Tricks of the trade

Pinellas County Internal Auditor Robert W. Melton recently lectured at Eckerd College in St. Petersburg on: Dirty Tricks of Guardianships and The Need for Change.”

Here are 10 of the “dirty tricks,” as outlined by Melton:

1) Guardian creation of a trust: When you remove all oversight by the court as a provision of the trust agreement; guardian becomes trustee; you actually provide that the trustee can do whatever they want at their sole discretion.

2) What they will do: They will or can sell real estate at lowball price: Use “lowball” valuations as a benchmark; don’t list property with Realtors; sell to a land trust, where nobody knows the beneficiary; watch property resold a few months later for a huge increase.

3) The guardian will maximize his or his crony’s profit from investments: Hire money manager for “financial expertise” and let the manager select an investment broker; invest in volatile stocks and trade frequently to generate commissions; if you run up a large gain, don’t selectively liquidate over time to pay the taxes but hold a “fire sale” to raise funds all in one day.

4) Undervalue beginning inventory: Have a used-furniture “friend” value a house full of antiques for $3,000; “forget” to put some of the more expensive items on the inventory; “forget” to include a $40,000 certificate of deposit.

5) Pay yourself first: Make payment of guardian and attorney fees the highest priority; disregard mortgage payments and let ward’s home go into foreclosure; squirrel away money in the attorney’s escrow account for possible future expenses.

6) Maintain guardianship at all costs: Keep family members uninformed; if family members try to become guardian, accuse them of stealing; use the ward’s assets for legal fights to retain guardianship.

7) Improper financial reporting: Bury asset-management and brokerage fees as aggregate capital losses “due to market fluctuations”; don’t classify disbursements separately; file incomplete or incorrect safe-deposit box inventories.

8) Forced incompetency: Visit assisted-living facilities and establish employee contacts; obtain voluntary limited financial guardianship; if there is money in the estate, do paperwork to force an evaluation of competency; get control over everything and the ward loses all rights.

9) Pay your attorney well: Let attorney bill full rate to shop for a computer and set it up for the ward; let attorneys bill their full rate, even if work is done by a paralegal or assistant.

10)       Forget to file federal tax returns: Ensure there is a refund; wait till the ward dies; get check without oversight.





Florida government auditor raises questions about court-appointed advocates for the aged!

Anne D. Romans celebrated her 85th birthday earlier this month in a Pinellas County nursing home, where she has been confined since the summer of 2002. Romans suffers from mental confusion and could be exploited, a local man named Delmon Johnson told a judge last year. So Johnson was appointed to look after the elderly woman.

Within weeks of his February 2003 appointment, Johnson sold his ward’s house for $119,000 to Suncoast Home Buyers Inc. Johnson portrayed the sale as a distressed one. Two months later, the same Pinellas Park house resold for $157,900.

Anne Romans netted $32,696 from the first transaction. Suncoast Home Buyers grossed $38,900 on the 33% markup in the second transaction.

Robert W. Melton is troubled by Johnson’s stewardship of Romans’ worldly possessions. Melton works for Pinellas Circuit Court Clerk Karleen F. De Blaker. He is the county government’s internal auditor. Melton has recommended that David A. Demers, chief judge of the state court system serving Pasco and Pinellas counties, take a closer look at this and other guardianships in the 6th Judicial Circuit.

Last July, Melton began focusing the attention of the court and the local news media on guardians, who are chosen by judges to represent those too young, too old or too infirm to look after their own affairs.  In a lengthy report, Melton accused the guardian of a Bradenton teenager, who had received more than $1 million in a medical malpractice settlement, of condoning “inappropriate practices and questionable expenditures.”

The original guardian in that case was Del Johnson’s wife.

Indeed, two names keep popping up in Melton’s findings:

·       Patricia Fleischmann Johnson, 58, of Largo, was the first guardian for the Bradenton teen, Timothy Matthew Corwin, who used to live in Pinellas. Patty Johnson founded the Tampa Bay area’s biggest guardianship agency, Adult Comprehensive Protection Services Inc. Before the recent controversy, Johnson was considered an expert in the field.  She went to work for a state office that oversees public guardians after she quit ACPS in a 2002 dispute with the non-profit’s board.

·       Leo Joseph Govoni, 46, of Clearwater, founded Boston Asset Management Inc. in 1992. The St. Petersburg investment advisory helps adults aged 70 and over with their financial planning. Govoni has been so successful that BAM and an affiliated nonprofit have pledged $1 million to endow a faculty chair at Stetson University’s law school. But Florida securities regulators wanted to bar Govoni from handling investments in the state in 1991 after a flurry of complaints by former clients.


Melton and court officials are poring over Pinellas guardianship case files. They have company. Pinellas-Pasco State Attorney Bernie McCabe has opened a preliminary inquiry into selected Pinellas guardianships.

Financial abuse of the elderly is almost the perfect crime. Prosecuting it is a difficult proposition. The victims, vulnerable and some feeble, are often unaware they’ve been taken. Ditto for family and friends, if the ward has any and they’re still around.

Melton is pursuing paper trails that have led him to a tight-knit group of professional guardians, investment advisers and probate lawyers. He has been disturbed enough by what he has seen so far to assign an auditor from his small staff to track guardianship cases full time.

Drawing on Melton’s reports and other public documents, GCBR found the auditor has presented the Pinellas judiciary with a lot to think about.

The Romans case

Del Johnson quickly petitioned the court to sell the house of Anne Romans in February 2003 because she was facing a foreclosure sale the next month.

A 62-year-old former automobile mechanic, Del Johnson worked 11 years at Pinellas Park-based ACPS with his wife before he was relieved of his duties in 2002.

Del Johnson portrayed Romans as cash-poor, with just $600 in the bank.  She lacked the money even to pay an appraiser to determine the market value of her house, her guardian claimed.

If Romans directly received the proceeds from the hasty sale of her house, Del Johnson told the court, she would lose her Medicaid eligibility. So Del Johnson placed Romans’ $32,696 cut from the house sale into a pooled trust operated by a Clearwater nonprofit called The Center for Special Needs Trust Administration Inc.

In a memorandum to Demers last November, however, Melton questioned Del Johnson’s decisions. The nursing home-bound Romans had fallen behind on two mortgages with principal balances of $81,000, court records show.  But the total arrearage was less than $3,000 and Romans held more than $6,000 in mutual funds at the time, says Melton.

The auditor could find no evidence that Del Johnson tried to work something out with the lenders. “While we recognize that ‘fire sale’ prices may occasionally be necessary to avoid foreclosure sale at the courthouse, all possible measures should be taken to avoid this situation, including negotiations with the lender,” Melton wrote to Demers.

Melton also found that the irrevocable trust established for Romans might not be in her best interest because:

·       The trustee, The Center for Special Needs Trust Administration’s Florida Pooled Trust, has sole and absolute discretion over all trust distributions.

·       The beneficiaries have no rights of entitlement, even if the trustee acts unreasonably.

·       The propriety and method of payment for trust expenses rests exclusively with the trustee.


To top it all off, Melton says the trust documents require the Romans trust to be administered by the Florida Pooled Trust, free of court supervision.

Melton told Demers that these provisions conflicted with state law, which allows even incapacitated people the right to prudent financial management of their assets as well as to court review of a guardian’s performance.

Del Johnson’s placement of the Romans assets with the Florida Pooled Trust was, in Melton’s words, “more in the best interest of the trustee and other companies operated by the principals of the trustee, than in the best interest of the beneficiary/ward, Anne D. Romans.”

Leo Govoni is listed in state records as corporate secretary for the Florida Pooled Trust’s operator, The Center for Special Needs Trust Administration. It was that non-profit center and Govoni’s BAM that have made the combined $1 million pledge to Stetson’s law school.

Executives with BAM and the center didn’t return calls from GCBR seeking their comments. Demers’ judicial assistant referred calls to courts spokesman Ron Stuart who didn’t respond prior to deadline.

Melton isn’t the only one unhappy with the Romans guardianship. Her son, Gary L. Dolan, has written to Demers to claim that Romans’ “assets in the range of one-quarter to one-half million dollars now seems missing.”

Dolan hasn’t made much headway. That could be because he is in prison.  State records show Dolan is serving a life sentence for attempted second-degree murder, armed robbery and drug possession.

Celia and Julius Parker

Celia and Julius Parker retired to Florida from Massachusetts in 1994.  Del Johnson was appointed guardian of Celia Parker, 90, and Patty Johnson ended up guardian for Julius Parker, 87, when the aging couple entered St. Petersburg nursing homes in 2002.

The Parkers had more than $2.6 million in intangible assets that the Johnsons placed with LaSalle Street Securities LLC, apparently through Govoni’s BAM.

“The adequacy of controls to protect principal, prevent churning, and to assume only a reasonable level of risk, are not clear,” Melton wrote to Demers in December after reviewing the relevant documents. “We question the reasonableness of allowing a securities dealer to invest and reinvest assets almost at will, without a defined expense or fee structure, and without defined allowable expenses.”

Besides the fees that LaSalle Street Securities decides to charge, Melton wrote: “Boston Asset Management appears poised to charge/receive substantial asset management fees.”

Melton also noted a $527,158 discrepancy between what was designated for investment with LaSalle Street Securities and what the Chicago brokerage reported receiving. The “apparent shortage,” Melton wrote, “indicates some of the funds may be unaccounted for.”

The Parkers have since passed away. They have a number of survivors, including a daughter in Sarasota.

In the wake of Melton’s findings, a judge has ordered Patty Johnson to produce all LaSalle Street Securities records of Julius Parker’s account. The president of The Center for Special Needs Trust Administration, Brett J. Walrath, works for LaSalle Street Securities.

In a Feb. 17 interview, Patty Johnson told GCBR that she hadn’t seen Melton’s written comments to Demers. But she defended her work as a guardian. “I don’t do anything without a court order,” says Johnson.  “That’s the way I work.”

Johnson wonders if Melton is checking other guardianships or only hers.  Melton told GCBR: “We are looking at any guardianship where there is possible irregularities or improprieties.”

Melton, who is a certified public accountant and certified fraud examiner, may not have the expertise to evaluate guardianships, according to Patty Johnson.

“The auditor is not an attorney,” she says. “He’s not a judge and he’s not a guardian. He has no idea what it’s like to be out there, trying to make these decisions. All he’s doing is Monday morning quarterbacking.”

Before Melton draws any conclusions, Patty Johnson urged him to review all 600 of the guardianships that she has handled since 1986. “I’ve been entrusted with millions of dollars,” she says.

The Corwin case

The guardianship that Melton’s office has subjected to a full audit was established for Timothy Corwin, now 15, in 1996.

Patty Johnson’s old nonprofit, ACPS, was appointed the boy’s guardian.  Half of the boy’s $1.1 million medical-malpractice award landed with BAM, which aggressively invested it in speculative high-tech stocks at the height of the dot-com craze.

By February 2000, just before the dot-com boom went bust, the Corwin account managed by BAM had swollen to a value of $2.6 million. As tech stocks plummeted in 2000, however, BAM incurred a huge capital-gains tax liability for Corwin as the holdings in his account were liquidated. By August 2002, the account was worth only $481,369.

SunTrust Bank, which replaced ACPS as guardian, has sued the prior guardian and BAM for negligence and breach of fiduciary duty. The defendants deny the allegations in the lawsuit, which is pending in Pinellas circuit court.

The county auditor says Patty Johnson, who has no college degree, may have abused her authority as Corwin’s guardian; BAM engaged in an inappropriately risky investment strategy; and the law firm retained by ACPS possibly submitted improper bills.

For instance, the law firm formerly known as Allan & Shipp PA billed Corwin’s guardianship $3,720 for helping ACPS to stave off his mother’s attempt to remove Patty Johnson as guardian.

Allan & Shipp, which worked extensively with the Johnsons and ACPS in probate court, has since been renamed Shipp & Deeb PA after partner Linda R. Allan became a Pinellas circuit judge in 2003. Wayne E. Shipp, Allan’s former husband and law partner, has protested to the court that Melton’s audit is “defamatory and appears calculated to damage the reputations of the individuals and entities described in the report.”

Shipp petitioned the court last August to strike Melton’s audit from the official record of the Corwin guardianship. Shipp argued that Melton’s office has no legal authority to audit guardianships. Shipp couldn’t be contacted by GCBR.

SunTrust has sought Allan’s testimony in its lawsuit against ACPS and BAM.

The BAM boss

SunTrust says Patty Johnson and ACPS should never have hired BAM to manage Corwin’s guardianship assets, considering Govoni’s track record.

Govoni started his investment career at First Jersey Securities, an infamous New Jersey penny-stock promoter. Govoni worked in the firm’s St. Petersburg’s office from 1981 to 1987, when First Jersey Securities collapsed. The colorful owner of First Jersey Securities, Robert E.  Brennan, who used to star in the firm’s 1980s television commercials, is in federal prison after his conviction on bankruptcy fraud and other charges.

Govoni moved on to Smith Barney, Harris Upham & Co. Inc., where he was a target of numerous complaints by a dozen investors while an account executive in the St. Petersburg office from 1987 to 1990. The complaints included allegations of churning client accounts, which result in extra sales commissions. Govoni was accused of making 51 unauthorized stock trades worth $253,572 over a period of two-and-a-half years, according to state records.

Following a Smith Barney review, Govoni was allowed to resign, according to regulatory records. Smith Barney paid $142,577 to settle with six of Govoni’s former clients, the records show. Any settlements with the other six clients were not disclosed in the records.

Govoni had to battle his way back into the securities industry.

In 1991, Florida regulators denied Govoni’s application to be an investment adviser at Brauer & Associates Inc. in St. Petersburg. But a state hearing officer disagreed. Govoni eventually went to Brauer & Associates, where the future president of The Center for Special Needs Trust Administration, Brett Walrath, also worked.

Hearing officer James E. Bradwell hinted that Govoni was the victim of a former Smith Barney co-worker’s vendetta. Gerald Lewis, Florida’s comptroller at the time, filed 45 exceptions to Bradwell’s recommendation. But Lewis reluctantly approved the application, although he noted his agency’s lawyers felt there was “ample, substantial and competent evidence” to prove Govoni had violated the Florida Securities and Investor Protection Act.

A year later, Govoni formed BAM.

Govoni has since founded something called the Elder Care Alliance, which his company’s Web site describes as “an interdisciplinary think tank for professionals dealing with the elderly.”

Last summer, Florida Bar President Miles McGrane appointed Govoni to represent the public on a special commission studying the Bar’s regulation of lawyers in the state. Govoni previously served for three years on a local Bar committee that hears grievances against attorneys.

Govoni is frequently called upon to lecture on investing and related topics before Bar groups and others. Last July, he was on the program for a Bar-sponsored retreat at a Florida Keys resort. His topic was the “Top Ten Sins of Wall Street.”