                   THE STATE OF SOUTH CAROLINA 

                        In The Supreme Court 


             In the Matter of David Weldon Gantt, Respondent.

             Appellate Case No. 2014-002495


                             Opinion No. 27483 

              Submitted December 1, 2014 – Filed January 21, 2015 



                             PUBLIC REPRIMAND


             Lesley M. Coggiola, Disciplinary Counsel, and Barbara
             M. Seymour, Deputy Disciplinary Counsel, both of
             Columbia, for Office of Disciplinary Counsel.

             Frank L. Eppes, Esquire, of Eppes & Plumblee, PA, of
             Greenville, for respondent.



PER CURIAM: In this attorney disciplinary matter, the Office of Disciplinary
Counsel and respondent have entered into an Agreement for Discipline by Consent
(Agreement) pursuant to Rule 21 of the Rules for Lawyer Disciplinary
Enforcement (RLDE) contained in Rule 413 of the South Carolina Appellate Court
Rules (SCACR). In the Agreement, respondent admits misconduct and consents to
the imposition of a confidential admonition or public reprimand with conditions.
We accept the Agreement and issue a public reprimand with conditions as set forth
hereafter in this opinion. The facts, as set forth in the Agreement, are as follows.

                                       Facts

In 1999, respondent began practicing law with Fredrick Scott Pfeiffer. Over the
years, Mr. Pfeiffer began to enter into various business ventures with clients, some
of which involved real estate investment and development. Respondent developed
a fairly extensive real estate practice and, from time to time, closed loans for
entities with which Mr. Pfeiffer was involved, either as an investor or owner.
Respondent represented a company (Client A) owned by three clients in
connection with the development of a tract of property (Development 1). ABC
Company, a company owned by Mr. Pfeiffer and his client, Client X, assisted
Client A in financing the Development 1 project.

In April 2006, Mr. Pfeiffer approached respondent regarding a new development
project (Development 2) with the three firm clients who owned Client A. Mr.
Pfeiffer and the three clients told respondent that they needed someone with good
credit to guarantee a loan in order to obtain financing for the Development 2
project. The clients agreed to give respondent an interest in the new development
company, called Development 2 Company, as payment for legal fees incurred in
connection with the Development 1 closings and other work performed for them.
In exchange, respondent agreed to personally guarantee the loan obtained by
Development 2 Company.

Mr. Pfeiffer prepared the corporate formation documents for Development 2
Company on behalf of respondent and the three clients. Although respondent
believed that his interest in Development 2 Company was only ten percent, the
corporate documents show respondent as a fifty percent shareholder. In any event,
Development 2 Company was owned by respondent and the three clients from
March 2006 until January 2007 when respondent relinquished his ownership
interest.

Respondent acknowledges that it was a conflict of interest for him to engage in a
business transaction with law firm clients. See Rule 1.8(a), RPC, Rule 407,
SCACR. He acknowledges he failed to ensure that the terms of the transaction
were fully disclosed and transmitted in writing in a manner that could be easily
understood by the clients. He further admits that he failed to advise his clients in
writing of the desirability of seeking the advice of independent legal counsel
regarding the formation of Development 2 Company. Further, respondent
acknowledges that he failed to communicate to the clients reasonably adequate
information and an explanation about the material risks and reasonably available
alternatives to entering into a partnership with their attorney. Respondent admits
he failed to obtain his clients' informed consent, in writing signed by the clients, to
proceeding with the formation of the partnership and waiving the conflict of
interest.

During the time respondent held an ownership interest in Development 2
Company, the company borrowed the initial funds to purchase the Development 2
property with plans to subdivide it for development and sale. Respondent assisted
with the closings on the loans to finance the initial purchase of the property by
Development 2 Company, including preparing mortgages to secure those loans.

Development 2 Company obtained loans of approximately two million dollars
from ABC Company to make the initial purchase of Development 2. At various
times during respondent's representation of Development 2 Company in connection
with the funding and sales of Development 2, Mr. Pfeiffer transferred partial
ownership of ABC Company to various companies in which respondent had an
ownership interest, including the law firm.

To cover the remaining purchase price of Development 2, Development 2
Company obtained a loan of approximately four million dollars from Client B, a
company owned by Client C. Respondent had represented both Client B and
Client C in unrelated business litigation prior to assisting Development 2 Company
with the financing from Client B.

Respondent acknowledges that it was a conflict of interest for him to engage in
business transactions between law firm clients and companies in which he and/or
his law partner held an interest. See Rule 1.8(a), RPC, Rule 407, SCACR. He
acknowledges he failed to ensure the terms of the transactions were fully disclosed
and transmitted in writing in a manner that could be easily understood by the
clients. He further admits that he failed to advise his clients in writing of the
desirability of seeking the advice of independent legal counsel regarding
Development 2 Company borrowing funds to finance the purchase of Development
2 from companies owned or represented by respondent and/or his law partner.
Further, respondent acknowledges that he failed to communicate to the clients
reasonably adequate information and an explanation about the material risks and
reasonably available alternatives to entering into transactions in which respondent
and/or his law partner held an interest in the other contracting party. Respondent
further admits that he failed to obtain his clients' informed consent, in writing
signed by the clients, to proceeding with the financing transactions and waiving the
conflicts of interest.

The terms of the purchase money loan from Client B required Development 2
Company to repay two million dollars within ninety days, then refinance the
remaining amount of approximately two million dollars. There were two existing
homes on the property that were not encumbered. Development 2 Company
planned to sell those two parcels, then recruit several "investors" to purchase
undeveloped lots and use those proceeds to pay off the loan balances to both Client
B and ABC Company. Most of the individual investors borrowed money from
traditional banks to fund their investments in Development 2.

There were three parties in these transactions: 1) the investor who was the
borrower; 2) Development 2 Company which was the seller; and 3) the bank which
was the lender. Essentially, the investor borrowed money from the bank and paid
that money to Development 2 Company at the closing. The bank received a
mortgage and promissory note from the investor. The investor entered into a "buy-
back" agreement with Development 2 Company in which Development 2
Company would make the monthly payments on the investor's mortgage during
construction and would then buy the property back from the investor once the
house was built. Development 2 Company agreed to "buy-back" the property from
the investor by paying off the mortgage balance and paying the investor a "fee" of
between ten and fifty thousand dollars within one year.

In conducting these closings, respondent used a document entitled "Conflict of
Interest Disclosure" (Disclosure) in which the investor/purchaser and Development
2 Company/seller acknowledged respondent's dual representation of the parties in
the closing and his limited obligations to the lender. Respondent added a sentence
to the Disclosure that stated, "Finally, the closing attorney has a limited equity
interest in the Seller." Approximately half of the closing files did not contain a
signed Disclosure. Of those that did, many of the Disclosures were undated.
Respondent did not disclose to the banks or the investor/purchasers the extent of
his interest in Development 2 Company. Further, he did not disclose to the banks
or the investor/purchasers that the funds were being used to repay Development 2
Company's obligations to ABC Company (respondent's partner's company) and to
Client B (respondent's client's company) instead of for the construction of homes
on the property.

Respondent conducted the closings on the sale of the two existing homes. He
disbursed the sales proceeds to Development 2 Company. In addition, respondent
conducted all of the closings on the "sale" parcels of Development 2 from
Development 2 Company to individual investors. Respondent paid the funds from
the investor closings to Development 2 Company. Respondent did not know how
those funds were spent and had no control over the management of Development 2
Company's accounts. Although he was a part owner of Development 2 Company,
respondent did not examine any Development 2 Company financial records to
confirm that the company had the financial ability to feasibly make the loan
payments or buy back the properties as agreed.
In the course of trying to obtain commercial financing to restructure Development
2 Company and pay off the high interest loans from Client B and ABC Company,
one traditional bank would not permit respondent to close the loan because of his
conflict of interest. In January 2007, respondent transferred his interest back to
Development 2 Company to allow the other members to restructure the company
and refinance the project. This transfer of ownership did not release respondent's
personal guarantees.

Ultimately, Development 2 Company defaulted on ABC Company's and Client B's
loans. Further, the investors defaulted on many of the bank loans because
Development 2 Company failed to make the required monthly payments to pay off
the mortgages. Various lawsuits, bankruptcies, and receiverships followed. At
least one bank alleged that it was not aware of the buy-back/investor arrangements
and believed it was making construction loans and that the investors were in fact
buyers.

Respondent acknowledges it was a conflict of interest for him to conduct closings
on loans to which his company was a party. See Rule 1.7 and 1.8(a), RPC, Rule
413, SCACR. He further admits that his Disclosure form was insufficient because
it failed to advise the parties in writing of the desirability of seeking the advice of
independent legal counsel regarding the transactions. He further acknowledges
that the Disclosure form was insufficient because he failed to communicate to the
parties reasonably adequate information and an explanation about the material
risks and reasonably available alternatives to going forward with a closing attorney
who had an interest in the transactions. Respondent further admits that he failed to
obtain the parties' informed consent, in writing signed by the parties, to proceeding
with the closings and a waiver of the conflict of interest in each case.

                                         Law

Respondent admits that by his conduct he has violated the following provisions of
the Rules of Professional Conduct, Rule 407, SCACR: Rule 1.7 (notwithstanding
conflict of interest, lawyer may represent client if: (1) lawyer reasonably believes
lawyer will be able to provide competent and diligent representation to affected
client; (2) representation is not prohibited by law; (3) representation does not
involve the assertion of a claim by one client against another client represented by
lawyer in the same litigation or other proceeding before a tribunal; and (4) affected
client gives informed consent, confirmed in writing) and Rule 1.8(a) (lawyer shall
not enter into a business transaction with client or knowingly acquire an
ownership, possessory, security or other pecuniary interest adverse to client unless:
(1) transaction and terms on which lawyer acquires interest are fair and reasonable
to client and are fully disclosed and transmitted in writing in manner that can be
reasonably understood by client; (2) client is advised in writing of desirability of
seeking and is given reasonable opportunity to seek advice of independent legal
counsel on transaction; and (3) client gives informed consent, in writing signed by
client, to essential terms of transaction and lawyer's role in the transaction,
including whether lawyer is representing client in transaction).

Respondent also admits he has violated the following Rules for Lawyer
Disciplinary Enforcement, Rule 413, SCACR: Rule 7(a)(1) (it shall be ground for
discipline for lawyer to violate Rules of Professional Conduct).

                                    Conclusion

We find respondent's misconduct warrants a public reprimand.1 Accordingly, we
accept the Agreement and publicly reprimand respondent for his misconduct.
Respondent shall pay the costs incurred in the investigation and prosecution of this
matter by ODC and the Commission on Lawyer Conduct (the Commission) within
thirty (30) days of the date of this opinion. Further, respondent shall complete the
Ethics School portion of the South Carolina Bar's Legal Ethics and Practice
Program within one (1) year of the date of this opinion and provide certification of
completion of the program to the Commission no later than ten (10) days after the
conclusion of the program.

PUBLIC REPRIMAND.

TOAL, C.J., PLEICONES, BEATTY, KITTREDGE and HEARN, JJ.,
concur.




1
 Respondent's disciplinary history includes an admonition issued in 2010. See
Rule 7(b)(4), RLDE (Court can consider admonition in subsequent proceeding as
evidence of prior misconduct solely upon issue of the sanction to be imposed).
