X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
At about 4 p.m. on Jan. 29, Rome, Ga., businessman David L. Pimper returned to the offices of his catalog company, Wall Street Creations Ltd., and discovered the doors padlocked and his employees gone. The same was true at the offices of his investment advisory firm, D.L. Pimper Group Inc. And a telephone call to his wife at home revealed that eight sheriff’s vehicles were blocking their driveway and deputies were videotaping the contents of each room, including the rooms of his two children, ages 8 and 11. Pimper was the latest target of an increasingly popular tool of Georgia’s local prosecutors — a civil RICO complaint. Wielding the weapon of the state’s Racketeer Influenced and Corrupt Organizations Act, prosecutors in Augusta, Albany, Baxley and now Rome have shut down what they say were criminal enterprises. In Augusta, the target was the scheme of two Medical College of Georgia professors to siphon off the schools’ research money for their own benefit. Using both civil and criminal RICO laws, prosecutors from Augusta and the State Attorney General’s Office recovered more than $10 million for the state. In Albany, armed with a civil RICO order, prosecutors last year shut down pawnshops and an auto dealership allegedly run with the ill-gotten gains of an embezzlement scheme. District Attorney Kenneth B. Hodges III says the state hopes to recover around $50,000 from the sale of seized property. And, in Baxley in southeast Georgia, prosecutors seized the assets of a doctor accused of unlawfully dispensing drugs. The civil RICO and a drug forfeiture case netted local law enforcement agencies about $990,000. Civil RICO allows a judge, upon the presentation of evidence by prosecutors, to freeze assets and seize property derived from or used in criminal enterprises and appoint a receiver to manage the targeted businesses. Prosecutors contend it’s the perfect tool in some instances to put criminals out of business and prevent the rapid disposition of illegally-gotten gains. Defense lawyers, however, say civil RICO’s actions can violate due process, can strip targets of the wherewithal to defend themselves, and are often used as economic leverage to exact guilty pleas. Prosecutors in Albany, Baxley and Augusta all say civil RICO is likely to be used more frequently by district attorneys. “As DAs become comfortable with [the RICO Act's] procedures and policies, yes, I would expect more” such cases, says Augusta Circuit District Attorney Daniel J. Craig. Brunswick, Ga., Circuit District Attorney Stephen D. Kelley, who prosecuted the Baxley case, agrees. Two factors are at work, he says: “DAs’ offices are maturing and the criminal element is getting more sophisticated.” AN EXTREME STEP Pimper’s lawyers, however, say the Rome district attorney’s use of civil RICO was an extreme step that ruined their client’s businesses, violated his constitutional rights, forced him into bankruptcy and damaged innocent people. “Just because RICO is a strong law, it doesn’t suspend the Constitution,” says Robert M. Brinson, whose Rome firm of Brinson, Askew, Berry, Seigler, Richardson & Davis mobilized to defend Pimper. Brinson says the claims against his client boil down to breach of contract allegations. Yet, his businesses were shut down, his bank accounts and credit cards frozen, and all his assets and property seized and put under the control of a court-appointed receiver. Pimper has had to live off the charity of fellow church members, and had to borrow gas money to be able to confer with lawyers, his lawyer says. The seizures made local headlines repeatedly and Pimper’s creditors began to demand their money. “The damage was done. Bam,” says Brinson. “Just like that. There’s no recovery from that.” Pimper has yet to be charged with a crime. But District Attorney Tami P. Colston says she had good reason to bring the civil RICO case and that she’ll be presenting criminal charges to a grand jury as soon as possible. Colston’s complaint — brought in her name as provided in state statutes — accused Pimper, his wife and the couple’s two companies of theft, false writings, violations of Georgia’s Securities Act, wire fraud and mail fraud. Specifically, the complaint said Pimper had signed up investor-customers for an “asset-allocation” program that was supposed to include a weekly analysis of their stock portfolios based on a unique statistical and mathematical model. The weekly reviews were not done, but Pimper still charged clients a fee for the service, the complaint said, adding that such fees totaled between $300,000 and $400,000 a year. Colston says Pimper had power of attorney over each client’s account and that he used it every quarter to cash in their stock to pay the “asset-allocation” fees. She also says he recently had directed employees of his catalog company, which sells Wall Street-related trinkets, to debit customers’ credit cards for merchandise that was not on hand. Brinson denies the allegation. Shortly before the civil RICO case was filed, Pimper was soliciting investors and simultaneously talking about filing bankruptcy, the district attorney says. “Any reasonable person could deduce people’s money was in jeopardy,” Colston says. SEMINAR SPARKED DISTRICT ATTORNEYS Colston’s civil RICO case, as well as Kelley’s, had their origins in a prosecutors’ seminar last year and a talk on state RICO laws arranged by Hodges. The seminar featured Atlanta lawyer Andrew J. Ekonomou, who since has been named as the court-appointed receiver in the civil RICO cases in Rome, Baxley and Albany. Ekonomou is a former federal and state prosecutor, civil litigator and white-collar criminal-defense lawyer, as well as onetime director of the state’s Securities Division. Ekonomou also has years of experience as a court-appointed receiver. In 1994, he was appointed to run the Gold Club in Atlanta while the nude dancing club was being sold. Sen. Max Cleland, D-Ga., nominated Ekonomou for a U.S. District Court vacancy in 1997. But his nomination hung in limbo for 15 months, during which President Bill Clinton never forwarded his name to the Senate. Finally, in 1999, Ekonomou told Cleland he no longer wanted to be a candidate. Noting the long wait, he wrote that it would not be beneficial to the court or to him to delay filling the vacancy. Cleland’s office at the time declined to say what held up the process. Ekonomou, through an assistant, declines to discuss his recent civil RICO receiverships, including the hotly contested Pimper case. The RICO complaint against Pimper was filed in the Floyd County Superior Court Clerk’s Office at 1:40 p.m. on Jan. 29. Less than an hour later, at 2:35 p.m., Superior Court Chief Judge Robert G. Walther, after an ex parte hearing with Colston that was not recorded by a court reporter, had signed a sweeping order appointing Ekonomou receiver over the assets of the Pimper Group, Wall Street Creations and the Pimpers. Ekonomou was authorized to take immediate possession of the assets and property, to freeze, seize, open and close bank accounts, hire anyone he needed to help him, and run the businesses as if they were his. That included the right to file bankruptcy. The defendants, Walther decreed, should pay the receiver’s costs and fees, once approved by the court. A section of the order provided that Ekonomou would not be liable for any act or omission while acting as receiver unless he acted recklessly or in bad faith. The order also restrained the Pimpers from disposing of any documents or assets or interfering with the receiver and suspended their licenses to sell securities and give investment advice. Finally, Walther ordered the couple to cooperate with the receiver and reveal all information about their assets. The next day, Colston held a brief press conference. Investors should not panic, she said, according to a copy of her remarks in the court file, adding that “authorities are taking and will take the actions necessary to insure that their property is safe and to prevent them from being abused.” Her office and local police were conducting a criminal investigation, she added, declining further comment. Pimper’s lawyers fired back in motions seeking to dissolve Walther’s order and the receivership. The order, they wrote, “is harsh and the aftermath, in a word, brutal.” It was also, they argued, illegal, unconstitutional and draconian. Lawyers for Pimper say that Walther’s order made no findings of fact, that it had been obtained via an ex parte hearing without notice to the Pimpers and that it froze all property without regard to any connection to alleged wrongdoing. They complain that the order gave the receiver “almost plenary power,” including taking away the Pimpers’ right to file a voluntary bankruptcy. And they note that the order didn’t cite any emergency that would justify such drastic action. They argued that the allegations in the RICO complaint were nothing more than claims brought in a federal suit pending in U.S. District Court in Atlanta for the past eight months, and investigated by the Securities and Exchange Commission. A Jan. 19, 2000, SEC investigation found that Pimper was charging clients in the asset allocation program for services that were not performed, and ordered Pimper to respond, which he did. Pimper’s lawyers say the SEC has taken no further action in the matter. The Pimpers’ due process rights had been trampled on, the defense lawyers argued, adding that “an alleged murderer, a pretrial detainee, or an indicted defendant has more rights than the Defendants in the instant case have been afforded.” EX PARTE HEARINGS ALLOWED The RICO act permits ex parte hearings when there is “reasonable cause” to believe that notice to the defendant would result in the loss or destruction of the property. The prosecutor must prove that to the judge by a preponderance of the evidence, the standard applicable to civil proceedings, says Craig. In the Medical College case, he adds, the judge conducted a full-day ex parte hearing before giving the go-ahead to seize assets. After the ex parte hearing and seizure, Craig adds, the Civil Practice Act kicks in, allowing the defendant the full range of rights available in any civil case, including the right to petition to dissolve the seizure order and receivership. Hodges says defendants’ due process rights are enforced even during an ex parte hearing � by the judge, who must be convinced that notice to the defense should not be given. In the pawnshop case that he handled he says he presented evidence that the defendants hid assets in the past. Walther did rescind the receiver’s right to file bankruptcy, but refused to dissolve the restraining order or the receivership. Pimper’s lawyers became even more incensed when they discovered that the first two checks written by the new receiver were to pay himself a $55,000 retainer, and the third was to pay a $50,000 retainer to Troutman Sanders to represent the receiver. Those fees, however, are subject to court approval. The $105,000, the defense team argued, meant that in less than a month, 54 percent of the seized cash assets of $194,193 had gone for attorneys’ fees while Pimper’s employees hadn’t been paid. Colston says the retainers do seem high, but points out that a court must approve any fees and expenses for the receiver. Ekonomou’s fees in the Albany case, according to Hodges, totaled $52,830 and his expenses came to $18,584. One of the defense lawyers in that case, Terry Marlowe, says the receiver’s tab was astronomical. “What we saw here in Albany,” Marlowe says, “was the money ended up being taken from defendants and given to the receiver.” Hodges, however, says Ekonomou’s hourly rate was between $150 and $175 an hour and was reasonable for a lawyer of his experience. Walther stayed all disbursements by the receiver, but still refused to dissolve the receivership. He allowed Pimper’s secured creditors — local banks — to enter the case. One bank filed an involuntary Chapter 7 bankruptcy against the Pimper Group Feb. 22. By the next day, less than a month after his first order, Walther concluded that the whole matter would be better handled in bankruptcy court since it appeared that most of the Pimpers’ assets were subject to the claims of secured creditors. “Determining whether any assets exist that are not subject to such claims would likely require protracted litigation and an appeal,” he wrote in a Feb. 23 order. He wrote that he was expressly authorizing Wall Street Creations to file bankruptcy by Feb. 26, and if the company did not, he added, the receiver should do so. Wall Street Creations obliged, filing a voluntary Chapter 7 on Feb. 26. The same day Colston dismissed Pimper and his wife from the civil RICO case, leaving only the two companies as defendant. The next day she dismissed the entire case. But before the dismissal Pimper’s lawyers had filed a notice of appeal of Walther’s refusal to dissolve the receivership, a step that complicates the status of the case and the receivership. At a status hearing March 1 before U.S. Bankruptcy Judge C. Ray Mullins, Pimper’s bankruptcy lawyer, Paul T. Carroll III, asked for the judge’s help in sorting out the difficult case. With a receivership in place, Carroll said, Pimper couldn’t meet the deadlines for filing financial data in the involuntary Chapter 7. He also said the civil RICO had forced the companies into bankruptcy, and that the accompanying publicity had virtually destroyed the value of Pimper’s investment advisory firm. “It’s a train wreck and we need your help,” he told Mullins. Carroll also had some sharp words for Colston, noting that she had told the Rome newspaper that Pimper had been in financial trouble before the civil RICO. “Frankly, Your Honor, I find that difficult to believe,” Carroll said, adding that his client would not be in bankruptcy were it not for the RICO case. The RICO plaintiff’s understanding of solvency and business, he added, referring to Colston without using her name, “ranks right up there with her understanding of due process.” Colston says the civil RICO was handled by the book and it wasn’t the cause of Pimper’s financial troubles. And she insists that she was justified in not providing notice to Pimper, adding that it doesn’t take much time to wire assets out of reach. Colston says Pimper took in $5 million a year from his catalog company alone, but the money can’t be found. She says she didn’t realize that authorities would descend on the Pimpers’ house, including the children’s rooms, with video cameras, and wishes that hadn’t happened. “I feel bad for every defendant who goes through this courthouse, including those kids,” Colston says. “I understand circumstances put people in positions, but I also understand the test of character.” There’s no crime in getting into a financial bind, she says. “The test [of character] comes in getting out — how you do it. If you start taking other people’s money, that’s the test of character.” Now, she says, the defendants have threatened to sue her and the receiver. She says she has received a six-inch stack of paperwork from them in about two weeks, “and I haven’t done a thing wrong.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.