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Securities and Exchange Commission v. Merrill

United States District Court, D. Maryland

February 1, 2019

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
KEVIN B. MERRILL, et al. Defendants.

          MEMORANDUM & ORDER

          Richard D. Bennett United States District Judge

         On September 11, 2018, a grand jury in the District of Maryland returned an indictment charging Defendants Kevin B. Merrill ("Merrill"), Jay B. Ledford ("Ledford"), and Cameron Jezierski ("Jezierski") with numerous counts, including wire fraud, identity theft, and money-lau'ndering. See United States v, Kevin B. Merrill, et al, Criminal No. RDB-18-0465 (ECF No.l, unsealed on September 18, 2018, ECF No. 12.)

         On September 13, 2018, the Securities and Exchange Commission ("SEC") filed a Complaint (ECF No. 1) alleging that Merrill, Ledford, and Jezierski (collectively, the "Defendants") raised more than $345 million from over 230 investors to purportedly i. purchase consumer debt portfolios. The SEC alleges that from at least 2013 to the present, the Defendants operated a Ponzi-like scheme that involved, among other things, securities offerings "rife with misrepresentations," fake debt, forged signatures, fabricated wire transfers, the movement of millions of dollars into personal accounts, and an elaborate scheme wherein Defendants offered and sold investments in the same debt and/or debt portfolios, to multiple victims. (Compl., ECF No. 1 at ¶ 1.) Of the $345 million, more than $90 million was invested by over 200 individual investors, approximately $52 million by family offices, and nearly $203 million by feeder funds. (Id. at ¶ 2.)

         This Court appointed a temporary Receiver on the same day the SEC filed its Complaint. (ECF No. 11.) On October 4, 2018, this Court entered a Preliminary Injunction Order continuing the appointment of the Receiver. (ECF No. 28.) On II October 25, 2018, this Court permitted the Government to intervene and stayed the proceedings in this case. (ECF No. 42.) The Order specified that "Defendants' obligation to respond to the Complaint and all discovery in the captioned case is stayed pending the resolution of the criminal action in this district." (Id.)

         Jack Jamison ("Jamison"), counsel for Jay Ledford, was admitted pro hac vice in this case on October 26, 2018 (ECF No. 48).[1] On December 24, 2018, the Receiver filed a Motion to Disqualify Attorney Jack Jamison (ECF No. 79). The parties' submissions have been reviewed, [2] and this Court has had the benefit of arguments of counsel during a telephone conference on January 16, 2019. No further hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons that follow, the Receiver's motion will be GRANTED and Jack Jamison will be disqualified from appearing in this action. Jay B. Ledford's and Jack T. Jamison's Motion for Leave to File Surreply to SEC's Reply to Ledford's and Jamison's Opposition to Receiver's Motion to Disqualify Attorney (ECF No. 97) will also be GRANTED.[3]

         RELEVANT BACKGROUND

         Under this Court's Receivership Order (ECF No. 11) and First Amended Receivership Order (ECF No 62), the Receiver has the authority to take possession of all assets for the estates of the Receivership Parties, which includes Defendants and affiliated entities. There are several affiliated entities, including DeVille Asset Management LTD ("DeVille") and Centurion Capital Corporation ("Centurion"). (ECF No. 79-1 at ¶ 3.) "The trustees, directors, officers, managers, investment advisors, accountants, attorneys, and other agents of the non-individual Receivership Parties [were] dismissed and the powers of any partners, directors, and/or managers [were] suspended." (ECF No. 62 at ¶ 5.) Further, the "Receiver maintains and controls the attorney-client privilege for all non-iindividual Receivership Parties." (Id. at ¶ 16.)

         During the period beginning on or about August 27, 2018, and ending September 18, 2018, Jamison had an attorney-client relationship with Ledford, DeVille, and Centurion concerning a contemplated business transaction and preparing transactional documents to effectuate the contemplated transaction. (ECF No. 93-1 at 8.) On September 20, 2018, an attorney for the SEC communicated with Jamison by email, (ECF No. 97-1 at ¶ 5), which was followed by a subpoena being served on Jamison on September 24, 2018, seeking production of documents regarding, among other topics, his negotiations on behalf of Defendants with an investor group (ECF 96 at 1). Jamison subsequently produced responsive documents. (ECF 96 at 1; ECF No. 97-1 at ¶ 8.)

         According to Jamison, on October 19, 2018, Jamison and an SEC attorney had a telephone conversation during which Jamison inquired whether the SEC would oppose ij a motion by Jamison for admission pro hac vice to represent Ledford in this action. (ECF No. 97-1 at ¶ 10.) This conversation was followed by an email on October 23, 2018 from Jamison to the SEC attorney asking the SEC's position on his potential motion. (Id.) Jamison and the SEC attorney had another telephone conversation on October 24, 2018, during which Jamison was cautioned about the potential for a conflict if he were to represent Ledford and the possibility that Jamison could be called as a witness. (Id. at ¶ 11.) Jamison states that the SEC's position was that it would neither consent nor oppose Jamison's admission pro hac vice to represent Ledford in this action. (Id.) The SEC followed up with a letter outlining its concerns, citing Rules 19-301.7 and 19- 303.7 of the Maryland Rules of Professional Conduct, and requesting that Jamison revisit the Rules and confirm, in writing, that he had considered his obligations under the Rules. (ECF No. 96-1.)[4]

         Joshua Treem, Ledford's local counsel, electronically filed Jamison's motion for admission pro bac vice on this Court's website on October 24, 2018. (ECF No. 97-1 at ¶¶ 12-13; see also ECF No. 41.) The motion was routinely granted by this Court on October 26, 2018. (ECF No. 48.)

         The Receiver contacted Jamison on December 12, 2018 and again on December 14, 2018 prior to the filing of the instant motion. (ECF No. 79-1 at ¶ 15 n. 5.) The Receiver had a discussion with Jamison on December 14, 2018 regarding his conflict of interest, but Jamison refused to withdraw. (Id.) Counsel for the Receiver notified Jamison that the Receiver, as the [holder of DeVille and Centurion's attorney-client privileges, would not waive the conflict of interest to the extent that there is any waivable conflict. (Id. at ¶ 15.)

         Receiver Gregory S. Milligan's Motion to Disqualify Attorney Jack Jamison (ECF No. 79) was filed on December 24, 2018. After granting multiple extensions of time to respond, the motion is now fully briefed and ripe for this Court's decision.

         LEGAL STANDARD

A motion to disqualify is a serious matter, which must be decided on a case-by-case basis. This is so because two significant interests are implicated by a disqualification motion: the client's free choice of counsel and the maintenance of the highest ethical and professional standards in the legal community. Nevertheless, the guiding principle in considering a motion to disqualify counsel is safeguarding the integrity of the court proceedings. Thus, this court must not weigh the competing issues with hair-splitting nicety but, in the proper exercise of its supervisory power over the ...

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