Rich Diplomat's Widow In Legal Battle With Heirs -- Harriman Family At Odds Over Trust Fund Loss Of $30 Million

WASHINGTON - Washington and New York society have gotten a glimpse into the personal and financial affairs of one of their most venerated families, thanks to a lawsuit filed in a Manhattan federal court last week.

The heirs to the former New York governor, financier and diplomat W. Averell Harriman have sued his widow, Pamela Harriman, claiming that $30 million in trust funds were squandered on ill-advised investments. The suit says the family is left with about $3 million.

Also named in the suit are old-line attorneys and Democratic advisers Clark Clifford and Paul Warnke, who served as trustees of various Harriman funds from 1984 to 1993.

The suit apparently grows out of years of bitterness between Harriman's third wife, Pamela, now serving as U.S. ambassador to France, and the offspring of her late husband's first marriage.

Harriman, 74, could not be reached for comment yesterday, but her attorney, Michael Helfer, said she "regrets that the children and grandchildren of Gov. Harriman chose to sue her and the advisers who were selected by the governor rather than trying to work things out cooperatively. She was never a trustee of the trusts whose assets were allegedly mismanaged. And she will defend this very vigorously."

Clifford said yesterday he believes there is no merit to the litigation. "I am perfectly comfortable in my mind about the service," he said.

Warnke was less satisfied. "I feel that I did do my job properly

on the basis of the information that I had," he said. "I feel that I did not have adequate information. . . . I did not know that trusts had been used as security for loans."

One of the grandchildren bringing the suit is Washington attorney Robert Fisk.

One focus of the litigation is a substantial loan to a New Jersey resort. According to the New York Times, $21 million was invested in the Seasons Resort and Conference Center, described in the complaint as a "long-troubled hotel and real-estate project." Large sums also allegedly were pledged to secure loans on high-risk investments.

Christopher Ogden, author of "Life of the Party: The Biography of Pamela Digby Churchill Hayward Harriman," said there was little love lost between Pamela Harriman and Harriman's daughters by his first marriage. Though Pamela and Kathleen Harriman Mortimer met and became friends when both were in their early twenties, the relationship degenerated about 30 years later after Pamela - the younger of the two - became Mortimer's stepmother in 1971. Ogden said Pamela Harriman bears most of the blame for the rift with the Harriman children.

"She froze them out physically and she froze them out psychologically and then she froze them out financially," Ogden said.

In his will, Averell Harriman left only $4,000 in cash to each of his daughters.

The terms of the will were not disclosed. Ogden said the value of Harriman's estate was estimated at $100 million. Some friends assumed that Pamela had essentially inherited everything since both daughters had married well.

By the time Averell Harriman died, the rift in the family was deep. On the day of Harriman's funeral, Ogden reported, the children went to a family grave site, unaware that their father and his wife had previously decided that he would be buried in another plot, four miles away.

While some friends of the children evidently expected them to sue after the will was read, the same friends acknowledge that bringing the fight into the public would have gone against the family's nature."

Rumors that there might be financial problems with the Harriman estate, caused by bad investments, had begun to filter through New York society last winter. Many found them hard to believe after reading so often of the estate's vast holdings.

Averell Harriman had asked Clifford and Warnke to serve as trustees on a variety of funds created for his heirs. After Harriman died in 1986, additional trusts were created.

For a time, the trusts performed well, reportedly growing in value from $13 million to $25 million. But eventually, the suit alleges, the investments became increasingly risky.