Sister of Phillies owner says he cheated her out of millions

The sister of John S. Middleton, the billionaire co-owner of the Phillies, has asked a judge to undo a 2003 deal she struck with her brother, saying he fraudulently deprived her of a share of the team and proceeds from the $2.9 billion sale of the family's cigar business.

Anna K. Nupson leveled that accusation this week in a filing in Montgomery County Orphans' Court, citing unspecified "new information" that her brother had concealed negotiations to sell the family business while scheming to first buy her and others out for a comparatively trifling $200 million.

Nonsense and lies, Middleton's lawyers replied.

His legal team provided The Inquirer with a 2005 letter to Middleton from the investment banker who orchestrated the $2.9 billion sale of John Middleton Inc. - a faxed letter in which the banker introduced himself with an acquisition opportunity.

That 2005 overture, the lawyers say, shows that Middleton began pursuing the sale two years after he had reached agreement with his sister.

"These allegations are lies," Middleton's lawyer, James T. Smith, said of Nupson's assertions. "There were no discussions in 2002, 2003, or 2004."

Nupson's demand arose from a legal dispute over Middleton's administration of several family trusts. She has accused him of breaching his fiduciary duty and costing her millions of dollars.

Nupson, 51, of New Mexico, has not requested a specific sum of money, her lawyers said, because the value of the trusts is in dispute. In court documents, she has asked a judge to order Middleton to award her a share of the Phillies, a family-owned hotel chain, and proceeds - plus interest - from the 2007 sale of the cigar company, John Middleton Inc.

Her lawyers moved to have documents outlining her position sealed, saying: "The matter is not particularly newsworthy but is potentially embarrassing to the parties."

Middleton's legal team wants the dispute to unfold publicly, according to court documents, to show "the truth about the sordid claims lodged against him by his sister and her attorneys."

"It is Mr. Middleton's reputation that is damaged by these baseless allegations, which he intends to defend vigorously and then seek appropriate remedies and sanctions against every party and attorney who was involved in this scandalous activity," Smith said.

Middleton, 60, of Bryn Mawr, has insisted he did nothing wrong and has said he was deeply disappointed by his sister's actions.

This month, Middleton asked Judge Lois E. Murphy to affirm the 2003 agreement that restructured the family business. He challenged his sister to make detailed claims against him.

She, in turn, listed 70 objections to Middleton's conduct and asked the court to investigate his "breach of fiduciary duty" and to conduct a review of his transactions.

Through her lawyer, Brian A. Gordon, Nupson declined to comment.

In 2003, Middleton was trustee of his sister's personal trust and president of Bradford Holdings Inc., a family firm that owned part of the Phillies, a McIntosh Inn hotel chain, and the cigar company. That year, Nupson sold more than 70,000 of her shares in Bradford back to the company, allowing Middleton to consolidate control.

Nupson's lawyers say that at the time of the sale, her brother "failed to disclose to Anna comprehensive information about the value of the companies within Bradford Holdings Inc."

Middleton's lawyers dispute that. The prices paid to Nupson and her sister, Lucia, exceeded the price suggested in two appraisals of Bradford Holdings, in 2000 and 2002, they said in court documents.

At the time of the deal, the cigar manufacturer - the family's biggest asset - faced an uncertain future because of class-action lawsuits against tobacco companies, court documents said.

Middleton bought his sisters and mother out of Bradford Holdings in 2003 for about $165 million - plus a $54 million dividend payment split among all of the family members.

Nupson's lawyers say she was "coerced" to sign that agreement. They said Bruce A. Rosenfield, a longtime family lawyer from Schnader Harrison Segal & Lewis L.L.P., improperly influenced her during the transaction.

"Anna received advice from a family lawyer who was working as the advocate and agent of her brother John with diametrically opposing interests," her lawyers wrote. She was "left defenseless" by relying on Rosenfield's advice, they said.

But when Nupson asked Rosenfield to represent her in 2002, she signed a waiver that released him from any conflicts of interest. That waiver, submitted to the court this month, said Middleton was represented in the matter by Larry Laubach of Cozen O'Connor.

Rosenfield declined to comment. In a statement, the Schnader firm said: "Mr. Rosenfield is not a party to these legal proceedings. The firm stands behind his work, and Mr. Rosenfield acted properly at all times."

Nupson's lawyers have asked the court to rescind decades-old amendments of various trusts, saying they violated her rights as spelled out in the language of family trusts from 1972, 1982, and 1990.

Among them is a 1995 agreement that restricted Nupson's access to her trust funds to interest only - something she wants to change.

Middleton is viewed as a possible future majority owner of the Phillies. Sources have said he holds a 48 percent stake in the team.

His fortunes rose, his lawyers said, with a letter dated Aug. 12, 2005. It was from Robert Pruzan, an investment banker representing the Altria Group Inc., the corporate parent of Philip Morris. Pruzan did not tell that to Middleton but said he had a client interested in the cigar business.

Pruzan listed seven corporate mergers he advised. He wanted to meet Middleton.

"In anticipation of a telephone call with you next week," Pruzan wrote, "I thought it might be helpful for me to introduce myself and explain the reason for my calls."

A little more than two years later, the $2.9 billion sale to Altria was announced.

mgelb@philly.com 215-854-2928 @MattGelb

Inquirer staff writer Bob Fernandez contributed to this article.