Schwabe Williamson sued for $230M in Yogi Bhajan-related suit

Portland Business Journal/February 24, 2012

The sale of a Springfield food manufacturer created to support Sikh activities is setting off legal action in state and federal courts across Oregon.

The dispute dates to 2007, when followers of the late Sikh spiritual leader Yogi Bhajan sold a 90 percent interest in his most profitable enterprise, Golden Temple Inc., to a corporate executive for a payment of just $100. A judge's ruling says the cereal-and-tea manufacturer was worth at least $100 million.

The deal triggered a state-led lawsuit in 2009 which in turn led to a preliminary ruling in December that the deal was improper, setting the stage for a damage award in the eight- to nine-figure range. U.S. District Court Judge Michael Hogan is presiding over efforts to mediate a solution.

As a result of the preliminary conclusion in Multnomah County, the holding company that controls the business, Golden Temple Management LLC, and the managing partner that led the $100 buyout, Kartar Singh Khalsa, have both filed for bankruptcy.

Separately, at least three Sikh groups are seeking more than $230 million in damages from Portland's Schwabe Williamson & Wyatt PC and former Schwabe attorney Roy Lambert. Lambert, who allegedly executed the deal, is no longer listed as a staff member in the Schwabe directory.

Public records indicate he was admitted to Oregon State Bar in 1975 but is no longer an active member. Disciplinary records show no sanctions against Lambert. Reached at a private number, Lambert declined to comment.

Schwabe managing partner Mark Long promised a vigorous defense.

"We think the conduct of our attorneys is very defensible," he said.

The suits pending against Schwabe in Multnomah County Circuit Court allege the firm's role in the Golden Temple transfer amounted to fraud, malpractice, breach of fiduciary duty and more.

Golden Temple was a cornerstone of the spiritual empire created by the late Yogi Bhajan, a charismatic Indian-born religious leader who immigrated to the U.S. in the late 1960s.

Yogi Bhajan built an empire introducing Western college students to Sikh-style spirituality. He established yoga studios near college campuses to recruit followers to his brand of spiritualism, creating a network of for-profit and not-for-profit entities along the way.

The latter advanced his spiritual work and the former helped foot the bills.

Golden Temple was in the foot-the-bill category, generating tens of millions from the sale of products such as Yogi Tea. As he neared death in 2004, Yogi Bhajan created a will that placed his empire in the hands of an Oregon nonprofit charged with advancing his spiritual mission.

Three years later, the board agreed to transfer 90 percent of the company to a private group in exchange for the $100 payment. The Sikh groups retained 10 percent, but no control over the company or distribution of profits. On paper, the 10 percent share was worth $23 million, but court records indicate no payment was made.

Cases related to Golden Temple fill state and federal court dockets from Eugene to Portland.

The pivotal case is a 2009 suit filed by Oregon Attorney General John Kroger and private plaintiffs alleging the deal was improper.

In mid-December, a Multnomah County Circuit Court Judge agreed. In preliminary "findings and conclusions" released Dec. 12, Judge Leslie Roberts concluded trustees breached their fiduciary duty to manage the assets for charitable and religious work. The judge valued Golden Temple at more than $100 million, based in part on the 2010 sale of the cereal division to Hearthside Food Solutions LLC of Butters Grove, Ill., for $71 million.

The judge's comments inspired the two bankruptcy petitions and the Schwabe suits.

Anticipating the worst, Golden Temple Management LLC, and its managing partner, Kartar Singh Khalsa, filed for protection from creditors under Chapter 11 of U.S. Bankruptcy Court in Oregon last week.

The Golden Temple board indicated it will need the breathing room bankruptcy offers to operate while it appeals the final court ruling.

Golden Temple Management identified $49 million in assets and $10.4 million in liabilities.

In a separate Chapter 11 filing, Kartar Singh Khalsa cited assets worth $31 million and liabilities of $1.28 million. Kartar Singh Khalsa lives in a Pearl District condo complex where he owns at least seven units under the name "Star of David Trust".

Attorneys in the bankruptcy cases could not be reached. Many of the people involved in the dispute share the last name "Khalsa," which is a spiritual term for "pure." According to an online encyclopedia of Sikh terms, the name is given to all who are initiated in the Sikh religion.

The judge's comments directed at the Schwabe attorney inspired Sikh groups to seek damages from the firm.

"Not only were the public statements prepared by (Roy D.) Lambert false, but they were intended by the board members who made the statements to mislead the Sikh Dharma community because the transaction — if fully disclosed – would inspire protest and likely litigation as a violation of trust obligation. All parties understood that the transaction could well constitute such a violation of the entrustment exclusively for religious and charitable purposes and this was the reason for the deception," the judge wrote in court documents.

The cases pending against Schwabe in Multnomah County Circuit Court as of Thursday are:

Sardarni Guru Amrit Kaur Khalsa, Avtar Hari Singh Khalsa and Viriam Singh Khalsa, on behalf of Sikh Dharma International and Siri Singh Sahib Co., v. Roy D. Lambert and Schwabe Williamson & Wyatt PC, et al. The case complains of a breach of fiduciary duty and seeks in excess of $115 million. It was filed by attorney Robert Banks of Portland.

Unto Infinity LLC, Khalsa International Industries and Trades Co. Inc. v. Schwabe Williamson & Wyatt PC and Roy D. Lambert. The case accuses defendants of negligence, legal malpractice, breach of fiduciary duty. It seeks $62 million in damages. Unto Infinity LLC is the Oregon nonprofit created to hold all of Yogi Bhajan's entities. It was filed by Folawn Alterman & Richardson LLP of Portland.

Siri Karm Kaur Khalsa, Peraim Kaur Khalsa and Sopurkh Kaur Khalsa v. Schwabe Williamson & Wyatt PC, Roy D. Lambert, Gary Roberts, Cogence Group PC and Jay Sickler. It claims professional negligence, legal malpractice, breach of fiduciary duty, fraud, intentional interference with prospective business advantage, negligent misrepresentations, civil conspiracy, unjust enrichment, indemnity, aiding and abetting and negligence. Filed by Stewart Sokol & Gray LLC, it seeks $60 million.

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