UC, Former Bar Girls Fight for DHL Founder’s Fortune

SAN FRANCISCO —  When he died after his vintage airplane plunged into the Pacific Ocean a year ago, Larry Lee Hillblom, the eccentric founder of the DHL international courier firm, left a will that has embroiled California in a bizarre legal battle with three former bar girls over an estate worth at least $500 million.

At stake is a bequest that the University of California says would be the largest private donation ever given to the institution--one that would provide an immense, long-term infusion of cash into medical research at UC’s five teaching hospitals. The women, however, claim the money belongs to their children, all the out-of-wedlock offspring of Hillblom.

Already, the case has attracted dozens of attorneys who have plucked hundreds of thousands of dollars in legal fees from the estate, and prompted a controversial move to change Saipan paternity laws. In the end, it may rest on the genetic makeup of a mole taken from Hillblom’s face two years before his death.

UC’s hopes are pinned on Hillblom’s instructions in his 1982 will that virtually all his estate be placed in a charitable trust. It was his wish, Hillblom said, that “substantially all” the trust funds be used “for medical research” with “particular attention” given to programs at UC.

“I see Larry Hillblom as a modern-day Carnegie,” said Yeoryious Apallas, the deputy attorney general charged with securing as much of the Hillblom estate as possible for the university.

“This man has engaged in a gift-giving program like the Carnegies, the Mellons and the other great benefactors,” Apallas rhapsodized during an interview in his San Francisco offices. “No one really understands the magnificence of what this gift will do for humanity.”

He estimates that the bequest should be worth at least $25 million annually to the UC system over the 15-year life of the trust--and tens of millions more when the trust dissolves and disburses its assets.

Such money, Apallas said, could be leveraged with other donations to pay for long-term research projects that are increasingly difficult to fund in an era of dwindling federal financing.

But standing between UC and the bonanza are the onetime bar girls, who in court affidavits paint a very different picture of Hillblom.

The Larry Lee Hillblom they portray was a well-known denizen of the bar scene in the Far East, hopping from island to island. Wearing the scruffy jeans and T-shirts he favored, Hillblom would regularly tip bar managers to procure girls barely into their teens. He would pay the girls to spend days or even weeks with him, the women’s attorneys say.

According to the affidavits, Hillblom was partial to virgins, and insisted on having unprotected sex with them.

“Other girls told me that he was a big tipper and that he was fond of virgins,” Julie Cuartero, now 16, recalled of the night she met Hillblom in a Philippines bar.

‘This Is All About Power’

In her affidavit, Cuartero swore she was 14 and working as a nude dancer when she encountered the DHL founder. After spending several days with him, she claimed she became pregnant. Hillblom urged her to get an abortion, but she refused. Now, Cuartero is contesting the will on behalf of her year-old daughter, Jellian, born just before Hillblom died.

Two other young women tell similar stories. Kaelani Kinney, now 28, from the Micronesian island of Palau, says her 12-year-old son, Junior Larry Hillbroom, also is the millionaire’s child. Kinney says she, too, was introduced to Hillblom in a bar. She was 16. She says he sporadically paid her support for her son. Even so, Peter Donnici, Hillblom’s longtime lawyer, says Hillblom always insisted the boy was not his child.

Last year, Kinney’s attorney rejected a $17-million settlement offer by the Hillblom estate, the only such offer made so far to any of the would-be heirs.

The third young woman, Mercedez Feliciano, 16, says she gave birth to Hillblom’s daughter seven months after his plane went down. Feliciano said she lived with Hillblom in his Saipan estate for a year before his death.

If the three women can prove their claims in court, their attorneys say, their children could walk away with the entire estate, which includes a controlling interest in the privately owned DHL international operation and a 23.6% share of DHL’s domestic operations.

“That would just be a shame,” Donnici said. “Because I know that is not what Larry would have wanted. He wanted this money to go to charity.”

Attorneys for the women, however, say Donnici’s concerns lie more with protecting his position as head of the trust and with DHL, than with providing money for charity.

“This is all about power,” said Randy Fennell, one of the Saipan attorneys now trying to prove Jellian Cuartero’s claim to the fortune. “Larry left his cronies in charge of the estate and they do not want to lose that power.”

Hillblom, a non-practicing lawyer who graduated from UC Berkeley’s Boalt Hall, left a legal door open for the children by failing to include in his will the boilerplate jargon used to disinherit offspring born out of wedlock, attorneys for both sides say. Hillblom’s will makes no mention of children, leaving room for the courts to decide if he knew of them.

Existing Saipan law presumes Hillblom would have left his estate to a child he knew existed.

But both California and the DHL insiders whom Hillblom named as directors of the trust reject the notion that the children are Hillblom’s, and complain the lawsuits unfairly tarnish the reputation of a man who was a respected pillar of Saipan society for two decades before his death.

“The plaintiffs’ lawyers have engaged in a concentrated, focused campaign of vilifying Larry Hillblom,” said Eric Behrens, an attorney for the UC Board of Regents. “He was loved on that island. He did a lot of good on that island. They have gone out of their way to destroy a pretty good reputation that he built.’

Hillblom, Apallas said, “may have had an interesting lifestyle,” but no evidence yet exists that the paternity allegations are true.

“If there was a half-billion-dollar estate at stake and you were a lap dancer, would you not be willing to issue an affidavit alleging these things?” he asked. “It beats working for a living.”

Modest Beginnings

Born to a family of modest means in the central California farming community of Kingsburg, Hillblom in 1969 founded DHL--an acronym for Hillblom and two friends, Adrian Dalsey and Robert Lynn. The idea initially was modest. DHL charged shippers for flying their paperwork between ports, a service aimed at speeding the unloading of cargo once ships docked.

Hillblom used a student loan as his initial investment in the firm, said Donnici. At first, he and his friends carried the paperwork in their suitcases, usually on commercial flights between San Francisco and Hawaii.

The bespectacled Hillblom quickly became the dominant force in the company, and in the 1970s, the corporation expanded into a worldwide courier service whose name became virtually synonymous with rapid delivery. DHL, with domestic headquarters in Redwood City and international headquarters in Brussels, now employs 35,000 people, boasts a fleet of more than 100 planes and reported earnings of $3.1 billion in 1994.

In the late 1970s, Hillblom retired from active management of the company, retreating to Saipan, the main island of the Commonwealth of the Northern Marianas. The Marianas, a U.S. possession acquired after World War II, are a tax haven for millionaires and a popular resort for the Japanese.

Almost immediately, Hillblom became active in Saipan politics, once even running unsuccessfully for the island’s legislature.

“There was Larry Hillblom, a billionaire, out on the street median wearing a sandwich board saying: vote for me,” recalled Fennell.

Hillblom championed the island’s rights in delegations that dealt with the U.S. government, and was appointed to Saipan’s Supreme Court, where he helped write several of the island’s laws.

‘He Loved Making Deals’

Even in his Pacific hideaway, however, the media-shy businessman continued to create companies, buy property and make high-risk investments. He was one of the first Americans to place large sums of money into Vietnam after the United States lifted the trade embargo with that nation, buying an estimated $50 million worth of Vietnamese real estate. That wasn’t all.

He owned a resort on Guam, a ranch in the San Mateo County town of Half Moon Bay and another in Idaho.

In 1992, Hillblom bought a 15% share of Continental Airlines after the company went bankrupt, and controlled two seats on its board of directors. He founded a cable television company in Micronesia and bought land throughout the islands.

“He loved making deals,” said Donnici. “He was an idea man who loved getting new projects off the ground.”

But to the bar girls Hillblom fancied, he was just a man with cash in his pockets, their attorneys say.

“My client never understood how rich Larry was,” said Fennell. “He dressed like a bum, wearing tattered jeans. His face was messed up . . . and you could say there was the quality of a small Frankenstein about him. He was blind in one eye and it would sometimes spin out of control.”

Fennell and others say Hillblom became increasingly eccentric as time went on.

In 1993, he crashed his small Cessna while attempting an emergency landing on the island of Tinian, another one of the Marianas.

“He hit a stump that just pushed the plane’s engine into his face,” said Donnici. “Every bone in his face was fractured. He lost his eye, and punctured a lung. He was a mess.”

Hillblom eventually was flown to San Francisco for reconstructive surgery at the Davies Medical Center. It was then that physicians removed the mole that may be the key to resolving the courtroom drama.

Preserved in wax for some unknown reason, the mole may be the only sample of Hillblom’s unique genetic makeup. His body was never recovered after he and two friends crashed into the Pacific near the island of Pagan on May 21, 1995.

Attorneys for the would-be heirs have obtained a court order allowing them to test DNA from the mole May 30 at a laboratory north of San Francisco. Gary Sims, a DNA expert who testified for the prosecution in the O.J. Simpson trial, will monitor the testing.

But already, Apallas is questioning its authenticity. “There are many questions about this mole, about the chain of custody of the mole,” said Apallas, who is seeking a stay of the judge’s order.

Even should the test go forward, Apallas says, the case is far from over. Hillblom’s will “is not a model of legal draftsmanship,” he said, but its intent is clear.

“It sets out what he intended to do. Foremost was the avoidance of taxes through establishing a charitable trust. That he does masterfully.”

Had Hillblom believed he had fathered children and had interest in providing for them, Apallas said, he would have done so in the will.

“We believe that he was unconcerned because there were no children, in his view,” Apallas said, adding that he believes he can produce evidence that Hillblom was sterile. Apallas refused, however, to elaborate on what that might be.

At first, the battle over the millions pitted the women only against the DHL insiders wanting to preserve the trust. But legal maneuverings led to California’s joining the litigation in January.

The state was called in by Donnici after a Saipan court suspended him and other DHL insiders as directors of the trust.

A special master appointed by the court to investigate actions Donnici took after Hillblom’s death determined that he improperly used $3.7 million of the estate money to buy the Bank of Saipan, named in the will as executor. Donnici says he bought the bank to guard the estate’s interests and has appealed the court’s decision.

State Gets Involved

But with the appeal undecided, Donnici says the court’s action left Hillblom’s estate “undefended” against the children’s claims.

Realizing what was at stake, California was all too happy to take up the fight. The state petitioned the Saipan court for standing in the case and in February was accepted as a participant, Apallas said.

Although barred from officially managing the estate, Donnici continues to lobby in Saipan on its behalf. Last week, Donnici and the California attorney general won a victory when Saipan’s legislature adopted a bill, dubbed by island political wags “the Hillblom law,” that would disinherit children not publicly claimed by their fathers.

The bill, however, must be signed by Saipan’s governor to become law and his intentions are unknown.

Lawyers for the children say the legislation was approved only after Donnici made a written promise that Hillblom’s trust would give “substantial” funds to Saipan charities.

Donnici says he merely was fulfilling an oft-repeated wish of Hillblom’s when he made the pledge.

Meanwhile, the legal wrangling continues.

The children’s lawyers have promised to mount a constitutional challenge to the legislation, as they pursue efforts to prove through DNA testing that the youngsters are Hillblom’s.

No one closely involved in the battle believes it will end any time soon.

“This case is like an octopus,” said Mitchell Hornecker, a Seattle attorney representing Cuartero.

“Half the bar association of Saipan is feeding off this case,” Apallas said with disgust.