Judge: Bank overcharged charity trust

A Horsham camp for poor children and the city's Episcopal cathedral won a partial victory in Philadelphia Orphans Court when a judge ruled that Bank of New York Mellon had no right to unilaterally raise fees for managing the Elizabeth England Trust.

Judge Joseph D. O'Keefe refused last week to oust Mellon as trustee for the charitable trust established by Elizabeth R. England, which finances the cathedral and Horsham's College Settlement Camp. But in a terse, seven-page ruling, O'Keefe rejected Mellon's argument that a 1963 fee agreement between England and Mellon's predecessor, Girard Trust Corn Exchange Bank, allowed Mellon to revamp its charges more than 40 years later based on its current fee structure.

O'Keefe also ordered Mellon to return more than $107,000 to the England trust for overcharging fees since 1998. During a 2009 hearing, a bank official surprised many in the courtroom by testifying that the bank had adjusted its fees years ago without seeking judicial approval.

England was a Girls' High art teacher and daughter of a pharmaceutical scientist and lab director at Smith, Kline & French Co., predecessor of GlaxoSmithKline. Her trust, whose value peaked in 1999 at less than $25 million, might never have drawn public attention but for the unusual fee dispute that erupted in 2007.

In a petition to Orphans Court, Mellon asked to be paid according to its "Standard Fee Schedule" for ongoing management of the trust, which also funds scholarships awarded each year at Girls' High and West Philadelphia High School to "a worthy, talented, and industrious young woman" who wants to study art at college.

But Mellon also sought more than $1 million in retroactive fees for running the trust from 1994 to 2007 - a request that drew sharp criticism from spokesmen for the beneficiaries, who accused the bank of gouging and mismanaging England's estate.

"They've spent more than $100,000 of the trust's funds to defend their right to remain the trustee. That's the part that kind of sickens me," Ralph McDevitt, College Settlement Camp's volunteer treasurer, said in a 2009 interview.

McDevitt, Philadelphia branch manager and an investment adviser for Raymond James & Associates, said the higher rates would have produced about $200,000 in fees in 2008, twice what Mellon earned under the original agreement.

McDevitt was also critical of Mellon's handling of the trust's assets - especially of its decisions to invest entirely in Mellon proprietary funds.

A Mellon spokeswoman said Tuesday that bank lawyers had not yet reviewed O'Keefe's decision and were not available for comment.

McDevitt, while pleased with the judge's ruling on Mellon's fees, said he was frustrated with the decision to keep the bank as trustee.

"It seems to me that the judge tried to split the difference," McDevitt said. "A biblical reference to a baby comes to mind, as no one really wins from this outcome."

Other representatives of the beneficiaries praised O'Keefe's ruling.

"We are delighted with the result that the court held that the bank is not entitled to increase its fees, that they're not entitled to get $1 million in retroactive fee increases, and that they have to return the secret fee increase," said Margaret E.W. Sager, a West Conshohocken attorney who represents the camp.

Nils Frederiksen, a spokesman for the state Attorney General's Office, which also weighed in against the fee increase, said the state was pleased with the result.

"The proceeds of the England Trust should benefit the community, not Mellon," Frederiksen said.

England's trust has provided decades of such benefits. In addition to the art scholarships, it has provided more than $10 million apiece to College Settlement Camp, which England served as a board member and volunteer, and to her beloved West Philadelphia church, which became the city Episcopal's cathedral in 1992.