Metro

How insiders snatch millions from estates in the scandal-scarred Surrogate Courts

If you’re a lawyer in New York, there’s no sweeter deal than getting assigned to an estate case in Surrogate’s Court.

The work is often routine — selling assets, paying bills, contacting heirs — but the pay can reach into the millions.

Landing such a gig requires currying favor with one of the city’s seven surrogate judges, who handle wills and estates. They have the power to appoint lawyers and approve their sometimes jaw-dropping invoices.

The jobs often go to the judges’ friends, associates or campaign contributors, court authorities admit. Looting of the estates can sometimes result.

The most recent example involves Bronx Judge Lee Holzman, who last week faced removal from the surrogate bench after he signed off on legal work that was never done.

The bills, according to the Bronx District Attorney’s Office, totaled $300,000 and went to the judge’s associate, lawyer Michael Lippman, a Democratic Party crony who ran Holzman’s campaign financing, raising $125,000, a court watchdog claims.

Lippman then got into money trouble himself, racking up $1 million in gambling debts and allegedly faking bills to cover his losses.

Prosecutors say they uncovered the cooked books and charged him with fraud.

Another alleged thief preyed on a lucrative and largely unsupervised part of the system — cases in which there is no will.

Such cases go to public administrators, who work with Surrogate’s Court judges in handling their finances.

In May, Richard Paul, the bookkeeper for the Brooklyn public administrator, was indicted for stealing $2.6 million from these estates, allegedly manipulating the check-writing process to get at the cash.

Judges who allow fraudulent pay-outs are “a disgrace to the legal profession and to the state of New York,” said Monroe Freedman, a Hofstra University professor and leading expert on legal ethics. “They should be removed from the bench and disbarred.”

Freedman said an entrenched system of favor-trading, with hints of bribery, has persisted for decades.

“They’re stealing from the client, which is one of the worst things you can do,” he said. “I can’t think of much worse. The judges are not only condoning it, but they’re helping lawyers do it.”

Even when there is no illegality, huge sums vanish.

A decade after Wall Street investment banker Ted Ammon was beaten to death in his East Hampton home, a group of politically connected lawyers pummeled his estate with $10 million in fees, records show.

That amounts to 20 percent of his $50 million fortune, well above the 6 percent rate that court administrators deem acceptable.

The staggering payments helped shrink the inheritance of Ammon’s adopted twin children — son Grego and daughter Alexa — to just $1 million each.

The hefty legal tab was rubber-stamped by Surrogate’s Court judges in Manhattan and Long Island.

One of them, former Manhattan Surrogate Eve Preminger, approved $4.3 million to a single firm, Schulte, Roth & Zabel.

That amounts to $9,710 per day between February 2002 and July 2003.

Preminger had personal ties to the firm. She privately worked with Schulte’s pointwoman on the case, lawyer Susan Frunzi. The two wrote a textbook, “Trusts and Estates Practice in New York,” together.

The judge also owned stock in JPMorgan Chase, which she approved as estate executor.

The bank picked Schulte, then submitted its own bill for $1.6 million.

After Ammon’s widow, Generosa, died of cancer in 2003, the matter moved to Surrogate’s Court in Suffolk County, where Gerard Sweeney, an insider with the Queens Democratic machine, made a windfall.

He and another lawyer, Michael Dowd, were executors to the estate of Generosa Ammon, but also got appointed as lawyers by the Suffolk judge, John Czygier.

Together they scooped up a cool $2.2 million.

Sweeney hired Eisner LLP, an accounting firm that charged $123,000 for just one month of work in April 2004.

State court authorities long ago recognized serious problems in the Surrogate’s Courts.

They conducted two blue-ribbon panel reviews, in 2001 and 2005, and found that there was “an opaque system that operates on the basis of connections and cronyism” and that its own rules were being ignored.

So in 2002, they pushed through reforms, barring court employees and political party leaders from getting fiduciary appointments.

Any lawyer who earns more than $75,000 in a given year on a single case he’s appointed to now must wait a year before getting a second appointment.

There’s also a “sunshine” provision that demands the court system publish the names of appointees and their fees on its official Web site.

But that hasn’t stopped the tide of scandal.

Former Brooklyn Surrogate Michael Feinberg was forced out in 2005 and disbarred for approving excessive fees of 8 percent to a law-school friend.

His successor, Frank Seddio, stepped down in 2007 amid a probe by the watchdog Commission on Judicial Conduct into allegations he sent campaign cash to political cronies.

A commission committee voted to boot Holzman last week, but he’s fighting to keep his job.

His defense is to claim that other surrogates did the same thing — namely, signing off on fat payments without examining invoices, a practice that court authorities say is not OK.

His examples, listed in rebuttal to the charges, include former Manhattan Surrogate Renee Roth, one of the four Ammon judges, who was ripped by the city bar association for handing two-thirds of her lucrative legal assignments to attorneys who funded her election.

Has anything really changed?

Not according to former Manhattan Supreme Court Justice Felice Shea, who was hired as a referee on the Holzman matter and dryly concluded last week that in Surrogate’s Courts “statutory compliance and transparency are not the norm.”

Court spokesman David Bookstaver said the new rules have greatly improved the system.

“They certainly lend themselves to much greater accountability and transparency and have gone a long way to increase the public’s understanding and confidence in the Surrogate Courts,” he said.

Preminger, Roth, Frunzi, Sweeney and Dowd did not return calls for comment.

Before his death in 2001, Ammon doted on children Grego and Alexa, who are now 21, but they stand to inherit far less than what has been paid to the court-approved experts — just $500,000 in cash each, plus $1million for them to share in a trust named after the widow Generosa.

That trust has only one other asset: the East Hampton home where their father was killed by Generosa’s husband, Danny Pelosi.

But the house, valued at $9 million, cannot be sold until their former nanny, Kathryn Ann Mayne, dies.

She gets to live there for free for as long as she wants.

Additional reporting by Alex Freeman