Attorney’s Ties to Other Shareholder Protected Him From Scrutiny, Former Buchalter CFO Testifies

 

Tuesday, September 11, 2018
By Meghann M. Cuniff, Daily Journal Staff Writer

A former Buchalter APC shareholder at the center of a fraud and negligent hiring trial was so close to a key attorney in the firm’s Orange County office that its top executive disregarded concerns about suspicious billing practices, a firm executive testified Monday.

Orange County Superior Court jurors considering the multimillion dollar claims against the firm saw emails between former Buchalter CEO Rick Cohen, a current shareholder, and Chief Financial Officer Pamela K. Webster, who testified that then-shareholder J. Wayne Allen’s relationship with shareholder Martin P. “Marty” Florman influenced Cohen’s response.

“He thought it was a possibility that if Marty left, the Orange County office, which had been struggling for years, would close,” Webster said.

Florman and Allen came to Buchalter from Berger Kahn LLP in 2007 as what Webster described as a “team hire” in which they split potentially lucrative originating fees from new clients. 

In response to questions from plaintiffs’ attorney Robert E. Barnes of Barnes Law LLP, Webster indicated Florman’s prominent position with Buchalter insulated Allen from scrutiny when she reported concerns about Allen’s billing methods to Cohen.

“And Mr. Cohen, who was CEO at the time, wrote back that he wanted to help Mr. Allen ‘up, not out.’ Were those his words?” Barnes asked.

“Yes, they were,” Webster answered.

“And was that because of the importance of Marty Florman to the Buchalter office, according to Mr. Cohen?” Barnes asked.

“He was concerned if Marty left, the office would have problems, yes,” Webster said. 

Superior Court Judge William D. Claster designated Webster as a hostile plaintiff’s witness, which allowed Barnes to ask leading questions during his direct examination.

Webster is the only Buchalter employee to testify so far in the trial over an eight-year-old lawsuit that seeks up to $200 million in damages for the Stueve family, the heirs to the Alta-Dena Dairy fortune who believe their former lawyers, Raymond “Ran” Novell and Allen, defrauded them through years of self-dealing that turned their estate into a Ponzi scheme. 

Novell is a sole practitioner and longtime Stueve family friend who partnered with Allen, who was with Buchalter from 2007 to 2009, to overhaul the family’s estate beginning in 2001. Novell settled all claims against him shortly before trial for a noncollectable judgment of $200 million. 

Allen settled for $1.25 million, which will be paid by an insurance carrier. Berger Kahn also settled on the eve of trial for an amount that has not been publicly disclosed. Stueve et al., v. Novell et al., 10-00411651 (Orange Super. Ct., filed Sept. 24, 2010).

The Stueves in early 2010 notified Buchalter they were petitioning to remove Novell and Allen from their estate. A short while later, Allen resigned from the firm after Cohen told him the other shareholders would force him out if he didn’t, Webster testified. 

Webster said Buchalter executives didn’t know Allen was lending himself money from the Stueve estate.

“It’s hard to come up with a positive reason why he wouldn’t have told us certain things,” Webster testified.

“Does it concern you that it happened when Mr. Allen was employed at Buchalter?” Barnes asked.

“Mr. Allen’s entire tenure at Buchalter concerns me,” Webster answered.

“Do you think Buchalter made a mistake in hiring Mr. Allen?” Barnes asked.

“I do,” Webster answered.

Webster again discussed Allen’s relationship with Florman, a current Buchalter shareholder, during cross-examination by Buchalter lawyer Alan A. Greenberg of Greenberg Gross LLP.

She said firm executives assumed Florman would leave if they forced Allen out and “were concerned about the future of the Orange County office.”

“Did you get confirmation from Mr. Florman that he would not leave before telling Mr. Allen to get lost?” Greenberg asked.

“No, we thought it inadvisable to discuss these issues with Mr. Florman,” Webster answered.

“So did you just take the chance that the Orange County office would fold when Buchalter told Wayne Allen to leave?” Greenberg asked.

“Yes,” Webster answered.

“And that was OK with you?” Greenberg asked.

“Yes, there wasn’t much choice,” Webster answered.

Webster said she was “appalled” and “very dismayed” when she learned Allen had lied to Buchalter about loans he’d taken from the Stueves.

“The day he walked in the door, he signed things that weren’t true,” Webster said. “I can’t ever be in a law firm where I think my partners are lying to me.”

Does it concern you that it happened when Mr. Allen was employed at Buchalter?
— Robert Barnes
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Robert Barnes