In re McMillian, 25822.

• Decision Date: 17 May 2004
• Docket Number: No. 25822.,25822.
• Citation: 359 S.C. 52,596 S.E.2d 494
• Court: South Carolina Supreme Court
• Parties: In the Matter of William Jefferson McMILLIAN, III, Respondent.

359 S.C. 52

596 S.E.2d 494

In the Matter of William Jefferson McMILLIAN, III, Respondent.

No. 25822.

Supreme Court of South Carolina.

Submitted April 13, 2004.

Decided May 17, 2004.

Rehearing Denied June 9, 2004.

Henry B. Richardson, Jr., Disciplinary Counsel, of Columbia, for the Office of Disciplinary Counsel.

R. Davis Howser, of Columbia, for respondent.

PER CURIAM:

In this attorney disciplinary matter, respondent and the Office of Disciplinary Counsel (ODC) have entered into an Agreement for Discipline by Consent pursuant to Rule 21, RLDE, Rule 413, SCACR. In the agreement, respondent admits misconduct and consents to the sanction of disbarment. We accept the agreement and disbar respondent from the practice of law in this state. The facts, as set forth in the agreement, are as follows.

FACTS

I.

Respondent was admitted to practice law in November 2000. Around March 2001, respondent entered into a business arrangement with Carolina Title Services, Inc., (CTS) through its principal officer and manager Amy Cook (Cook). The purpose of the arrangement was to close large volumes of real estate loans. Neither Cook nor any other CTS employees were licensed to practice law.

Under respondent and CTS' arrangement, real estate loan transactions would be closed, for the most part, in the following fashion: the handling of the underlying transactions were solicited and obtained by CTS; the lenders sent the loan packages directly to CTS; CTS' non-lawyer staff would conduct or obtain a title search which was completed by a non-lawyer; the non-lawyer staff of CTS would prepare the closing documents; respondent attended closings, reviewed closing documents with parties and signed HUD-1 Settlement Statements as "settlement agent;" thereafter, CTS would see to the recordation of the documents, the disbursement of the proceeds of each transaction, the issuance of title insurance policies, and other actions necessary to consummate the transactions.

For attending the closings, respondent was usually paid a fee of $300 to $350 out of each transaction which was reflected on the Settlement Statements. CTS retained amounts collected for title examination, document preparation, title insurance commitment/binder fees, and commissions on title insurance premiums.

To implement the foregoing arrangement, respondent opened an IOLTA Trust Account at Bank A. This account was styled "The McMillian Law Firm Trust Account." Respondent gave Cook signatory authority over this trust account. The trust account checkbooks, bank statements, and cancelled checks were maintained by Cook at the offices of CTS. CTS' address was used for mailing monthly bank statements and cancelled checks. Deposits to and disbursements from this account were usually made by Cook and/or employees of CTS without respondent's supervision.

Cook was a licensed agent for Chicago Title Insurance Company (Chicago Title) which was the primary provider of title insurance for the transactions closed in furtherance of the foregoing arrangement and, in most cases, Chicago Title issued insured closing letters in connection with these transactions. Usually, loan packages were sent directly from lenders to CTS and almost all negotiations and discussions with lenders related to these transactions were handled by the staff of CTS and not respondent.

Under this arrangement, approximately three hundred transactions were closed by CTS with respondent's assistance and/or using one of respondent's trust accounts between March or April 2001 and April 2002. Respondent estimates that he was present at 80% to 95% of the closings, however, because of the large volume of transactions, it was impossible for him to attend all the closings. When respondent did not attend, closings were conducted by CTS' non-lawyer staff without the presence of a licensed attorney. In those cases, someone at CTS would sign respondent's name to the HUD-1 Settlement Statements and any other documents requiring respondent's signature. While respondent never specifically authorized anyone else to sign his name on documents, on a few occasions, respondent had actual knowledge that Cook and/or one or more employees at CTS were signing his name to closing documents and had constructive knowledge that this was occurring on the other occasions when respondent was unable to be present at closings. Notwithstanding this knowledge, respondent did not prohibit Cook or other CTS employees from signing his name to closing documents and, by not doing so, gave his tacit approval to this practice.

During the entire period of the foregoing arrangement with CTS, respondent maintained no files concerning the real estate transactions (other than a list of closings for which he expected payment from CTS), failed to reconcile or even review monthly bank statements, and failed to comply with any of the money handling and record keeping requirements of Rule 417, SCACR, notwithstanding establishment of an IOLTA Trust Account styled "Law Offices of William J. McMillian, III, Trust Account." Contrary to Rule 417, SCACR, no one involved in these transactions maintained ledgers or placed identifying data on checks and deposit slips. Any files maintained on these closings were kept by CTS at its offices.

Under this arrangement, neither clients nor lenders (for the most part) were advised of respondent's limited role in the closing of these real estate transactions through CTS. Because respondent provided limited services to clients in these closings, the fees charged for his services were excessive. By signing the HUD-1 Settlement Statements as "settlement agent," respondent gave the parties and lenders the incorrect impression that he had or was going to see to the proper disposition of the settlement proceeds when, in fact, he did not do so. Respondent's actions were contrary to the certification requirements imposed by the Federal Truth in Lending Act.

Beginning in September 2001, respondent became aware of non-sufficient fund (NSF) charges for checks written on the Bank A trust account. In November 2001, respondent became aware that there was a negative balance of approximately $119,000 in the Bank A trust account. In this time frame, respondent learned that one or more lenders would no longer accept checks written on this account because of the NSF problems.

As a result of checks on the Bank A trust account not being accepted and because of negative balances in the account, respondent opened a new trust account styled "McMillian Law Firm, P.A., IOLTA Trust Account" at Bank B in December 2001. Notwithstanding the difficulties experienced and the irregularities reported in the Bank A trust account managed by Cook, respondent allowed Cook to be a signatory on the Bank B trust account and continued to allow Cook to make deposits to and write checks from both his Bank A and Bank B trust accounts in furtherance of closing real estate transactions pursuant to his arrangement with CTS. After opening the Bank B trust account, respondent became aware that Cook was "floating" funds between the Bank A and Bank B trust accounts. Presumably, the "float" was necessary in order for checks to clear in spite of shortages in the accounts.

In December 2001 and January 2002, respondent unsuccessfully attempted to work with Cook to identify the nature and amounts of the bank account shortages and then correct the shortages. On or about February 5, 2002, respondent had his last direct dealings with Cook. After that occasion, respondent appeared at the closing of one or two more loans for CTS. Respondent ceased attending closings for CTS in late March 2002.

After respondent ceased, for the most part, attending closings of transactions with CTS in January 2002, Cook made arrangements with several other attorneys to attend closings on behalf of CTS in place of respondent. Even after respondent terminated his working relationship with CTS, respondent continued to allow Cook to be a signatory on and have control and use of both the trust accounts until respondent was placed on interim suspension on May 1, 2002.

ODC's examination of the Bank A trust account revealed that this account was assessed charges for overdrafts and/or NSF checks on approximately 309 occasions, had a negative balance on approximately sixteen occasions, had a negative balance of $372.98 on April 30, 2002, and had shortages of approximately $188,000 when the attorney to protect clients' interests took charge of that account. ODC's examination of the Bank B trust account indicated overdrafts and/or NSF checks on thirty-four occasions and a shortage of $250,000 on April 30, 2002.

Respondent learned of the approximately $119,000 shortage in the Bank A trust account in November 2001, the approximately $188,000 shortage in the Bank A trust account in February 2002, and the approximately $250,000 shortage in the Bank B trust account in January 2002. Respondent took no action to either close the accounts or to remove Cook as signatory on the accounts. Cook continued to have the use of and control over both of the trust accounts until they were placed under control of an attorney to protect clients' interests by this Court.

Unbeknownst to respondent, Cook directed that Bank A place a "sweep" order on the Bank A trust account in March 2002. Pursuant to this order, funds in the account were "swept" out of that account on a daily basis and into Cook's personal account or into some other account under her control.

Chicago Title reported that, in compliance with the terms of its title insurance policies and/or its insured closing letters, it had paid out approximately $714,214 due to shortages in respondent's trust accounts and had further paid out approximately $36,000 in negligence claims in connection with transactions closed by CTS. In addition, Chicago Title has, in the aggregate, spent approximately $868,000 due to claims and expenses related to CTS (not all of these claims...