Fight over $5M insurance fund in Parente murders-suicide

The deaths of a Garden City family in a Maryland hotel room have ignited a protracted struggle almost a year later over the $5 million life insurance fund of its patriarch, William Parente, a battle that may turn on an unusual posthumous trial to prove that he killed them and himself.

"We're going to, in essence, have to do the final step for the police," said Steve Cohn, a Carle Place attorney for one of Betty Parente's relatives and her estate.

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The trial is only one possible element in a sprawling financial dispute pitting the heirs of Parente and his wife, Betty, against each other and also against friends, colleagues and clients of Parente, a Manhattan tax and estate attorney who told others he ran a commercial bridge loan investment business on the side.

His investors say they lost at least $12 million and perhaps as much as $35 million. In court papers, some now accuse Parente of running a Ponzi scheme, paying returns of 12 to 15 percent by shuffling money among clients instead of investing the funds.

Parente "perpetrated a fraud," one investor, Dr. Marie-Jeanne Castadot, a Manhattan gynecologist, said in a signed affidavit. An FBI spokesman said agents were investigating.

Some friends and colleagues say they are skeptical of the fraud allegations, and a court-appointed administrator for his estate has filed papers in Nassau disputing Parente's culpability in the deaths.

Baltimore County police found the Parente family dead in a Towson, Md., hotel on April 20, 2009. Betty, 58, was bludgeoned with a lamp and asphyxiated. In the bed next to her were the bodies of the couple's youngest daughter, Catherine, 11, who was asphyxiated, and Stephanie, 19, a sophomore at nearby Loyola College, who was beaten and asphyxiated, according to police. William was found dead on his back on the floor. A Baltimore County Police Department probe concluded William Parente killed his family, then fatally stabbed himself in the neck.

Betty's cousin, Joseph Mazzarella, a North Bellmore funeral director and administrator of Betty's and the girls' estates, said Betty's only surviving heirs, two nieces, daughters of her late sister, deserve some of the life insurance. He said his attorneys offered a group of investors a settlement giving them "10 cents on the dollar," which they rejected.

"These investors, they're greedy, greedy people," Mazzarella said.

Multiple courts involved

The dispute is playing out in multiple Long Island courts.

In Nassau Surrogate's Court, lawyers are debating a grim question: If Betty died before William, can her survivors lay claim to money from her husband's life insurance policy?

The answer is maybe, estate attorneys said, but only if a court finds that William Parente murdered his family. Baltimore County police records - released to Newsday recently through a Maryland Public Information Act request - present evidence of his guilt but fall short of the guilty plea or jury verdict that a judge could use to prevent William Parente's own heirs from getting the money.

The unusual circumstances require a hearing, a posthumous trial of sorts that Nassau Surrogate Judge John Riordan has ordered but not scheduled.

It could also take place in Nassau State Supreme Court, where Betty and the children's estates, through Mazzarella, are suing William's estate for wrongful death.

William Parente's guilt in the deaths and Betty's family's claim to the life insurance policy will be challenged in court by Eric Milgrim, the Nassau public administrator. He oversees William's estate because all his surviving relatives - an elderly uncle and aunt and seven cousins - declined to be involved, though they could still inherit part of the life insurance.

Milgrim has argued in court papers that Parente could have been insane or under extreme duress before the killings and therefore not culpable.

The hearing could be avoided if the parties settle their dispute outside of court.

Milgrim and his attorney, Mark Brosnan of Garden City, declined to comment.

Whatever estate ends up in control of the insurance policy will have to contend with claims from dozens of angry friends, clients and colleagues of William Parente who invested money with him.

At least six, including Castadot, who say their losses total $4.4 million, have filed court claims. More claims are expected Tuesday, a deadline set by Milgrim.

High-interest loans

Believing they were funding high-interest emergency loans to construction projects, Parente's investors gave him at least $12 million and up to $35 million over a nearly 20-year period, according to interviews, police records and court documents.

Among the biggest losers was Garden City dentist Anthony Salierno, who first tipped off police to the possibility of a Ponzi scheme, a day after the bodies were found, according to Baltimore County police records. In court records, Salierno said he and his wife, Kathleen, gave Parente $950,000 of their savings and $1 million of a retirement fund.

"[Salierno] told detectives that his life was over," a police report says. Salierno declined to comment.

Baltimore County police have said they deferred to the FBI about Parente's finances.

The documents indicate that Parente appeared under pressure in the days leading up to the killings. On April 14, he told his lifelong friend Dorothy Schimel that someone had threatened his life.

"He did not look good," Schimel, 84, of Manhattan, said, according to a police report. "He got mixed up with the wrong people."

Authorities have yet to find business associates of Parente, said a law enforcement official familiar with the probe. Asked if investigators had looked into who "the wrong people" might be, the official, who spoke on condition of anonymity, said they had: "There's a possibility that no such people exist."

The ongoing court saga makes a public spectacle of the lives and finances of a family that was, in the words of Stephanie Parente's friends, Stephanie Nguyen and Julieanne Malley, "status-oriented" and "very private."

But court records show the Parentes' status markers were built on shaky foundations.

They had less than $5,000 in the bank. Their $1 million Garden City home had an outstanding mortgage of $600,000. A Westhampton condo appraised at $250,000 has two mortgages for $500,000 and now is in foreclosure, court records show.

The creditors calling on the Parente estates aren't just angry investors. According to court records, HSBC wants $21,850 and Citibank wants $16,396 for undisclosed debts. William Parente still owes $11,000 for his Mercedes-Benz.

William Parente - a 59-year-old estate planning lawyer friends described as conspicuously conscientious - had not prepared a will, according to court records. Neither had Betty.

It has family members scratching their heads. "How could it be a Ponzi scheme? There's no money in the bank accounts," asked Mazzarella, adding that it complicates helping Parente's investors. "They can't get nothing because we got nothing."

With Matthew Chayes

How it works

Garden City attorney William Parente set up a $4.9 million irrevocable life insurance trust - a legal entity meant to avoid estate taxes - on Jan. 24, 2007, more than two years before his and his family's death.

Typically, insurance policies don't pay out if the policyholder commits suicide within a year of taking out the policy. Parente died more than two years after he got the insurance.

The insurance company last year paid the benefits to an account controlled by Parente's designated trustee, Leonard Aloi.

He was then ordered by a judge to set it aside in a separate bank account, according to Nassau Surrogate's Court records.

Because Parente's wife, Betty, a beneficiary of the life insurance, appears to have died before him, her heirs must prove in court that she was murdered by her husband. Normally, a beneficiary of a life insurance policy must survive the deceased, if only for a few moments, for the payout to pass to that person's heirs.

But lawyers for William Parente's estate say in court papers that they will dispute Parente's guilt, arguing he may have been legally insane, under extreme duress or emotionally disturbed. If a judge finds Parente culpable, Betty's heirs would probably inherit the money. Whatever the ruling is, investors who say Parente bilked them of millions could make legal claims, tying up the insurance payout for years more in court.