A San Benito County Superior Court judge on Monday, Nov. 13, ruled that Mitchell Dabo, president of the county Board of Education, illegally emptied nearly $644,000 in a private charitable trust for his own personal use.
Superior Court Judge Marjorie L. Carter ordered Dabo to pay the Community Foundation for San Benito County—which had been promised money from the trust—$1.74 million in damages, plus an estimated $85,000 in attorney fees.
“I’m glad it’s over—but we’re not going to see any of it,” said Gary Byrne, executive director of the Community Foundation, despite the court victory that ended a five-year struggle to get money from a trust established by a Hollister couple.
“My understanding is there is no money,” said Byrne. “We just hope this doesn’t happen to anyone else.”
Lawyers said such awards likely would not be dischargeable in a bankruptcy when they involve a fraudulent, willful, or reckless breach by the a trustee.
Dabo did not appear at the 90-minute trial in Hollister. He had said in court papers he should not be held accountable for the missing funds because a former business partner had defaulted on most of a $490,000 unsecured personal loan.
Bank statements presented in court Monday showed that Dabo’s loan to the late Jack Tyler and other deposits into Dabo’s personal accounts came from a charitable trust that Dabo had managed for Barbara and Tony Matulich of Hollister. Tony Matulich died in 2003; Barbara Matulich died in 2012. All remaining funds in the Matulich Charitable Trust were designated for the Community Foundation in the event of their deaths..
The judge doubled the actual damages in her ruling, because state law allows for the doubling of damages in cases where a defendant’s action are “self-dealing, serious, willful and in bad faith.”
Dabo did not respond to an emailed request for comment on Carter’s ruling.
Immediately after her 11am ruling, the judge asked: “Has this been referred to the D.A.?”
John Clark, the Morgan Hill attorney representing the Community Foundation, said its complaints about Dabo—affirmed by evidence accepted by Carter in court this week—had been passed on to local police and prosecutors for possible criminal violations.
San Benito County District Attorney Candice Hooper said late last month that she would not make a decision on whether to begin a criminal investigation of Dabo’s actions until after the civil lawsuit had been resolved. On Tuesday, she said she had not made up her mind whether to ask city police or some other agency to investigate possible criminal charges.
Clark presented the judge at Monday’s trial with a thick evidence binder that included more than 230 pages of copies of bank statements, canceled checks and emails, which showed a multi-year pattern of electronic transfers of funds from the Matulich charitable trust to Dabo’s personal accounts.
Dabo was named sole trustee of the Matulich trust in 2008, and bank statements and canceled checks showed the trust was quickly drained, except for regular deposits by Dabo to provide for $3,000 monthly payments to Barbara Matulich until her death. Bank records show Dabo even wrote several checks to the widow after her death.
Dabo owns a Hollister liquor store, and the website for Dabo Financial Group continues to offer estate and financial planning services, despite the fact that Dabo has no licenses or authorized credentials for such activities. He was censured or fined on four separate occasions in 1998, 1999 and 2001 for selling securities or acting as a securities broker by the Financial Industry Regulatory Authority.
Dabo listed his business address in court papers as 801 San Benito St, which is in the same building as Dabo Liquor Store. His LinkedIn profile says he is President of Dabo Financial Group, LLC and a financial planner.
He advertises his business as Dabo Financial Group LLC, but the California Secretary of State has no record of an LLC or corporation with that name or for the name of Mitch Dabo Associates, a name used on some bank accounts. A limited liability corporation, Dabo Holdings LLC was formed in 2007, and has an active registration with the Secretary of State, listing Catherine M. Dabo as the sole principal and as manager.
Clark told the judge Monday that Dabo had refused to produce detailed financial documents for the Matulich trust. The lawyer obtained them with a subpoena of records and correspondence from the Salinas accounting firm of Hayashi Wayland.
It remained unclear this week whether this week’s civil court judgment—and the revelations of documents showing how Dabo drained more than $640,000 from a charitable trust to his personal accounts—would have any impact on his duties as president of the county school board, or as a 23-year trustee for the county Office of Education.
Dabo was elected to the county school board in 1994 and was elected board president in 2016. He is up for reelection in 2018.
Carter’s ruling that Dabo’s actions with the Matulich trust violated state probate laws represented a legal victory for the Community Foundation, which filed the lawsuit against Dabo in December 2015, after three frustrating years struggling to obtain some financial accounting of the Matulich trust.
Byrne said he doesn’t expect Dabo to be able to pay Monday’s judgment.
Carter also ruled Monday in a separate but related lawsuit that the Community Foundation be paid an additional $35,500 by Dabo. Claims against two co-defendants, Jim Morris and David Vavoulis, former Dabo business partners, were rejected by the judge, who ruled that a $40,000 loan from the trust between Dabo and Tyler was an individual loan, and did not involve the other two partners. The judge said the loan amount was part of her probate ruling, but added $35,500 in interest to the promissory note.
Dabo, a licensed financial representative from 1983-1999, had been a longtime friend of Barbara and Tony Matulich when they named him the trustee of the Matulich trust. Appointed in 2008, Dabo had sole authority to manage the trust, which was established in 2001 with $750,000 and had $643,599 in 2008, according to court documents.
Instead of investing the trust money so it could grow, Dabo, according to court documents, “utilized the trust assets for his own personal use,” including spending on auto repairs, restaurants, clothes, airline tickets and tickets to sporting events—and the unsecured loans to Tyler.
“Clearly, he used the money personally for his own interests,” Clark told the judge on Monday.
Clark walked the judge through the bank statements and canceled checks, showing a pattern of borrowing money from the trust, which “continued through his tenure until there was no money left to borrow.”
Morris and Vavoulis were partners with Dabo and Tyler in a development firm called DMT Investments. They claim in court papers that they have no connection to the dispute between Dabo and the Community Foundation, saying that Dabo had acted as an individual, and not in any capacity with their partnership. “The partnership did not misappropriate any money from the trust,” said Wade in court papers.