A recession doesn't discriminate. Families of every income have had to face hardships, including Chicago's wealthy Bucksbaums.
In April, their company, General Growth Properties, filed for the largest real estate bankruptcy in U.S. history.
Now, a member of the Bucksbaum family is suing the family’s longtime attorneys for legal malpractice, blaming them for more than $300 million in investment losses from her share of the trust.
General Growth Properties owns, has interest in, or manages more than 200 regional shopping malls in 45 states, including Water Tower Place. By 2004, it was the nation's second-largest shopping mall company. But in the process of accumulating so much property, it accrued $27 billion in debt, mostly in mortgages.
As the economy took a downturn, GGP was unable to refinance those mortgages and negotiate new terms with lenders. In November 2008, the company missed a deadline to repay $900 million in loans. As GGP's stock plunged by more than 97 percent, board members seriously considered bankruptcy protection.
GGP failed to reach a deal with its creditors. On April 16, the company filed for Chapter 11 bankruptcy: the largest real estate bankruptcy since at least 1980, and the largest ever failing by a mall operator.
Mary Bucksbaum Scanlan, the 40-year-old daughter of GGP's co-founder, has lost more than $1.7 billion, according to a lawsuit she filed Monday against the family's law firm. She has alleged that the attorneys are responsible for more than $300 million of her losses.
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According to the lawsuit, the attorneys—Marshall Eisenberg, Earl Melamed, and their law firm—neglected their duties when they kept most of the trust's assets in General Growth stock, even as the stock declined from a high of $67 in 2007 to below $1 last year.
Especially pertinent to the case though is the fact that Eisenberg and Melamed also control General Trust Co., a corporate trustee set up to oversee Bucksbaum family trusts, including Scanlan's. The lawsuit suggests that Eisenberg and Melamed seemed more interested in serving General Growth than making wise investment decisions on Ms. Scanlan’s behalf, according to Crain's.
"As a result of these conflicts, (the law firm), Eisenberg and Melamed placed themselves in a situation in which they were rendered incapable of satisfying their professional obligations to render independent, objective legal advice as Mary’s counsel and ensuring that (General Trust) satisfied its fiduciary responsibilities to properly manage the assets of Mary’s Trusts for her benefit," the complaint says.
More than 70 percent of Scanlan's trusts' assets were in General Growth stock. By the end of 2008, her trusts had lost $1.4 billion.
The defendants' attorney argues, however, that the trusts' losses were caused by the collapse of stock markets last year.
"There is simply no basis for Mary's attempt to shift the blame for the trusts' losses to the law firm," Stephen Novack, an attorney representing Eisenberg, Melamed, and their law firm, said, reports the Chicago Tribune. "We are confident that when all the facts come to light, the firm and its members will be completely vindicated."
While a person should be able to trust the attorneys and accountants he or she hires to do the right thing, there is also something to be said for personal responsibility and keeping an eye on one's own finances.
Matt Bartosik, a "between blogs" blogger, rarely trusts anyone with his money.
