BL Special Report by BenitoLink Reporter Jack Foley
A longtime Hollister financial advisor and elected official is headed to court next month amid allegations he took hundreds of thousands of dollars earmarked for charity and used it in an attempt to enrich himself and business partners.
Mitchell J. Dabo is accused in a lawsuit of using his position as trustee of a private charitable fund to illegally use—and then lose in a real estate deal—more than $490,000 left to the Community Foundation for San Benito County (CFFSBC) by Hollister farmers Tony and Barbara Matulich.
Dozens of nonprofit organizations in the county depend on the foundation’s support to help make ends meet each year.
It’s illegal in California for a trustee, or fiduciary officer, to use charitable fund assets in any way designed to benefit themselves or in a manner that adversely affects the interest of the fund’s beneficiary, according to legal experts.
Dabo owns Dabo Financial Group LLC at 801 San Benito St., Hollister, which is in the same building with the Dabo Liquor Store, and Mitch Dabo Associates. He has been in business for more than 30 years.
Dabo offers “tax, investment and estate planning mainly to retirees or those very close to retirement,” according to an online business guide.
His motto, “Sleep Well At Night Solutions,” appears on the front door of his downtown office.
Dabo was first elected to the San Benito County Board of Education in 1994 and currently serves as board president.
Dabo declined to be interviewed for this article. His lawyer did not respond to a phoned request for an interview about the CFFSBC lawsuit and other issues.
Since 2008, Dabo had controlled the Matulich trust’s approximately $600,000 in assets, of which the community foundation as the trust’s sole beneficiary has received $83,000 and has yet to receive $490,000, according to CFFSBC President/CEO Gary Byrne.
The outstanding funds were to go to the foundation when Barbara Matulich died in 2012, according to the lawsuit the foundation filed in Superior Court in San Benito County.
Mr. Matulich died in 2003, two years after the couple set up their charitable trust fund whose assets at one point neared $1 million. It provided income in their later years and, when they died, the trust was supposed to help the community through CFFSBC. Tony Matulich died at 79 and his wife, Barbara died when she was 84.
“My dad was born and raised in Hollister,” said Toni Brady, 67, the Matulich’s daughter who, with her husband Ed, has run a Hollister pest control business for 30 years.
“He made some money farming and he wanted to do something for San Benito County, he had been here all his life,” Brady said of her father.
The Matuliches grew apricots, walnuts and tomatoes, among other crops, during a lifetime of farming in the county.
When the trust was created, a relative was named as the trustee to oversee its assets, according to Brady.
That may have been because, Brady said, decades earlier her parents had had a bad experience with Dabo, a family friend and advisor.
“He got my dad to invest money in some scam and of course my dad lost all the money, along with other people in Hollister,” she said.
After her husband died, Barbara Matulich hired a firm in Salinas to act as the fund’s trustee, but later wanted to do business in Hollister and turned to Dabo, Brady said.
The pull toward Dabo was strong, according to Brady.
“He is related to my dad in a roundabout way. They are both Croatian and that bonds people here in Hollister; so all along he felt a bond with (Dabo),” she said.
“My sister and I always said, ‘why are you dealing with him, money-wise?’”
According to Brady, Dabo told her that the person who received loans of trust fund money for the real estate deal, Jack Tyler, had died and his estate went into bankruptcy, so the money was gone.
“I just thought that was the most bizarre thing I ever heard in my life, it was beyond comprehension to me,” she said.
But the money was gone, invested in a real estate deal that went sour.
Dabo was a one-fourth partner in the deal with three other men, according to the lawsuit. In 2009, he lent $490,000 of the Matulich trust in unsecured loans to partner Jack Tyler of Hollister.
With it, the company, DTMV Investments (the initials of the partners’ last names), bought several parcels of land on Malorie Way in the city, according to the suit and case documents.
Dabo never told Barbara Matulich about the loans, according those documents.
In 2011, a year after Tyler died, the surviving partners found themselves in default on their $400,000 loan for the land, according to foundation lawyer John Clark.
At that point, in exchange for liability waivers that essentially allowed Dabo and Jim Morris, of Gilroy, to walk away from the deal, they signed the property over to David Vavoulis, a Gilroy contractor, Clark said, and DTMV was dissolved.
In a separate agreement, Vavoulis agreed to pay Dabo $40,000 when the property sold, if Vavoulis realized a specified amount in profit, Clark said.
Prior to that, the partners had refinanced their original note with a private lender and pulled out $300,000 to repay three of their initial investments, leaving Vavoulis alone with $100,000 still invested in the land, according to Clark in what he described as a “complex” series of financial dealings.
Brady does not believe her family is the only one to have issues with Dabo’s complex financial dealings.
A Canadian woman who was in contact with the community foundation told BenitoLink that money intended for her when her elderly Hollister aunt died in 2015 vanished under Dabo’s management.
“What happened to me can happen to other people,” said Mary Bissola in a phone interview from southern Ontario.
Her aunt, Maria Castora, also called Mary, was an Italian immigrant whose husband’s family founded one of the city’s biggest canneries, according to Bissola, who over the years made many visits to her aunt’s home.
Castora was a close friend of Dabo’s mother, according to Bissola. Castora died in May 2015 at the age of 94; Dabo was in charge of her finances, her will and estate, including the sale of her home.
“She believed in (Dabo), she really did,” said Bissola. “He took everything, her house, her money, her jewels, everything. He sent me old photos of people I didn’t know. I had to pay when they delivered (the photos), and I don’t even know these people,” Bissola said.
In August 2015, Dabo sold Castora’s Victoria Street house for $460,000, according to documents in the CFFSBC case.
That money was supposed to be split 50-50 between Bissola and her aunt’s longtime caretaker, but neither received any money, Bissola said.
Dabo claimed Castora had a big mortgage and owed him money, according to Bissola, but she doesn’t believe him.
She said her aunt was very comfortable financially, including proceeds from the sale of a house she owned in Chicago.
Dabo offered no proof of his claims, she said.
When she once met Dabo, he looked “like a knight in shining armor” but made her very uncomfortable, she recalled.
“He had no right to sell the house. He never showed me the will. I sent a letter from my family lawyer and it came back to me unopened.”
In an email to BenitoLink, CFFSBC’s CEO and President, Gary Byrne, said Bissola “never got any paperwork from Mr. Dabo. (She) is very open to working with the district attorney’s office.”
Giving up control
Toni Brady said it was without her knowledge that her mother exercised the right, when the fund was worth approximately $650,000, to change trustees and signed on with Dabo in 2008.
“Mitch talked my mom into giving it to him. I was not in on it, I don’t know how it happened, he just convinced my mom to let him control the trust,” she said.
“And when she passed away and we went to transfer the money to the foundation, (Dabo) said there isn’t any, with a dumb look on his face,” Brady said.
After that, Brady refused to have anything to do with Dabo and went straight to Byrne at the foundation.
Byrne was not surprised by what she had told him, she recalled.
It took months for Dabo to respond to requests for information and the funds, Byrne said, adding that he finally sent a check for almost $83,000.
Byrne said he thought that was partial payment but soon learned Dabo had other plans.
At a first court mediation in San Jose, Dabo offered about $200,000 to settle the matter, and then in January of this year he offered $50,000 a year for 10 years, but the foundation board rejected the offers, according to Byrne.
“To honor the donors’ intent, we wanted to get the whole amount in one piece,” he said. Dabo offered “nothing but broken promises every step of the way.”
Court-supervised mediations in San Benito and Santa Clara counties as recently as this year failed to come up with a settlement, he said.
DA declines to prosecute
When the foundation asked San Benito County District Attorney Candice Hooper and the Hollister Police Department to take up the matter, it went nowhere beyond initial interviews with the foundation, Byrne said.
In an email response to questions, Hooper told BenitoLink, “Last year we met with the foundation on several occasions to discuss the matter. We consulted with a prosecutor well (versed) in this subject matter. After reviewing the documentation provided we declined criminal prosecution.”
When pressed a second time for answers, Hooper said in an Oct. 12 email, “As the matter is set for trial in November per your inquiry, I believe it would be inappropriate for me to comment as to the merits of the matter. To do so may prejudice the judicial system.
“As for your reference that myself or members of my office have either a fiduciary or personal relationship with any of the parties involved, I know that I do not and I do not believe that any member of my staff have any sort of relationship with the parties. Thank you for your inquiry.”
When BenitoLink pushed for an accounting of Hooper’s reasons for not pursuing the matter, she did not respond to a query emailed Oct.12 in which she was asked to explain why her office opted not to pursue a full criminal investigation and possible criminal prosecution in the Dabo matter.
Christine Breen is a lawyer whose civil practice in San Benito County deals largely in estate planning and trust administration. She is a member of the community foundation board of directors and has advised BenitoLink on legal matters on a voluntary basis.
She said of Hooper’s response, “I do not fault our DA per se. I think that a lack of resources probably more than anything else was a primary factor.”
What Dabo is accused of doing in the civil action, using trust funds to benefit himself, is referred to as self dealing, she said, adding, “it’s unlawful for a fiduciary to self deal as it appears Mr. Dabo did.”
The Monterey County District Attorney’s Office has a unit dedicated to financial frauds and white collar crime, Breen said, adding that lawyers in that county have been “criminally pursued and prosecuted because of the same type of financial malfeasance we are dealing with in (the Dabo) case.”
She called Dabo’s alleged malfeasance “blatant,” and said the evidence is “pretty shocking” and “the type of thing the state bar would certainly step in and discipline an attorney for if they had participated in this type of behavior.”
Community’s best interests
And while the amount of money involved was a driving factor in pursuing litigation, Breen said the foundation board must also look out for the best interests of the community.
Breen said she knows of two other cases, including Mary Bissola, where people believe they “lost a great deal of money with Mr. Dabo.
“As a board member,” she continued, “I in good conscience would not feel right about writing the money off knowing that this could possibly happen again to someone. While we would like to recoup the funds that were lost, we also have a larger duty to the community to see that it does not happen again.”
To help in the legal battle to recoup those funds, the foundation turned to attorney John Clark of the Morgan Hill law firm of Rosconi, Foster and Thomas.
Clark said that, as required by law, his office has notified the California Attorney General’s Office about the Dabo matter.
The AG’s press office said in an email that it does not comment on whether it’s conducting a criminal investigation.
Clark said, “I don’t know if Mr. Dabo ever intended to distribute the monies to the foundation, we just don’t know. He never contacted them. Mr. Dabo took over $600,000 and in the end distributed about $82,000.”
However, through a series of loans, defaults, a death and a bankruptcy and the dissolution of a partnership, one of the parcels of land that trust money bought ended up in the hands of one of Dabo’s former partners, and sold recently for more than $1 million, Clark said.
“Whether (Dabo’s behaviour) was one of those incidents where the economy took a turn for worst and he thought he would do a quick turn around and pay (the money) back, it did not work out that way. He is a bad manager of money. The temptation was too great to self indulge in those assets,” Clark said.
“I am not accusing him of committing any crimes; I don’t want to wrongly accuse someone of a crime,” he continued, “But if this is not a crime, it ought to be.”
The CFFSBC, Brady and Bissola episodes with Dabo were preceded by one with a powerful regulatory agency.
In August 1998, four years after he was first elected to the county school board, Dabo was censured by the National Association of Securities Dealers, according to official records available online.
He was fined $10,000 by NASD and ordered not to associate with other members for 10 days because he was found to have violated securities laws, according to a report by the Financial Industry Regulatory Authority, or FINRA.
FINRA is a non-governmental regulator that oversees securities firms doing business with the American public. Its mission is to protect investors by regulating brokers and brokerage firms and monitoring trading on U.S. stock markets,” according to its website, www.finra.org.
In March 1999, Dabo’s membership was revoked for failure to pay the fine, FINRA spokesperson Michelle Ong in Washington, D.C., told BenitoLink, and he has not been a member since.
In the case of the community foundation, after trying for years to recover its money from Dabo, including failed mediations, the CFFSBC in May 2015 filed a civil suit in San Benito County Superior Court against Dabo and his two surviving business partners. Case number CU-16-00069 is scheduled to be heard the week of Nov. 13, Clark said.
The suit alleges breach of contract and unjust enrichment. It claims Dabo failed to give the money as required to the trust’s rightful beneficiary, CFFSBC, and that he violated state conflict of interest law.
The latter happened when Dabo wrote checks totaling $490,000 on the Matulich’s charitable trust account to make the unsecured loans to his partner, Jack Tyler, the suit alleges.
Under California law, a trustee is prohibited from using trust assets for his own benefit, and from participation in transactions in which his interest would adversely impact the beneficiary, in this case the community foundation.
The suit seeks full restitution plus interest and legal fees that are estimated at $80,000, according to Byrne.
In addition to his other financial services, Dabo is listed on the National Directory of Registered Tax Return Preparers & Professionals.
Manta, an online small business guide, says Dabo’s company “offers tax, investment and estate planning mainly to retirees or those very close to retirement,” and bestows annual “Swan” awards on its loyal clients.
It says the firm, “offers income tax planning and preparation, living trusts through the estate plan, methods to pay for long term care, fixed and fixed indexed annuities, life settlements, structured pensions, low cost reverse mortgages and first deeds of trust as ways to increase income without increasing risk.”
Note: Since 2015, BenitoLink has received three grants totaling $45,000 from the Community Foundation for San Benito County. It rents office space from the foundation. Before receiving its own nonprofit status, it operated under the CFFSBC umbrella. A member of the CFFSBC board of directors is related to BenitoLink’s Executive Director and has been a volunteer budget advisor to the news and information website.
Senior Editor Jack Foley does general, in-depth and investigative journalism at BenitoLink. He can be reached at [email protected]