Apr 9, 2012

Widow with dementia gave $600,000 to Kabbalah Centre charity

She also borrowed millions to build a home in Beverly Hills. Her financial advisor, a key figure in the oversight of Kabbalah Centre finances, has been instrumental in those expenditures, public records and interviews show.
Harriet Ryan
Los Angeles Times
April 9, 2012

Susan Strong Davis, an 87-year-old widow, spends the day inside her Palos Verdes Estates home, tended round-the-clock by nurse's aides. For company, relatives say, she has her dog, the television and, on increasingly rare occasions, memories of the glamorous socialite's life she once lived.

"She definitely has some sort of dementia," said Viki Brushwood, a niece who visited from Texas in December. "I don't know if it's Alzheimer's or what. She is somebody who is not making decisions anymore."

But decisions involving large amounts of money are being made in Davis' name. In recent years, she has borrowed millions to build a four-bedroom house in Beverly Hills featuring three fireplaces and a pool, according to property records, court filings and interviews. She has also given at least $600,000 to a charity to which relatives say she has no ties and which is run by the controversial Kabbalah Centre, the Westside spiritual organization now under investigation by the Internal Revenue Service.

Public records and interviews show Davis' longtime financial advisor, John E. Larkin, has been instrumental in these expenditures. A veteran entertainment industry money manager, Larkin has been a devout student of the Kabbalah Centre's brand of Jewish mysticism for nearly a decade and is a key figure in the oversight of its substantial financial assets. He was handling his elderly client's personal finances when she made the donation. And Davis' Beverly Hills home is being built on a lot Larkin previously owned and sold to her at a substantial personal profit.

Larkin, 64, did not return messages seeking comment. Although the IRS' criminal division has been investigating the center and its controlling family, the Bergs, for tax evasion for more than a year, Larkin has not been identified as a subject of that probe and has not been accused of any crime in handling Davis' money.
Davis has no children, and her siblings are dead. Those relatives still in touch with her — three nieces — said they visit at most once a year. Neither they nor seven other family members contacted were aware of her donations to the Kabbalah Centre or of the home under construction in Beverly Hills.

Bunny Sumner, an 89-year-old niece who lives in Carlsbad, said that when she visited Davis two years ago she was "well into" dementia.

"She wasn't a bit well," Sumner recalled. "We just talked about old times."

The daughter of Frank R. Strong, a pioneering real estate mogul who made a fortune subdividing Southern California scrubland, Davis grew up in a turreted mansion in La Cañada Flintridge. Her family's dinner parties and vacations were detailed on the society pages. She became a professional ice skater, touring in the chorus line of Sonja Henie's ice revue. She married three times, including a 1951 union with British actor Richard Stapley that put her on the Hollywood party circuit. Her last husband, Frank Davis, died in a car crash in the 1980s.

She was a free spirit before it was a free spirit time. [A] very Katharine Hepburn-ish type but only better looking," said nephew Thomas H. Dutton of Lodi.

Davis' lifestyle was underwritten in part by a trust fund set up upon her mother's 1962 death and supervised by a Los Angeles probate court. By 1981, the original trustees had died or become too ill to serve. At Davis' request, the court appointed Larkin one of two co-trustees. How he and the heiress had become acquainted is unclear.

Larkin operated a financial advising business in Sherman Oaks, and he had built up a clientele of TV executives, athletes and actors that eventually included the likes of Ricardo Montalban and Candice Bergen.

The court approved Davis' choice of Larkin and a second trustee, George W. Dickinson, a real estate developer who had known Davis for decades. The men took control of the trust, a portfolio of stocks, oil rights and other assets valued in a court filing last year at just under $11 million.

Over the next two decades, Davis signed off on their pay and put Larkin in charge of her personal finances as well, according to court filings. Within a two-year period a decade ago, their compensation doubled to $100,000 a year, probate records show. Since 2002, the trust has paid Larkin and Dickinson a combined $900,000.

Larkin's intense involvement in the Kabbalah Centre began in the early 2000s, a period in which Madonna's devotion piqued the interest of many in Hollywood. Raised Roman Catholic, Larkin became close to founders Philip and Karen Berg. He converted to Judaism and took a top center official, Orly "Esther" Sibilia, as his fourth wife in a 2006 ceremony performed by the Bergs' son Yehuda. The couple bought a $2-million home on the Beverly Hills block where the Bergs and their sons live in side-by-side homes.

The family put Larkin in charge of an auditing committee that oversees center finances, and according to a suit pending against him and the center by a former member, he also managed personal investments for Philip Berg and his celebrity followers.

In 2006, a center charity, Spirituality for Kids, attached a list of the previous year's major contributors to a publicly filed tax return. Madonna, who has served as the organization's board chair, gave generously as did local billionaires Stewart and Lynda Resnick. The biggest donor of all, however, was Susan Davis, whose tax-exempt contribution was listed at $600,000. The address listed for her was Larkin's office.
Relatives said that when they visited Davis in the mid-2000s she was lucid. They said she never mentioned kabbalah or Spirituality for Kids. Her family was nominally Protestant, but she had never demonstrated an interest in religion, relatives said.

"I never heard of her going to church," said Karen Molinare, a niece who lives in San Diego. "She's been known to go to a wedding and not show up at the ceremony, just the reception."

It is not clear what instructions Davis might have given Larkin about the donation. While Larkin was an almost daily presence at the Kabbalah Centre, former employees and members said they never saw her at center classes, religious services or other events.

Whether Davis made other donations is not known. Spirituality for Kids did not disclose its contributors before or after that year, and the center has never made public its donors. Through a spokesman, the center declined to answer questions about Larkin, Davis or her donations.

Spirituality for Kids' finances are a subject of the federal probe. The nonprofit shuttered its domestic programs last year, citing budget problems.

In 2009, a period in which Davis' relatives say her memory was failing, Larkin sold her the vacant lot he owned near the Kabbalah Centre's Robertson Boulevard headquarters for $1.4 million. Although it was one of the worst real estate markets in memory, the sale price for the land on South LaPeer Drive was $300,000 more than Larkin had paid for it in 2004, according to assessment records.
To facilitate the sale and construction of a home on the site, Davis has borrowed $2.65 million from the trust, according to property records and court filings. The trustees had informed the probate court of potential conflicts of interest in the past, including Larkin's handling of Davis' personal affairs. But their annual reports to the judge did not disclose Larkin's role in the home sale.

"The judge has nothing to say about it. It's not trust business," said Alan L. Rosen, a Westlake Village attorney who filed the trustee accountings.

Experts consulted by The Times disagreed, saying the real estate deal appeared to be a conflict of interest that called for a judge's review. Under the state probate code, a transaction "by which the trustee obtains an advantage from the beneficiary is presumed to be a violation of the trustee's fiduciary duty."

Arnold Gold, a retired L.A. County Superior Court judge, said a judge could determine whether such a transaction was legal only if trustees brought it to the court's attention.

"It's a conflict of interest. In my opinion, he should have disclosed the entire aspect of the loan, not only that she was borrowing it for a house but that he was the seller," Gold said.

The trustees' filings state that the loans to Davis were "to help with costs on her new home." Davis has lived for three decades in her large Palos Verdes Estates home overlooking the ocean, surrounded by a flower garden and decorated with mementos from her ice skating career. The Beverly Hills house sits on an alley next to a defunct car dealership. It is a block from Larkin's own home and in an area convenient for Kabbalah Centre followers who want to be within walking distance of their synagogue because of the Sabbath prohibition on driving.

In a brief phone interview, Larkin's co-trustee, Dickinson, who is 85, said he hadn't had contact with Davis in "a couple of years."

"Most of the paperwork is handled by Mr. Larkin," Dickinson said. He said he was unaware of Larkin's role in the transaction but didn't see it as his concern.

"I'm a trustee, not a guardian. She can give it all to the dog and cat hospital if she wants," he said before hanging up.

Rosen, the trustees' lawyer, said, "If Ms. Davis has a problem, I suppose she could complain about it." Asked whether dementia might prevent such a complaint, he said he had no information about her health and hadn't seen her in "many, many years."

"I know nothing about the woman," he said.

Despite $1.2 million advanced for construction by Davis' trust, the Beverly Hills home sits half-finished because of what the contractor said were his client's "cash-flow" problems. Ron Kolodziej of Niagara Construction said he had never met Davis and dealt exclusively with Larkin. He said four months ago, Larkin told him that the owner wasn't going to move into the home and that it would be sold instead. To make it more attractive in the heavily Orthodox Jewish neighborhood, he said, Larkin directed him to install a kosher kitchen.
One recent morning, a home health aide who answered the door at Davis' Palos Verdes Estates residence said Davis was in bed and unable to talk to a reporter. Asked whether Davis might be available by phone, the aide shook her head.

"She is not allowed to use the phone," the aide said. "She has a trustee that takes care of that sort of thing."