Charities Take on Trustee — And Win!

Lena DeBenedetto did not forget her favorite charities in her estate plan. Her nephew will remember them for quite a while as well, but not so fondly. Shriners Hospitals for Children and the American Heart Association (AHA) pushed back against his diversion of funds intended for the beneficiaries on his aunt’s estate. They held him to account, but it was a struggle.

The Backstory

Decedent DeBenedetto’s trust named her son Robert as beneficiary and her nephew Richard Ruggiero as successor trustee upon her death. Ruggiero was an attorney licensed in Illinois, where the trust administration took place. The trust instructed Ruggiero to sell the decedent’s condominium and to distribute the proceeds to Robert in monthly payments, over a period of years. Robert died in August of 2018, long before he would have received his full bequest.

DeBenedetto anticipated such a situation. She provided that if Robert died before receiving her full estate, any balance would go in equal shares to AHA, Shriners, Lupus Foundation, and Pacific Garden Mission.

At the time of DeBenedetto’s death, Ruggiero never notified the charitable beneficiaries of their contingent interests. More ominously, after Robert died, he neither contacted those now-vested beneficiaries nor distributed any money to them.

Anonymous Phone Calls, Mysterious Faxes

The charities learned about their trust entitlements several months after Robert’s death. In March 2019, AHA and Shriners (hereafter the “Litigating Charities”) received anonymous phone call tips about what was going on with the DeBenedetto estate. Around that time, the organizations also received faxes not only of the trust documents, but also the death certificates of Lena and Robert. Soon after, the Litigating Charities retained counsel to engage with Ruggiero and to obtain information about the trust assets and his plan of distribution. The inevitable back-and-forth that occurs with a recalcitrant fiduciary went on for an extended time. Ruggiero stalled, offering various excuses for the delays, including the effects of COVID-19. His stock response was always a version of “the check is in the mail.” But it never was.

Finally, in August of 2020, the Litigating Charities filed a lawsuit against Ruggiero demanding a full trust accounting and seeking to hold him liable for breach of his fiduciary duty as trustee of his aunt’s estate. [1]

Sadly, Ruggiero had all the while been draining the estate of most of its assets. Lena had left approximately $80,000 in cash, along with the condominium, which sold in 2019 with a net of just over $220,000. Apart from a small amount used for legitimate expenses connected with the real estate, Ruggiero eventually transferred the entire estate – about $290,000 – to himself in a series of several dozen checks.  He characterized these payments as “trustee fees,” even though the only duty Ruggiero had was to sell the condominium and distribute the proceeds. By the time the dust settled, the trust had an account balance of less than $500.

The Court Proceedings: Exhausting Exercise for the Charities

The blow-by-blow progression of the litigation between the Litigating Charities and Ruggiero would require novella-length treatment far beyond the scope of this newsletter. (A citation for the court’s opinion appears below for the reader who relishes more detail.). The following “highlights reel” will give a sense of the Litigating Charities’ four frustrating years in pursuit of justice for themselves and for Ms. DeBenedetto.

1. Ruggiero failed to provide financial or other relevant information in response to routine discovery requests. The Litigating Charities eventually pieced together the condition of the trust by acquiring information from third parties, such as banks at which accounts were maintained. The time and effort required for this undertaking created considerable expense.
2. Ruggiero missed court deadlines with astonishing frequency, repeatedly failing to “show up” or to provide required information. He attributed these lapses to his personal health issues but usually provided unsatisfactory (and in some cases no) proof. Through it all, the Litigating Charities remained steadfast in the rightful pursuit of their entitlements.
3. When Ruggiero did participate in judicial proceedings, he did not advance the litigation toward a satisfactory conclusion. For example, despite warnings from the court, Ruggiero repeatedly failed to appear for his deposition. When he finally did sit down for questioning, under oath, he asserted his Fifth Amendment rights against self-incrimination more than sixty times in an hour, hardly the performance one would expect from a man with nothing to hide.
4. The only “defense” Ruggiero offered for his actions was the production – after judgment had been entered against him – of a suspicious writing, supposedly in the hand of the decedent, “modifying” the trust to leave everything to Ruggiero instead of the four charities. Ruggiero could neither authenticate the document nor explain why he had waited so long to produce it. The court refused to consider the so-called “evidence,” as Ruggiero had long since lost credibility with the tribunal.
5. The most vivid description of Ruggiero’s conduct during the litigation is this blunt in-court statement from an exasperated trial judge: “And I will add that I am incredibly troubled by your conduct, Mr. Ruggiero, throughout. In this case, during the discovery process, you made every effort to frustrate and complicate a very, very simple process. You knew better and you did it on your own, and you did it [not only to frustrate the plaintiffs’ lawyers] but in defiance of multiple court orders.”

Paying the Piper

Ruggiero managed to forestall accountability for a while, but not forever. The Litigating Charities prevailed at the trial court level. Ruggiero filed a half-hearted appeal, but at the end of the day, the court ordered him to pay the plaintiffs the money that they would have received from the trust (approximately $75,000 each) as well as the legal fees incurred for the litigation (approximately $25,000 each). The court’s judgment was against Ruggiero as trustee and in his individual capacity, meaning that (1) he had to pay it with his own money and (2) the Litigating Charities could enforce their rights by levying against his personal assets, such as bank accounts, future earnings, real estate etc. (Above and beyond the $200,000 liability to the plaintiffs, the court also ordered Ruggiero to repay the balance of the money pilfered from the trust, another $150,000.)

And that was not all. During the litigation, the Illinois Bar had undertaken an investigation of Ruggiero’s conduct. Three of the four charitable beneficiaries of the DeBenedetto Trust testified at the disciplinary hearing and explained what the loss of the bequest meant, in tangible terms, to the affected organizations. For example, AHA could have trained one hundred people in life-saving CPR measures, while the Pacific Garden Mission could have provided almost 40,000 meals to people in need.

In November of 2023, the Illinois Supreme Court disbarred Ruggiero.

Thoughts for Bequest Managers

How Can Charities Address the Problem of Concealed Bequests?

There is no easy answer to this question. Given the right circumstances, it is all too easy for a personal representative or a trustee to hide a bequest from a beneficiary. In the Shriners case, only the anonymous phone calls and faxes alerted the beneficiaries to their entitlements. It is not unusual that the DeBenedetto bequest came as a surprise to the affected charities – many bequest donors do not inform organizations ahead of time.

If a charity is aware of an anticipated estate gift, it can easily put reminders in place to check the status of the donor from time to time. (Obviously, this involves something akin to a “death watch,” but sometimes there is no alternative.) Good Samaritans like the anonymous tipsters in this case can be a godsend, but they appear rarely. Unfortunately, situations like the Ruggiero debacle do occur more frequently than one might imagine.

In October 2024, the Iowa Supreme Court disbarred Rebecca Sharpe for a Ruggiero-like offense. In that case, Sharpe hid a charitable bequest from both the probate court and the intended recipient and redirected the money to her own purposes. The beneficiary – a church endowment – only learned of the misappropriation because a friend of the decedent happened to ask church officials if they had yet received the gift. (The friend knew of the estate plan, while the church did not.)

As in the Shriners case, the emergence of a de facto whistleblower was a lucky break, but not something that happens in most cases of wrongdoing. (For the details of the Sharpe case see Iowa Supreme Court Attorney Disciplinary Board v. Sharpe, 12 N.W.3d 338 (Iowa 2024).) Greater publicity for the severe consequences that befell Ruggiero, Sharpe and others might deter similar behavior. There is little criminal prosecution that arises from estate-related embezzlement. More enforcement actions, both civil and criminal, would certainly help.

Why Were the Other Two Charities Not Parties to the Litigation?

Participation in litigation as a plaintiff is always a choice made by the organization. In most cases, charities that decline to engage feel that the amount and/or likelihood of a favorable outcome do not justify the costs of the lawsuit.

Are the Two Non-Participating Charities Covered by the Judgment?

No, but it is likely that those organizations can benefit from it. Since Ruggiero’s conduct inflicted the same injury upon them as on the Litigating Charities, it would be a simple matter for them to file an abbreviated lawsuit and obtain a “copycat” judgment against Ruggiero. This would occur under a legal principle known as “collateral estoppel,” which is available in the Illinois courts.  See, e.g., ILCS S. Ct. Rule 23(e)(1). (Unlike the Litigating Charities, the other two organizations would likely not receive an award of attorney fees. The fees for a collateral estoppel action, however, should be quite modest.)

Will Any of These Charities Ever Get a Dime from Ruggiero?

This will depend upon the amount and availability of Ruggiero’s personal assets. It is quite possible that the organizations could force his hand by, for example, filing liens against any property that he owns.

Was the Effort and Expense of this Litigation Worth It?

Only the participants can answer that question. However, we believe that the Litigating Charities’ disciplined and unyielding pursuit of the wrongdoer in this case represents the best in stewardship of a bequest gift. By obtaining judgment against Ruggiero, the organizations have done everything possible to bring about the result that Ms. DeBenedetto intended, i.e., supporting the missions of charities that she valued.

Endnote and Resource

[1] Lupus Foundation and Pacific Garden Mission did not join the litigation.  This did not affect their rights to the DeBenedetto bequest.

Shriners Hospital and American Heart Association v. Richard Ruggiero, individually and his capacity as Successor Trustee of the Lena DeBenedetto Trust, 2024 IL App (1^st) 232232316-U (2024), also available at 2024 WL 4010553.