By Thomas P. Caldwell, InDepthNH.org
CONCORD — Director of Charitable Trusts Thomas Donovan has petitioned for restitution, damages, civil penalties, and fees in a case alleging that a former Portsmouth attorney defrauded the Salvation Army of assets his client had intended to go to the charity.
James E. Ritzo and his wife, Carol B. Ritzo, allegedly manipulated trust funds in his care by purchasing homes and transferring cash to reduce the amount of payouts intended for the Salvation Army. The assets initially were valued at more than $2 million, but the Salvation Army received less than $400,000 from the trust fund created on behalf of Francis W. Cash.
According to the petition filed on July 16 in the 10th Circuit Probate Division, James Ritzo and the late Roger W. Guilbault Jr. of Portsmouth “insinuated themselves” into the the life of Francis Cash, an elderly bachelor with no close relatives, more than 20 years ago.
Guilbault had a lengthy criminal history, with convictions on charges of receipt of stolen property, burglary, and bail jumping.
On June 5, 2001, Ritzo drafted the Francis W. Cash Memorial Trust which provided that, upon Cash’s death, Guilbault would receive 80 percent of the trust’s net income annually. (To meet Internal Revenue Service requirements, the terms later were amended to provide five percent of the trust’s principal value on an annual basis.) The Salvation Army was to receive the trust’s remaining value upon Guilbault’s death.
Ritzo also drafted a deed conveying Cash’s residence at 293 Austin St., Portsmouth, to Cash and Guilbault as joint tenants with right of survivorship.
Cash died on Oct. 20, 2002, at the age of 87. Four days later, when Ritzo filed probate documents, the value of the Cash Trust was listed as $2,037,047.73. As part of the probate process, Ritzo petitioned for the amended payout amount to Guilbault and asked for an increase from 1 1/2 percent to 2 1/2 percent as his trustee fee. Ritzo allegedly failed to notify the director of Charitable Trusts of the change in terms.
On July 23, 2004, Ritzo created the Demeritt Farm and the Rock Street trusts in order to purchase real estate, allegedly using money from the Cash Trust, to purchase a single-family home and adjacent land at 67 Demeritt Avenue in Lee and a four-unit apartment building on Islington and Rock streets in Portsmouth.
Guilbault resided on Demerrit Avenue for a while, then the property was rented to college students for several years, Donovan writes in the court petition. Ritzo used a garage on the property as a rental unit for wintering automobiles.
Ritzo converted the Portsmouth apartment complex into four condominium units, conveying one of them to his wife and later using it for his law office. Another unit also was conveyed to his wife who then sold the unit to an unrelated third party. A third unit was conveyed by Rock Street Trust to Carol Ritzo who then sold it back to Rock Street Trust. James Ritzo then leased it to his son. The fourth unit was conveyed to Guilbault who conveyed back a mortgage on the property to Rock Street Trust and later transferred ownership to the trust to discharge the mortgage. James Ritzo then leased the unit to others.
In 2008, Portsmouth police arrested Guilbault in connection with a violent home invasion and the theft of an antique rifle. At the time of his arrest, Guilbault also was a fugitive from justice in Ohio in connection with narcotics trafficking. He would remain in prison for the next seven years, eventually dying there.
Donovan alleges that James Ritzo was aware of Guilbault’s declining health and, anticipating the Cash Trust’s obligations to the Salvation Army, he conveyed two units on Rock Street and the Demeritt Farm property to the Cash Trust. Carol Ritzo first leased and then sold ownership of the unit at 125 Islington St. to her son and daughter-in-law.
After failing to get the Salvation Army to accept the Demeritt Farm property as a partial distribution of the Cash Trust’s obligation, James Ritzo sold the property to Plumer Homestead, LLC, for $200,000, but he distributed only $86,250.23 to the Salvation Army. He also persuaded the Salvation Army to accept the 6 Rock St. unit as partial distribution of the remaining interest. A year later, the Salvation Army accepted 4B Block St. as another partial distribution of assets.
Finally, Donovan alleges, although the Cash Trust still exists, Ritzo has never registered it with the Charitable Trusts Unit and has never filed the required annual reports.
“The unusual transactional history of the Rock Street and Demeritt Farm properties and the non-contractual nature of the transfers among the Three Trusts demonstrates that the Three Trusts existed merely as legal fictions and that James E. Ritzo freely commingled assets among them,” the petition states, diverting them to personal use.
“For his myriad breaches of fiduciary duty, James Ritzo is liable for breach of trust to the Salvation Army,” Donovan continues. “There is no evidence that the Cash Trust was ever reimbursed in connection with the Ritzos’ real estate conveyances or that all the proceeds associated with most of these transfers were ever distributed to the Salvation Army.”
In addition to damages and restitution to the Salvation Army, the petition seeks damages for breach of trust and a civil penalty of $10,000 for each violation of his duty as trustee, as well as “costs and reasonable attorney’s fees.”
James Ritzo declined comment and Thomas Donovan didn’t respond to a request for comment.