News

Legal fights imperil restitution promises

By Bill Moss, Published: February 21, 2013

A year after he pleaded guilty to federal tax evasion charges and five months after he pleaded guilty to state charges of stealing from trusts and estates he managed, Sam Neill remains free and victims wonder if his promises of restitution will ever amount to cash payments.

Neill pleaded guilty last September to five counts of diverting $3 million from estates or trusts for his personal use. He offered to make restitution in the form of promissory notes backed by land deeds. So far, say victims or their representatives, Neill has paid no one and no one has seen any progress toward liquidating assets to pay victims.
"We have not had any type of payment. There's not been any funds paid to us," said McCray Benson, executive director of the Community Foundation of Henderson County. The foundation, along with Four Seasons hospice lost a total of almost $900,000 that a longtime philanthropist and hospice volunteer left for both organizations.
Property on South Grove Street at Spartanburg Highway is on the market for $2.9 million
Barry Clemo was a hospice volunteer who hoped that his life's earnings would do good for years after his death. Instead, prosecutors say, Neill embezzled the money for his own use.
Since September, things have looked no better for the heirs or beneficiaries of estates. A bankruptcy trustee trying to sell the old Flight restaurant property accuses Neill of stonewalling requests for documents with a "catch me if you can" attitude.
In court last fall, an SBI investigator testified about the deeds of trust that Neill had offered to pay the victims. When the court session was over, Neill's attorney, Joseph B. Cheshire V, told reporters that the value of the land, home and buildings that the defendant put up more than covered the losses.
According to a review by the Hendersonville Lightning of criminal and civil court files, land records and an ongoing bankruptcy case, that may be turn out to be a hollow promise. Neill and his attorneys have done little to hasten the sale of property that he offered as restitution; in fact, his attorney filed a motion that blocked the sale of the Fourth and Main property that contained Flight restaurant.
The bankruptcy trustee in that case, Langdon Cooper, told the court that Neill has been uncooperative in providing business records needed to set a value on the property. Whether a sale would produce money for his alleged victims is in doubt. TD Bank, which also objected to the sale, on the grounds that the price was too low, holds a first lien on the property. One of the trusts that Neill admitted stealing from holds a second lien, for $330,000. With the property underwater, it is unlikely any sale will reach a junior loan like the one held by the estate.
Rocky Mountain is accessible by an unimproved road.
Neill, who was disbarred in May 2011, pleaded guilty last April to one count of federal income tax evasion after prosecutors charged him with failing to report income of $1,517,125 in 2008 and 2009. He owes the IRS $511,136 in back taxes, federal court records say. He is awaiting sentencing on the tax evasion charge, which carries a maximum penalty of three years in prison and $250,000 fine.
In September Neill pleaded guilty to state charges that he embezzled $900,000 from the estate of Irene Meinke, $55,000 from the Harold R. Talmadge Trust, $247,682 from the Edna R. Davis trust, $884,515 from the Barry E. Clemo trust and $850,000 from the estate of Ruth D. Danis. Of those cases, only the Talmadge case has resulted in a payment. A surety bond payment that guaranteed Neill's legal work paid the estate.
Flight Wood Grill property
If any case shows how hard it is to unravel Neill's finances, it may be the current fight over the old Flight Wood Grill property. Known as the one of the finer restaurants in town, Flight was an urban oasis in a historic bank building; it had a loft overlooking a spacious dining room on the ground floor. The old bank vault served as its wine cellar.
Neill bought the space in 2002 from TJF Enterprises, the corporation owned by the renowned golf course designer Tom Fazio, who divides his time between Hendersonville and Palm Beach, Fla.
TD Bank, which holds a $390,000 mortgage on the 401 N. Main Street property, foreclosed on the property a year ago. Neill was a step ahead. He blocked the foreclosure by declaring bankruptcy on Feb. 29, one day before the upset bid period expired.
Cooper, the court-appointed bankruptcy trustee whose job it is to resolve the case in a way that's fair to creditors and the debtor, listed the property for $699,000 through Whitney Commercial Real Estate.
The court actions have accelerated since just before Christmas. In early December TJF Enterprises offered to buy the property for $399,000. Cooper proposed that of the proceeds, TD Bank would receive $284,000. The rest would go towards closing costs, $5,000; past due condominium dues, $15,000; real estate commission, $32,000; property taxes, $15,000; and the trustee, $42,000. TJF Enterprises would also get four other condos, on which it holds a $170,000 mortgage. Cooper proposed paying $5,000 to the Meinke trust "simply to avoid" having to file a lawsuit separately to set aside a "junior deed of trust." If the sale were to go through, Neill's restitution offer would drop from its stated promise of "a deed of trust covering six condominium units" to a mere $5,000.
Both Neill and the attorney for the Meinke estate have objected to the sale at $399,000. The price is too low, attorney Charles Waters wrote on behalf of the Meinke estate, the payment of a real estate commission is "inappropriate under these circumstances" and the sale eliminates any chance the 10 Meinke beneficiaries, including Mt. Pisgah Lutheran Church, will recover any money.
In his response, Neill's attorney, Rodney Kight Jr., said Neill had received offers from two prospects to lease the space, one for $5,000 a month and the other for $6,500 a month. Based on those offers, Kight said, the building should be valued at $675,000 to $800,000. A sale at $399,000, he said, would set aside any chance of paying unsecured creditors, including the Meinke estate.
Cooper has also filed a motion asking a judge to convert the bankruptcy from Chapter 11 to Chapter 7, which would authorize him to liquidate assets for the benefit of creditors. Separately Cooper also asked that the court order Neill to turn over deeds and insurance documents, federal and state tax returns, business ledgers and other financial documents he needs to sort out the case. Neill's "partial and untimely responses" have yielded no progress. "Incomplete production, followed by ... stonewalling, is not simply disingenuous, but it implements the 'catch me if you can' philosophy of many debtors," the trustee said.
The case ought to be changed to a Chapter 7 liquidation, Cooper said, because Neill has refused to supply records and is unable to operate the property in the best interest of creditors.
'A kick in the teeth'
To pay restitution to the Community Foundation and Four Seasons hospice, Neill has offered his half interest in the old Joy Drive-In property.
The property is listed for sale at $2.9 million.
Realtor Eric Goodman, of Southern Commercial, said he thinks that price is realistic.
"You've got about eight acres right here in town," he said. "You're sitting here at a red light; it's hard to find that many contiguous acres ready for development. You have good visibility there, you're convenient to the Spartanburg Highway corridor and you're also accessible through Grove Street."
Benson said he had heard the listing price of $3 million, which he described as "shockingly high." The property is assessed for tax purposes at $2 million.
"No property was transferred, there's no control transferred," Benson said. The restitution offer "did have the power of at least being registered in paper form, so it's a little more than just the promise alone."
Benson said the foundation and Four Seasons have missed the money they were due from the Clemo gift.
"If it was $1 million that would be $40,000 (a year) to do charitable work in health and animal care, plus Hospice," he said. "That means $40,000 times four years during a time that's been a hard time for all of us. That would have made a big difference, to see his charitable donation at work in the community."
Chris Comeaux, the Four Seasons CEO, echoed Benson's point. The Clemo money was lost at a time it was needed the most.
"Right now we're facing a 2 percent rate cut March 1 because of sequestration," Comeaux said. "That's precious because that's our future right now, how to make sure our organization is sustained for the future to serve Henderson County and Western North Carolina."
Barry Clemo, Comeaux said, would have wanted his life's earnings to help the needy.
"It's a real kick in the teeth. He was one of the very first volunteers I met with. He wanted to make sure Four Seasons was here for a long time to come. To have his estate used that way is an insult to the organization that he worked so hard for."
Benson said he had wondered why, if the drive-in property is for sale, there's no sign on it.
The Neill family, which handles the business as the landlord, insisted on no for-sale sign, said Goodman, the agent.
"They didn't want to disturb the tenants," he said. "Sometimes when you put a sign up the tenant is going to assume the worse and look for some place else to go. They just didn't want to upset the tenants."
He said he didn't know how much rent the commercial buildings generate.
"The Neill family collects it," he said. "We're not involved in that part."