Pismo Beach attorney arrested for grand theft

July 8, 2011

By LISA RIZZO and KAREN VELIE

UPDATE: The San Luis Obispo Police Department says investigators have possibly identified additional victims as a result of searches conducted Thursday at Attorney William Peter Terhune’s Pismo Beach office and home.

Terhune is facing charges of embezzlement and excessive taking of over $200,000. Bail was set at $1 million. He is scheduled to be arraigned July 15 at 4 p.m.

Client trust accounts and Terhune’s office bank accounts have been frozen. Client’s needing more information can contact California State Bar Investigators at (213) 765-1731.

ORIGINAL: A Pismo Beach law practice was seized by the State Bar of California Thursday and the attorney was arrested for allegedly stealing more than a quarter-million dollars from a client’s estate.

Law enforcement officers took William Peter Terhune, 57, away in handcuffs as officials from the State Bar began combing through his practice’s records and files.

Terhune is accused of stealing nearly $275,000 from the estate of Junko S. Hensling of which he was the attorney and the administrator. The estate’s sole beneficiary lives in Japan and does not speak English.

Terhune has been an active member of the San Luis Obispo community. According to his website he is a past chairman of the San Luis Obispo County Bar Association’s probate section, and a former director of the association’s board. He was also previously on the board of directors of the San Luis Obispo Chamber of Commerce and the president of the San Luis Obispo Downtown Business Improvement Association.

In the State Bar’s petition to take over Terhune’s law practice, it details 19 bank account transfers from the estate’s account to the attorney’s private business account made between May 2009 and March 2010, according to documents CalCoastNews obtained from the State Bar.

Terhune allegedly dwindled down his client’s account from nearly $300,000 to an ending balance of $1,278, taking out from $4,000 to $30,000 at a time, and sometimes more than once a day.

The estate’s beneficiary says she has not received a single penny.

Even after the attorney was confronted by his paralegal, who discovered the missing funds, Terhune admitted he took the money because “he was unable to get a small business loan,” but he continued to steal money for five more months, according to the State Bar’s petition.

Also at issue is the fact that Terhune has requested and been granted several time extensions to file a final accounting of the Hensling Estate, as required by the courts. Investigators claim Terhune has been lying about the status of the estate to hide the fact that he was using its assets for his own personal use.

As of Thursday evening the attorney was still in county jail so he was unable to respond to the allegations against him.

Terhune has said, in writing, that the funds from the Hensling Estate bank account “were invested over time in various loans as evidenced by promissory notes that will produce a much greater rate of return on the estate’s funds,” the petition says.

The State Bar contends the notes were created only after the misappropriation of funds was discovered and may contain fraudulent dates. Even so, Terhune did not have the probate court’s approval to make the transfers.

The attorney’s former paralegal filed a complaint to the State Bar on behalf of the Japanese beneficiary.

Earlier this year in a response to the complaint, Terhune denied the allegation that he had “misappropriated the funds” and said that all assets of the Hensling Estate “have been held and maintained for the benefit of the estate and will ultimately be distributed to and for the sole benefit of Momoko Sasaki.”

An order filed with the San Luis Obispo County Superior Court on Thursday gives the State Bar of California permission to retain all of Terhune’s file’s, redirect his phone lines to the state bar, suggest clients find a new attorney and with client permission – file motions and other pleadings.