ALBUQUERQUE, N.M. (KRQE) – State regulators finally have control of a non-profit accused of stealing millions of dollars from New Mexicans with special needs, but another challenge now lies ahead.
The state is beginning the process of trying to recover hundreds of thousands of dollars for clients of the nearly defunct Albuquerque-based Desert State Life Management trust company that’s at the center of a state and federal investigation.
State financial investigators believe that up to $4 million in private funds was taken from roughly 70 client accounts under the watch of Desert State Life Management’s CEO Paul Donisthorpe, who hasn’t been seen or heard from since February.
As the state now moves to recover funds, regulators believe much of it is locked up in various investments Donisthorpe is said to have made in real estate and as well as a cattle ranch in Texas.
Meanwhile, clients of the trust company are in a critical waiting game, unsure how much, if any, of the funds they relied on for critical medical care costs and living expenses will return.
“This is devastating,” said Donna Burk.
Burk’s 96-year-old mother was a client of Desert State Life Management (DSLM.) As a part-time caretaker for her mother, Burk is feeling the effects of the financial mess DSLM has left behind.
“To me, this is like a mass murder, because the people that did this took life from 77 people,” said Burk. “These people are alive, but their quality of life, their life line, some of them have been cut.”
The private money Donisthorpe was supposed to be looking after is meant to pay the bills of special needs people who can’t do it themselves. For Burk, the money missing from her mom’s account is critical for prescriptions, medical care and housing costs.
“There’s definitely an impact,” said Burk.
Burk says her mother and father were forced to put their assets in a trust fund around 2008 in order to obtain federal VA benefits.
“(My mother) was always a very good money manager, she was the money manager in the home,” said Burk. “She would always tell me, ‘Why do I have to put my money in the hands of a stranger, and pay them to manage my money? And I can’t even have my money when I want it?’”
Burk says that by 2012, the trust fell below a certain amount of money and needed to be moved to a different financial management company that was willing to handle smaller amounts. With the help of their previous trust company, Burk says she and her mother, a former Rio Rancho real estate broker, chose DSLM to manage the trust.
“I’ll be honest, I never felt that comfortable, but I was stuck, there was nothing I could do, I lived in another state, there was nothing at all that I could (do) when you’re told you have to do something,” said Burk.
Roughly $32,000 should be Burk’s mother’s trust account today. However, in April 2017, Burk was told by financial investigators with the state’s Regulation and Licensing Department that her mother’s trust account actually had a zero balance.
“I was very shocked, but to a degree, there was a tinge there that… I always had a feeling with them,” said Burk.
Investigators began looking into DSLM’s financials in February 2017 as part of a standard review of the trust company. By March, investigators found problems. In the months since, financial regulators have moved to preserve any remaining funds, while investigating what happened to the roughly $4-million said to be missing from the trust.
While Donisthorpe initially sent an email to investigators in February, no one has seen or heard from him since.
State Takeover, Recovery Effort
At an August 3, 2017 court hearing, Bernalillo County District Court Judge Nan Nash granted the state full control or “receivership” over Desert State Life Management.
Donisthorpe was once again a no show at the hearing.
The receivership ruling now means the New Mexico Regulation and Licensing Department’s Financial Institutions Division can start the process of recovering client funds, but that has its own challenges.
The state believes hundreds of thousands of dollars in DSLM client funds are locked away in investments Donisthorpe made.
“We have substantial belief that there are assets located in the state of Texas that are tied up into both real estate there as well as cattle, and some cattle that have been bred,” said Kevin Graham during the court hearing. Graham is the Senior Enforcement Counsel for the Financial Institutions Division.
The cattle business the state is eyeing is the “Corazon Pitchford Cattle Company.” Online, the company advertises cattle for sale with one of its recent posters even listing Paul Donisthorpe’s phone number as a point of contact.
“I do anticipate that we will be attempting to recover some assets,” said Graham.
While the state moves to recover assets, the other challenge is how the state will manage the work itself. According to Graham’s statements in the August 3 court hearing, the state doesn’t have the money to hire another receiver to do the work of recovering assets.
“The Financial Institutions Division is looking at essentially just eating the cost of doing this work with our own staff, and Mr. Moya (FID Director) taking on an extra job and a couple of other staff members taking on extra work,” said Graham.
As Graham outlined in the most recent court hearing, due to lack of funding to hire an alternative receiver the state’s financial regulators will have to decide how and when to sell Donisthorpe’s bovine investments.
“We’re looking at a lot of those issues, weighing and balancing, do we really want to be a receiver in the cattle business for another six months or so, until those cattle have their calves, and they become worth more? Or do we try to sell those faster?” said Graham.
The state is also looking to recover funds thought to be spent on Donisthorpe’s office property on Fourth Street in downtown Albuquerque, and his $900,000 home in Angel Fire that was recently listed for sale online.
“We believe we can show that moneys from Desert State went into paying either mortgage payments or upkeep or other expenses on the building,” said Graham.
The FBI has also filed paperwork in federal court to seize Donisthorpe’s properties.
What’s Next for the Victims?
Donna Burk is struggling with what to do next for her 96-year old mother.
“Number one, keeping it a secret, number two, trying to figure out how I’m going to make up that money,” said Burk.
Burk works full time and cares for her mother when she’s off. With about $32,000 now missing from her mother’s trust account, Burk says she’s not sure how she’ll be able to afford various bills come January.
“Now there’s more medical costs, there’s more food cost, the utilities, my fears are, will I be able to keep her cool? Will I be able to keep her warm?”
Burk says she can’t tell her mother what happened to her trust account for fear of how she’ll react.
“If she ever found out about this, it would absolutely devastate her.”
For now, Burk says she’s leaning on her faith to get her through the financial problems she’s dealing with.
“God promises us in his Word to fret not when the evildoers seem to prosper, and to rest in the Lord and trust and do good and you will be fed, and I believe that,” said Burk. “In Psalm 37, especially verse 9, it says to rest in the Lord and those that trust in the Lord will inherit the land and the evildoers will be cut off, and I’m just trusting in that.”
The Financial Institutions Division is scheduled to go back to Bernalillo County District Court on September 20 to give the state a preliminary inventory of assets and liabilities tied to Desert State Life Management. By then, the state could have a better idea of just how much they may be able to recover.