Dueling financial portraits of John Paterakis emerge in legal battle between widow and children over his estate

Nov. 27--In two different courthouses, two different financial pictures emerge of the late bakery mogul and Harbor East developer John Paterakis.

There is the Paterakis who was awash in cash, stashing millions of dollars in safes and "play money" accounts that he used for gambling or buying expensive gifts. That at least is the view from Baltimore Circuit Court, where his widow Roula Paterakis sued the six children from his previous marriage on Nov. 13 for her share of what she says is a $1 billion fortune. Three others are also named in the suit.

But in Baltimore County's Orphans' Court, Paterakis' will and other documents filed after his death on Oct. 16, 2016 depict someone whose assets were largely held in trusts rather than easily accessed cash. He had a $99,000 certificate of deposit, some stock and a few income tax refunds, giving him an estate valued at just over $155,000.

How much Paterakis left behind after his death at age 87 and how much will go to his second wife are at the crux of a family feud playing out in multiple court filings. Paterakis, who turned a small rowhouse bakery into a multi-million-dollar conglomerate and became an influential campaign contributor known as the "bread man" to local and state politicians, had lived a life in which personal and financial details were kept mostly private.

Now, some of that's becoming public. Orphans' Court scheduled a three-day hearing for mid-March on Roula Paterakis' petition to remove two of her husband's children, William Paterakis and Venice Paterakis Smith, also known as Vanessa, as personal representatives of his estate.

"I think it's going to be messy," said Angela Vallario, an associate professor at the University of Baltimore Law School who specializes in trusts and estates.

At issue is reconciling what Roula Paterakis' lawsuit says is "cash hoards" that her late husband maintained in an office safe, bank accounts and safe deposit boxes, with what has been filed in Orphans' Court, which makes no mention of such stashes, she said.

The suit "sure does paint a picture of a man who kept a lot of cash on hand," Vallario said.

Any cash a person keeps around must be reported in an estate inventory, she said.

Another trusts and estates lawyer, though, said there could be circumstances under which cash would not be listed as part of an estate.

"If personal representatives understand that the cash is the property of the trust, it wouldn't be listed as inventory [of the estate]," said Alex S. Tanouye, a Bethesda-based trust and estate lawyer. "There must be some basis for personal representatives to take the position it's not the property of the estate."

Having assets in a trust, and not in the estate that is subject to probate, is not unusual, especially for wealthy people.

"There are legitimate ways to shelter income," said Bobby Waldrup, accounting professor and interim associate dean of the Sellinger School of Business at Loyola University Maryland. "A billionaire could die with much of his income sheltered."

Paterakis' will, submitted to the Baltimore County Register of Wills on Oct. 24, 2016, offers no details on how he wanted his estate distributed, referring instead to a trust that apparently includes those terms. The trust is not public.

"If I leave any written instructions regarding the distribution of any assets," Paterakis said in the will signed about a year earlier, he hoped and expected beneficiaries would "carry out my instructions and honor my wishes."

An initial inventory of Paterakis' estate was filed on February 27, saying it was worth $116,868.56. Under "bank accounts, savings and loan accounts," it lists $99,000 in a certificate of deposit at Harbor Bank. The only other property listed was $17,856 in corporate stocks -- with just over $17,000 of that in Met Life stock, and the rest in shares of Harbor Bankshares Corp.

Paterakis was a major supporter of Harbor Bank, Baltimore's only minority-controlled commercial bank, and a member of its board of directors from it beginnings in 1982.

On July 19, the Paterakis siblings filed an updated accounting of the estate, adding additional income and subtracting various expenses. The Met Life stock was sold for a more than $2,700 profit, for example, and there were six state income tax refunds from 2012 to 2015,that totaled almost $36,000. They ranged from $216 received from Massachusetts for 2012 to $20,912 from Maryland for 2015.

Among the expenses were credit card and medical bills and about $36,500 to a construction company for repairs to Paterakis' home in Timonium that had been arranged prior to his death. There were also funeral expenses and probate fees and other administrative costs. The total estate came to $155,354..

According to Roula Paterakis' lawsuit, that figure should be much greater. She alleges that her husband's cash, assets and "controlling interest in the H&S Bakery enterprise" are worth more than $1 billion and should be part of his estate. The suit alleges that Paterakis' children have withheld assets including millions of dollars in "cash hoards" that their father kept in safes and bank accounts.

Documents filed in Orphans' Court show trouble brewing between Roula Paterakis and her husband's children by his first wife over the past year. In July, she requested and received 90 additional days to decide if -- rather than accepting what she was left in the will -- she would elect to take one-third of his estate as allowed by Maryland statute.

On Oct. 11, she sought another three-month extension, citing a dispute over the estate. While she and the estate representatives "have made progress toward resolving that dispute," she said, "they need additional time to complete their negotiations."

Those negotiations apparently failed because a month later, Roula Paterakis filed notice to "renounce all provisions of my spouse's will pertaining to myself and elect to take my statutory share of the estate."

How much of John Paterakis' wealth is rightfully a part of his estate and thus subject to his widow's claim to one-third of it will be hashed out among lawyers and in court. Her lawsuit alleges that the defendants -- the six Paterakis siblings, a son-in-law, a grandson and a business associate -- transferred assets into trusts to keep them out of the estate. In September 2014, for example, about $23 million of assets were transferred into a newly created irrevocable trust, the lawsuit said.

In life as in death, John Paterakis' wealth is not publicly known. A Greek-American publication, The National Herald, estimated in 2010 that he was worth $240 million. The Herald said that made him the 39th richest Greek-American in the country. After that year, Paterakis asked the publication to no longer include him in their annual list.

That there would be a squabble over how that is dispersed is "not surprising" given the family dynamics, Tanouye said.

"Speaking from my own practice, the vast majority of elective share cases involve an underlying dispute between the surviving spouse and children from an earlier marriage," he said.

Paterakis married Antoinette "Toni" Apostolou, in 1950; they had six children and divorced about 40 years later. He and Roula Passon began dating in 1997, she moved in with him in 2001 and they married in 2015, according to her lawsuit.

"When someone very wealthy gets married late in life, that's when red flags go up with estate planning attorneys," Tanouye said. "If there is explicit animosity already, that's a larger red flag. And if there's a lot of money that's at stake, to mix metaphors, that's almost strike three.

"You're almost guaranteed litigation," he said.

But there is usually great motivation to handle any disputes without going to court, he said, both to keep from airing any dirty laundry and to preserve as much wealth as possible from going through an expensive legal battle.

"They almost always settle," Tanouye said. "There has to be some amount of money that would make this go away. Are the children willing to give that up to avoid the fight?"

[email protected]

twitter.com/jean_marbella

*

Cyber Monday: Online shopping hacks to hunt down best deals and save the most

*

Meredith to buy Time Inc. for upward of $2.8 billion in deal backed by Koch brothers

*

Consumers shop small on Saturday after Thanksgiving

___

(c)2017 The Baltimore Sun

Visit The Baltimore Sun at www.baltimoresun.com

Distributed by Tribune Content Agency, LLC.