Elderly heir claims fraud by advisers

A lawsuit charges the men used the Raleigh woman's money to enrich their reputations and wallets

RALEIGH -- Attorneys for an 81-year-old Raleigh woman with dementia claim in a lawsuit that her Raleigh financial adviser and a Florida lawyer diverted at least $2 million from her accounts for their benefit.

The financial adviser and the lawyer deny the charges.

Martha B. Capps got bad advice from her longtime adviser, Harold "Hal" Blondeau, a former N.C. State basketball player, and lost a large portion of a $4 million inheritance, her attorneys argue in a lawsuit filed Friday at the Wake County Courthouse. The suit says she knew little or nothing about the diversion of money from her accounts to various causes, several with ties to Blondeau.

Florida records show that a foundation set up in 2001 by Blondeau and co-defendant Neal Knight Jr., a West Palm Beach lawyer, has given more than $450,000 to North Carolina and national causes, including Peace College, St. Mary's School, the N.C. Museum of Art and Ducks Unlimited. The lawsuit charges that Blondeau and Knight used the charitable donations to enhance their own reputations, and also diverted money from Capps' accounts for college tuition for their children and $24,000 in wine purchases.

The suit also claims that Blondeau, who was terminated in March from his position as a financial adviser at Morgan Keegan & Co., borrowed $350,000 from Capps in 2004 and bought a beach house at Morehead City in her name that would be passed on to Blondeau if she should die.

Knight's two daughters and Blondeau's son are also named in the lawsuit, as well as Morgan Keegan and Co.

Capps, through her son, Bruce, seeks to recover the more than $2 million in diverted funds, plus damages, and dissolve the foundation.

Bruce Capps declined to comment Friday.

Blondeau said Friday through his lawyer, David Long, that the accusations were false.

"Mr. Blondeau denies any wrongdoing and plans to defend himself aggressively," Long said.

F. Hill Allen, the Raleigh attorney representing Knight, said, "Mr. Knight denies any wrongdoing and will defend himself against these frivolous claims and smear tactics with utmost vigor."

Martha Capps lived with her husband until December 2005, when she moved into an assisted living home, according to the suit filed by Raleigh attorneys Gil File and Robert Zaytoun. Now diagnosed with Alzheimer's disease, Capps inherited at least $4 million in 1989 after the death of a North Carolina-born aunt who lived in Florida, according to the lawsuit.

The suit says Capps leaned on Blondeau, 63, to invest the money and protect it from her husband, Ed Capps, with whom she had a contentious relationship. Knight helped handle the aunt's estate.

The lawsuit also accuses Blondeau and Knight of keeping information about the nonprofit foundation from an estate attorney who drew up Martha Capps' will at the same time the foundation was created.

Tax and court records show that the Marvin L. Baker Family Foundation, named after a relative of Capps, was formed in 2001. That year, Bruce Capps first began to notice his mother's lapse in memory, according to a recent court order.

Judge Donald Stephens named Bruce Capps his mother's guardian ad litem on Jan. 23, switching control of her accounts to him and away from Blondeau.

Donations suspect

An examination of five years' worth of tax records of the Baker foundation from 2001 to 2006 shows the fund gave $68,200 to St. Mary's, a private girls' school in Raleigh that Blondeau's daughter attended, and $6,000 to the Edenton Street United Methodist Church, where Blondeau is a member. Capps did not attend St. Mary's or the Edenton Street church, according to the lawsuit.