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Court revisits financier

By   /   Monday, August 31st, 2009  /   Comments Off on Court revisits financier

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A wrongful death lawsuit unfolding in a Santa Barbara courtroom is shedding light on the final days in the life of the late Michael Klein, the fast-rising Santa Barbara hedge fund manager who died along with his daughter and a pilot in an airplane crash in Panama on Dec. 23, 2007.

Kim Klein, Michael Klein’s ex-wife, filed a civil suit against Michael Klein’s estate in mid-2008 for the wrongful death of their daughter, Talia Klein. Francesca Lewis, a friend of Talia Klein’s, was also aboard the plane when it crashed but survived. Her family also sued Michael Klein’s estate for personal injury, and the cases were combined into one 10-day trial before Judge Thomas Anderle in Santa Barbara County Superior Court.

No dollar figure has been named so far. But as a legal precursor to filing suit, Kim Klein and the Lewis family had filed claims against Michael Klein’s estate totaling $525 million. The estate rejected the claims, opening the door to civil suits.

Attorneys for Kim Klein and the Lewis family are asking a jury of seven women and five men to find that Michael Klein – who both sides agree was not flying the plane when it crashed and did not touch the controls – was nonetheless responsible for the accident because he was legally negligent. Lawyers for Klein’s estate are arguing to the jury that the blame rests with Edwin Lasso, the 21-year-old Panamanian pilot who died in the crash.
Here is what both sides agree on.

On Dec. 23, 2007, Michael Klein was vacationing his daughter and her friend on a set of bucolic islands off the coast of Panama that Klein had invested in as an eco-resort. On the second-to-last day of the trip, Klein had arranged for a junket to a ranch on the mainland to go horseback riding, one of his daughter’s favorite hobbies.
When the Cessna 172 that would fly the group to the mainland arrived on the islands, it wasn’t the pilot Michael Klein expected. Once the flight was under way, its correspondence with flight controllers suggests that it deviated from its scheduled course. Long after it should have landed, it flew into a cloud and then slammed into the side of an 11,000-foot volcano.

After that the sides diverge. They have made the question of who’s at fault a contest between the vastly different pictures they paint of Michael Klein.

Kim Klein’s attorneys want the jury to see Michael Klein as decisive and persuasive, a man who could cajole a pilot into flying into a cloud where he normally would not.

“Michael Klein was not a backseat driver,” Marc Moller, a Los Angeles attorney representing Kim Klein, argued in his opening arugments. “He was in the front seat [when the plane crashed]. Michael Klein was not a backseat driver in anything in his life. He was authoritative.”

Kim Klein’s attorneys are also trying to paint Klein as an experienced pilot who had logged flight hours in Panama and should have known danger when he saw it. They urged the jury to believe that Michael Klein was familiar with the area while Lasso was not and that he ordered Lasso to take an unplanned alternate route to the mountainside airstrip to avoid low clouds that had moved in.

“[Michael Klein] is a man who knew everything about the planes he used in Panama,” Moller said in his opening arguments. “This was a controlled flight into terrain, which means that somebody drove this plane into a mountain. It was not an accident. Michael Klein decided to put [the plane] there, not intentionally, but through his negligence.”

Kim Klein’s attorneys also went for the emotional gut punch. Moller held up a large photograph of a smiling Talia Klein and Francesca Lewis in ladybug costumes, calling Talia a “little angel.” A few feet from the jury, Kim Klein bit her lip and dabbed away tears with a tissue.

“The tragedy here is that we have a young child who was innocent, and we have Kim Klein here whose whole purpose in life was taken away from her when that plane crashed on Dec. 23, 2007,” Moller told the jury. “[Michael Klein’s] responsibility essentially was to keep [Talia Klein] safe and bring her back to her mother. This case is about this mother’s loss of the most important thing in her life – this 13-year-old girl.”

On the defense side, attorneys for Michael Klein’s estate portray Klein as a loving father but also a sophisticated and highly accomplished businessman who had graduated college at 17. They want the jury to believe that investors in his firms trusted Michael Klein because he didn’t play fast and loose with their money.

“He had incredible discipline and focus,” Gary Hill, a Santa Barbara attorney that had long worked with Michael Klein, said in his opening arguments. “Fortune 500 companies invested in this company because of his judgment and prudence.”

Hill also told the jury that the fact Michael Klein was putting himself on the same plane with his daughter should show that he felt it was safe.

“There’s no reason on earth why Michael Klein would want his daughter and her friend in a plane that appeared unsafe,” Hill said. “He was just taking his kids horseback riding. If something looked dangerous, you’d just go back to snorkeling. The fact that this sophisticated man got on this plane is all the evidence to see that he thought it was safe.”

Hill also sought to portray Michael Klein as a man who had dabbled with airplanes but given up flying two years before the crash. He pointed out that no one is claiming Klein was flying the doomed aircraft Dec. 23, 2007.
“Michael Klein was not the pilot of this plane. There will be no evidence to show that he ever had control of the plane,” Hill said. “He got on an airplane. He lost his life. His daughter lost her life. To suggest that he is responsible is wrong.”

Michael Klein’s estate wants the jury to blame Lasso for the crash.

“This was obviously a classic case of pilot error, and the pilot was Edwin Lasso,” Peter Ezzell, a Los Angeles attorney representing Michael Klein’s estate, told the jury. “The captain of the ship – the pilot in command – makes all of the decisions regarding the safety of the aircraft. Even if someone had put a gun to his side and told him to fly into clouds, it was [Lasso’s] responsibility to say, ‘I’m not going to do it.’ That’s what pilot in command means.”
Ezzell said in his opening argument that Lasso was taking an alternate, less cloudy route to the mountain airstrip. Lasso had meant to fly over a saddle in the volcano but got lost and flew into a box canyon instead, Ezzell told the jury. “Basically, [Lasso] turned left too soon,” Ezzell said.

Michael Klein’s hedge fund, Pacificor, was originally named in the lawsuits. Current Pacificor CEO Andrew Mitchell said that the fund’s insurance companies settled the matter early on but wouldn’t disclose the terms of the settlement.

In the nearly two years since Klein’s death, Pacificor has seen some of its investments suffer. It paid $40 million to help bring Michigan-based automobile parts maker Dura Automotive Systems out of Chapter 11 bankruptcy, but the deal closed as global demand for vehicles cratered along with the economy. The fund’s $39 million investment with the owners of the Terminator sci-fi franchise has ticked off a legal scuffle in which Pacificor is trying to reclaim the $24 million it alleges it has yet to be repaid. The fund is also still seeking $12 million it says it’s owed by a hard-money lender in Camarillo.

The trial against Klein’s estate is expected to end in early September. Judge Anderle has issued a gag order in the case, barring attorneys from commenting outside the courtroom.

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