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Judge rules for nonprofits in $10 million trust battle
Tuesday, September 25, 2007

A judge has ruled in favor of four nonprofit organizations in a five-month battle over a $10 million trust that pitted them against other charitable groups and raised questions about the ethics of a respected local attorney.

Judge Robert A. Kelly of Allegheny County Orphans' Court ruled Friday in favor of Animal Friends Inc., the American Cancer Society, Geneva College and the Humane Society of Western Pennsylvania.

Their shares of the trust will apparently increase by hundreds of thousands of dollars each.

Three other groups -- Jefferson Regional Medical Foundation, Phipps Conservatory and Botanical Gardens, and Pittsburgh Symphony Orchestra -- will apparently not be entitled to any money at all. Six other charities will either see no difference or a minimal change to their distributions.

The four groups that raised a challenge objected to the way attorney Gregory A. Harbaugh tried to distribute the trust of Rita Conrady, a longtime Beaver County resident who relocated to Florida, where she died last year.

They argued that Mr. Harbaugh preyed upon an elderly woman in failing health and wrongfully modified the way Mrs. Conrady wanted to spread her wealth, cutting the amount going to the four nonprofit groups by a total of $1.2 million.

At the same time, they argued, Mr. Harbaugh added Jefferson, Phipps and the symphony at their expense and for his personal gain. Each would have received about $400,000 from the trust.

Mr. Harbaugh is on Jefferson's board and is a Phipps trustee. His wife, Gail, is a member and past president of the symphony association.

Mr. Harbaugh and his attorney, Mario Santilli Jr., have denied that Mr. Harbaugh took advantage of Mrs. Conrady or acted in his own interests. They said he tried to execute Mrs. Conrady's wishes.

Mr. Santilli yesterday described his client as "shaken."

Mr. Harbaugh, an attorney with the Houston Harbaugh law firm, is active in Republican politics and the nonprofit sector. He held power of attorney since the 1980s for Mrs. Conrady, her husband, Dr. William Conrady, and his radiology practice.

"I was surprised by this," Mr. Santilli said of the ruling. "We're reviewing the opinion and our options."

The court gave Mr. Harbaugh 30 days to present a distribution petition that reverts to Mrs. Conrady's wishes prior to last year, when the controversial changes took place.

"I'm really excited. I'm very, very happy. Justice prevailed," said Marleen Ashton, president of Animal Friends' board of directors.

The no-kill shelter stands to receive about $1 million -- twice the amount it would have received under Mr. Harbaugh's proposed distribution, which was tossed out by Judge Kelly.

Animal Friends has an annual budget of about $3 million, Mrs. Ashton said, so such a large donation will have a dramatic impact.

Animal Friends has a pending five-count civil lawsuit against Mr. Harbaugh alleging fraud and breach of contract among other things.

In his efforts to distribute the money, Mr. Harbaugh sent a settlement agreement drafted by Mr. Santilli to 13 charitable groups. They were supposed to sign off, as was the state attorney general, which oversees charitable groups. The agreement contains language that the document be sent for approval to the Orphans' Court.

In his nine-page opinion, Judge Kelly wrote that the settlement agreement could not be enforced because neither the court nor the attorney general's office signed off on it.

Judge Kelly also ruled that Mr. Harbaugh did not have authority under Florida law to change the distribution scheme without Mrs. Conrady's express consent.

Mr. Santilli said he viewed the court's approval as a "rubber stamp." The court disagreed.

John Edgar, attorney for Geneva College, filed the first motion challenging the settlement agreement. He said yesterday he was pleased by Judge Kelly's opinion and anticipated that the school would soon receive its share -- about $1 million, up from $800,000 under the proposed settlement agreement.

"There really shouldn't be any holdup. I can't imagine the symphony, Jefferson or the Phipps taking an appeal on this matter," Mr. Edgar said. "It's a fairly straightforward ruling that I don't think is likely to be disturbed on appeal."

It could not be discerned what Jefferson, Phipps or the symphony might do. Attorneys for the latter two groups could not be reached. Samuel Braver, who represents Jefferson, declined comment, saying he was still studying the opinion.

Absent from the judge's opinion was a ruling on Mrs. Conrady's state of mind in March 2006 when changes were made to the beneficiaries.

Mr. Harbaugh has said the two of them discussed how to modify the trust and she verbally agreed to all the changes. He said he revised the trust documents, signing on his client's behalf with the intention that she would sign them at a later date. But three days later, Mrs. Conrady was hospitalized and never recovered. She died in May 2006.

In the end, Mrs. Ashton said, the dispute was about principle, not payout.

"We did not do this just to get more money. We did this because it was the right thing to do for the organization, Mrs. Conrady and the community, so the community understands we will carry out whatever Mrs. Conrady's wishes are," she said.

"This was never our intent to be fighting with other charities. Those charities were not entitled to the money."

First published on September 25, 2007 at 12:00 am
Jonathan D. Silver can be reached at jsilver@post-gazette.com or 412-263-1962.
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