A longtime family friend, with the help of an attorney, raided about $50 million from the founders of the Alta-Dena milk empire, while the law firm they worked for did nothing to stop it, an attorney told an Orange County jury Monday while the firm’s lawyer said the family should have done a better job of monitoring its fortune.

“This case is about a legacy,” said attorney Robert Barnes, who represents the Stueve family in its lawsuit against the Buchalter law firm.

The legacy of the three brothers who founded the Alta-Dena milk empire wanted to ensure they could provide a lifetime income for their heirs as well as a steady stream of donations for their favorite charities, Barnes said.

Co-defendants in the lawsuit, longtime family friend and attorney Raymond A. Novell, and the Irvine-based Berger Kahn law firm, reached a settlement with the Stueves last week. Berger Kahn was sued because it had employed estate planning attorney Jay Wayne Allen, who the Stueves allege teamed up with Novell to siphon money from the family.

The Stueves turned to the Buchalter firm, which employed Allen, “to protect their legacy,” Barnes said.

“The question is what happens when a big law firm thinks it’s above the law,” Barnes said.

Elmer, Harold and Edgar Stueve, who were all born from 1913 to 1917, in a small town in Missouri, started the dairy farm after joining the Dust Bowl migration West during the Great Depression. It was a family business and they typically lived a modest lifestyle while giving away much of their income to charity, Barnes said.

They sold the Alta-Dena brand in 1989, but they took a financial hit during the “dairy wars” over raw milk vs. pasteurized milk in the mid-1990s and had to declare bankruptcy, Barnes said. They emerged from the bankruptcy by 1999 and paid back creditors they didn’t even have to reimburse, Barnes said.

They sold the entire Alta-Dena company by 2001, he said. The family grew concerned as the founders of the company began dying that they would lose everything to estate taxes, so they turned to Novell when he offered help, Barnes said.

They were assured by Novell and Allen that they could set up a complex set of trusts that would ensure each of the heirs would have a lifelong income and they could still keep giving to charities, Barnes said.

In 2008 the last of the wives of the founders died, leaving her daughter in charge of the estate, Barnes said. She thought the insurance payout would be $2 million, but when Allen explained it would be less because of some borrowing, she sought advice from another trust attorney, Barnes said.

She was advised she could ask for a full accounting to avoid having to file a lawsuit, which she was reluctant to do, Barnes said. A family meeting was called in September 2009 at the Buchalter firm’s offices in Irvine to go over the family’s finances.

“Buchalter says everything is fine and in order,” Barnes said.

When family members asked for an audit they were told it was not possible because it would violate privacy rules governing the trusts, Barnes said. Also, it would be “very expensive,” as they estimated $300,000, the attorney added.

The family was “still very confused” about loans taken out by a foundation, so that led one family member to seek help from an old friend, who was an attorney, who advised them that tax laws had been reformed and they had no danger of “losing everything” to estate taxes and that much of the work done on their behalf by Novell and Allen was unnecessary, Barnes said.

When they took their case to probate court, Novell was removed as trustee of the estate, and they learned that nearly all of the family fortune was gone and half of one valuable piece of property in Chino had been sold out from under them, Barnes said.

Novell had spent $7 million on himself with vacations and homes in San Diego and Long Beach for himself and his family, Barnes said. Novell, when reached last week, declined to comment on the settlement.

In a discussion over the law outside of the ears of the jury, Barnes said Novell had signed a document in the settlement saying he was responsible for the family losing $200 million.

Experts found a “spider web of transactions so thick it could block out the entire sun,” Barnes said.

“There was a lot of self-dealing, a lot of concealing,” on behalf of Allen and Novell, Barnes said.

Buchalter ignored several “alarms” that would have warned them off of hiring Allen, including background and conflict checks, Barnes said.

When Buchalter partners learned probate court ordered an accounting of the family’s funds, there was a “hush hush meeting” and Allen was cut a check before resigning, Barnes said.

Allen walked out of the firm with a computer of records and had it “nuked” so no one could recover files, Barnes said.

Forensic experts eventually concluded that Allen and Novell left the Stueves “short of $50 million and the interest on that is $150 million,” Barnes said.

Attorney Alan Greenberg, who represents Buchalter, said his clients did not know of any alleged fraud until February 2009 and when they did they quickly moved to try to fire Allen, who resigned before the shareholders could vote on a separation.

Greenberg said the Stueves were content to take in millions under the estate plan set up by Novell and Allen for years until the economy tanked during the Great Recession in 2008.

“The plan was very successful in many ways,” Greenberg said.

Greenberg said the family knew when Allen took out loans of up to $200,000 and didn’t object.

The Buchalter firm only received $150,000 in fees from the Stueves, Greenberg said.

“No one told the firm, hey, you’ve got a problem on your hands,” Greenberg said. “They had nothing to investigate.”

“We will prove this is about personal responsibility,” Greenberg added. “The Stueves had personal responsibility… They chose to have Novell to be their trustee.”

They also put family members in charge of the estate who had no expertise in money management, Greenberg said.

For years they stuck with Allen and his plan, which they chose, Greenberg said.

“They decided it was a problem when the economy was terrible and it was harder for (Allen and Novell) to do their job,” Greenberg said.

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