SC Lawyer, Nov. 2004, #5. HUD-1 Misery.

AuthorBy John Freeman

South Carolina Lawyer


SC Lawyer, Nov. 2004, #5.

HUD-1 Misery

South Carolina LawyerNovember 2004HUD-1 MiseryBy John FreemanThe biggest risk facing the good lawyer is the bad client. Even work as seemingly routine and mundane as residential real estate closings becomes tricky when clients are less than honest. Two Greenville law partners, Ray Lathan and Ronald Barbare, ended up with some bad clients and paid a fearsome price: federal criminal prosecution, license suspension, and the temporary dismemberment of their law partnership, not to mention the need to fork out large sums to settle civil claims. See Matter of Lathan, ___ S.C. ___, 600 S.E.2d 902 (2004); Matter of Barbare, 2004 WL 1661038 (S.C. 2004).

Lawyers Lathan and Barbare were law partners in a law firm handling 1,400 to 1,600 real estate closings per year, around six every business day. Lawyers willing to handle so many loan closings run foreseeable risks, among them paperwork glitches that leave mortgages unsatisfied, slipshod title work that leaves the lender without the bargained-for lien protection, and improper use of lay staff to do lawyer work, leading to unauthorized practice issues. None of these standard types of closing problems bit the two Greenville lawyers. What got them were crooked clients.

As chronicled in the Court's decisions, both lawyers ended up being played for patsies by greedy property sellers and a lender's crooked employee. Interfacing principally with the lawyers' paralegal, the bad guys worked relentlessly as a criminal ring to cheat lenders out of cash. Crime paid well for the law firm's crooked clients, at least temporarily. One, a real estate property seller, "admitted he had derived between $5,000,000 and $10,000,000 in benefits from his scheme." Matter of Lathan, 600 S.E.2d at 905. Another property seller who used the lawyers' legal services "admitted deriving $3,075,000 from the real estate transactions related to his plea." Id. at 907. Another defendant, a dishonest employee for a lender, "admitted deriving between $1,500,000 and $2,500,000 from his scheme." Id.

Lawyers Lathan and Barbare missed out on the lush financial returns enjoyed by beneficiaries of the loan closings they processed. Said the Court: "ODC's investigation reveals respondent did not receive any special financial benefit from the closings investigated by ODC. All fees received are shown on the Firm's class report [trust account ledger]; the fees appear to be...

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