M. Reid Stanford v. The Mississippi Bar

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2018-BR-00587-SCT
M. REID STANFORD
v.
THE MISSISSIPPI BAR
ATTORNEYS FOR APPELLANT: ANDREW J. KILPATRICK, JR.
B. SEAN AKINS
ATTORNEY FOR APPELLEE: MELISSA SELMAN MARTIN
NATURE OF THE CASE: CIVIL - BAR MATTERS
DISPOSITION: REINSTATEMENT DENIED - 01/17/2019
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
COLEMAN, JUSTICE, FOR THE COURT:
¶1. Attorney M. Reid Stanford filed the instant petition for reinstatement pursuant to Rule
12 of the Rules of Discipline for the Mississippi State Bar following his suspension from the
practice of law. While the Mississippi Bar supports Stanford’s petition for reinstatement, its
support is conditioned upon the Court’s determination of whether “restitution by a third
party, such as an insurance company, satisfies the Benson requirement that an attorney
petitioning for reinstatement must make full amends/restitution[.]”1 Because Stanford’s
1
In re Benson, 890 So. 2d 888, 890 (Miss. 2004).
petition fails to satisfy the jurisdictional requirements necessary for reinstatement, we deny
his petition for reinstatement.
FACTS AND PROCEDURAL HISTORY
¶2. In September 2017, the Complaint Tribunal of the Supreme Court of Mississippi
entered an agreed opinion and judgment in the case of Mississippi Bar v. M. Reid Stanford,
No. 2011-B01390 (Miss. 2011), wherein M. Reid Stanford received a “three year suspension
to be composed of a six month suspension with two and half years of probation[.]”
According to the opinion, the basis for Stanford’s suspension was as follows:
Mr. Stanford owned a 40% interest in MREC, Inc., a real estate closing
company. MREC, Inc. held a 40% interest in Mississippi Real Estate Closings
of Hattiesburg, LLC . . . . MREC, Inc. also held a 40% interest in Mississippi
Real Estate Closings of Columbus, LLC; Mississippi Real Estate Closings of
Greenwood, LLC; Mississippi Real Estate Closings of Grenada, LLC;
Mississippi Real Estate Closings of Hernando, LLC; Mississippi Real Estate
Closings of Oxford, LLC; Mississippi Real Estate Closings of Senatobia, LLC;
Mississippi Real Estate Closings of Southaven, LLC and Mississippi Real
Estate Closings of Tupelo, LLC.
With the approval of Stewart Title Guaranty Company . . . , Mr. Stanford
elected to use a sweep account for all of the real estate closing businesses’
escrow accounts. All of the available funds in each escrow account were
“swept” from the accounts daily following the close of business and placed
into an investment account. When a check payable on any individual account
was presented for payment[,] funds sufficient to pay the check were “swept”
back into the account without regard as to which loan closing company had
deposited the funds.
On March 6, 2009, Grand Bank for Savings, FSB (“Grand Bank”) entered into
a transaction with SP Properties and Russell Roberts (“Roberts”) to purchase
certain property in Lamar County, Mississippi. During the transaction, a
dispute arose over the availability of parking. Roberts and Grand Bank
contacted Mr. Stanford and asked if $100,000.00 of the loan proceeds could
remain in the escrow account of [Mississippi Real Estate Closings of
Hattiesburg, LLC]. The settlement statement for the transaction between
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Grand Bank and the Roberts reflects the $100,000.00 from the sale proceeds
to be held in escrow by [Mississippi Real Estate Closings of Hattiesburg,
LLC,] related to the parking issue. When Grand Bank and Roberts failed to
resolve the parking issue, [Mississippi Real Estate Closings of Hattiesburg,
LLC,] attempted to interplead the escrowed funds on April 29, 2009; however
the escrowed funds were not available to deposit with the Chancery Court.
Between March 6, 2009, when the $100,000.00 from the Grand Bank
transaction was deposited[,] and April 29, 2009, when [Mississippi Real Estate
Closings of Hattiesburg, LLC,] attempted to interplead the funds, an employee
at [Mississippi Real Estate Closings of Tupelo, LLC,] failed to make a deposit
of approximately $587,000.00[,] making the [Mississippi Real Estate Closings
of Tupelo, LLC,] account deficient to cover the checks and wires from the
closing. When checks and wires for the Tupelo closing were presented for
payment, the [Mississippi Real Estate Closings of Tupelo, LLC,] account had
insufficient funds to pay the proceeds from the closing. As a result, the sweep
account automatically used money from the other real estate closing
businesses’ accounts to cover the Tupelo error, again without regard as to
which company had deposited the funds. This necessarily included the
$100,000.00 held in escrow by [Mississippi Real Estate Closings of
Hattiesburg, LLC,] for Grand Bank and Roberts.
Upon learning of the problem, Mr. Stanford closed the sweep account, but at
that point, neither Mr. Stanford nor anyone else was able to determine what
portion of the remaining funds belonged to which real estate closing business
or any party to any real estate transactions being conducted by those
businesses. Eventually, $80,000 was found in the account of Mississippi Real
Estate Closings of Southaven, LLC, but the distribution of the full
$100,000[.00] has still not been accounted for to date.
Based on Stanford’s conduct, the Complaint Tribunal concluded that he violated Mississippi
Rules of Professional Conduct 1.15(a), 1.15(b), 5.3, and 8.4. In determining the appropriate
discipline, the Complaint Tribunal noted that “the Supreme Court of Mississippi has not
extended leniency to attorneys who mishandle the funds of others. The Court has repeatedly
disbarred lawyers for as little as one instance of misappropriation.” The Complaint Tribunal
found that Stanford “should be suspended for three years to be comprised of a six month
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suspension and two and a half years of probation effective as and from September 1, 2017.”
Additionally, Stanford had to pay costs and expenses incurred by the Bar, notify all clients
with active matters, parties opposite, and courts and agencies with active cases of his of his
suspension. Finally, the suspension prohibited Stanford from the practice of law or holding
himself out as a lawyer until he sought and was granted reinstatement from the Court.
Stanford agreed to the discipline imposed by the Complaint Tribunal.
¶3. In April 2018, Stanford filed a petition for reinstatement with the Court. In his
petition, he explained the underlying conduct for which he was disciplined. He also
represented that he had complied with the requirements imposed upon him by the agreed
order. Stanford submitted twelve letters of recommendation in support of his reinstatement.
The Mississippi Bar conducted an investigation into Stanford’s petition for reinstatement and
concluded that it supported Stanford’s reinstatement, conditioned upon the Court answering
one question, whether “restitution by a third party, such as an insurance company, satisfies
the Benson requirement that an attorney petitioning for reinstatement must make full
amends/restitution,” in the affirmative.
ANALYSIS
¶4. In matters “pertaining to attorney discipline, reinstatement, and appointment of
receivers for suspended and disbarred attorneys[,]” the Court has exclusive and inherent
jurisdiction. In re Reinstatement of Watkins, 849 So. 2d 843, 845 (¶ 8) (Miss. 2002).
Reinstatement to the practice of law is governed by Rule 12 of the Rules of Discipline for
the Mississippi State Bar, and Rule 12(a) provides that “no person . . . suspended for a period
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of six months or longer shall be reinstated to the privilege of practicing law except upon
petition to the Court.” The Court applies a de novo standard when reviewing attorney
reinstatement petitions. Watkins, 849 So. 2d at 845 (¶ 8).
¶5. The Court has provided the following jurisdictional requirements that a petitioner for
reinstatement must satisfy:
(1) state the cause or causes for suspension or disbarment; (2) give the name
and current address of all persons, parties, firms, or legal entities who suffered
pecuniary loss due to the improper conduct; (3) make full amends and
restitution, (4) show that he has the necessary moral character for the practice
of law; and (5) demonstrate the requisite legal education to be reinstated to the
privilege of practicing law. Though not a jurisdictional requirement, we
consider the Bar’s position as to reinstatement as a factor in determining
whether to grant the petition.
In re Benson, 890 So. 2d at 890 (¶6).
CAUSE FOR SUSPENSION
¶6. In his petition for reinstatement and at the deposition regarding his petition for
reinstatement, Stanford provided an account of the underlying actions that resulted in his
suspension. We agree with the Bar’s position that Stanford satisfied the first jurisdictional
requirement.
NAMES AND ADDRESSES OF THOSE WHO SUFFERED
PECUNIARY LOSS
¶7. As to the second jurisdictional requirement, Stanford was to present the names and
current addresses of all persons, parties, firms, or legal entities who suffered pecuniary loss
due to the improper conduct. The Bar states that “Stanford’s Petition and his testimony at
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deposition adequately acknowledge the pecuniary loss incurred as a result of his misconduct
. . . .”
¶8. While Stanford does acknowledge the names of the parties to the transaction who lost
access to their funds. Nowhere in his petition or any provided documents does he include the
addresses of the parties. The Court has repeatedly held that the burden lies with the
petitioner to prove rehabilitation and to prove that he has met the jurisdictional requirements
necessary to be reinstated. Benson, 890 So. 2d at 890 (¶¶ 4-5). The jurisdictional
requirement requires the addresses of parties who suffered pecuniary loss, and Stanford has
not fully satisfied the jurisdictional requirement.
FULL AMENDS AND RESTITUTION
¶9. Next, Stanford was required to prove that he has made full amends and restitution to
the parties who suffered pecuniary loss due to his misconduct. The Bar explains,
In the course of its investigation, the Bar received a letter from Gene Harlow
. . . . Mr. Harlow asserts that his client was not made completely whole in the
settlement with Mr. Stanford’s insurance carrier. Mr. Harlow’s clients were
deprived the use of $100,000.00 and ultimately received only $75,000.00 from
Mr. Stanford’s insurance carrier. The parties also executed a full release as
part of the settlement. . . . This letter [from Harlow] prompted further
investigation from the Office of General Counsel. Mr. Stanford fully
cooperated with the additional investigation and provided more information.
The Roberts[es] made a settlement offer of $75,000.00 to Mr. Stanford’s
insurance carrier, that the carrier accepted. Mr. Stanford’s policy limits were
more than sufficient to cover the full amount of loss. The Roberts[es] entered
into an agreement to accept $75,000.00 and executed the appropriate releases
to fully and finally settle their claim.
There appears to be a question of first impression in the context of attorney
reinstatement for [the] Court to decide. Does payment by a third person, such
as an insurance company, on behalf of a petitioner fulfill[] the making full
amends/restitution requirement for reinstatement. In this case[,] the parties did
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not receive the full amount of loss but executed releases fully and finally
settling the matter.
In a footnote, the Bar stated, “Additionally, Mr. Stanford filed and received a discharge in
bankruptcy and any attempt to further collect debt through the disciplinary process may be
impermissible under 11 U.S.C. § 524.”
¶10. Harlow’s letter, which is an exhibit attached to the Bar’s answer, stated, “And to be
clear, to this very date, these funds have not been fully replaced or repaid. . . . We feel that
the full responsibility lay with Mr. Stanford[,] and he has an obligation to make the parties
affected by his actions whole before he seeks reinstatement.” Harlow further explained that
“[t]here was in reality a $75,000.00 settlement after much litigation and significant expense
that was paid by [Stanford’s] insurance carrier.” Harlow concludes,
The point to be made is that he did not take responsibility for his actions. If
my client [was] to be made whole, I would assume that the amount my clients
received would be the full $100,000.00 plus the costs of litigation concerning
the missing funds. This type of restitution has never occurred.
Stanford’s response to the letter reiterated that insurance coverage was available for well
over the $100,000 plus litigation expenses actually lost by the Robertses but that Harlow’s
letter did not explain why the case was settled for $75,000. According to Stanford, “it was
Mr. Harlow and his clients that made the conscious decision to accept the money in a full and
complete settlement of all claims. This was not forced on them by anyone and certainly not
Mr. Stanford who would have had little to no control over the carrier’s decision to settle the
case.”
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¶11. The Court has explained that “[t]o make restitution is ‘1. [a]n act of restoring the
proper owner of something taken away, lost, or surrendered. 2. [a]n act of repaying or
compensating for loss, damage, or injury. 3. [a] return to or restoration of a former state or
position’.” In re Prisock, 5 So. 3d 319, 323 (¶ 27) (Miss. 2008) (citation omitted). Although
not a lot of caselaw exists on the specific issue, the Court appears to have taken a hardline
approach to restitution.
¶12. In Watkins, 849 So. 2d at 844 (¶ 1), disbarred attorney William Watkins sought
reinstatement to the practice of law. After Watkins pleaded guilty to three counts of
“financial institution fraud and making false statements to influence the actions of a federally
insured financial institution[,]” he was ordered to pay restitution to two different Louisiana
banks. Id. at 844 (¶ 2). At the time he petitioned for reinstatement, a “point of contention
between Watkins and the Bar” existed about whether he had paid Pelican Homestead Bank
its full amount of restitution. Id. The Court explained,
Pelican Homestead extended a line of credit in the amount of $135,000.00 to
Watkins in 1983, and this line of credit is the main portion of the financial
dealings that led to Watkins’s criminal indictment and disbarment. Following
his conviction, Watkins was ordered to pay restitution to Pelican Homestead
in the amount of $107,335.00. However, he only paid Pelican Homestead
$10,000.00 before the Bank became insolvent and was taken over by the
Federal Deposit Insurance Corporation (FDIC).
Id. at 844 (¶ 3). Moreover,
Watkins and the FDIC entered into an agreed compromise and settlement
reducing Watkins’s obligation to Pelican Homestead to $35,000.00. On July
12, 1999, the United States District Court for the Eastern District of Louisiana
entered an Amended Judgment and Commitment Order amending that court’s
June 13, 1991, order to read “the defendant is to make restitution to the Federal
Deposit Insurance Corporation to be paid in a single lump sum payment of
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$35,000.00 in the form of a cashier’s check payable to the United States
Department of Justice, within 45 days following entry of this order, or on
August 23 1999, whichever date is later.” . . . The main issues in this case are
whether the settlement agreement reached with the FDIC constitutes full
restitution to a person or entity that was harmed by Watkins’s wrongful
conduct, and whether he still must pay the $97,335.00 (now $62,335.00) to
Pelican Homestead.
Id. at 844-45 (¶ 4). In denying Watkins’s petition for reinstatement, the Court held,
Petitioners for reinstatement to the Bar have the burden of proving that they
have met all the jurisdictional requirements of Rule 12.7. The cursory order
entered by the U.S. District Court in the Eastern District of Louisiana, by itself,
does not satisfy this burden. Since the petitioner did not include any financial
evidence that the $35,000.00 amount reached as settlement with the FDIC was
equal to the financial liability incurred by Pelican Homestead, his burden has
not been met. The petition does not include any evidence of the amount that
Pelican Homestead realized off the oil and gas production, nor does it show
any other reason Watkins was not liable for less than the $107,335.00. Watkins
contends in his deposition taken by the Mississippi Bar that this amount
reflects the financial loss incurred by the lending institution in his fraudulent
dealings with them. However, the petitioner in reinstatement cases has a
heavier burden than simple assertions. Watkins must submit proof of this
assertion. Watkins claims that he never received credit for the amount realized
by the bank on the oil and gas production fields that the bank received which
Watkins defaulted on the loan. However, he offered no proof of this claim.
Until Watkins can present evidence that the amount agreed upon with the
FDIC represents the financial loss that Pelican Homestead actually suffered,
his burden has not been met.
Id. at 847 (¶ 15). As in Watkins, it is clear from the face of the petition that the party has
not been made whole by the settlement. Additionally, there is an important distinction
between a party’s legal liability that can be cured by a settlement and a party’s duty to
provide full restitution as a requirement for reinstatement. Plaintiffs and creditors often
accept settlements that equal less than the actual debt, and they do so for varied reasons, e.g.,
to avoid litigation expenses and to avoid a full or nearly-full loss of the amount in the event
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of an adverse verdict or bankruptcy. The execution of a release by the injured party does not
release Stanford from the full restitution duty imposed by the reinstatement process. As
stated previously, it is the duty of the petitioner to satisfy each requirement, and based on the
petition currently before the Court, Stanford did not satisfy the requirement.
NECESSARY MORAL CHARACTER FOR LAW PRACTICE
¶13. The fourth requirement is that Stanford prove that he has the necessary moral
character to practice law. The Bar’s answer to Stanford’s petition, took into consideration
Stanford’s employment since his suspension, any civic and charitable involvement Stanford
engaged in while suspended, personal letters of recommendation or opposition to Stanford’s
reinstatement, and Stanford’s mental and emotional state.
¶14. During his deposition, Stanford testified that he had not engaged in the practice of law
since his suspension, and he outlined measures he took to ensure that he was not perceived
as practicing law. Stanford explained that during his suspension, he compiled data in
environmental cases for expert witnesses to use, and he summarized depositions. Stanford
indicated that he enjoyed the environmental cases he had been working on during his
suspension and said that he planned to continue working in that area should he be reinstated.
¶15. As the Bar points out in its answer, the length of Stanford’s suspension “does not lend
itself to the type of active community involvement we usually see from a petition[,]” which
was limited further by Stanford’s moving several times during his suspension. Stanford did
testify that he has found a new church in the Pope community, where he hopes to become
more active.
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¶16. Stanford submitted twelve letters of recommendation in support of his petition, and
the Bar received one letter of opposition from the attorney who represented the injured
parties, which was discussed in detail above. The Bar stated that “Stanford appears to be
mentally and emotionally stable during his deposition and testified that he is not suffering
from any serious medical problems; that he does not use illegal drugs; and that he is generally
in good health.”
¶17. The Bar concluded that Stanford, through his petition and testimony, has demonstrated
that he has the requisite moral character and mental health to practice law.
DEMONSTRATE REQUISITE LEGAL EDUCATION
¶18. Finally, Stanford must demonstrate that he has the requisite legal education to be
reinstated. In support of his petition, Stanford testified that during his suspension, he studied
for, took, and satisfactorily passed the Multistate Professional Responsibility Exam. Stanford
testified that at the time of his suspension, he had been current on his Continuing Legal
Education hours.
THE BAR’S RECOMMENDATION
¶19. As discussed above, the Bar does support Stanford’s petition for reinstatement,
conditional upon the Court’s decision about whether Stanford satisfied the requirement to
make full amends and restitution.
CONCLUSION
¶20. Because Stanford failed to satisfy each jurisdictional requirement for reinstatement
to the practice of law, we deny Stanford’s petition for reinstatement to the practice of law.
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¶21. PETITION OF M. REID STANFORD FOR REINSTATEMENT TO THE
PRACTICE OF LAW IN THE STATE OF MISSISSIPPI IS DENIED.
WALLER, C.J., RANDOLPH AND KITCHENS, P.JJ., KING, MAXWELL,
BEAM, CHAMBERLIN AND ISHEE, JJ., CONCUR.
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