THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, October 19, 1995 TAG: 9510190350
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 170 lines
In her lifetime, Mary Morton Parsons lost millions of dollars to a doctor and a lawyer who drugged the elderly widow, confined her to an Oceanfront home and stole her inheritance, lawyers say.
In death, the heiress' estate has lost millions more, this time to the Internal Revenue Service.
It's not that Parsons' heirs aren't entitled to the money, the IRS argues. It's just too late. And now, two federal courts have agreed.
As a result, the Richmond charity that Parsons created before her death has lost at least $4 million - probably double or triple that, with interest from 1980 - that would have gone to libraries, schools and museums.
``Parsons' refund claim was untimely,'' a federal appeals court has ruled.
But the ruling has sparked a howl of protest from at least one unlikely source: one of the three appeals judges who heard the case and dissented from the panel's 2-1 ruling against Parsons earlier this month.
``If ever there was a tax case in which (the statute of limitations should not apply), it is this one,'' Judge Donald Stuart Russell wrote. ``The government can certainly afford to do the honorable thing in this case. To the government, which deals with budgets of trillions of dollars, $4 million is just a drop in the bucket.''
The bizarre case of Webb v. USA revives a 7-year-old tale of massive thievery among Virginia's high society. The case made headlines in Hampton Roads and Richmond in 1987 and 1988, and may be destined for the U.S. Supreme Court.
It features a Richmond heiress who disappeared one day into her Virginia Beach vacation home, then reappeared a decade later with her money gone and a wild tale of abduction by her trusted physician and attorney.
``She was well born,'' recalled Clinton Webb, a lifelong friend who now heads her charitable trust. ``Her immigrant ancestors were married in Jamestown in 1620. Now, you can't be a better Virginian than that.''
Parsons died at age 88 in 1990, but her legal fight continues.
In her time, Mary Morton Parsons was a socialite worth knowing.
Among friends in Richmond, she was known for grand parties and generous gifts. Her fortune - inherited from her father, who helped found a Richmond life insurance company - was worth $23 million in 1976. She gave it away freely, but didn't talk much about it in public.
``She had a complex about it,'' Webb said. ``She felt people were after her money.''
Despite her wealth, Parsons was vulnerable. She didn't really understand financial matters, so she left the details to others - her husband, at first, then her sister-in-law.
Finally, in 1972, Parsons turned to a Virginia Beach social acquaintance, Dr. Alvin Q. Jarrett, to be her physician and financial manager. Jarrett, in turn, hired as his legal adviser a Richmond lawyer, B. Roland Freasier Jr.
What happened next, Judge Russell wrote, was ``simply tragic.''
``Through systematic physical and emotional abuse during the ensuing 14 years,'' the appeals court wrote, ``Jarrett and Freasier induced Parsons to relinquish to them total control over her day-to-day affairs. They persuaded her to move into virtual seclusion in Virginia Beach, where they confined her to her bed under heavy sedation.
``They discharged most of Parsons' household staff and prevented her from receiving mail or telephone calls and from seeing visitors. They also induced her to grant to each of them powers-of-attorney.''
Then, the doctor and lawyer became rich.
First there was a house. Parsons owned a second vacation home on Virginia Beach's North End, next door to her own. She sold it to Jarrett in 1977 for $50,000, even though it was assessed that year at $214,608.
Then the doctor and lawyer took most of the stock that Parsons held in her father's insurance company, Home Beneficial Corp., lawyers charge.
To cover their tracks, Jarrett and Freasier made the stock transfer look like a ``gift'' from Parsons to them, and paid $4.3 million in federal gift taxes in 1980 out of Parsons' money, the court wrote. They paid another $7 million out of Parsons' money in 1986 and 1987, after an IRS audit.
One day in 1987, Parsons came out of her drugged stupor. When she realized what happened, she called Webb, her old friend in Richmond. ``I don't have a penny,'' she told him. ``Come and get me.''
He took her home to Richmond in an ambulance.
From there, the widow took her tale of abduction and thievery to court.
In 1987, Parsons filed a $200 million lawsuit in Richmond Circuit Court against the doctor and lawyer. Her new lawyer, Charles F. Witthoefft, declared Parsons ``effectively insolvent and bankrupt.'' She was broke.
To scrape up some cash, the widow sold many of her belongings at a tag sale. The collection of antiques was so big and valuable, and the sale so badly managed, that collectors and antiques dealers got into fistfights amid the old chairs and bureaus.
But it netted Parsons about $300,000, enough to pay some back taxes.
And then, quietly, her lawsuit was settled.
Details are confidential, but Parsons got back most of her stock, plus some cash, court records show. The deal allowed Parsons to pay more than $2 million in back taxes and ``live in the manner in which she is accustomed,'' Witthoefft said.
She didn't live long. She died two years later - coincidentally, within a few months of Dr. Jarrett.
And so the money passed on. But to whom?
Parsons had no heirs. She had no children, no surviving husband. In her will, Parsons left her fortune - now about $50 million - to a charitable foundation bearing her name.
Today, the Mary Morton Parsons Foundation gives money to many projects: schools, libraries, historic preservation. ``We're more or less open to any worthy thing,'' said Webb, the foundation's president.
Last year, for example, the foundation gave $500,000 each to a state library, a state museum, the Richmond botanical gardens and Prestwould, an historic plantation on the Roanoke River. The biggest gift was $2 million to Union Theological Seminary in Richmond, for a new library named for Parsons' father, William Smith Morton.
But still the foundation is missing something. It wants back the $4 million in gift taxes that the doctor and lawyer allegedly paid fraudulently to the IRS.
The federal government refuses to give it back - not because the Parsons estate doesn't have a valid claim, but because the claim is too late.
The law is clear: Taxpayers must file for refunds within three years of filing the tax return, or two years of paying the tax. Otherwise, the IRS can ignore them.
Courts say this is fair, even if it seems arbitrary, because there must be some deadline, somewhere. Otherwise, the IRS would forever be reviewing old tax returns.
``It probably would be all but intolerable. . . ,'' the court wrote, ``to have an income tax system under which there never would come a day of final settlement and which required both the taxpayer and the government to stand ready forever and a day to produce vouchers, prove events, establish values and recall details of all that goes into an income tax context,'' the court wrote.
Both sides agree that Parsons' claim was filed too late.
Parsons filed her claim in April 1988, a few months before she died. That was plenty of time to get back the $7 million paid in 1986 and 1987, plus $2.8 million in interest and penalties.
But it was too late to get back the 1980 payment of $4.3 million.
Tough break, the IRS argues; the government gets to keep your money.
Parsons' attorney doesn't buy it. He argues that, in some cases, the statute of limitations doesn't apply. He argues that his client was duped and drugged, so she could not possibly have filed on time.
So far, he has not persuaded anyone. A Richmond trial judge ruled against him last year. On Oct. 2, a three-judge panel of the 4th U.S. Circuit Court of Appeals voted 2-1 that Parsons was too late to get her money back.
``We hold that there is no (stopping the statute of limitations) in tax refund cases. . . '' the court wrote. ``Accordingly, Parsons' refund claim was untimely.''
Judge Russell strongly dissented.
``Parsons was not a taxpayer who, because of her incapacity, simply neglected to claim a refund of overpaid taxes that the government rightfully collected or withheld from her,'' Russell wrote.
``Instead, Parsons paid taxes she never would have paid had she not been rendered incompetent and defrauded by her physician and attorney. The government, although not a participant, was an unintentional beneficiary of the physician's and the attorney's fraud. . .
``Requiring the government to return the money improperly collected from Parsons would not impose any burden on it. Such an unbudgeted loss of revenues would destroy many corporations, but the government would hardly be affected.''
Webb is considering an appeal to the full appeals court and then, maybe, the U.S. Supreme Court.
It is strictly a business decision, he said - something Parsons' father, the insurance company founder, probably would appreciate.
``We are business people,'' said Webb, an 88-year-old stock broker, ``and we will be practical about it.'' ILLUSTRATION: Portrait
File photo
The former homes of the late Dr. Alvin Q. Jarrett, left, and the
late heiress, Mary Morton Parsons, were located at 4704 and 4708
Ocean Front Ave. in Virginia Beach. The case made news in 1987 and
1988, and may end up in the U.S. Supreme Court.
by CNB