A San Diego Superior Court judge has ruled that Michael Paulson, son of the late Thoroughbred owner and breeder Allen Paulson shall be removed as trustee of his father’s living trust.
In a decision handed down on March 24, Judge Robert P. Dahlquist found that Paulson “Put his own personal interests ahead of the interests of the trust beneficiaries, misused trust assets for his own personal benefit, and used his position as trustee to harm, or seek to harm, other beneficiaries.”
As for additional grounds for removal, Paulson was found to have “committed a breach of the trust and has paid himself trustee’s compensation, which is excessive under the circumstances.”
Paulson did not comment on the ruling.
BloodHorse.com reported: Allen Paulson died in 2000. His legendary racing and breeding operation was one of the most successful in the sport’s history, and he raced such standouts as Cigar, Theatrical, Estrapade, Blushing John, Eliza, Ajina, Opening Verse, and Arazi. His living trust set forth disposition of his assets, which the court estimated at approximately $37 million pre-tax, to various extended family members; his third wife, Madeleine; and his three adult children, Michael, Richard, and James.
In his ruling, Dahlquist wrote that “The gifts to extended family members have not yet been paid in their entirety...and nothing has been paid” to the three adult children.
Judge Dahlquist cited “the trustee’s failure to sell the trust’s racehorses even though the trust instrument states the horses were to be sold promptly upon Allen’s death.” This is a failure to administer trust and itself a breach of fiduciary duties.
Under Michael’s direction, the living trust raced the champion Azeri to a Breeders’ Cup Distaff (gr. I) victory at Arlington Park in 2002. Last January at Keeneland, the living trust bought back Azeri after a final bid of $4.4 million fell short of her reserve. In September, Azeri’s A.P. Indy yearling colt, Vallenzeri, was bought back by the trust for a Keeneland-record $7.7 million.
The court apparently did not agree with the purchases, and found them to be in contradiction with the terms of the trust. Following removal of Paulson, the court appointed James and Vikki Paulson as trustees.
Los Angeles attorney Neil Papiano, who represented James and Vikki Paulson in the case said, “There are allegations of a tremendous waste of money for nearly 10 years while the beneficiaries got very little. Now the beneficiaries will take over and try to restore as much as they can to the trust."