Trustee case lands in courts




  • In US
  • 2022-05-14 12:35:00Z
  • By The Record-Eagle, Traverse City, Mich.

May 14-BENZONIA - It was a spring day in 2019 when Beverly Markword, then 89, opened the door to her apartment at Frankfort Pines Assisted Living and welcomed a sheriff's detective inside.

Beverly was recently widowed - her husband, Louis, died before the couple could celebrate their 72nd wedding anniversary.

Detective Troy Lamerson of the Benzie County Sheriff's Office arrived with John Stier of Adult Protective Services, to investigate a complaint from an Honor Bank compliance officer.

Robert Ellis, the man named in the complaint, had been visiting the bank's ATMs, after hours and on weekends, and withdrawing cash from Beverly's checking account.

There were more than 20 of these withdrawals, bank records show, totaling $12,500.

"And that's when Ms. Markword would go through this three-ring binder she had on her lap," Lamerson recalled, "and provide documents and explain to us what she was unhappy with."

Beverly was disturbed by the ATM withdrawals, Lamerson said, but also by the approximately $100,000 Ellis spent from a trust Louis established before he died.

Ellis was the boyfriend of Beverly's granddaughter, records show. He was also Beverly's power of attorney and the sole trustee of the Markword's $550,000 estate.

Ellis declined comment for this story through one of his attorneys, Frederik Stig-Nielsen, who acknowledged in court documents, his client was a "de facto guardian for Mrs. Markword."

Stig-Nielsen said Ellis maintains he did nothing wrong, that he was asked by the Markwords to serve as their trustee, the services Ellis provided were extensive and complicated, his expenditures legitimate.

Lamerson said when he began investigating, he didn't know much about trusts or what the law required of trustees, but he aimed to learn all about it.

"After I left Ms. Markword's that day," Lamerson said, "I went down the rabbit hole."

Trusting the trustee

In 2021 the Michigan legislature passed the Financial Exploitation Act, requiring banks and credit unions to report suspected financial abuse of vulnerable customers.

This law does not reference trusts specifically, which are under the auspices of the Michigan Trust Code, passed in 2009.

The MTC spells out duties of a trustee, including filing an annual accounting with the local probate court, but a closer look reveals opportunities for abuse.

For example, trustees are required to keep "adequate" records, keep trust assets separate from their own, exercise their power "in good faith" and charge "reasonable" fees.

These terms are not well defined, however, and in Michigan you don't have to be certified, licensed, have a college degree or a high school diploma to be a trustee.

An estate lawyer or an accountant can accept the task, but so can a convicted felon, as long as they haven't been convicted of a financial crime, are over 18, are no longer incarcerated and are "legally competent" - another nebulous term.

After his meeting with Beverly, Lamerson said he returned to his desk at the sheriff's office, read through the MTC, then began seeking subpoenas and search warrants.

Lamerson interviewed Beverly's family - her son, Jim Markword, and her daughter, Karen Leland - as well as Holly Buda, a compliance officer at Honor Bank, and Adam Lett, an attorney Beverly and Jim hired to help them unravel Beverly's finances.

The detective said a disturbing picture began to emerge.

"When I talked to Jim and Karen, they both advised me that Ellis didn't want them speaking with their mother," Lamerson said. "He changed her mailing address to his address in Illinois and all her mail was going to him."

A will signed by Louis, establishing the H. Markword Irrevocable Trust and naming Ellis sole trustee was drafted by a Traverse City attorney, John Rizzo III, who records show was hired not by the Markwords but by Ellis.

Louis signed it on May 25, 2018, while hospitalized at Munson Medical Center after suffering a stroke. Ellis witnessed the will, as did the Markwords' granddaughter.

"I never liked it," Jim Markword said, of this trustee arrangement. "But I wasn't going to rock the boat with my dad in that condition. Then after my dad passed and Rob took over, there were a lot of things my mom and I started questioning."

Between May 30 and June 4, 2018, records show Ellis closed Beverly's IRA account, canceled Beverly's debit card for her personal checking account, requested a new card in his name be mailed to his Illinois address and closed Louis' four certificate of deposit accounts - incurring $1,300 in early withdrawal penalties.

When Honor Bank responded to Lamerson's search warrant with a dozen ATM surveillance images of Ellis withdrawing cash, Lamerson hired Fiduciary Services North, an Elk-Rapids professional guardianship company, to audit the Markword estate.

Stig-Nielsen said at least $7,000 of the $12,500 in withdrawals was later returned to Beverly's account and the remainder spent for Beverly's benefit.

Chainsaws, Steaks and Tires

"A trust is a whole 'nother animal," Lamerson said, of the authority trustees in Michigan have over someone else's money. "And as explained to me, the type of trust set up for Beverly Markword is not a normal trust that most people would want to get into."

Lamerson said he learned selling Beverly's assets - her $29,000 IRA, Louis' $118,000 certificates of deposit and their $275,000 Demerly Road farmhouse - then depositing the proceeds into an irrevocable trust was part of a strategy by Ellis to make Beverly eligible for Medicaid, which has a $2,000 income limit.

Medicaid recipients receive additional financial assistance for medical services beyond what Medicare covers and may qualify for other services, too, such as housing assistance.

Selling assets in this way may be within the lawful authority of a trustee, according to the MTC.

Still, the strategy didn't work. Social Security and a pension put Beverly over the limit, records show.

Many of Ellis' trust expenditures did directly benefit Beverly.

For example, Ellis paid Beverly's health insurance premiums and eye exam visits, paid for new glasses, put gas in her van, paid the farmhouse's utility bills and the $4,700 monthly rent on her assisted living apartment at Frankfort Pines.

Other expenditures, however, were questioned.

Ellis used trust money to pay $6,859.77 in taxes on property he owned in Illinois, and spent $4,116.36 at Costco Warehouse stores in Illinois, Michigan and Wisconsin on rotisserie chicken, ribeye steaks, a Yamaha chainsaw, a six-pack of Heineken and had new Bridgestone tires installed on his car.

In 2018, Ellis and Christine gave Beverly a 50-inch Samsung television and a poinsettia plant for Christmas.

Records show these gifts were purchased at Costco, along with a thin-crust pepperoni pizza and a bag of pistachios, paid for with trust money.

As trustee Ellis had power over Beverly's money, but could also decide where she lived.

Jim Markword said his father spent 38 years working in a Kalamazoo-area paper mill and his mother drove a school bus, then trained as a nurse. The Markwords retired to Benzonia in the 1990s, bought a farmhouse and acreage on Demerly Road and lived there with Jim's sister, Karen.

Six months after Louis Markword died, Ellis put the farmhouse up for sale - another action a trustee can take - but Jim said Ellis never consulted the family about this decision.

"We always knew the farm would be sold," Jim said, "but we figured my mom would live there until she couldn't live there no more. And Rob just took control. He just did it all on his own."

Jim said the family learned their home was listed with a realtor when Karen happened to see it on Zillow, a real estate website.

"A few days after that, a 'For Sale' sign appeared in the yard," Jim said. "Then Rob moved my mom."

Lamerson and Jim Markword both said Frankfort Pines is a clean, capably-run facility and that Beverly is well cared for there.

Services Rendered

Today, Lamerson says it was lax oversight in Michigan's Trust Code that allowed Ellis unchecked control over Beverly's money.

Back in 2019, a week after the detective "went down the rabbit hole" and began researching trusts and trustees, he said he found a legal ambiguity of his own.

Lamerson is not an attorney, but on April 25, 2019, he filed an emergency ex parte petition in Benzie County Probate Court, asking a judge to remove Ellis as trustee and replace him with a professional fiduciary.

A sheriff's detective making a court filing is an unusual move - Lamerson acknowledged he's never heard of anyone in law enforcement doing it - and one of Ellis' attorneys labeled it a "hoodwinked and backdoor approach."

"The proper procedure to object to the actions of the Trustee has not been followed," attorney Michael Swogger said, in a response petition seeking to have Ellis reinstated. "No hearing has been held. No facts have been presented to this court to support the removal of Mr. Ellis."

The annual accounting wasn't due for weeks, Swogger argued, and Ellis would prove he'd rendered the services he'd been paid approximately $33,000 to provide.

"I was working really closely with Mr. Ellis to prepare the accounting," Swogger said. "It hadn't even been a year yet. It wasn't even due when all of these objections came up."

The annual accounting would have shown what all the expenses were for, Swogger said.

"To this day I am extremely confident he was performing his fiduciary duties," Swogger said.

Benzie County Probate Court Judge John D. Mead disagreed, and stripped Ellis of his trustee status.

A slew of court filings followed.

Attorneys for Ellis said the accusations against him - and the resulting criminal investigation - were a rush to judgment. Ellis was denied due process, Swogger told the judge, and had legal authority to spend trust money the way he had.

Benzie County Prosecutor Sara Swanson charged Ellis with three felonies - two counts of embezzlement of between $20,000 and $50,000 from a vulnerable adult and one count of using a computer to commit a crime.

Judge Mead stayed - or paused - the probate action until the criminal case could make its way through the courts, Lamerson arrested Ellis during a court hearing and he was released on bond.

On Sept. 18, 2019, Ellis sat for an interview with Lamerson, after his first criminal defense attorney, Wilson Brott, said Ellis wanted to explain his side of the investigation.

Lamerson's five-page narrative of this interview states Ellis confirmed the trust was structured to qualify Beverly for Medicaid and that Ellis made the ATM withdrawals for the same reason.

Swogger said there's never been a dispute over the terms of the trust.

Any questionable expenditures - the ribeye steaks, for example, or paying his own property taxes - were in lieu of compensation the trust owed him, Ellis told the detective.

"Everything he did, he was trying to charge a flat fee for," Lamerson said, adding trustees are supposed to charge by the hour, keep better records and not mingle trust money with their own.

Ellis's own services rendered document states he charged the trust $12,000 for travel, $4,000 to manage Louis' burial and wake, $4,500 to set up the trust, $3,600 to manage Beverly's finances and $1,200 to meet with attorneys.

A local Real Estate One realtor sold the Markword's farmhouse, yet records show Ellis charged the estate $3,600 to manage the property and $5,480 to sell it. This fee purportedly included marketing the property in Chicago and Detroit, yet a purchase agreement shows the farmhouse was sold to neighbors, who previously told Louis if he ever wanted to sell, they'd be interested.

Plea Deal

As the criminal case against Ellis proceeded, his prior trustee status, even after he was removed by a judge, showed another way the MTC can impact the vulnerable.

By now, Beverly's attorney, Adam Lett, had sent a letter to Ellis rescinding his role as Beverly's power of attorney. In response, Ellis sent a $25,000 retainer to Swogger, Bruce & Millar, for continued legal representation, while he sought to be reinstated as trustee.

Records show he paid this retainer with money from the Markword trust, which is legal.

The MTC allows courts to award "reasonable" attorney fees for a trustee who participates in a civil action "in good faith." Lamerson said while this may be legal, he thinks it's wrong.

"The fact that Mr. Ellis was able to use Ms. Markword's funds out of the trust to try to defend his actions that, clearly at this point, were illegal, I find very disheartening," Lamerson said.

The MTC states a judge can deny a trustee's claim for attorney fees when there's a breach of trust, and when Judge Mead stayed Ellis' probate case, he also ordered whatever was left of the $25,000 retainer, be escrowed until the criminal case was complete.

That did not stop legal fees from accruing, or attorneys from seeking payment.

A petition filed by Swogger & Bruce - Millar has since left the firm - seeking to use trust assets to pay $34,412.91 in attorney fees was also stayed, pending a circuit court decision on Ellis' delayed sentencing, records show.

Stig-Nielsen in 2020 replaced Brott as Ellis' criminal attorney. He declined to say what he was charging Ellis, but said Markword trust money was not used to pay his fees.

Stig-Nielsen negotiated a plea agreement for Ellis, who in June pleaded no contest to one felony count of embezzlement from a vulnerable adult of more than $1,000 but less than $20,000.

In exchange, Benzie County Prosecutor Sara Swanson dropped the remaining charges and agreed if Ellis paid $22,438.28 in restitution and costs, he could petition the court to withdraw his felony plea and plead to a single misdemeanor embezzlement charge.

Stig-Nielsen confirmed Friday Ellis has paid restitution and court fees in full.

A successful plea withdrawal petition could close the case with no jail time and no felony conviction. Jim Markword said he thought the Benzie County assistant prosecutor who handled the sentencing hearing appeared unprepared.

A transcript of that hearing suggests the presiding judge, who ruled the state did not prove fraud, thought so too.

"My instincts are telling me that what you did, Mr. Ellis, was criminal," 13th Circuit Court Judge David A. Thompson said, adding there was "no way on earth" the approximately $100,000 Ellis spent from the trust was reasonable.

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