In one of the saddest disciplinary cases I’ve read to date, the South Carolina Supreme Court disbarred a real estate practitioner for dipping into his trust account to support his gambling addiction.
In the Matter of Webb, * involved a real estate practitioner who had worked in a law firm for many years. The lawyer opened his own practice in 2020. He self-reported numerous instances of accessing his trust account for personal use in 2022.
When he left his law firm, the lawyer hired his long-time real estate paralegal and gave her access to his real estate trust account. Interestingly, no funds were misappropriated from this account. He subsequently opened another trust account, however, and used this account inappropriately. His paralegal offered to handle and reconcile this account, but he refused, and he never kept proper financial records for this account.
The improper transfers suggest the lawyer was attempting to merely borrow funds. For example, he received a wire of $114,352 to be held in escrow on May 10, 2021. On May 12, he transferred $4,000 of these funds to his operating account. On May 14, he made a cash deposit of $4,000 into the trust account, and on May 18, he transferred the full amount of $114,352 to his client. His records indicate he used some of the $4,000 for personal and business expenses and some to conduct online sports gambling.
Later, the lawyer began to repay funds he had borrowed from one client by using funds held in trust for another client. For example, on August 20, 2021, he received a wire in the amount of $284,150 to be held for a 1031 exchange. Over the course of the next seven months, he converted these funds for his personal use, including to fund gambling activities. When he disbursed the funds to his client in March of 2022, he did so, in part, by using $53,336 held in trust for another client. He delayed disbursement to the second client by three months, and he made that disbursement using funds held in trust for other clients.
He admitted he failed to keep client ledgers and “did a terrible job of keeping financial records.” The case lists funds misappropriated from numerous clients and, in addiction, lists an aggregate amount of more than $500,000.
The sad part of the case is the evidence the lawyer presented in mitigation. He explained that he had struggled with a gambling addiction since 1999, and that addiction escalated between 2014 and 2016, resulted in him taking out numerous mortgages and loans and eventually declaring bankruptcy in 2016. He then sought counselling and attended Gamblers Anonymous meetings, and “quit gambling for the most part” for approximately two years.
He explained that after he opened his own practice, the pressure of managing his business and personal finances triggered a gambling relapse. He was able to leverage assets and borrow additional funds from family members and friends to replace all but $126,000 belonging to five clients. After the self-reported his misconduct, he advised those five clients to file claims with the Lawyers’ Fund for Client Protection, which covered the full amount of losses for all but one client. The lawyer said he borrowed $35,000 from his parents to cover the funds owed to the fifth client.
Following his suspension, the lawyer enrolled in an in-patient gambling recovery program. After returning from that program, he explains he has prioritized healthy activities, including Bible study, church attendance, Gamblers’ Anonymous Meetings, maintaining contact with Lawyers Helping Lawyers, spending time with his children, working out, and working a full-time job and driving part-time for Uber.
The lawyer explained his “decisions and actions cost me my marriage, my law license, friendships, and significant time and experiences with my children.” The Court commended the lawyer for his extensive efforts to address and rehabilitate his gambling addiction, but said the mitigating circumstances in no way excuse the serious misconduct.
He failed to pay off four mortgages. By his own calculations, the loss was more than $200,000, but the Office of Disciplinary Counsel stated that his financial records and computers had been destroyed, making it impossible to prove the true extent of the financial mismanagement and misappropriation. Apparently, the money from new closings was used to fund prior closings, up until the date of Mr. Samaha’s suspension from the practice of law.
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