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Posted: Jan. 8, 2003

The Betrayal

Donna Sturman is one of four children (the other three, brothers, are the debtors in this case). The brothers, Wayne Sturman, Bruce Sturman, and Howard Sturman, are much older than Donna.

Their father was a successful and wealthy real estate developer in New York. When he died in 1979, the four children inherited sizeable assets with the bulk going to their mother.

Mrs. Sturman, however, died in 1980 leaving equal shares of her substantial assets to her four children. Howard Sturman and Joseph Warren were the executors of that estate.

Donna has asserted in her legal filings that instead of properly managing the assets of the estates, Howard, Bruce and Wayne Sturman operated the properties and entities owning them so as to purposely deprive Donna of her rights and her share of profits and excluded her from management.

Donna goes on to claim that the Sturman brothers received extraordinary management fees; siphoned millions of dollars through unknown and unauthorized "loans to stockholders" for personal purposes; paid extraordinary personal expenses with assets of the estates; failed to repay "loans" from the Muriel Estate; borrowed some $75 million from various banks and, as security for their loans, mortgaged / pledged the inherited real estate, ultra vires, in which Donna had a 25 percent interest; and to this date the brothers have failed to provide a proper accounting.

Instead of using the proceeds for proper business purposes, the brothers used the vast majority of these borrowings and diverted them into investments in which the brothers alone had an interest,for their personal gain, including, but not limited to, the purchase of stock of Cooper Companies.

The Sturman brothers have since been convicted and sentenced in federal court on bank fraud charges.

Finding the Missing Money

Donna filed a $20 million proof of claim in each of the above bankruptcy cases known in the system as "debtor's estates," the basis of the claim being that she is entitled to 25 percent of all assets that the three debtors owned as of the time of the bankruptcy filings because pre-petition her brothers stole her 25 percent interest in their father's and mothers' assets.

Were she to prevail, Donna would have a dollar-for-dollar claim and would be entitled to interest on this money from the date the funds were received, which (at the legal rate of 9 percent) would amount to $2.1 million. Thus, were she to prevail on this element of her claim, Donna would be entitled to approximately $6.9 million.

Additionally, Donna asserts a claim to 20 percent of the gross receipts from the operations of the 86th Street property, given that Donna did not approve the expenses, and asserts a claim through the Muriel Sturman Estate.

The Muriel Sturman Estate has a 20 percent interest in the 86th Street property worth about $2.4 million, plus interest at 9 percent from July 7, 1998, for a total of approximately $2.9 million.

Donna asserts that she is entitled to the Muriel Estate's interest in the 86th Street property and operating receipts relating to the property due to the pre-petition diversion of assets by the debtors.

Finally, Donna asserts that the debtors improperly made loans to themselves totaling about $1.5 million from the Muriel Sturman Estate which have not been repaid, of which Donna's 25 percent share would be $389,523.20. With interest since 1985, Donna would be entitled to approximately $915,379.52.

In short, Donna's claims total well over $10 million. To be paid this money dollar-for dollar because her claims arise from Donna's ownership interest in assets which were never property of the estate due to their having been fraudulently diverted and appropriated by the debtors.

Bankruptcy Court Run Around

As early as December 10, 1996, the Bankruptcy Court Judge stated that the amount of legal fees paid to date were so extraordinary as to call into question the trustee's judgment in incurring legal expenses.

The Judge noted that $2.9 million in fees had been paid and that $1.2 million in fees remained to be paid,and remarked :So we are talking about churning away here at eating up the entire estate".

"I look at it now and I say to myself how in the world did we spend $2.6 million on legal fees before this?" the judge said. "What in the world was going on? Why did we allow those legal fees? I thought the bulk of that was somehow in connection with 86th Street and yet I can't really immediately see what it is that was done during that period of time or what you took over or what that benefited the estate."

Nine years later, and millions of dollars more charged against the estate, and it still remains unresolved in a case that was filed in 1989.

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