ Paragraph 3 Nearly thirty years ago a mentor said to me, "There are two kinds of people in the world: those who get ulcers and those who give them to others., Which do you want to be?" It took me some years to master the technique, but now I usually manage to get aggravations out of my system instead of brooding on them. ”

“ Paragraph 30 The important point is that there never were any assets at the Trust Company. All the assets were in the brokerage accounts at Hutton & Co., and all the Trust Company ever had was the phantom SEI accounts supposedly reflecting whatever happened in the brokerage accounts. The companies the trusts belonged to got monthly statements from the brokerage firm and monthly statements from the Trust Company, and if they didn't match, the customers were likely to complain to their AEs, who would usually complain to the Trust Company. ”

“ That's the theory, at least, but what often happens is the committee of trustees don't know enough, or have enough time outside of their work, to make investment decisions, so they take the broker's advice, and that's not necessarily bad. But to keep the brokers honest, trustees with good sense often deal with several brokers and play them off against each other, and that's free-market competition and good for everyone except the greedier brokers. ”

“ Paragraph 8 Clark was one of the most obnoxious people I've ever met, and that was his reputation throughout Hutton. One AE who was, like Clark, such a big-volume salesman he was invited to the prestigious annual national meetings/blow-outs Hutton threw for its "Blue Chip" AEs, told me he had met Clark when he roomed with him at one of those conventions: The AE who was assigned to be Clark's roomie didn't want to be in with him, and this guy, who didn't know Clark but figured he could get along with anybody for a few days, agreed to swap room assignments. ”