In the Hands of a Troubled System

By Leslie Eaton
New York Times
March 29, 2004

To Maryann Milani, there is something wrong with a legal system that she believes put her disabled son's financial future in the hands of Ronald A. Straci.

Mr. Straci is a Manhattan lawyer who specializes in labor law and whose clients over the years have included some union leaders and locals that government investigators have linked to organized crime. (In 1990, he represented the brother of Anthony Salerno, the Genovese family crime boss known as "Fat Tony.") These days, Mr. Straci is better known as an owner of Rao's, the East Harlem restaurant that has been the embodiment of "Sopranos" chic since before the invention of cable television - or broadcast television, for that matter.

The story of how Mr. Straci came to be the court-appointed
Maryann Milani wants the money    co-guardian of Ms. Milani's son Christopher - and of her
her son Christopher received from    struggle to have him removed after the value of her son's
a malpractice lawsuit to be put into   investments dropped by about $400,000, or almost 25 percent
a trust. About $400,000 of it was        percent - is one of those old-fashioned "only in New York" kind
lost in investments guided by a         of tales.  But it is also a story of problems and disputes that
Manhattan lawyer, the co-guardian  New York State's troubled system of appointing guardians
Ms. Milani wants removed.                those cases who cannot look out for themselves.

Long plagued by allegations about the influence of political patronage and favoritism, the system has also been repeatedly criticized for failing to supervise guardians. That criticism, as well as evidence that some guardians are poorly trained, was cited in a report issued this month by a Queens grand jury investigating how a court-appointed lawyer managed to steal more than $2 million from his wards.

But lawyers involved in the system say that in the majority of the estimated 17,500 guardianships across the state, deliberate wrongdoing is not an issue. Instead, when problems arise, the causes are cronyism, inattention or inadequate expertise. Yisroel Schulman, executive director of the nonprofit New York Legal Assistance Group, said he consults on about 125 guardianship cases a year. He said that often, "I find myself thinking, 'Why on earth is this person being appointed?' "

Guardians are appointed by judges to handle a wide range of responsibilities, from managing an infirm person's finances to making decisions about where the person lives and what medical care is provided. Required to take only a brief training course, guardians must often deal with complex issues including Medicaid coverage, asset allocation and "special needs trusts."

Charles Devlin, director of guardian and fiduciary services for the state court system, said that New York courts have not caught up with the need for specialized knowledge on the part of guardians.

The justices of the State Supreme Court who appoint guardians, he said, "have the mind-set that you can do everything and anything." Indeed, despite new limits that Chief Judge Judith S. Kaye imposed on court appointments last year, he said that some judges still think of guardianships as patronage plums.

They can be just that when substantial assets are involved, because guardians are paid based on the size of the estate, and the appointments can be lucrative.

In 1993, Christopher Milani received $1.75 million from the settlement of a malpractice lawsuit his parents had filed against the doctors who handled his birth. Some of that money went to build a house in Rockland County that accommodates his wheelchair; the rest was kept in municipal bonds, with the income spent on his needs.

Mr. Milani, who is about to turn 24, has had cerebral palsy and severe mental retardation and other health problems since birth. He is, as his mother puts it, not very verbal, but he responds to what he sees and hears. He likes to swim and loves to watch television; his favorite program is "A Baby Story" on the Learning Channel.

His mother, who graduated from high school in the Bronx and briefly studied nursing, has devoted her life to caring for her three children. In Christopher's case, that means everything from brushing his teeth and changing his diapers.

Ms. Milani, who was divorced in 1996, makes a small salary working as a special education teacher's assistant for the local school system. And since 1997, she has received about $8,000 a year from his assets for serving as co-guardian, after Justice Bertram Katz, a Supreme Court judge in the Bronx who approved Christopher's settlement, ordered Ms. Milani to apply for a guardianship so she would not have to request court approval every time she spent money for Christopher.

A lawyer appointed by the judge to evaluate the situation reported that Ms. Milani was "a loving, devoted and articulate person," according to court filings. "The best interests of her son continue to be her main interest in life."

Ms. Milani's lawyer, a former special education teacher, was named co-guardian for insurance purposes. In 1999, when the lawyer moved out of state, Ms. Milani hoped to be appointed sole guardian, but she also arranged for a local lawyer to advise her and, if necessary, serve as co-guardian.

Justice Katz, however, rejected both of those plans and appointed Mr. Straci as co-guardian instead. In a written response to questions, he said last week that he has found that as guardians, lawyers "are vastly more reliable and capable" than family members.

Mr. Straci might not seem like an obvious choice, given that he is based in Manhattan and specializes in labor law, rather than trusts and estates or elder law (about two-thirds of guardians are appointed for elderly people). Mr. Straci was a lawyer for a Bronx Teamsters local with a pension fund before a trusteeship was imposed on the local as part of the court-ordered effort to rid the union of the influence of organized crime. In 1999, Mr. Straci and his law firm were among the defendants who settled a lawsuit filed by the trustees of the pension fund over the way it was handled.

Mr. Straci said in an interview that he had not been an adviser to the funds, and that the lawsuit had targeted "everyone who had given advice, whether it was taken or not."

He did, however, have another link to the Bronx: his former law partner, Justice Paul A. Victorof the State Supreme Court. Justice Victor was previously a lawyer for the Bronx Democratic Party, which controls judgeships in the borough.

"I know a lot of people up there," Mr. Straci said.

He has received a number of appointments from Justice Katz, including two other guardianships that involved significant assets. Justice Katz wrote that he had known Mr. Straci "for many years based on his practice before me in this specialized area of guardianships."

Ms. Milani said that she was dismayed by the appointment of a co-guardian who was based inconveniently far from her home, and that she felt intimidated by Mr. Straci. But she said she believed she could rely on him not just for legal advice, but also for financial advice, because she knows little about investments.

"I'm not well versed in the stock market," she said. "I don't come from any kind of money."

Even for investment experts, developing a financial plan for a young person with disabilities is a complex process. One certified financial planner who specializes in this area, Mary Anne Ehlert, said that the first step is figuring out the person's medical and financial needs. Next, she said, is determining how to invest to meet those needs, and deciding whether assets should be placed in a special trust so that the person is eligible for government benefits.

The investments must be even more conservative than those of retired people, she said, because people with disabilities cannot go back to work to support themselves.

That is not the process that was followed after Mr. Straci was appointed co-guardian in 1999. Ms. Milani said he told her, "The first thing we do, let's make you some money in stocks." She said she had not known that was possible but, faced with rising expenses, she agreed.

As Mr. Straci recalls it, Christopher's money was not making much of a profit. So in 2000, he entrusted a large chunk of it to an investment advisory firm that bought a mix of bonds and stocks. Though the advice was not cheap - it has cost about $8,000 a year - the portfolio has made money.

Not so the investment, more than half a million dollars, that Mr. Straci gave to a broker at Morgan Stanley, someone he described as "an old family relationship, friends of friends of friends." The broker, who has since left the business, put the money in what experts say were high-cost, high-risk investments: junk bond mutual funds and bundles of high tech stocks.

It was near the peak of the stock market, which started to plunge. By the end of 2000, the value of the investments had dropped by $127,000, and in 2001 the slide got steeper.

"I assumed he knew what he was talking about," Ms. Milani said. "He didn't even bat an eye" at the losses.

But eventually she did. In the summer of 2001, she insisted that Morgan Stanley sell some of the riskiest investments, at losses of up to 70 percent. More were sold the following year; today most of the Morgan Stanley money is in certificates of deposit and money market funds.

Mr. Straci said that everyone who invested in stocks lost money during "the burp in the market," and that the value of Christopher's investments has now stabilized at about $1 million. Because of the investment losses and his rising expenses, that is roughly $400,000 less than he had at the end of 1998.

Ms. Milani had also become aware of the costs of the guardianship. Guardians are paid commissions based on the value of their wards' estates; under that complex formula, she and Mr. Straci had received a total of about $27,000 apiece since he was appointed.

It seemed to Ms. Milani that Mr. Straci was receiving a lot of money for not much work, she said, especially since he did not visit her son four times a year, as the law requires. Mr. Straci concedes that he has not visited Christopher this year.

There were also steep accounting costs. And another lawyer, called a court examiner, has received more than $2,000 a year for reviewing annual reports filed with the court. Ms. Milani said she had been troubled that the examiner, Lewis E. Alperin of Mount Vernon, did not seem to review the suitability of the investments or the large losses in her son's account. But Mr. Alperin said his chief job is to guard against theft, though he would question an investment that seemed highly unusual, like a third mortgage. Deciding on individual stock investments is the guardian's role, he said.

Panicked that her son was going broke, as she put it, Ms. Milani began to demand that all of his assets be put back into municipal bonds. Mr. Straci did not agree. She asked him to step down as co-guardian. He did not agree.

He said last week that if she can get the court to replace him, "It's fine with me."

But the court does not seem ready to do that. Last October, she and a lawyer who was advising her met with Mr. Straci and Justice Katz's law secretary, John D'Alessandro. In a letter to her after the meeting, Mr. D'Alessandro wrote that the judge's involvement in investments was limited to making sure they complied with the "prudent investor rule," which requires diversification.

As for Mr. Straci, Mr. D'Alessandro wrote on behalf of the judge, that he was "probably the most capable attorney available" for guardianship appointments, and that he had received were modest compensation.

"Your quarrel is not with Mr. Straci, or with his commissions, but with the behavior of the equities markets, which is something beyond the control of everyone," he wrote.

So the parties are at an impasse. Mr. Straci has recently agreed with Ms. Milani that her son's money should be put into a trust, and has asked the court to let them pay another lawyer to set up the trust. Ms. Milani still wants a different co-guardian. And she thinks the whole system should be changed. "These attorneys," she said, "they should have more knowledge, to help people like myself."