A Superior Court judge has ruled that Michael Paulson, son of the late Thoroughbred owner and breeder Allen Paulson, should be removed as trustee of his father’s living trust.
In a decision dated March 24, Superior Court judge Robert P. Dahlquist handed down his decision in San Diego County, Calif., 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.”
In addition, the judge wrote that Paulson “has committed a breach of the trust and has paid himself trustee’s compensation, which is excessive under the circumstances.”
Paulson said March 27 that he had not seen the judge’s decision and would withhold comment until he had done so.
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.
Michael Paulson and his father’s accountant, Edward White, were tapped by Allen’s trust to serve as trustees upon his death. Since a 2003 settlement between Michael and Madeleine Paulson, Michael has served as the sole trustee of the trust.
The judge also 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.”
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 estimated the living trust’s equine value at approximately $11 million. It also said Michael has spent an additional $4 million on buying more racehorses. In its conclusion, the decision reads “Effective immediately, Michael Paulson is removed as the trustee of the trust...James Paulson and Vikki Paulson (widow of Richard, who died in 2007) are appointed as co-trustees of the trust.”
Said Los Angelese attorney Neil Papiano, who represented James and Vikki Paulson in the case, “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."