FILED: NEW YORK COUNTY CLERK 04/03/ :27 PM INDEX NO /2017 NYSCEF DOC. NO. 30 RECEIVED NYSCEF: 04/03/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X BRIAN A. RAPHAN, solely in his capacity as Guardian of the Property of Edward Strasser, on behalf of himself as Guardian, Edward Strasser, and the Estate of Edward Strasser -against- Plaintiff, JEFFREY A. ASHER and ROBINSON BROG LEINWAND GREEN GENOVESE & GLUCK, P.C., Index No /2017 Part 43 Ho. Robert R. Reed AFFIRMATION OF BRIAN A. RAPHAN, GUARDIAN, IN OPPOSITION TO DEFENDANTS MOTION TO DISMISS THE COMPLAINT Defendants X I, BRIAN A. RAPHAN, ESQ., an attorney duly admitted to the practice of law before the Courts of the State of New York, hereby affirm the following under the penalty of perjury: 1. I was appointed as permanent Successor Guardian of the Property (and not of the Person) of the Edward Strasser ( Guardian ). I submit this affirmation in opposition to the defendants motion (the Motion ) to dismiss the verified complaint ( Complaint ), which I filed January 5, 2017, against Jeffrey A. Asher ( Asher ) and Robinson Brog Leinwand Greene Genovese & Gluck, P.C. ( RBL ). 2. I have reviewed the guardianship file in Index No /13, the verified Complaint, and the brokerage accounts generally of Mr. Strasser, and I have personal knowledge of the facts set forth herein and of those documents, except where I state it is on information and belief. To the extent I refer to exhibits submitted in support of the Motion by the affirmation of Marian Rice, I refer to them as she designated them, Exh The exhibits attached hereto are true and accurate copies of the documents referred to, and together with the exhibits submitted with the 1 of 17

2 opposition affidavit of Samuel J. Furnival ( Furnival Aff. ), I shall refer to them by letters A, etc. Thus, the exhibits attached hereto are A through S, and the exhibits attached to Mr. Furnival s affidavit are T through MM. For the Court s convenience, Exhibit A hereto is an index of the exhibits A-MM, which plaintiff is submitting. 3. For the reasons set forth below, I submit that the claims are well pleaded, and the issue of dismissing the Complaint as a second-filed action has been resolved against defendants by the July 21, 2014, order of Justice Visitacion Lewis, Exh.D, discussed at 6 below. 1. The Guardianship Proceeding a. Background 4. On May 23, 2013, Richard Strasser, Edward Strasser s son, filed a petition for appointment of a guardian of the property of Strasser, an alleged incapacitated person. Index No /2013 (the Guardianship Proceeding ). By Order dated July 18, 2013, the Court (Visitacion-Lewis, J., the Guardianship Court ) appointed Asher sole temporary Guardian of the Property. Exh. B. By Order dated October 8, 2013, the Guardianship Court appointed Asher, sole permanent guardian of the Property and appointed Francine Strasser (Strasser s wife) and his friend Ika Brakha as co-guardians of the person of the IP ( Co-personal Guardians ). Exh By Order to Show Cause in the Guardianship Proceeding, signed March 20, 2014, the Co-personal Guardians sought to remove Asher as the property guardian. RBL represented Asher in the Guardianship Proceeding to oppose that petition. To add insult to injury to Mr. Strasser, RBL later filed an application to be paid by the Strasser s Property for opposing the petition to remove Asher. Exh. C. 6. After holding a hearing with argument on this petition to remove Asher, by Decision and Order filed July 21, 2014, the Guardianship Court decided to replace Asher and restructure the. 2 2 of 17

3 guardianship, with Asher continuing to serve for a transition period pending the appointment of a successor property guardian. Exh. D, p. 5. The Guardianship Court stated, however, in footnote 1: Nothing contained in the court s determination that it is necessary to appoint a successor guardian of the property may be interpreted as a finding on the merits of the claims made against Jeffrey A. Asher, Esq. The defendants have totally ignored this Decision and Order, and in particular the following language on page 5, which is controlling with respect to their instant motion. ORDERED, that any issues and argument seeking damages based upon claims of poor business judgment, improper investment decisions, or other financial matters that are not within the scope of this guardianship matter, must be filed in an appropriate forum, and that the guardians shall refrain from attempts to litigate such matters before this court by letter or otherwise. 7. By Order entered August 27, 2014, the Guardianship Court removed Asher as property guardian and appointed me as successor guardian of the Property, and pending the issuance of the permanent commission, temporary successor guardian of the Property. Exh. 6. Subsequently, on December 24, 2014, the Guardianship Court appointed me permanent property guardian. b. The Accounting 8. After he was removed in August 2014, Asher failed to file a timely, final account for his permanent guardianship for the period after October 8, 2013, and failed to file any final account for any acts during his temporary guardianship (July 18, 2013, through October 8, 2013), a period during which the Complaint alleges that one of the improper, involuntary sales of Strasser s stock occurred. 9. As a result of his delay, upon my petition, by Order dated, March 11, 2015, the Guardianship Court ordered Asher to show cause why he should not be ordered to immediately file his final account. Exh. E of 17

4 10. On March 23, 2015, Asher finally filed a petition to approve his final account, but his account only covered his permanent guardianship beginning with the Court s order of October 8, Exh. F. 11. By Order dated December 8, 2015, the Guardianship Court directed Asher to submit a long-overdue Amended Final Account on or before January 28, See description in the Court s order of June 16, Exh. G (without attachment). 12. On or about March 7 and April 20, 2016, Asher filed an amended final account and a second amended final account. See description in Exh. G. Again, he only filed an account for the period beginning October 8, 2013, and none of these papers accounted for anything from July 18, 2013 through October 8, I objected. 13. On June 16, 2016, the Guardianship Court appointed a Special Referee to hear and report on the second amended final account. Exh. G. 14. On June 25, 2016, I petitioned the Guardianship Court to compel Asher to file his final account for the period of his temporary guardianship. 15. On July 13, 2016, the Guardianship Court signed an Order for Asher to Show Cause why he should not settle a final account for the temporary guardian period. Exh. H. 16. On September 6, 2016, Asher filed a verified, purported final account as to his temporary guardianship, entitled Supplemental Petition for Accounting of Temporary Guardian and Discharge of Temporary Guardian. Exh. I. This purported accounting listed no assets, despite Asher having sole control of the Property. See infra. Rather it had three selfdescribed schedules, pp.3-4, which respectively read MARSHALED ASSETS $0; DEPOSIT AND ADDITIONS $0, AND BALANCES $0. Apparently forgetting his initial order of appointment and various contrary statements he made during his temporary guardianship, see. 4 4 of 17

5 18-22 infra, at paragraph 4 of Asher s alleged account, he stated under oath to the Court for his explanation for not accounting for any assets during this period: None of the IP s assets were marshaled during the period in which I served as temporary property guardian. My duties as temporary guardian did not include marshaling the IP s assets, liquidating the investment accounts, or selling any portion of the IP s assets or investment accounts. While Asher also claimed in that document that he created a plan to diversify Strasser s accounts, I have seen no evidence of a plan or of any steps he took to diversify or to support his other claims. 17. For the following reasons, I submit that the trier of fact in the Action could find that Asher lied to the Court in his account of his temporary guardianship and each other time he has denied authority to marshal and dispose of assets during that period. 18. First, as the Referee noted in Exh. 8, 18, the July 18 order first appointing Asher temporary guardian, Exh. B, page 2, directed: The temporary guardian shall... exercise the powers to review [the IP s] financial records... and determine their appropriate disposition; to investigate the... status of the[ip s] tax filings;,,, to negotiate the settlement of any tax liability;,,, and to review [the IPS ] investments and investment strategies, evaluate risks, and make appropriate decisions accordingly. 19. Second, as the Referee noted in Exh. 8, 19, the July 18 order also incorporated by reference the Temporary Property Management Powers set forth in the original petition to appoint a guardian, which powers included: (b) to establish a guardianship account for [the IP]; (c) to collect all income... ; (d) to marshal or recover all assets held by [the IP] or in his name, and to deposit the same into a guardianship account; (f) to pay, settle or otherwise dispose of lawful expenses and liabilities of 17

6 20. To the extent Asher was in doubt about this issue (although I submit he had no reasons for such doubts), Asher never sought clarification from the Guardianship Court. 21. As the Referee further noted, Exh. 8, 20-21, Asher actually did marshal assets and exercise control during his temporary guardianship, although his sworn account denied doing so. 22. The exhibits we are submitting include the following as examples only: a. Exh. II is an dated September 24, 2013, concerning whether to take action with respect to the IP s Merrill Lynch brokerage account, including closing out a short call option position and using proceeds to buy back the call and lower margin in the account. Asher admits (emph. added): Although it is within my authority as Temporary Property Guardian for Ed to make this decision solely, and will do so forthwith, if you disagree with this course of action, please let me know at your earliest convenience so that I may consider your opinion. b. Exhibit EE is an dated September 25, 2013, from Asher to David J. Katz of Merrill Lynch, instructing the broker to sell 4,000 shares of Strasser s stock holdings in UTX. c. Exhibit FF is a letter dated August 12, 2013, from RBL to Franklin Templeton Investments forwarding instructions from Asher to liquidate and close any Strasser accounts and issue a check to Asher as guardian. 23. On September 29, 2016, I objected to that final account. 24. By Order dated September 15, 2016, the Guardianship Court directed the Referee to review Asher s purported final account for the period of Asher s temporary guardianship. On December 13, 2016, the Referee rejected the accounting as defective because Asher refused to. 6 6 of 17

7 account for any assets for the temporary period. Exh. 8, The Referee s report does not reflect that he did anything to review Asher s actual decision making with respect to the Property, and he did not make any findings about that or any damages. Rather, he only reviewed whether Asher had accounted for all the Property under his control during the entire period, and he limited his recommendation as to Asher to the following 45(a): JAA s accounts should not be settled at this time and should be amended to include all transactions in which he had any role. 25. It is four months later, and Mr. Asher has done nothing to correct the accounting or file any further papers. It is almost three years since he was terminated. The Guardianship Court has taken no action or scheduled anything further, but of course that court knows I have filed this Action, and knows it issued the July 21, 2014, Order. c. Fee Applications 26. On November 4, 2016, the Guardianship Court signed an Order to Show Cause returnable November 21, 2016, why it should not approve the interim fees of his counsel and expert for this Action ( Application 1 ). Justice Visitacion-Lewis did not, however, hear or do anything else to consider or issue a decision on Application On or about January 27, 2017, the Guardian submitted to the Guardianship Court a second Order to Show Cause why it should not approve additional professional interim fees. ( Application 2 ). Justice Visitacion-Lewis never signed the second Order to Show Cause and never took any actions to consider Application Instead, Justice Visitacion-Lewis issued two orders transferring both Applications to Justice Friedman, then presiding over the Action. Exh. J. On or about February 28, 2017, after the Action was randomly assigned from Justice Friedman to Justice Reed, Judge Moulton. 7 7 of 17

8 referred both Applications to Justice Visitacion-Lewis for expedited disposition. Exh. K (without attachment). On March 6, 2017, however, Justice Visitacion-Lewis closed the Applications and determined that the assessment of the Applications was best made by the Justice presiding over the Action. Exh. L. 29. Subsequently, the Applications were assigned to a referee to hear and determine. d. Nature of the Guardianship Proceeding and Accounting 30. The Guardianship Proceeding is not a plenary action and the accounting is not an action at all. Mr. Asher has repeatedly delayed his accounting for more than two years and then to this day has refused to account. RBL is not a party there, and defendants have not shown how plaintiff could not make RBL a party to the accounting. Asher has never properly accounted for the Property and transactions relating thereto, which Property was under his solely control from his appointment on July 18, 2013, through October 8, 2013, when his appointment became permanent. There is no ongoing litigation in the accounting with respect to the facts alleged in detail in the Complaint, and Justice Visitacion-Lewis has taken no action or made any findings with respect to Asher, even when she terminated him. 2. Asher Acts as an RBL Partner and Acts of RBL 31. Based on the exhibits submitted with the Furnival affidavit, I respectfully submit that in deciding whether I have a cause of action against RBL, the Court may consider those documents, which support our position that I have a bona fide cause of action (i) against RBL (a) in Claim, both for its liability for Asher s acts as an RBL partner and for his acts if he were an agent and not a partner; (b) in Claim 2 for tis liability for failure to supervise Asher; and (ii) against Asher for punitive damages. Inter alia, these facts (all of which were known RBL) show that during Asher s guardianship of the Property:. 8 8 of 17

9 (i) Asher was a partner of RBL and Fees Earned from the Guardianship would benefit RBL; (ii) (iii) Asher and RBL held Asher out to the Court and the world as an RBL partner; Asher and RBL promoted Asher s skills, knowledge, and experience as a fiduciary and an RBL partner; (iv) Asher used the resources of RBL to assist him in performing his duties as a Guardian, and to the extent he could charge his ward for that, also benefitted RBL; (v) Asher s work benefitted RBL because he likely had to pay to use its resources; and because he hired RBL as his attorneys in the guardianship, from which RBL would seek to recover substantial fees; (vi) RBL had a duty to supervise its partners and actually did so, and it represented on its website that it advised its fiduciary clients [which included Asher] how to act to carry out their fiduciary duties. 32. In addition, defendants counsel has advised my counsel that the RBL liability insurance policy includes coverage for work as a guardian. Upon information and belief, for underwriting purposes an application for such insurance commonly includes questions about the percentage of the fiduciary/guardianship work of the partners and employees of the firm. For example, I have obtained a copy of an application of the Hartford Insurance Company for such law firm liability insurance, which policy provides coverage for fiduciary matters like a guardianship. Exh. M. As the Court can see, question 22 requires an answer about this type work, and if the answer is Yes, it requires the applicant to fill out the Trustee Supplement form, which requires extensive information about fiduciary activities and the nature of any investments. We submit that a. 9 9 of 17

10 similar application required of RBL would show RBL s knowledge of Asher s guardianship and other fiduciary activities, and that this also supports the bona fides of our allegations that RBL was aware that Asher was performing guardianship work and that it was within the scope of his work as a partner. 33. On March 1, 2017, we served upon the defendants a formal demand for documents, including (i) documents reflecting the terms of the agreements between Asher and RBL and how RBL and Asher answer any insurance application questions and (ii) Asher s s concerning Strasser while he was guardian. Exh. N, pages On March 3, 2017, we also made an request to defendants following up our formal demand and focusing on documents relevant to the relationship between Asher and RBL. Exh. O. Defendants have refused to produce these documents. 3. This Action a. Preliminary Matters 35. By Orders dated June 22 and 27, 2016, the Court authorized me to retain a financial expert and counsel, respectively, to advise me, what, if any claims, I should pursue with respect to the facts during Mr. Asher s guardianship. Exhs. P and Q. 36. In order to be as efficient as possible and try to save any unnecessary fees and expenses, if possible, we took two steps. First, I proposed to the defendants, and they agreed, to execute an agreement tolling any statute of limitations while we investigated the facts. Second, after my advisors and I investigated the facts, on November 2, 2016, my attorneys sent Asher and RBL a detailed 13 page demand letter setting forth the potential claims and damages and requesting that all parties submit to a third-party professional mediation in an attempt to resolve of 17

11 this dispute without ligation. After some time, the defendants informed us that they would not agree to a mediation. 37. As a result, at my direction, Mr. Devorkin prepared and on January 5, 2017, filed a Summons and Complaint and designated the Commercial Division. The action was initially assigned to Justice Marcy Friedman. Three times, the Guardianship Court or the Chief Administrative Judge have declined opportunities to have the Guardianship Court hear the Action. 38. First, the Complaint and the filing cover papers clearly specified that the Guardianship proceeding was related and pending. Complaint 10. But at no time did the Guardianship Court take any steps to have the Action proceed in that forum. Again, doing so would have been contrary to the July 21, 2014, Order. 39. Second, on February 27, 2017, after Justice Friedman informed the parties and Chief Administrative Judge Moulton that she did not consider the Action a commercial case and referred the matter to him, both sides wrote letters to Judge Mouton stating their views as to which Court should hear the matter. 1 On or about February 28, Judge Moulton acted to randomly assign the Action rather than assign it to the Guardianship Court. This resulted in its assignment to Justice Reed. 40. Third, as set forth above, I twice requested the Guardianship Court to approve the payment of fees of my counsel and expert for this Action. Twice Justice Visitacion-Lewis declined to hear such Applications or consolidate the Action as related, but instead, on February 10, 2017, and March 6, 2017, issued orders transferring the Applications to the Justice presiding 1 Inter alia, plaintiffs urged to leave the case in the commercial division or in the alternative assign it to a Part that can give it expedited consideration, and which could also decide the motion to dismiss. Exh. R. Defendants urged that the case was not a Commercial Division case, and the matter be transferred to Justice Visitacion-Lewis who may then hear the issues raised in Defendants motion to dismiss. Exh. S of 17

12 over the Action because a decision on the Applications was best made by the Justice presiding over the Action , supra. b. The Nature of the Action 41. The Complaint alleges that Asher breached his fiduciary duties in two ways. First, he failed to act at all, and to the extent he acted, he was grossly indifferent and incompetent, with respect to Mr. Strasser s financial investments and his strategy to manage and protect them. Second, he (i) failed to pay timely or at all bills of Mr. and Mrs. Strasser and payments due Mrs. Strasser, which put various accounts in default; caused Mrs. Strasser to borrow money; created great havoc; and (ii) was abusive to the Co-personal Guardians. Complaint Mr. Strasser s principal financial assets, held in brokerage accounts (the Accounts ) was a large position - as many as 60,000 shares - of United Technologies (UTX), which he had acquired a long time before his incapacitation, at a very low cost basis, held for a long time, and had grown to a market value in excess of $5,500,000. Complaint As a result of this low basis, any sale of the stock prior to Mr. Strasser s death (when an automatic step-up in cost basis would occur) would result in a realized taxable gain and thus a very large, unnecessary, capital gains tax, a depletion of Mr. Strasser s assets, and the loss of those assets that generated appreciation, dividends, and cash from margin loans that were critical to support Mr. and Mrs. Strasser. Complaint I anticipate calling one or more experts to testify that (i) in order to prevent this bad result and conserve Asher s assets, for some time prior to his incapacity, Mr. Strasser used a prudent, well-recognized, hedging strategy for the UTX stock (the Strategy ), known as a lowcost collar of put and call stock options; (ii) that Asher could have and should have maintained of 17

13 this Strategy; and (iii) Asher s failure to do so was grossly negligent and caused Mr. Strasser economic damages of $2,000,000 or more. The Strategy enabled Mr. Strasser to eliminate most of the downside risk to his concentrated UTX position; to receive dividends on the stock, and to retain significant appreciation potential of the stock; and to avoid the realization of the large embedded taxable capital gain. 2 The cost of the Strategy was reasonable and minimal in relation to its benefits. 45. In order to meet his cash needs, Mr. Strasser also used the UTX stock for liquidity to support himself and his wife by borrowing on margin to generate cash. The Strategy was also an important tool to prevent margin calls that would trigger a costly, forced sale. Using margin in conjunction with the Strategy is also a common technique to monetize large, concentrated, low cost basis stock positions, taking into account the health and life expectancy of Mr. Strasser, and Asher should have continued it. 46. Beginning July 18, 2013, and during the entire period of his guardianship, Asher had sole authority (and obligation) over the Accounts and the powers and duties to marshal, administer, and account for these and other assets; to make decisions; and to make true and accurate reports to the Court and Co-personal Guardians. Asher (i) did nothing to investigate properly the facts and inform himself about the Strategy, the Property, and the financial condition and needs of Mr. Strasser; (ii) ignored repeated warnings and pleadings from the Copersonal Guardians and others to maintain the Strategy and protect the Property; and (iii) did not take appropriate action to marshal assets and to invest and to protect the investments and 2 Strasser periodically bought puts at strike prices out of the money (i.e., below the current market price of the stock) and sold calls at strike prices out of the money (i.e., above the current market price of the stock). As the market price of UTX changed, Mr. Strasser bought further puts and sold calls at intervals for different periods in order to protect his position. The premium obtained from selling the calls generally largely paid for the premiums to buy the puts. Any costs above the premiums generated from the call sales were more than covered by the UTX dividend, which was generally about two percent of 17

14 maintain the Strategy. Essentially, he put his head in the sand and ignored his responsibilities. As a result, more than 30,000 shares of the UTX stock were sold involuntarily and unnecessarily, resulting in damages of at least $2,042,000 as of the date of the Complaint. 47. In addition, even though the Property included cash, at times more than $1 million, Asher breached his duties by failing to pay bills and to make other payments for the benefit of Mr. and Mrs. Strasser. Accounts, including credit card, rent, phone, and insurance bills, fell into arrears and default, tax warrants were issued, and other threats to the Strassers well-being ensued. Often Asher s negligence required Mrs. Strasser and Ms. Brakha to pay for such expenses themselves. The additional compensatory damages are hundreds of thousands of dollars. 48. Defendants contend that my Claim 2 for faulty supervision requires that RBL have notice about Asher s conduct. While I dispute this, we have obtained other information about prior complaints or lawsuits against Asher for his alleged professional negligence, and we submit that such prior allegations would constitute notice to RBL. Our discovery request no. 20 also requests this. 4. Defendants Refuse to Provide Discovery Relevant to the Motion. 49. On March 1, 2017, my attorneys served on defendants counsel a simple demand for the production of documents. Exh. N. Responses were due March 21, At the first court conference on March 16, 2017, (now adjourned to May 4, 2017), I was present for meetings with the Court attorney at which my attorneys requested that discovery proceed and be completed quickly, including discovery relevant to the defendants motion. Defendants objected on the grounds that the motion stayed discovery pursuant to CPLR 3214(b), although the rule of 17

15 gives the Court authority to permit discovery to proceed. We were unable to meet with the Court that date, and no discovery was ordered. 50. I also note that defendants have not served discovery demands, but requested that I voluntarily provide them a copy of all hard files of Asher s that Asher turned over to me when I replaced him as Guardian, consisting of two bankers boxes. On March 3, 2017, although defendants had not filed discovery demands and had not agreed to provide discovery to me, I produced to them a searchable, digital copy of these boxes consisting of approximately 4000 pages (we shared equally the cost). 51. Defendants motion makes the bald and unsubstantiated assertion that Asher s work on the guardianship was not as a partner of RBL, within the scope of his duties as a partner, and within the scope of or in furtherance of his duties as an employee or agent of RBL. Defendants have not produced a single document concerning, let alone supporting, this assertion. 52. The pleadings are sufficient to sustain the allegations, and it is not necessary for a plaintiff to produce any proof in support of or to detail these allegations. Nevertheless, I have sought relevant documents from the defendants, who have refused to produce such documents that are relevant to the issues they raise in the Motion. I respectfully submit that the Court take into consideration in deciding the Motion, the fact that defendants have refused to produce such documents that would be highly relevant, including for example documents that define the scope and duties and benefits to each party of Asher s RBL partnership. 53. While my document demand to RBL sought documents relevant to the performance of Asher, it also sought documents relevant to the motion, which they have refused to produce, including documents concerning (number below refers to the document request number): of 17

16 ... (i) the terms of the relationship, position, and partnership of Asher at Robinson Brog; and (ii) agreements and understandings between Asher and Robinson Brog Concerning his work as a court-appointed guardian, including but not limited to the use and application of Robinson Brog resources, funds, or support of any kind for such work by Asher, (iii) the application and any sharing of any fees received any Asher for such work, and (iv) Asher s holding himself out to the public and the courts as a partner of Robinson Brog. No Robinson Brog s assistance to Asher with respect to, or knowledge about, Asher s education, knowledge, experience, and training from January 1, 2008, to date with respect (i) investments in any publicly traded securities, (ii) investments in any form of option on publicly traded securities, (iii) the duties of a property guardian, and (iv) the Prudent Investor Act. No Communications between or among (a)... Robinson Brog, on the one hand, and (b) [others] Concerning the Guardianship and the Assets.... No the application of Robinson Brog and Asher for insurance to cover Asher s work while holding a position at Robinson Brog, including but not limited to his work as a guardian. No. 16. WHEREFORE, I request that the Court deny the Motion is all respects and grant Plaintiff s Cross-Motion in all respects. SIGNATURE ON NEXT PAGE of 17

17 BRIAN A. RAPHAN, a member of the Bar of the State of New York, under penalty of perjury, hereby affirms the aforementioned statement.,., B IAN A. RAPHAN Dated: ~~ ~, ~,~ ~~ 17 of 17