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He built a fortune on a widow's funds

The venture capitalist is ordered to pay her and her family $100 million.

January 27, 2007|Kim Christensen | Times Staff Writer

Neil Kadisha is one of Los Angeles' richest people, with a fortune based largely on his stake in the once-highflying wireless tech firm Qualcomm Inc.

The 51-year-old venture capitalist and father of three -- worth $910 million by one estimate -- also is known as a generous benefactor of charitable causes here and in Israel.

But a recent court decision casts him in a far harsher light, finding that he relied on more than savvy for his success.

Over an eight-year span beginning in 1988, Kadisha looted the trust funds of a young widow and her children and then parlayed the ill-gotten gains into a sizable chunk of his wealth, a judge ruled.

"Kadisha was no more than a common thief in his monumental takings of [their] money for his own use and benefit," Judge Henry W. Shatford wrote in a blistering, 190-page decision that capped a four-year civil trial in Los Angeles County Superior Court.

Portraying Kadisha as self-serving and deceptive, Shatford said the Beverly Hills resident took $6.2 million from Dafna Uzyel, a family friend who sought his help after her husband died. While acting as trustee for Uzyel and her children, he used their money to replenish his Union Bank credit line, buy real estate and acquire Qualcomm stock.

"Kadisha could have been charged under the Penal Code for Grand Theft ... for his misappropriations," Shatford wrote. The allegations have never been investigated as a crime.

Shatford ordered Kadisha, a former Qualcomm director and once one of its largest shareholders, to pay the family $100 million, including $5 million in punitive damages.

Kadisha, who declined to be interviewed, has asked for a new trial and plans to appeal. He contends that the funds he took from the family's trusts were legitimate loans, ultimately repaid in full, with interest.

"I am deeply disappointed that what began as an effort to help a family friend, at her request, resulted in these unfair claims," he said in a written statement.

Kadisha's lawyers say that Shatford's references to him as a criminal are unjustified and should be removed from the decision, which was made public last month, after the bench trial.

The case is remarkable for several reasons, including the size of the award, which legal experts say is extraordinary among trust cases involving individuals. It also stands out because the Uzyels' trusts eventually gained $20 million despite Kadisha's actions, unlike cases in which unscrupulous trustees have left their victims penniless.

"It is undisputed that while I was the trustee, the Uzyel trusts increased in value from less than $6 million to more than $27 million, representing a 22% average annual return over 12 years, and guaranteeing the financial security and independence of the Uzyel family," Kadisha said.

Friend of the family

The case is detailed in 20,000 pages of testimony and 3,000 exhibits generated since Uzyel sued Kadisha in 1999. Shatford, an 89-year-old retired judge, heard the case by special assignment.

Its genesis was the May 1986 death of Rafael Uzyel, 40, who suffered a fatal heart attack while driving back from Mammoth Lakes, Calif., with his wife, then 28, and their children, Izzet, 6, and Joelle, 4.

The couple had married in Israel in 1979 and later moved to Los Angeles, where Rafael ran a successful business importing fabrics to sell to manufacturers. He managed the couple's assets, which included a house in Beverly Hills, an apartment in Israel and $2 million in a Swiss bank account.

Dafna, a native of Israel who spoke little English, had worked only briefly, as a makeup artist, and had almost no financial experience, Shatford wrote.

After Rafael's death, his sister in Switzerland, Lillian Nomaz, sought to restrict Dafna's access to the couple's bank account there, contending that the widow's prolific spending would threaten the children's interest in the $2 million.

With almost no liquid assets and in need of a lawyer to fight Nomaz's challenge, Dafna turned to Kadisha, then a young entrepreneur and friend of her late husband. He put her in touch with his own attorney, who settled the dispute with Nomaz by creating a trust fund for the children.

The lawyer also set up a trust for their mother, and at her request, Kadisha became trustee of both funds.

But the lawyer built in "escape clauses" that effectively relieved Kadisha of all legal liability, Shatford said, calling it "almost unbelievable but true."

Another lawyer drafted three "shocking" amendments that Kadisha induced Dafna Uzyel to sign, Shatford wrote. One of the documents authorized Kadisha to lend trust money to enterprises in which he had a financial interest and to make loans and investments "that might be deemed imprudent."

Kadisha wasted no time in taking advantage of Uzyel's lack of sophistication to tap the trusts as his "veritable piggy bank," Shatford said.

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