Fraudulent oil rig sale triggers nine month suspension
The South Carolina Supreme Court handed down two Christmas season lawyer disciplinary cases involving trust accounting failures on December 20*. In a twist on the now common tale of fraudulent real estate transaction targets, one of the cases involved a fraudulent oil rig sale.
Attorney Bell was hired to negotiate the purchase of an oil rig in Oklahoma by NTB Management and Control, LTD (NTB), an Israeli company. Although NTB is a legitimate company, the purchase of the oil rig was a fraudulent transaction.
The fee agreement provided for a retainer of $21,000 plus hourly fees, but Bell never received the retainer. Instead, NTB advised him that insurance proceeds due NTB would be wired to his account for expenses related to the purchase of the oil rig. A wire of $48,600 from Liberty Company Insurance Brokers (Liberty) soon arrived in Bell’s trust account at Wells Fargo. This wire was initiated by an email scam perpetrated on NTB. NTB’s USA director, Roland Nelson, asked Bell to give him cash from these funds to pay NTB’s third-party vendors.
Pursuant to Nelson’s instructions, Bell paid two of NTB’s third-party vendors. On the same day, Bell withdrew $8,000 in cash from his Wells Fargo trust account. Bell gave Nelson $500 of this amount for his hotel bill, and deposited the remaining $7,500 into his trust account at Bank of America. He then transferred funds to the second vendor’s account and paid himself $8,500 in fees by two online transfers from his Wells Fargo trust account, one to his operating account and another to his personal checking account.
During an angry telephone call, Nelson claimed the vendors had not been paid and threatened to cut Bell’s throat. Bell decided to terminate the relationship and to withdraw the balance from his Wells Fargo trust account. He forgot to account for the transfers he made for his fees, so he believed the balance of the account was higher than it actually was. He signed a cash withdrawal slip for $33,987.43 to purchase a cashier’s check made payable to his firm and deposited the check into his Bank of America trust account. Once these transactions were processed, Bell’s Wells Fargo trust account was overdrawn by $8,485.
When Wells Fargo contacted Bell about the overdraft and the fraudulent wire, Bell agreed to return the $33,987.43 to his Wells Fargo account and authorized the return of the account balance equal to $25,467.43 to Liberty. He elected to retain the $8,500 in fees he paid to himself, claiming he failed to understand from his conversation with Wells Fargo that the funds belonged to Liberty. He later admitted he failed to ask questions.
In addition to the issues of cash withdrawals from trust accounts and insufficient financial recordkeeping, Bell also failed to respond fully to the Office of Disciplinary Counsel’s (ODC’s) demands for information. He was suspended for nine months and required to complete ethics and law office management courses.
In the other December 20 disciplinary case, The Supreme Court disbarred an attorney for failing to maintain adequate financial records, for making cash withdrawals from his trust account, for converting trust account funds to personal use and for providing false information to the ODC.
South Carolina lawyers should absolutely understand by now that the Supreme Court and the ODC are extremely serious about trust accounting rules.
*In re Bell, South Carolina Supreme Court Opinion No. 27755, and In re Johnson, South Carolina Supreme Court Opinion No. 27756, both dated December 20, 2017.
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