The Family Jewels

In life, Paul Kalmanovitz controlled every business decision related to his $500million brewery/real estate dynasty.He even made detailed plans forthe governance of his estateafter he died. So why is the Kalmanovitz fortune the center of two vituperative

But Hegseth told me she didn't want the story in the paper. She's afraid for her life, she said.

Then as the family-jewels case headed into its last day, she took the stand and told the story in open court.

"For three days my house was surrounded," Hegseth recalled in court last month. "They blocked my driveway. They were there twenty-four hours a day."

Hegseth is not a plaintiff in the family-jewels case. But she was an ever-present figure in the courtroom, sitting behind the plaintiffs' attorney, Thomas Hunt Jr., constantly handing him notes, some of which he used on cross-examination.

Hegseth told the story of the alleged raid on her house in order to illustrate what she and Hunt felt was the questionable behavior of the deputy attorney general on the case, Yeoryios Apallas.

Apallas was certainly pugnacious in court, sometimes losing his cool and yelling at witnesses rather than cross-examining them. Once, Hunt had to remind him that the case was being tried in a court of law and not a bar. But Hunt says Apallas has taken to the defense's case with too much gusto. According to the Sacramento lawyer, deputy AGs in trust cases are supposed to mediate, not prosecute one side of a case.

Hegseth shared another incident to make the point clear.
One day in mid-August, a witness for the plaintiffs was sitting outside in the hall of the courtroom and Apallas came out and allegedly started badgering the man. "What are you going to say?" Apallas said, according to Hegseth, who witnessed the incident. "I'm going to sit right here and listen to every word you two say."

Later, Apallas says he apologized to the court for his overzealous behavior. But in the process, he let go with a Freudian slip that the plaintiffs say gets at the heart of where Apallas' and the AG's Office's interests lay. "I was merely carried away in my attempt to represent the S&P Co.," Apallas told the judge.

S&P? Wasn't the AG representing the people of California, the ultimate beneficiaries of the Kalmanovitz charitable trust?

Hunt says sometimes he isn't sure who Apallas represents. Last October, for example, Apallas helped the estate pull $5.3 million out of S&P coffers in order to pay estate taxes.

The tax had kicked in because Orsi and others had received cash bequests from the last Kalmanovitz will. Since there was no ready money on hand, Bitting proposed selling some of his stock in S&P back to the company. The company would shell out the cash to pay the tax bill. A solid, legal plan. But a plan that the attorney general, in his role overseeing charitable trusts, had to approve.

Taking $5.3 million out of the company meant that was $5.3 million charities would not receive. But not only did Apallas argue in favor of the stock sale in front of Judge Dufficy, he wrote the court petition for the securities offering, a highly unusual move, Hunt says. And one which ran counter to the AG's mandate to protect estate largess for charities.

As he drags his dolly of documents out of the courthouse, Hunt explains why he thinks Apallas has taken such a shine to the trustees. "He's like a peacock," Hunt says. "He's playing with the big boys, the rich and powerful. He's carrying Bitting's cigars for him. He's riding in their limo."

But there's apparently another reason, Hunt and the Kalmanovitz relatives say. Sitting out by the courthouse fountain one day, Stanley Kalmanovitz drops one of his hints. "Campaign contributions," he says. "Check the campaign contributions."

So I do. I high-tail it down to the Registrar of Voters Office in San Francisco and per-use the major donor files. And lo and behold, S&P has given Attorney General Dan Lun-gren's campaign chest $229,700 since he was elected in 1990.

What's more interesting is the timing and amount of some of the donations. From 1990 to 1993, before Lydia died and before any lawsuits were filed, S&P gave Lungren no more than $3,700 a year. In 1993, they gave no money at all. Then in 1994, the year the lawsuits were being prepared, S&P gave Lungren $192,000. Granted, it was an election year. But Lungren was an incumbent up against a challenger who had little chance of winning.

Apallas says the allegations of misbehavior on his part are totally baseless.

First, he says Hegseth's account of the so-called raid on her house is a complete fabrication. "She was avoiding service of the subpoena," Apallas says in a phone interview. "She was hiding in the back seat of her husband's car with a blanket over her head in order to sneak into her house."

He says Hunt is misinformed when he says deputy AGs normally act as mediators in trust disputes. "I am engaged in this litigation to preserve the assets of the charitable trust," he says. "And any assault on those funds will be met with a substantial counterattack from Deputy Attorney General Apallas."

Hunt's implication that he argued against the interests of charities in approving the sale of S&P stock is also misinformed, Apallas says. "The tax had to be paid," he says. "The trustees had no choice."

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