November 19, 2009 in City

Boys ranch moves assets before abuse trials’ start

Alleging fraud, plaintiffs’ attorneys seek to delay proceedings

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Morning Star Boys’ Ranch has moved the bulk of its assets, including securities and real estate worth millions of dollars, to a nonprofit foundation in advance of the first trial over sexual abuse lawsuits against it.

In 2007, the ranch transferred more than $12 million in securities and other assets to the Morning Star Boys’ Ranch Foundation, an organization that supports youth sports and other charities, according to federal tax documents.

On April 2, the ranch deeded to the foundation 25 parcels of Spokane County real estate with a total assessed value of nearly $3.5 million. The signature appearing on those deed transfers as both grantor and grantee was that of Joe Pickert, a foundation board member who at the time was executive director of both the foundation and the ranch.

Those transactions follow the filing of 18 lawsuits against Morning Star Boys’ Ranch and some of its employees by former residents of the south Spokane facility for troubled boys, alleging beatings and sexual abuse. The lawsuits were filed beginning in 2005.

Morning Star and its supporters have vehemently denied those allegations, saying those filing suit are trying to squeeze money from the nonprofit organization.

Attorneys for 15 of the 18 plaintiffs against the ranch now have filed a motion seeking to delay trial in Spokane County Superior Court so that they can depose board members of the ranch and the foundation about the asset transfers. Morning Star’s attorney countered in a court filing Tuesday that he will try to prevent those depositions.

In an e-mail Wednesday, Seattle attorney Tim Kosnoff accused “Morning Star insiders” of trying to protect the ranch’s assets from upcoming litigation and “conspiring to commit a fraud of massive proportions.” He called upon state and federal authorities to open a criminal investigation into the matter.

The directors of the Morning Star Boys’ Ranch and the newly renamed Morning Star Foundation deny that the transfers were made to defraud potential creditors, which would be a violation of state law.

“There was no attempt to defraud anybody,” said Richard I. Petersen, the ranch’s executive director, who added that forming a foundation is a common practice among charitable organizations.

“It was transparent and done with the advice of legal counsel,” Petersen said.

Petersen, who has served on the ranch’s board of directors since 2008, became director in April, succeeding Pickert, who remains executive director of the Morning Star Foundation.

According to Pickert, the foundation, established in 2006 “to support causes that help young people grow into successful citizens,” raises funds through charitable donations. By far, most of the foundation’s assets are a result of the transfer from the ranch.

The foundation’s federal tax filing for 2008 shows it began the year with $12.5 million and ended with $9.1 million. It raised $137,000 through contributions and grants and reported total revenue of $321,000. It paid out $1.4 million in grants, most of that to support the operations of the ranch, according to the tax documents.

Other beneficiaries include Spokane South Little League, AAU Youth Basketball, Southside Christian School and Greater Spokane League programs, Pickert said.

Asked if the ranch’s benefactors approve of the assets being used for purposes other than caring for troubled boys, Pickert said, “The foundation is a vehicle for us to preserve and protect what the donors intended.”

Attorneys for the plaintiffs saw the ranch’s transfer of assets “without the exchange of reasonable equivalent value” as an attempt to render the nonprofit judgment-proof.

“It is sort of like if a millionaire rear-ended you and when you filed a lawsuit against him, he gave away all of his money and said there was nothing to recover in your lawsuit,” Seattle attorney Daniel Fasy – who’s working with Kosnoff to represent 15 of the plaintiffs – said in an interview. “Instead of litigating these claims in good faith, MSBR has taken steps to render itself insolvent by simply giving assets to another corporate entity.”

But Pickert and Petersen said in a letter Wednesday that “the ranch remains a solvent entity with sufficient assets capable of satisfying the demands of such creditors.”

Linda Hume, a University of Washington law professor specializing in bankruptcy and commercial law, said the state’s Uniform Fraudulent Transfer Act allows creditors to ask the court to reverse property transfers made prior to bankruptcy.

“If you transfer something for less than fair value, it is presumed to be fraudulent and can be undone,” Hume said, even if there was no fraudulent intent.

The real estate transferred includes most of the 222-acre ranch, except for the southern portion on which the ranch buildings sit at 4511 S. Glenrose Road.

The foundation has entered into a deal with the Spokane South Little League to sell 19 acres in the northeast corner of the ranch for use as a baseball complex. However, neighbors opposing the sports complex have filed an environmental appeal, which will be heard next month.

The foundation also received from the ranch several residential properties, mostly in south Spokane; a cabin on Newman Lake; and 675 acres of Lincoln County farmland, which had been transferred to the ranch by the Catholic Diocese of Spokane.

Though the ranch and the foundation have separate boards of directors, the foundation’s four-person staff, including Pickert, is headquartered at the ranch.

Since June, six employees have been terminated at the ranch and two others have resigned, according to management and employees. The fired employees, all of whom had direct contact with the resident boys, sent a letter to Morning Star’s board last month alleging mismanagement of the ranch and intimidation of employees. In later interviews, three of the six ex-employees alleged that Pickert and Petersen were spending more than $1 million a year in administrative salaries and attorneys’ fees.

“They are sucking the ranch dry,” John Loch-ridge, a 30-year employee who was fired in September, said in an interview. Lochridge said he was terminated for questioning management practices.

Pickert and Petersen, both of whom come from business backgrounds, say the ranch is being run more efficiently with its 30 employees than it was with 48 last year.

“We have brought a business discipline” to the ranch, Petersen said.

But there also are fewer boys – 11 at the ranch and six at Morning Star’s Bosco House, a facility for boys 16 to 18, and Savio House, a home for adult graduates of the Morning Star program. At one time there were more than 30 boys in residence at the ranch. Petersen said he would like to see those numbers again.

The Department of Social and Health Services has three boys placed at the ranch and four at Bosco House. A DSHS spokesman said state budget cuts have resulted in fewer placements with residential providers.

The lawsuits against Morning Star have been separated into individual trials. The first is scheduled to begin Jan. 4 in the courtroom of Judge Kathleen O’Connor and will center on allegations brought by Kenneth Putnam, who says he was molested by the ranch’s former director, the Rev. Joseph Weitensteiner, during a boating trip in the 1980s.

Weitensteiner, who retired as director in 2005, has denied the allegations. He is on the board of the Morning Star Foundation.

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16 comments on this story so far. Add yours!

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  Uptight_Spokanite on November 19 at 7:04 a.m.

  This is gonna be an ugly one. The massive transfer of assets may be a sort of pre-trial admission of liability. I'm guessing if they took the risk of negative publicity and possible legal inquiry into the transfer, they must know they've got a tough road ahead on the allegations.

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  Fixer on November 19 at 7:26 a.m.

  Spokanite -

  I agree with you. Even if it's a move made in the normal course of doing business, the timing couldn't be worse.

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  Rifleman__Dodd on November 19 at 8:51 a.m.

  and Judge O'Connor is not the sharpest knife in the drawer either. I'd recuse her in a heartbeat for having an IQ lower than the outside (or inside) temperature. A renta-judge from Witless County could do better.

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  Spokanite on November 19 at 9:05 a.m.

  This article is good but doesn't even touch on the tragedy of the staff that were fired. Six of the child care staff were let go because they spoke out against the administration. These were the ones who took care of the boys and were their family. Residential Counselors, the two Social Workers, and the Equine Program Supervisor were let go with no warning and were all told it was because the Ranch was “going in a different direction.” The fallout has been tragic as the boys (many with abandonment issues already) try to deal with their issues as their base of support is ripped out from under them. All of the staff that were fired had been working there for between 4 to 30 years. Two other staff resigned, one because of harassment issues and one because of sexual discrimination.

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  Anonymous on November 19 at 9:55 a.m.

  There are no winners in this litigation - the damage has been done. The ranch is protecting whatever it can - the attorneys are whining not so much about their clients as about their potential loss of a windfall in fees.
  The boys remain in need of counseling - past and present residents. Perhaps the bulk of attention should be placed towards their continuing care and not so much whining about asset transfer.
  Dismissal of employees is always a negative - put it in perspective with the Spokane labor marketplace. How many others have lost their jobs because of the economy?
  Hope the Ranch finds a way to appropriately take care of their charges.
  

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  David Partovi on November 19 at 10:26 a.m.

  Not to comment on the story, but just to set the record straight for Rifleman Dodd, Judge O'Connor is, in fact, the very sharpest knife in the drawer and everybody who truly knows anything about it agrees.

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  Anon on November 19 at 10:53 a.m.

  Yes, the focus should be on the boys and their needs. The staff were not fired because of the “economy”. All of their positions were replaced. The horse program supervisor's position was filled by Suzy Dix's daughter. Dix is a member of the Foundation Board.

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  ReesRHallJr on November 19 at 10:54 a.m.

  Hi People.. Has anyone been at MSBR before?? Does anyone ever met the staff at the MSBR?? Well I have over the years. I just wanted to say to the guys are making these stories up thank you for destroying legacies of the staff that loved the boys so much and wanted them to succeed. I have to say this I am the LATE REES HALL JR'S GRANDDAUGHTER.. I love him so much and would do anything to keep his name and legacy alive and I would do the same Father Joe. U don't know that ur destroy their legacies.. Stop what ur doing and think about the other people that have families.. Your Destroy My Grandpa Rees Hall Jr's legacy.. I was only 7 yrs old when died.. Please talk to the relatives before making stories. I grew up appreciating the ranch and Father Joe.. Where in the heck u get these ideas.. Go sue the families that beat up their children and wifes.. Leave the ranch alone and get on with ur life. Just stop destroy staff. Don't bring down my Grandpa Rees and Father Joe. They haven't done anything wrong to me and my family.. Get off the drugs! Live a normal life. Stop destroy me and my Grandpa Rees Hall Jr and Father Joe he's my other Grandpa.. My Grandpa Rees Hall Jr has been dead for over 23 yrs.. He would been there to support u.. Who is making up these stories tell me in my face and what my Grandpa Rees and Father Joe have done. I want to know.. My Grandpa Rees and Father Joe mean everything to me and I can go.. Thank you for hurting me and my family and many other families, Alummni's.. U have no respect for me and other families.. Stop and realize ur making a big problem.
  Morning Star Boys Ranch no matter what I do appreciate what the ranch has done over the yrs. I hope that Grandpa Rees's spirit stays alive. If u see his ghost just tell him that I love him very much and miss him.. He will always be loved!!

  To the guy who is making up this story do u know what is love all about and treat people?? Thank you for destroying the legacies.. Thank you for destroying my Grandpa appreciation for the ranch and his spirit.. Thank you telling me that My Grandpa Father Joe wasn't doing the awsome job at the ranch and thank you telling that My Grandpa Rees shouldn't be my hero!! My Grandpa Rees loved the ranch so much that he died at the ranch.. I have so little of memories of him and ur out to take that away from me.. Heck no ur taking anything away from me or the ranch. We not perfect people.. We just want to make a difference in people's lives..

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  CONCERNEDREADER on November 19 at 11:00 a.m.

  This comment is in regard to, and in agreement with David Partovi, I am an attorney and can say from experience, Judge O'Connor is one of the best, intelligent, and sharpest knives we have on the bench…. the person who made that comment about her has no idea what they are talking about.

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  Steve on November 23 at 8:05 a.m.

  move along, no anti-catholic bias at the spokesman, nothing to see here..

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  spoketucky on November 23 at 6:25 p.m.

  reeshalljr: Based upon the record of the Catholic Diocese of Spokane using every method of chicanery to obfuscate their culpability in the perpetuation of sexual abuse by members of their clergy, your comments are delusional.

  You may be realizing that you are victim too, but in the early stages of dealing with the trauma. Experts call it denial.

  These cases will not go to trial and will all be settled out of court. Since the Ranch managed to clearly violate the intent of asset transfer legislation the dwindling congregation of Catholics in Spokane best be ready to swipe their debit/dcredit cards again before taking a place in the pews.

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  Cody on November 24 at 7:00 p.m.

  Anon,
  Good job Sherlock on your personal investigation, you just pointed out something that is so glaringly obvious that it was advertised on their website as well as the most recent newsletter. Don't you think the ranch considered how people, like yourself, might react to this situation but still replaced the former supervisor with someone so competent that it would be worth the fallout? Just because someone's parents are apart of an orginization does not not make them any less qualified. In fact, hiring someone who is a third generation supporter, and yes, smarty pants, Suzy Dix's father was also a huge supporter, would enhance an employee's commitment to an organization. I personally know the lady that is running the equine program now, and she is more horse savy than 95% of people that even claim to know anything about horses. And with a Bachelors degree in animal science, a record of leadership and limitless resources within the horse community, you would think she is plenty qualified. So please next time do some real research on someone's qualifications before assuming their parents have anything to do with it. Thank you for choosing to become more educated and next time try not to cheapen a woman's success by giving her parent the credit.

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  Sharpgarry12 on November 27 at 9:48 p.m.

  One should not look at this activity in a vacuum. Here in Bellingham, St Joseph's Hospital became Peacehealth in a “sale”. This transfer, I believe, leaves the two establishments owned by the same entity as before the transfer, the Roman Catholic Church. I believe that the church and the pope are strapped due to an inability to pay off on “contracts” and defend against pedophilia claims. Liabillity, for the sake of the Empire, the church and the pope, had to be limited or eliminated! “So long as the Empire continues to exist”.

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  Anon on November 28 at 10:27 a.m.

  I don't see it 'advertised' anywhere on their website. What IS advertised, though, it that they do Equine Assisted Psychotherapy- which they don't. Neither the new horse person or any of their mental health staff are trained in it. This training is expensive and also requires plane fare and hotel fees. Are they going to train these people? Maybe. But they're certainly not trained now and running a program like the website says. And she did get her job because of her mom.

  I find it a bit fishy that they also advertise 'programs' like livestock and agriculture management. Maybe feeding goats and chickens can be considered a livestock program. Or do they mean taking care of the horses- but wouldn't that be part of the horse program? I don't think you can say the boys are involved in an agriculture program when the only agriculture they have is the hay field. That the hire someone to take care of.

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  Sharpgarry12 on November 28 at 10:04 p.m.

  Folks, there is an infringement on the protection from criminal activity at the FEDERAL level. Everyone seems to have forgotten the implementation, federal control, and necessity for the federal law, The White Slave Act! Why has this ignorance penetrated our society? It is not as if slavery has EVER left us. I do not understand, why people do forget or ignore this extremely important law. Do they think that hospital and medical clinic patients do not qualify as slave victims. Do they think that pedophilia is not slavery when it is done by authorities, and by whose dictates? There should be FBI involvement in a White Slavery Crime! Where in this creation are they?

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  vapors67 on November 30 at 10:06 a.m.

  im not making up what happened to me an im not on drugs!!!!morning star needs to be held responsible for the things they let go on and did nothing about!!!! those are the facts !!!!!!!!!! they ruined my famlies life and mine and the other people involved for ever.

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