Bid to Freeze Assets of Ambassador Harriman Is Rejected

A federal judge Tuesday declined to freeze the assets of U.S. Ambassador to France Pamela Harriman, ruling that there is little risk of her hiding funds or fleeing from a complicated legal fight with other heirs of the estate left by her late husband, financier and former New York Gov. W. Averell Harriman.

In a case that offers a window on the monetary affairs of the wealthy, three generations of Harriman’s heirs contend that Mrs. Harriman and prominent Washington lawyers Clark M. Clifford and Paul C. Warnke were “grossly negligent” and committed “professional malpractice” in violating the terms of limited partnership agreements and trusts.

Harriman’s daughters, grandchildren and great-grandchildren claim that nine trusts going back to 1935 were squandered by the defendants on ill-conceived investments--mainly a troubled 560-room New Jersey resort and conference center.

The former governor and veteran diplomat died on July 26, 1986, leaving an estate valued at about $65 million. The heirs charge that trust funds once worth about $25 million have dwindled to $3 million.

But U.S. District Judge John S. Martin Jr. ruled that Mrs. Harriman, a prominent Democratic Party fund-raiser who helped President Clinton’s election campaign, still has assets of more than $30 million--more than enough to satisfy any eventual judgment in the case.

“Plaintiffs have not sufficiently established that there exists a real threat to their ability to enforce a judgment against Harriman and Clifford and that drastic action is required,” Martin said in his written opinion.

Veteran trust and estate lawyers said that unless a settlement is reached, the case could go on for years, with issues to be litigated including whether Harriman’s widow was a figurehead and decisions were made by others, whether investments were reasonable and what knowledge advisers had when they decided to allocate money.

Pamela Harriman, who once was wed to Winston Churchill’s son, Randolph, married Averell Harriman in 1971 when he was 79 and she was 51. She quickly became one of Washington’s premier hostesses and Democratic Party fund-raisers.

When Harriman, who served as ambassador to the Soviet Union and Great Britain, died in 1986, he left her $33 million of his $65-million estate, according to court papers. The will also named her executor of his estate, with some responsibility for administering trusts Harriman set up in 1935 for his daughters and their children.

The will left only $4,000 in cash to each of his two daughters, “not for any lack of love and affection for them but because I know them to be otherwise well provided for.”

Two years before he died, he asked Clifford, who was secretary of defense under President Lyndon B. Johnson, and Warnke, who served as President Jimmy Carter’s chief arms negotiator, to serve as unpaid trustees of the trusts. After his death, the trusts were consolidated in an investment pool, administered by a New York lawyer, William Rich III, who is also a defendant in the suit.

At first the trusts did well, growing to about $25 million. But when investments turned from the stock market to real estate, the results were hardly stellar. According to court papers, there was little diversification of assets. The Seasons Resort and Conference Center in Vernon Valley, N.J., where the trusts were heavily allocated, proved to be a financial sinkhole. According to the lawsuit, by 1993 the resort had gobbled up $21 million of the trusts’ funds.

Harriman’s heirs charge--and the defendants deny--that the extent of the investment in the resort and other troubled ventures was concealed.

Lawyers for the heirs had argued before Judge Martin that Harriman’s widow was liquidating real estate in Washington and Barbados and was giving other assets away or transferring them overseas.

But the judge ruled “none of the purported transfers of assets plaintiffs have highlighted raise any inference of an attempt to evade potential judgments, and Harriman has provided reasonable explanations for all of them.”