A pair of lawsuits filed against the late Michael Klein’s estate and its posthumous trust could do more than gain as much as $525 million for death and injuries suffered when a small plane he had hired crashed into a mountain in Panama just before Christmas.
It also might provide testimony that sheds light on why Klein, a rising star among hedge fund managers, was traveling in bad weather in dangerous terrain with a pilot reportedly nicknamed “Mr. Death.”
The latest chapter in the Klein saga unfolded in mid-July when Klein’s former wife, Kim, filed a wrongful death lawsuit on behalf of their daughter against his estate and other parties. Until his death Klein ran Pacificor, a Santa Barbara-based hedge fund.
Michael Klein’s daughter, Talia Klein, 13, died with him when a small plane carrying them crashed into a mountainside in Panama on Dec. 23.
Also aboard the plane were a pilot and Francesca Lewis, a friend of Talia Klein who was 12 at the time. In addition to Michael and Talia Klein, the crash killed the pilot, but Lewis survived.
Lewis’ family filed a personal-injury suit related to the crash at about the same time the wrongful death suit was filed.
The complaints did not name a dollar figure being sought. As a legal precursor to filing suit, however, each family had filed claims against Michael Klein’s estate, totaling $525 million.
The estate rejected the claims, opening the door to civil suits.
“We hope they’ll do the right thing and sit down with us and try to resolve this,” said Stuart Fraenkel, the Los Angeles-based attorney handling Kim Klein’s wrongful death lawsuit. “And if they don’t, we’ll go all the way [to court]. We’re not one of those small-time operators who need to settle a case to keep the lights on.”
Walter Lack, the Los Angeles attorney who was on Erin Brockovich’s legal team, is handling the Lewis family’s personal injury suit.
At the time of his death Klein was well on his way to legendary status among Central Coast financiers.
After graduating from the University of California, Santa Barbara, at age 17, he founded MIBEK Corp., a financial analysis software company, and sold it four years later. He also earned a masters in business administration from Pepperdine University and a degree from the Santa Barbara College of Law.
Klein went on to start Transoft Networks, a network data storage firm that he sold to Hewlett-Packard in 1999. He then built up eGroups, a group e-mail company, and engineered its sale to Yahoo! for more than $430 million in 2000. By 1999, Klein became the largest investor in Pacificor, buying it out in 2002.
The two lawsuits filed in July allege that Klein, then 37, was a licensed pilot who should have known the limitations of the single-engine Cessna 172N aircraft carrying the group. They allege that the plane’s pilot, Edward Lasso, had been nicknamed “Señor Muerto,” or “Mr. Death,” by the local flying community.
The complaints allege that Klein “intentionally, recklessly, and in conscious disregard for the safety of others, flew, or directed the flight” of the craft off its slated course and into dangerous weather near the mountains around Boquete. Klein, the suits allege, deviated from the planned route to scout properties for a business interest.
The assertion that Michael Klein or the pilot acted in relation to a business interest is an attempt by the plaintiffs to connect liability for the crash to Pacificor and other businesses named as defendants in the suit. Gary Hill, the Santa Barbara attorney representing Pacificor in the cases, rejects the allegations that Klein was on company business.
“Neither the trip nor the accident had anything to do with the business activities of Pacificor,” Hill said. “Pacificor, along with many other entities in which it is believed Michael Klein had an interest, have been named based upon the mistaken belief that Michael Klein was somehow acting on their behalf at the time of the accident.”
Hill also represents Michael Klein’s estate and trust. “From the point of view of the trust and estate, we do not believe that they or Michael Klein [are] in any way legally responsible for the aircraft accident which occurred while he was vacationing in Panama,” Hill said.
Pacificor reported it manages more than $530 million in its most recent disclosure with the Securities and Exchange Commission. Earlier this month, Pacificor gained control of Michigan-based Dura Automotive, a publicly traded company that emerged from Chapter 11 bankruptcy in late June.
Pacificor is named as a defendant in two multi-million-dollar legal battles separate from the wrongful death and personal injury suits.
Santa Barbara businessman Steve Sorensen, the founder of Select Staffing, has filed a $24 million lawsuit against Pacificor. The hedge fund is also named in a $60 million complaint in the bankruptcy proceedings of Quality Home Loans, an Agoura Hills-based firm that Pacificor made a large investment in before the lender collapsed.
Company representatives have denied the allegations in those suits and have said they expect the complaints against Pacificor to be dismissed. Kurt Benjamin, the company’s senior vice president of business development, said legal proceedings have not hindered Pacificor.
“On the contrary, we are and will continue to be completely focused on our core business, which is in the midst of entering the most opportune period in the company’s long history,” Benjamin said.