Paulson Suit Alleges 'Breach of Trust'

By Jack Shinar

The volcanic relationship between the son of deceased multi-millionaire Allen E. Paulson and his stepmother figures to erupt in California Superior Court in northern San Diego County later this year.

Madeleine Paulson, widow of the man who owned champion Cigar and dozens of other top stakes winners, is seeking the removal of Michael Paulson as co-trustee of the Allen E. Paulson Living Trust. In a probate petition filed Jan. 24, she seeks his ouster for "breach of trust" and demands he be required to pay for damages resulting from his "malfeasance."

Madeleine Paulson, who lives in San Diego, contends that Michael Paulson's "stated hatred to others" of his stepmother led him to take actions that were directly intended "to harm (her)."

Reached by telephone, Madeleine Paulson said, "Horse racing has given me many thrills, and I've enjoyed many wonderful partnerships over the years, first with my husband, Allen, and with Jenny and Sid Craig, and now with Action Racing and others. But if it becomes unpleasant, there comes a time" to end it.

The case is in discovery phase with a hearing in Superior Court expected later this year, said attorney Jack Jones, who is representing Madeleine Paulson in San Diego County. Attorney Andrew Garb, who represents Michael Paulson, did not return phone calls.

Madeleine Paulson charges that Michael Paulson "breached his fiduciary duties" by failing to administer the trust, provide loyalty to beneficiaries, avoid conflict of interest, protect trust property, and make the trust productive.

Specific examples of what she called "pure malice" toward her by Michael Paulson included having her parking privileges and then her honorary membership with the Paulson Trust-owned Del Mar Country Club stripped, and cancellation without notification of her health insurance.

She claims Michael Paulson ignored her proposal of $20 million to purchase the Del Mar Country Club from the trust, when the best offer he had received from another source was $12 million. He also rebuffed her offer of $50,000 more than what he had received in bid for one of his father's airplanes, Madeleine Paulson charges in the suit.

As far as the Paulson bloodstock operation is concerned, Madeleine Paulson contends her stepson has failed to sell more than 70 horses in the 18 months after Allen Paulson died in July of 2000, and continues to race many of them in his own name. In addition, he has spent $4 million in trust funds to purchase more horses, she alleges.

As a result of his refusal to sell off assets, the trust was forced into selling "stock under disadvantageous circumstances" to satisfy estate taxes, according to the petition.

The lawsuit is the latest exchange in a battle that began publicly in August, when Michael Paulson fired trainer Simon Bray and moved many of the trust's California-based horses to Laura De Seroux's barn. He later moved Kentucky stallions Theatrical and Jade Hunter and 16 mares and foals from Diamond A Farm to Hill 'n' Dale Farm. Both farms are in Kentucky.

Among the horses affected in the move is Azeri, a 4-year-old filly that has romped over her rivals in a pair of grade 1 races, the Santa Margarita and Apple Blossom handicaps, in her last two starts for De Seroux.

Madeleine Paulson has retained Bray as her trainer and continues to own horses, mostly in partnerships. She recently formed Action Racing with other partners.