Little Remains of Menendez Estate, Records Show : Courts: Inheritance of $14.5 million was lost to taxes, lawyers’ fees and inflated real estate appraisals, probate files reveal.

The Menendez brothers have said they are broke. It turns out they are right.

Initially valued at $14.5 million, the Menendez family estate has almost entirely been run through, according to recently unsealed probate records that explain how the millions were lost to taxes, legal fees, inflated real estate appraisals and even bad karma.

All that technically remains of an estate that boasted of prime Beverly Hills real estate and millions of dollars in entertainment industry stocks is one house in Calabasas, a condominium in New Jersey, some jewelry, a few pieces of furniture and $651,948 in cash, the probate files show.

Nearly $10.8 million has already been spent, the records reveal, about half of that in taxes and lawyers’ fees for the defense of sons Lyle and Erik Menendez, who admit that they killed parents Jose and Kitty Menendez.

What’s left, after figuring in millions in losses on the sale of real estate and stocks, is simply not enough to pay a mountain of debts that grows higher each day as interest accrues.

“The money goes,” said one attorney familiar with the files. “It just goes.”

So much of it is gone, according to the files, that even if Lyle and Erik Menendez were to be acquitted of murder in the Aug. 20, 1989, shotgun slayings of their parents, they would stand to inherit nothing--a remarkable turn of events for a case in which prosecutors have long contended that the brothers killed out of hatred and greed.

At their first trial, the brothers asserted that money had nothing to do with it. They testified that they killed in fear and self-defense after years of physical, emotional and sexual abuse.

That first trial ended in January when separate juries, one for each brother, deadlocked between murder and lesser manslaughter charges. Prosecutors immediately vowed to try the brothers on murder charges, and again to seek the death penalty.

No date has yet been set for the retrial. But in anticipation of the second trial, and after reviewing the probate files, a judge assigned two public defenders to take over Lyle Menendez’s case. Attorney Jill Lansing left the case to spend more time with a young daughter.

Defense lawyer Leslie Abramson, who represents younger brother Erik Menendez, wants to stay on for the retrial. She is due to appear Tuesday at a Los Angeles Superior Court hearing to renew her request to be paid $100 per hour, up to $250,000, in taxpayer money.

Abramson has justified her request by saying that the brothers are out of money.

The probate files back up that assertion.

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When he was killed, Jose Menendez was the highly paid chief executive officer of Live Entertainment, a Van Nuys-based video distribution firm and a subsidiary of Carolco Pictures, the movie production company. If he had lived, he stood to make a bonus of $850,000 for 1989 alone, the probate files reveal.

Under California law, all his property was split equally with his wife. Under their wills, their sole heirs were their sons.

The estate was first thought to be worth $14,501,342, according to a probate document filed Aug. 22, 1990.

That, though, left out $164 in savings bonds, $30,470 in jewelry and $28,044 in furniture, clothes and personal things that had been overlooked.

The added $58,678 brought the original total to $14,560,020, according to a Nov. 26, 1990, probate filing.

In large measure, according to the court records, the estate was made up of three assets: a mansion in Beverly Hills appraised at $4.8 million, the house in Calabasas appraised at $2.65 million and 330,000 shares of stock in Live Entertainment appraised at $6.58 million.

The remainder included items such as the jewelry, the furniture and oddities such as 16 French francs said to be worth $2.46.

For accounting purposes, the probate files also include in the asset column some $1.3 million in income generated from 1989 through April 30, 1993, the date on which the executors submitted the balance books. No updates have been filed since.

The files also add in gains on stock sales during those four years, bringing the value on the books to a grand total of $16,018,906.

It is that figure--not the $14.5 million estimated in the estate at the time of the killings--from which the calculating is actually done.

The estate has paid $3,906,280 in taxes, most of it in estate taxes.

To defend Lyle Menendez, it spent $740,000. That sum was divided among attorneys Gerald Chaleff, Joel Isaacson and Lansing. To defend Erik Menendez, it spent $755,000. Abramson earned $740,000; Robert Shapiro, the younger brother’s first attorney, earned $15,000. Total in criminal defense fees: $1,495,000.

The estate spent $2,743,219 on the Beverly Hills house and $1,404,007 on the Calabasas site, mostly for mortgages and upkeep.

The estate allocated $314,384 for “Lyle’s miscellaneous expenses.” Of that, $300,000 went for the purchase of a New Jersey chicken-wing restaurant, said an attorney familiar with the file.

It also spent $9,392 on “Erik’s miscellaneous expenses.” Included were medical expenses, a pre-arrest plane ticket and phone bills.

A variety of other fees and expenses brings the total spent to $10,771,199.

To calculate the value of what remains, the executors--one of Jose Menendez’s sisters and her husband--factored in losses on sales of the Beverly Hills house and the Live Entertainment stock.

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The house turned out to be worth nowhere near $4.8 million.

It was there, in the TV room, that the sons killed the parents, and “it was widely believed by the home-buying public and the real estate brokers and agents that this house had bad ‘karma,’ and was one to be avoided,” according to court records filed on behalf of lawyers for the executors.

In 1991, it sold for $3,607,975--a loss of $1,192,024. What was left after meeting the mortgage and closing costs went directly to the Internal Revenue Service, attorneys said.

The 330,000 shares of Live Entertainment stock proved difficult to unload, because the share price tumbled after the killings, the probate files indicate. The shares sold at a loss of $530,981.

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The estate recorded other losses on the sale of some furniture with the Beverly Hills house and on Carolco debentures. Total losses amounted to $1,806,577.

Subtracting the expenditures and the losses from the $16,018,906 working figure leaves $3,441,130 as the total of the inventory in the estate.

But that figure is misleading, because it lists the Calabasas house at its 1990 appraised value, $2.65 million. It was last listed for sale at $1.9 million.

If it sells, the house, which sits on 13 acres tucked into a hillside off Mulholland Drive, figures to yield $1.5 million, according to papers filed by the brothers’ probate attorney, Gail Kass. Adding in the cash on hand, $651,948, and the estimated net proceeds from the sale of the New Jersey condo, $90,000, puts the estate at $2.2 million, not $3.4 million.

Debts outstanding include the $864,000 Calabasas mortgage, estate taxes estimated at $600,000, probate attorney’s fees and executors’ commissions. If those were all paid immediately, the estate would have $310,000 left, Kass figured.

Meanwhile, interest on the Calabasas mortgage and the taxes is accruing at some $146,000 annually, Kass estimated. The estate also owes $200,000 in court costs from the murder trial; that money is due to go to the county, which advanced the funds. Tax attorneys and accountants also are due to present more bills.

If paid, it all would leave the estate with less than zero.

What about the $651,948 in cash on hand? It can’t simply be allocated to the brothers’ defense. Under the probate law, taxes, the Calabasas mortgage and other expenses take a priority.

Besides, attorneys stressed, the estate is under no obligation to pay for the defense.