Pepper v. Ky. Bar Ass'n

• Decision Date: 21 September 2021
• Docket Number: 2021-SC-0181-KB
• Parties: H. Harris PEPPER, Jr., Movant v. KENTUCKY BAR ASSOCIATION, Respondent
• Court: United States State Supreme Court — District of Kentucky

632 S.W.3d 312

H. Harris PEPPER, Jr., Movant

v.KENTUCKY BAR ASSOCIATION, Respondent

2021-SC-0181-KB

Supreme Court of Kentucky.

September 21, 2021

OPINION AND ORDER

Pursuant to Supreme Court Rule (SCR) 3.480(2),¹ the negotiated sanction rule, Movant, H. Harris Pepper, Jr.,² requests this Court to impose upon him, retroactive from February 27, 2020, a suspension for five years or until the time he has satisfied in full the terms and conditions of probation in his federal criminal case for conspiring to launder proceeds of an illegal gambling operation, whichever event occurs first. Pepper states that presently his probation is set to run until July 2025 and that he has been tentatively advised by his probation officer that after two and one-half years or so of successful probation, the probation officer may recommend that Pepper be released from probation. If the proposed suspension were approved by this Court, grounds for revocation of his suspension in this disciplinary action and for seeking his permanent disbarment would include his violation of the terms of probation in his criminal case. Further conditions of the suspension would be Pepper's KYLAP³ participation on terms and conditions set by KYLAP and payment of the costs of this disciplinary proceeding.

Pepper requests this discipline to resolve a disciplinary case in which the Inquiry Commission charged that by engaging in a criminal conspiracy to commit money laundering, evidenced by Pepper's guilty plea, he violated SCR 3.130 (8.4)(b) and SCR 3.130 (8.4)(c). Pepper admits his conduct violated SCR 3.130 (8.4)(b). He does not admit his conduct violated SCR 3.130 (8.4)(c); other than referencing the Charge, his motion is silent as to the allegation that he violated SCR 3.130 (8.4)(c).⁴

Pepper, pursuant to SCR 3.166,⁵ was automatically temporarily suspended from the practice of law in Kentucky on February 27, 2020 when he entered his guilty plea.⁶ Bar Counsel has no objection to Pepper's requests. Upon review of applicable authority and in keeping with its guiding principles, we approve the proposed sanction in part. While we approve of a full five-year suspension, we cannot agree with terms that would allow for a suspension of less than five years.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Prior Disciplinary Proceedings

Pepper was automatically suspended from the practice of law in this Commonwealth on February 27, 2020, when he entered his guilty plea in United States v. Pepper , Case Number 1:20-CR-00003-JRW, United States District Court, Western District of Kentucky, Bowling Green Division, to the charge of conspiracy to commit money laundering in violation of Title 18, United States Code, Section 1956(h). In July 2020, he was sentenced for that crime to one year and one day in prison, probated for five years, with conditions.⁷ Pepper was also fined $100,000, which was paid promptly. Admitted to the practice of law on October 17, 1991, he has no prior disciplinary history.

B. Pepper's Guilty Plea

Pepper's plea agreement with the United States provided the following facts:

From 2008 through 2016, Pepper knowingly conspired with Douglas Booth to conceal the proceeds of Booth's unlawful conduct. During this period, Pepper was aware that Booth was operating an illegal sports-gambling operation out of Bowling Green, Kentucky, and conspired with Booth to launder proceeds of his gambling operation into real estate investments. At all times, Pepper knew the significant portions of the money provided to him by Booth was from this illegal activity. Pepper, a practicing real-estate attorney, took actions to conceal Booth's involvement in a series of real estate investments by concealing Booth's investment and not documenting or recording Booth's ownership of the real estate. More particularly, Pepper and Booth knowingly conspired to conduct financial transactions affecting interstate and foreign commerce that involved proceeds of an illegal activity, that is transmission of wagering information in violation of 18 U.S.C. § 1084, with the intent to promote the carrying on of the illegal activity and to conceal and disguise the nature, location, source, ownership, and control of the proceeds of the illegal activity. During the course of the conspiracy, Pepper and Booth did the following:

A. In 2008, Booth purchased a percentage ownership of Hard Six, LLC, by providing $125,000 in cash to Pepper. Hard Six owned real estate and buildings that it leased to Dollar General Store, Inc. Both Pepper and Booth knew portions of the proceeds invested by Booth were proceeds of a specified unlawful activity. Pepper did not document or record Booth as an owner in Hard Six [in] order to conceal Booth's involvement in the transaction.

B. In about 2010, Booth attempted to purchase a percentage of ownership of an apartment complex on Louisville Road in Bowling Green, Kentucky, by providing $90,000 in cash to Pepper. Both Pepper and Booth knew portions of the proceeds invested were proceeds of a specified unlawful activity. Pepper did not document or record Booth as an owner in the apartment complex in order to conceal Booth's involvement in the transaction.

C. From in or about 2009 through 2016, Booth purchased and maintained a percentage of ownership of HAAM Investments, LLC, by providing approximately $250,000 in cash to Pepper. HAAM Investments was created and used for purchasing an apartment complex in Russellville, Kentucky. Both Pepper and Booth knew portions of the proceeds invested were proceeds of a specified unlawful activity. Pepper transferred his ownership of HAAM Investments in July of 2009. As part of the conspiracy, but not known to Pepper, on August 19, 2016, Booth sold his ownership interest of HAAM Investments and received a $160,000 check payable to B.B. from HAAM Investments. Pepper did not document or record Booth as an owner in HAAM Investments [in] order to conceal Booth's investment in the transaction.

D. From in or about 2010 through 2016, Booth purchased and maintained an ownership interest in MYP Properties by providing approximately $200,000 in cash and relief from gambling debt to Pepper. MYP Properties were created to own and operate apartment complexes. Both Pepper and Booth knew portions of the proceeds invested were proceeds of a specified unlawful activity. In April of 2016 Pepper wrote a check for $20,000 payable to Kentucky Aviation Partners for the benefit of Booth. Pepper did not document or record Booth as an owner of MYP Properties in order to conceal Booth's involvement in the transaction.

Each of these transactions was financial transaction in that they affected interstate commerce by involving the movement of funds by wire and involved monetary instruments, i.e. United States currency.^[8]

C. Violations Charged in KBA File 20-DIS-0046

The Charge in KBA File 20-DIS-0046 alleges Pepper violated two rules, SCR 3.130 (8.4)(b) (Count 1) and SCR 3.130 (8.4)(c) (Count 2), when he engaged in a criminal conspiracy to commit money laundering, evidenced by his guilty plea. Under SCR 3.130 (8.4)(b), "[i]t is professional misconduct for a lawyer to ... commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects." Under SCR 3.130 (8.4)(c), "[i]t is professional misconduct for a lawyer to ... engage in conduct involving dishonesty, fraud, deceit or misrepresentation."⁹ Pepper admits violating SCR 3.130 (8.4)(b).

D. Mitigating Circumstances

Pepper states in his verified motion that he does not seek to excuse his conduct, but that he seeks mitigation. In the motion, he explains certain circumstances, conditions and events before, during, and after the criminal conduct in mitigation of the resolution of the present disciplinary proceeding. He describes his professional life; his family circumstances, which includes care of two children (now young adults), one on the autism spectrum but functional, and the other autistic, non-verbal, and requiring constant oversight and care;¹⁰ his history with alcohol abuse and gambling; and his conduct which led to the criminal case against him. The mitigation he seeks is in part related to a mental health condition, a condition for which he gained insight upon participating in a community-based mental health treatment program as part of his probation in the federal criminal case.

Pepper successfully practiced transactional law, including real estate transactions and business transactions and formations as a member of a Bowling Green law firm. He resigned from the firm following his guilty plea on February 27, 2020 and has not practiced law since. In May 2020, Pepper transferred his part of a title company to his wife. The co-owner of the title company at that time has always been and remains responsible for the day-to-day operations of the company, including the oversight of support staff and overseeing the financial operations of the company. Since May 2020, Pepper has been an employee of the title company, not engaging in the practice of law. The Office of Bar Counsel has been advised of Pepper's activities at the title company since he entered his plea.

Pepper began drinking around age fifteen and has been sober since late 2004. He credits continuing support from a relative, a Certified Alcohol and Drug Counselor, and regular attendance at Alcoholic Anonymous meetings for a three-year period, as contributing to his sobriety. He states his drinking had concluded by the time of the conduct set out in the criminal case, conduct which spanned nine years.

Pepper states that while he was able to address his alcohol addiction, his addictive behavior transferred and increased as to gambling. Although the Certified Counselor had warned him in previous years about the adverse consequences of addictive behavior, Pepper failed to heed the concerns and advice regarding gambling. The gambling activity escalated, eventually leading to Pepper betting and losing significant amounts...