U.S. Trust Corp. finally got its day in court Wednesday, and found itself on the defensive over its handling of the estate of tobacco heiress Doris Duke.
The two-hour hearing before the Appellate Division of the New York Supreme Court came and went without a decision. But hostility was evident, as a parade of witnesses - including representatives of Morgan Guaranty Trust Company of New York - argued for U.S. Trust's removal as preliminary co-executor of the $1.2 billion estate.
U.S. Trust was in court to appeal its ouster last month by a Manhattan probate court judge, who also fired co-executor Bernard Lafferty, the late Ms. Duke's butler. Morgan Guaranty was temporarily placed on the job, along with Alexander D. Forger, a prominent trust lawyer.
The decision by the lower court to bring Morgan Guaranty into the fray has compounded the problems of U.S. Trust, which already had been fending off accusations of impropriety from Ms. Duke's former servants and caretakers.
The showdown between the two banks was the main event of Wednesday's hearing in the elegant courthouse, a New York City landmark on Madison Avenue.
Thomas D. Barr, an attorney for U.S. Trust, got things started. He stuck to procedural matters, arguing that Surrogate Court Judge Eve M. Preminger had rushed to remove U.S. Trust without adequate deliberation. "We never had an opportunity to demonstrate how we fulfilled our obligations" to the Duke estate, he said.
Brief arguments by a lawyer for Mr. Lafferty and a representative of the state attorney general's office followed.
Then Morgan's lawyer, Daniel F. Kolb, was on.
He blasted U.S. Trust for "complete inattention" to Mr. Lafferty's allegedly lavish behavior. Judge Preminger had concluded that U.S. Trust, out of fear that Mr. Lafferty would fire the bank as co-executor, had consistently appeased him by granting loans and by turning a blind eye to his spending of Ms. Duke's funds.
"It is the corporate fiduciary's responsibility to look after the individual," Mr. Kolb asserted. He said U.S. Trust should have investigated Mr. Lafferty's actions and allegations that the butler helped hasten Ms. Duke's death, and should have sought counsel from the court. "They did none of these things," Mr. Kolb said.
The five justices in attendance took turns asking pointed questions about the "propriety" of U.S. Trust's actions in overseeing Mr. Lafferty's actions and loaning him $825,000.
Salvos also were directed at U.S. Trust from attorneys representing one of Ms. Duke's former physicians, Harry B. Demopoulos, and three of her domestics - all of whom want U.S. Trust off the estate.
"U.S. Trust ran the whole show," said Raymond J. Dowd, the attorney representing the three domestics. "Now they've come back to tell you they didn't know anything. That's outrageous."
Even a representative of the New York attorney general's office - which had filed briefs in U.S. Trust's support - backed down somewhat under the justices' questioning. Deputy Attorney General John H. Carley acknowledged that U.S. Trust's unsecured loans to Mr. Lafferty may raise "a question of conflict of interest."
But, Mr. Carley added, "after all is said and done, there is no imminent danger to the estate."
As the proceedings ended. U.S. Trust President Jeffrey S. Maurer, who sat in the main witness box but did not testify, quickly slipped out of the room.
But executives from Morgan and a handful of other banks with an interest in the proceedings stayed on to mingle and chat, joining a group that included attorneys, Ms. Duke's former chef, Colin Shanley, and Dr. Demopoulos - but not Mr. Lafferty, who reportedly has not attended any of the proceedings.
