Family fights probate court over fortune

Relatives trying to end financial dispute say they found a patronage system that cost them

Lise Olsen (lise.olsen@chron.com)
June 25, 2007
Houston Chronicle (TX)

Probate court comes cloaked in mourning, its chambers filled with feuding families and highly charged dramas of human riches and human rights.

It’s where the grieving, the embittered and sometimes the unscrupulous seek to settle inheritance issues, where the disabled and the mentally ill venture to find protection.

But it’s also where some Texans claim they’re getting ripped off.

Court critics — from a River Oaks heiress to a retired Baytown refinery worker — have alleged that Texas probate judges run a patronage system that allows court-appointed lawyers and others to charge exorbitant fees, at times forcing the sale of family heirlooms, homesteads and businesses.

Some of the fattest fees generated by any recent Texas probate case went to the accounting firm of Paula Miller, a former court favorite who is not a lawyer, a certified public accountant or a banker.

Miller, an accountant with two master’s degrees, did serve for a while, though, as Probate Judge Russell Austin’s campaign treasurer — something the family of River Oaks widow Doris Conte initially did not know.

Her family trusts eventually paid Miller and her company $1.38 million. Austin ordered more than $780,000 in additional payments to people assigned to work with her, according to court and family records.

The judge entrusted to Miller a family fortune built by Joe Conte, son of an Italian immigrant who had come here from New Orleans as a car salesman and worked his way up to own the Mike Persia dealership downtown and then another, Joe Conte Chevrolet, in Clear Lake.

By the time he died unexpectedly in March 1993, Conte had amassed a fortune later valued at more than $10 million. It included land with buildings in the Texas Medical Center and nearly three full blocks downtown, about $2 million in cash and a huge home on a River Oaks cul-de-sac that had never been mortgaged and sat on a prime lot next to former Enron CEO Jeff Skilling’s.

In the aftermath of their father’s death, the Conte siblings argued over how money was being used and borrowed from the family trust. Each accused the other of spending too much or not paying back what they owed — though Doris Conte and her children were each beneficiaries of the trust money. They sued each other over the dispute, as well as their mother’s care, and went to probate court seeking help, never imagining what the ordeal would eventually cost them.

The Conte appointment was among the most complex and lucrative probate assignments in Harris County in years, the type of job that usually goes to a bank, a large law firm or an attorney/certified public accountant.

Instead, it became the first probate appointment for Miller, then a 33-year-old accountant who had recently started her own consulting firm.

In 1998, Austin personally introduced Miller to Doris Conte’s feuding children, Susan and Joe Conte Jr. The two at first agreed to allow Austin to appoint Miller to review accounting in their family trusts.

Initially, Miller charged the Contes more than $30,000 a month for what was supposed to be a temporary job. She later got the judge to approve hiring five law firms and a CPA, who got paid separately to help.

Within seven years after her 1998 appointment, Miller had generated more than $1 million for her own firm. When the Contes’ cash ran low, Miller got more by selling properties and cutting lease deals, sometimes over family objections.

In an interview, Miller claimed her fees were similar to those a bank might charge for a complex trust case. “We did a tremendous amount of work,” she said.

However, when Miller prepared to leave the trusts in 2003, she collected estimates from banks who competed to replace her. Those documents show that their proposed fees were lower than her own.

Miller’s work at first included redoing five years of financial records, funding the trusts, overseeing accounting and monitoring several lawsuits. But she also frequently billed at $225 an hour for tasks such as buying a lawn tractor and arranging for household repairs.

From 2003 to 2005, her last three years on the case, she earned nearly $400,000 from the Conte trusts, the second-largest reported payout to any appointee in a probate case in the state of Texas, based on a Houston Chronicle analysis of fees paid in probate cases over a three-year period.

Austin, who oversaw every step of Miller’s work, regarded her as the salvation of the Conte trusts. He credits her with resolving lawsuits and property disputes.

The judge blames the Conte children for mismanaging and taking money from the family trusts, which they ran jointly with their mother.

Austin described the estate as “bankrupt” at the time, despite paperwork that shows its assets in 1998 included stocks, millions in real estate and more than $1 million in cash.

“The family fortune had then been essentially squandered on very poor investments and the lifestyle of the family members. Succinctly stated from her agreed upon appointment … she (Miller) resolved multiple complex litigation matters and managed the estate to the extent that its value increased to, circa, 10 million dollars,” Austin said in a letter he sent to the Chronicle about the case.

But the Contes saw Miller as their destroyer.

”My family was financially raped,” Susan Conte said.

No other Harris County judge had appointed Miller to a probate case before the Conte case or had appointed her to any case since, according to the newspaper’s review of appointments from 2003 to 2005.

Two other probate judges, William C. McCulloch and Rory Olsen, said in interviews with the Chronicle that they did not consider Miller qualified for appointment. Olsen said he met Miller when Austin introduced her to him at a reception as a prospective appointee.

Judge Mike Wood said Miller sought appointments by approaching his staff attorney. Wood said he might have tried her, but she seemed to have plenty of work in Austin’s court.

In an interview, Miller disputed that she was unqualified to be appointed to probate cases. She said she had often served as an accountant under lawyers who had been appointed by probate judges in other probate matters.

Austin, as a judge, is bound by judicial conduct rules not to play favorites and not to approve payments above fair market value for court-ordered services. Austin said he thought Miller’s fees were reasonable in the Conte case, given the circumstances. So did Louis M. Ditta, a board-certified attorney who still serves as guardian of Doris Conte’s estate.

Yet other prominent probate lawyers interviewed by the Chronicle said they thought Miller’s hourly rate of $225 and her monthly fees and expenses, which ran as high as $30,000, seemed excessive.

Attorney R.W. Calloway of Dallas, who is board-certified and a CPA, said he had never seen monthly and total trustee fees run as high in his nearly 50-year legal career: “I’ve not run across that, nor have I seen that.”

Miller’s own reports show that the trusts never appeared to make enough money to pay the professional fees she generated.

“Due to the condition of the Conte Trusts at the time of (her) appointment … and the amount of work required to correct those conditions, the total attorneys’ fees, trustees compensation and all similar professional fees for Oct. 1998-Sept. 1999 exceeded the net income of the Conte Trusts,” read the first of Miller’s yearly reports.

It was a line she would often repeat.

The Rev. James J. Gaunt, a Catholic priest and longtime family friend who met the Contes during his years as teacher and principal at Houston’s St. Thomas High School, initially advised the Contes to go to the courts but quickly regretted it.

“They trusted, and their trust was shattered,” he said in an interview. “It’s a tragedy.”

The Conte family’s troubles began not long after Joe Conte collapsed and died after his regular weekly trip to buy groceries.

Conte had envisioned that his children, Joe Jr. and Susan, and his wife, Doris, would jointly run the family trust he’d planned. But a few years after his death, a Toyota dealership in New Orleans owned by son Joe Conte Jr. began to fail; financial woes followed.

So began a sibling struggle.

Joe Jr. argued that Susan had mishandled the trust management; Susan and her mother sued Joe Jr., arguing he had not paid back money he owed to the trust.

The Conte siblings fought over the care of their mother, who suffered a series of small strokes after losing her husband.

The court found Doris Conte unable to manage her affairs. Two lawyers, appointed to represent her at the time, recommended liquidating the family trust assets, including their River Oaks home, a place Susan Conte felt her mother could not bear to lose.

To avoid that, the Conte siblings agreed to allow Miller, an accountant they had not previously met, to run their trusts and review their financial records. The Contes insist that Austin personally recommended Miller and believe the judge gave them little choice: “I never heard of that woman before I met that judge,” Susan Conte said.

Austin denies he pushed Miller or even that he strongly recommended her. “That’s totally false,” he said. In a letter he sent to the Chronicle about the case, he wrote: “They chose Mrs. Miller after (an) exhausting inquiry of corporate fiduciaries.”

According to court records, the Contes signed an order that originally limited the agreement to six months and said that, at the termination of the appointment, the Contes would be “reinstated without further Order of this Court.”

Austin then hand-altered the document to make Miller’s appointment “continue until terminated by court order.” He said he read the changes into the record with all of the lawyers present. Later, in a series of hearings, he extended the agreement for seven years. In interviews, Austin emphasized that the Contes did not frequently object and instead praised Miller.

At first, the Contes assumed that Miller had done other probate work. However, Miller admits she had never run a trust, though she had done accounting work on trusts.

The Contes’ cash quickly dwindled. In 2000, Miller began the first of multiple attempts to sell their properties.

It was then that Joe Conte Jr. fought back hard, arguing that Miller should be removed, and that she was pushing unwise deals solely to raise cash to enrich herself and others.

In an objection he filed in court records, Conte described her efforts as “fraudulent and illegal and solely for Miller, her associates and agents to personally profit … ” In January 2000, Joe Conte Jr. essentially asked the judge to fire Miller.

Later that year, the Contes persuaded Judge Austin to stop the sale of one of their downtown properties after proving that Miller was pushing to sell below market value. Austin did approve, at Miller’s request, another deal, however, for the sale of 2.2 acres of land on Old Spanish Trail for $2 million — a transaction Joe Conte Jr. argued in an interview should have made at least $3 million, based on the value of its most recent lease deal.

But that deal was nothing, the family said, compared with the one with a tax dodger and a criminal.

Miller pushed through a 25-year lease on property the family owned near the Toyota Center — even though no rent would be paid to the family for the first four years.

At the time, Joe Conte Jr. protested that Miller had provided no background or credit information on the tenant and that the lease was too long, according to court records.

It turned out that the tenant had unpaid taxes and had received deferred adjudication on prostitution and theft charges in 1990 and 1994, records show. In 2006, he pleaded guilty to felony charges of conspiracy, drug sales and unlawful travel as part of a multistate drug ring based in Louisiana, according to federal court documents.

The Contes had to hire an attorney to evict him. “We have had to pay to get rid of him,” Susan Conte said.

Miller said she was aware of some of the tenant’s legal problems but didn’t know he was involved in a drug ring. And he did put up $274,053 toward improvements as part of the deal. She says she shared specifics of all the deals with the family.

In an interview, Austin said he left the details to Miller: “I cannot micromanage estates.”

In 2001, Miller became Austin’s campaign treasurer.

Miller also was among Austin’s $5,000 campaign contributors. Others who worked on the Conte case gave Austin money, too, including an appraiser, a CPA, lawyers and the doctor who had examined Conte and recommended she be declared unable to manage her own affairs. Such contributions are legal and subject to Texas disclosure laws, though critics claim they may present an appearance of impropriety.

Texas judicial rules generally do not require judges to disclose campaign-related relationships in court. However, Lillian Hardwick, co-author of the Handbook of Texas Lawyer and Judicial Ethics, said it might have been prudent in this case for Austin to tell the Contes that Miller was serving as his treasurer.

Austin said he felt it was unnecessary because it was a matter of public record. He said Miller did not help him raise money, though her name appeared on fundraising letters.

In 2005, the Contes discovered Miller’s role as Austin’s treasurer in an Web search of Harris County records. They were furious.

That same year, Miller had requested authorization from Austin to put all the Conte properties on the market, including their home. After the Contes objected, Miller, who had previously talked about resigning, stepped down from their case. She also stopped serving as Austin’s treasurer.

But before her work ended, Austin signed one more document in Miller’s favor. This one could protect her from the Contes.

“For purposes of any future claims of liability the effect of judicial discharge shall be as though Paula Miller never served … No person or entity shall have any cause of actions against Paula Miller or any of her actions or inactions … ,” the order said.

Doris Conte, 81, is now the only family member who gets any money from the family trusts, which are now being run by Frost Bank under court order.

Her children were removed from running the trusts after Austin ruled they both owed it hundreds of thousands of dollars, though he said they did not have to repay the debts.

At the mansion, which Joe Conte bought for cash in 1973, the strain on family finances is visible. Outside, there are unrepaired gaps in the ornate balustrade and damaged garage doors; inside, some gilded furniture is shoved aside because of ceiling leaks.

Still, Doris Conte likes to hold court with visitors in her small wood-paneled parlor, a room she keeps decorated for Christmas year round. She and her daughter, who serves as her unpaid guardian, have reconciled with her son to fight the probate courts.

“They’re putting my money in their pockets,” Doris Conte says slowly in her native New Orleans accent. “How do they get away with that?”

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