News

NEILL PLEADS GUILTY TO 5 COUNTS

Sam Neill, with attorney Joseph B. Cheshire V, in court.

By Bill Moss, Published: September 17, 2012

D. Samuel Neill, a prominent Hendersonville attorney, Democratic activist, two-time candidate for Congress, restaurant owner and donor to the arts, pleaded guilty in Henderson County Superior Court today to five counts of stealing $3 million from clients' trust accounts or estates.

The plea, which Neill made before Superior Court Judge Lindsay R. Davis Jr., signaled one more step in a dramatic fall from the days when Neill counted top state officials among his friends, served in a variety of political appointments and represented his party in two campaigns for Congress.

Prosecutors said Neill had stolen nearly $3 million from trust funds and estates that he was obligated to administer on behalf of the deceased for heirs and other beneficiaries. Among the cases prosecutors brought was the embezzlement of $884,515 from a trust that was supposed to go to the Community Foundation of Henderson County and Four Seasons hospice.

District Attorney Jeff Hunt recused himself from the investigation because he had employed one of Neill's sons as an assistant prosecutor, and turned the case over to the state Justice Department.

On the recommendation of state prosecutors, Judge Davis delayed sentencing until Neill is sentenced in federal court on a charge of income tax evasion, to which he also has pleaded guilty, and until prosecutors and trustees can vet his promises to repay money with a variety of promissory notes and real estate deeds.

Neill answered a series of questions from the judge to establish that he was willingly pleading guilty, knew he was entitled to make a defense and was under no pressure to make the plea. When the judge asked whether he knew that a conviction on all five counts subjected him to 84 years in prison, he said yes. Asked whether he was under the influence of drugs or alcohol, he said no. Asked when was the last time he had had either substance, Neill said, "More than three months ago."
Under questioning from James Coman, the senior deputy attorney general, SBI agent Andrew Pappas laid out the circumstances of the five cases of embezzlement. Pappas, a CPA and special agent in the financial crimes unit, was assigned the case in June 2011, a couple of months after Neill admitted the trust thefts to the state bar and turned in his law license. Describing Neill as cooperative in the investigation, Pappas said the former attorney recounted how he wrote himself checks or otherwise diverted trust fund money to his own benefit.
On the witness stand, Pappas testified that:
• During an interview with the agent, Neill admitted to taking $198,000 from the Edna Davis Irrevocable Trust. Further investigation by the SBI and the trustee for the account put the amount at $247,000. Neill disbursed $90,000 of the $350,000 trust to two beneficiaries and also took a fee of $10,000. Agreeing to pay back the stolen money plus the fee, Neill has signed a promissory note and a deed of trust valued at $263,067, Pappas said.
• In 2000 and 2001, Neill stole $55,000 from the Harold R. Talmadge trust. A bond company paid the trust back the money, the agent said.
• In March 2009, Neill embezzled $100,000 from the Irene Meinke trust, according to the indictment. The amount was much, according to the trustee for the estate. Neill actually stole $442,000 and has agreed to pay that much back, Pappas said.
• In 2008, Neill wrote himself four checks totaling $850,000 from the trust account of Ruth Danis, Pappas said. Neill has provided four promissory notes committing to repay that amount plus $75,000, the amount of an executor commission he had paid himself.
• In 2009 and 2010, Neill improperly write himself $884,514 worth of checks from the estate of Barry Clemo, who had willed the money to the Community Foundation and Four Seasons. In a settlement of a civil lawsuit brought by the two non-profit organizations, Neill has agreed to repay $1.15 million. None has been paid yet, Pappas said.
Coman told Judge Davis that the state attorney general's office had tried to make sure Neill would repay the victims.
"While the state does not consider itself a collection agency, one of the primary concerns that we've had from the outset was to try to assist the victims as much as we possibly could to make them whole," he said.
Neill's promise to make restitution has come in the form of deeds of trust for real estate he owns, Cheshire said.
"He's given securities," he said. "You can't turn those securities into money. I would imagine if the world gets better, they'll get higher (in value). All I can tell you is they've been secured and their losses have been covered. They are sufficient in value to cover the losses of each of the entities that lost money."
Attorneys for the victims were dubious about the promises they had heard during the 47-minute hearing.
"Ask him if he'll guarantee that," said Bob Haggard, the attorney for the Community Foundation, which lost roughly a half million dollars to the Clemo embezzlement. "The question I have is when is somebody going to ask what are the liens ahead of those deeds of trust." Did the attorney think the properties were encumbered? "I would be shocked if they were not," he said.
Edward Harrell, the attorney for the Edna Davis trust, said the deeds of trust Neill signed to repay $263,000 "purport to be securities on real property" owned by Neill and a partner. "They're not cash ... We'll see if anything gets paid. He seems to be making a good effort at making restitution."
The next step for Neill is sentencing in federal court on the income tax invasion indictment. He pleaded guilty to failing to report $1,517,125 in income in 2008 and 2009 and owing the IRS $511,136. He faces up to three years in prison and a $250,000 fine.
Cheshire said he did not know when the federal court would set sentencing. "I'm expecting it to be this fall," he said.

Judge Davis told the attorneys he would order a sentencing hearing for Neill no later than January 2013.