Hatcher Stubbs attorney ‘betrayed’ Bill Heard’s family and lost $25 million trust, suit claims

Defense counsel says Columbus attorney Barry Vaught was caught between a 'rock and a hard spot'

Attorney Eric Frisch tells the jury in his opening statement that when Hatcher-Stubbs attorney Barry Vaught turned over the trust holding two large life insurance policies, the policies "were intact," with no outstanding loans and all premiums paid
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Attorney Eric Frisch tells the jury in his opening statement that when Hatcher-Stubbs attorney Barry Vaught turned over the trust holding two large life insurance policies, the policies "were intact," with no outstanding loans and all premiums paid

Two dead Columbus business titans are subjects of a lawsuit tried this week in Muscogee Superior Court:

One is Bill Heard Enterprises, once a multi-state car dealership that dominated the Chevrolet market before its 2008 bankruptcy, and the other is the defunct law firm Hatcher, Stubbs, Land, Hollis and Rothschild, which dissolved in 2015.

William Heard III, son of the dealership’s last owner William Heard Jr. and grandson of its founder, is suing both Hatcher Stubbs and attorney J. Barrington Vaught, who was a partner in the firm and long represented the Heard family.

The son claims Vaught and the firm committed malpractice born of a conflict of interest that led to the son’s losing a $25 million trust based upon a life insurance policy on his parents.

The suit alleges Vaught failed in his duty to protect the trust in 2008 when Bill Heard Enterprises went bankrupt and demanded payment on loans issued to cover the costs of the insurance premiums.

It claims Vaught and Hatcher Stubbs instead acted in their own interests and that of the dealership by giving the son bad advice and concealing a document he could have used to keep the bankruptcy court from collecting on those loans.

The suit raises complicated financial and legal issues that attorneys tried to explain to jurors Thursday during their opening statements.


“The facts of this case are shocking,” Heard’s attorney W. Winston Briggs told jurors, calling it a tale of “betrayal and disloyalty.”

He said Vaught not only was the Heard family’s attorney, but a longtime friend and trusted confidant of Bill Heard Jr., who once had the largest Chevy dealership in the world, with about 30 locations.

The father in 1996 wanted to ensure his sons Bill Heard III and Edward financially were able to inherit the business without hardship, so he had Hatcher Stubbs set up a trust for each, based on $25 million life insurance policies on the father and his wife, Sara. Neither parent since has passed away.

The arrangement was that the dealership would pay the annual $352,000 premiums on the policies, and it would be reimbursed when the policies paid off upon the death of both parents. This was called a “split-dollar” agreement.

In 2003, the Internal Revenue Service updated its regulations to make such agreements taxable, and they became disadvantageous. To maintain the practice of having the business pay the premiums, the trusts issued promissory notes, meaning promises to repay Bill Heard Enterprises. Each note amounted to about $1.7 million, with the understanding those notes would come due later.

Under the new agreement, the due date would be October 2006.

Briggs told the jury that date was set only to take advantage of short-term interest rates on the notes, as a lower rate might be obtained later. Like the split-dollar premiums the business paid before, the notes were not to come due until the insurance policies paid off, he said.

This worked as long as business was good. Bill Heard Enterprises did not demand payment on the notes in 2006 or 2007.

Then a recession hit, and the business foundered in debt.

According to a defense filing, Bill Heard Enterprises lost $90 million between Jan. 1 and Sept. 28, 2008, the day it declared bankruptcy. Attorney M. Elizabeth O’Neill, who represents Hatcher Stubbs, said the dealership by then owed between $500 million and $1 billion to around 1,000 to 5,000 creditors.

At the time, the dealership hoped to pay off all that it could and stay in business. The bankruptcy court formed a committee of creditors to step in and find assets to satisfy debts.

Learning the business would go after the trusts’ promissory notes to help cover its debts, Vaught warned the Heard family in a letter in early October 2008. He was instructed to try to sell the insurance policies, which few investors wanted in the midst of an economic downturn. No suitable bid came.

To represent it in the bankruptcy, Bill Heard Enterprises hired attorney Edward Peterson, who on Oct. 8, 2008, demanded payment on the notes.

Realizing he likely would need a new profession, Bill Heard III started taking courses in insurance, and began to suspect he had other options to protect his trust. He began to consult another attorney, Eric Lanigan, who told him to get the file on his trust from Vaught.

Briggs, the son’s attorney in the lawsuit, told jurors Thursday that Vaught was reluctant to relinquish the files. Briggs alleged Vaught was trying to conceal a Bill Heard Enterprises memo dated Dec. 31, 2003, and authored by executive Richard Young, who wrote that the notes were not to come due until the insurance policies paid off.

If the son had seen that memo, he could have used it to defend against demands for payment on the notes, Briggs said. Instead his only asset available to pay off the notes was the cash value of the life insurance policies, which builds up over time as premiums are paid.

Bill Heard III began asking Vaught about other options in March 2009. On April 10, 2009, he hired Lanigan as his attorney.

Meanwhile Vaught in the spring of 2009 persuaded Edward Heard to cash in his insurance policies to satisfy the debt. Edward Heard later sued Vaught and Hatcher Stubbs. That case was settled Dec. 11, 2015, in a confidential agreement, the details of which remain sealed.

Judge William Rumer has ruled Edward Heard’s lawsuit differs significantly from his brother’s, and has no bearing on the case at trial.


On April 15, 2009. Bill Heard Enterprises again demanded payment on the notes, and Bill Heard III instructed Vaught to pay nothing. On April 21, 2008, he ended his relationship with Vaught, but did not then name a successor trustee.

Two days later, Bill Heard Enterprises filed suit to collect its debts from the son’s trust.

On April 30, 2009, Vaught emailed Bill Heard III to ask who would succeed him as trustee, as the successor had to meet certain qualifications.

The bankruptcy court that May set a trial date of June 17 and a schedule for submitting witness lists, exhibits and other documents. Vaught, still the trustee at that time, filed an answer admitting the facts of the case.

On June 5, 2009, Bill Heard III appointed Regions Bank to succeed Vaught as trustee. That same day, Bill Heard Enterprises asked the bankruptcy court for a summary judgment authorizing it to collect the debt from the trust.

Five days later, Lanigan told Peterson, the dealership’s bankruptcy attorney, that the trust was getting loans on the insurance policies’ cash value to pay off the debt. The next day, Bill Heard Enterprises filed an emergency motion asking the bankruptcy court to stop the trust from getting those loans.

The court held a hearing by telephone June 12, and ordered the trust to pay the debt. On July 1, 2009, trustee Regions Bank was authorized to get a $1.4 million loan on the policies, and it paid Bill Heard Enterprises the following July 13.

The debt was cleared, but the next $352,000 premium was due July 1, 2010, and Bill Heard III had no assets to cover it. Regions Bank resigned as trustee in June 2010, and Lanigan took over.

The son finally was forced to sell the insurance policies, netting about $2.5 million. A witness is expected to testify that, overall, he lost around $15.6 million.

Had he been able to present the defense that the notes were not to be paid until his parents died, he still would have the policies, because their accumulated cash value could have been used to pay the premiums from then on, Briggs argued.

Richard Young’s 2003 memo came to light in 2014, and the son sued Dec. 23, 2015.

“He buried the memo,” Briggs said of Vaught. “He hid the evidence from everybody.” And meanwhile he negotiated a fee from the bankruptcy court for acting as the trustee, he said. That was “gross negligence” at best and “fraud” at worst, Briggs said.

The defense

“Just because you say it doesn’t make it so,” countered O’Neill, Hatcher Stubbs’ attorney in the lawsuit. She said Briggs was using hindsight to recast events that those involved at the time could not have foreseen.

Vaught earned a fee only as the trustee of Edward Heard’s trust, not Bill Heard III’s, she noted. And though Vaught should have disclosed the memo and better communicated with his client, that is not proof he had some ill will or his own self-interest at heart, she said.

Vaught was distraught over seeing his longtime friends’ business die, she said: “Their empires crumbled. Lives fell apart.”

And the contrast would be stark, she added: Bill Heard III had been earning a salary of $40,000 a month. He abruptly had to learn to be financially responsible. “But for the bankruptcy, we would not be here,” she told jurors.

Representing Vaught, attorney Eric Frisch said that when the trust was set up in March 1996, it specifically stated that it was irrevocable, and Bill Heard III had no right to amend it. The first policy for $10 million was purchased March 1, 1998, and the second for $15 million on July 1, 1998.

The terms of the agreement said that were it terminated, the cash value of the policies would be surrendered, he said. The agreement also said it automatically would end if the business went into bankruptcy, Frisch said.

The original agreement was terminated when the split-dollar premium payments stopped in 2003, he said.

Vaught did not hide Bill Heard executive Richard Young’s 2003 memo, Frisch said: Vaught saw the memo and didn’t think it would make any difference, as Young had no authority to alter the terms of the trust agreement.

Both O’Neill and Frisch noted that when Vaught was relieved of his duties as trustee, Bill Heard III’s trust was secure and unchanged, so what happened afterward was not Vaught’s fault nor that of Hatcher Stubbs.

The trial continues Friday in Rumer’s Government Center courtroom.