The court-appointed receiver for the estates of confessed Ponzi schemer Arthur Lamar Adams and his disgraced company, Madison Timber Properties, has sued Am Law 100 firm Baker, Donelson, Bearman, Caldwell & Berkowitz along with law firm Butler Snow and several other entities and people who allegedly abetted or turned a blind eye to Adams’ $100 million scheme.
Although Adams pleaded guilty to wire fraud and was sentenced to 19.5 years in prison in October—a sentence he will begin serving in January 2019—receiver Alysson Mills argues responsibility for the corrupt scheme, which dealt a blow to investors around the country, extends far beyond one individual.
Filed in the United States District Court for the Southern District of Mississippi’s Northern Division on Dec. 19, the complaint also names as defendants Brent Alexander, a Baker Donelson senior public policy adviser and lobbyist in the firm’s Jackson, Mississippi office; Jon Seawright, a lawyer and shareholder in the Jackson office; their investment vehicle, Alexander Seawright LLC; Butler Snow Advisory Services LLC; and Matt Thornton, Butler Snow’s founder, president and CEO, who allegedly steered investors to Madison Timber.
Both law firms issued statements adamantly denying the allegations against them and promising to vigorously defend themselves in the suit.
“I would say that the complaint speaks for itself and we look forward to prosecuting the case for the benefit of defrauded investors,” said Mills, a lawyer with Fishman Haygood in New Orleans. Brent Barriere of that firm said, “We believe the evidence will show that the defendants played a critical role in finding potential investors and exponentially growing investments.”
The complaint alleges a series of events in which people who should have known better ignored numerous red flags and used the imprimatur of a respected law firm to abet the Ponzi scheme. It alleges Alexander and Seawright made use of their vehicle, Alexander Seawright Timber Fund I LLC, to lend money to Madison Timber Properties. The latter organization and Madison Timber Company LLC, the complaint alleges, tricked hundreds of investors, reportedly ranging from a Hollywood producer to a U.S. senator and an L.A.-based philanthropic foundation, by pretending to collect funds for the purpose of buying timber and reselling the timber at a 13 percent markup. In reality, no timber purchases ever took place, and funds from new investors in the Ponzi scheme went to pay existing investors and cover Adams’ personal expenses, the receiver alleges.
Mills alleges that between 2011 and 2018, Alexander and Seawright failed to perform basic due diligence on the investment they were actively promoting. The complaint claims there were numerous red flags that went ignored. According to the complaint, Mills alleged Alexander and Seawright acted illegally as unlicensed brokers, egging investors on while making no effort to verify the existence of the timber in question, examine the deeds for the timber, or peruse cutting agreements between the timber owners and Madison Timber, which bore signatures forged by Adams; neglected to call the supposed landowners; and failed to call the lumber mills with which Madison Timber claimed to have contracts.
While much of her allegations focus on Seawright and Alexander, Mills argues Baker Donelson cannot avoid responsibility. According to the complaint, the investors whom Alexander and Seawright targeted with their pitches believed that Baker Donelson had vetted and gave its approval to investments in Madison Timber. The two referred people to the law firm’s website, and to their profile pages on the website, fostering an impression that they were acting in some sort of official capacity as representatives of the law firm, she alleged. Moreover, Alexander and Seawright used the law firm’s Jackson address for their investment activities, used messengers in the employ of the firm to collect investors’ checks, and even held closings at the Jackson office, according to the complaint.
“Baker Donelson knew Alexander and Seawright relied on their affiliation with Baker Donelson in securing investments and allowed it,” the complaint alleges. “Investors were led to believe that they could rely on Alexander and Seawright to evaluate each investment using their professional expertise and judgment, which was backed by Baker Donelson’s reputation.”
In response to a request for comment, Baker Donelson issued the following statement: “Baker Donelson did not represent Lamar Adams, Madison Timber Properties LLC, Alexander Seawright Timber Fund I LLC, or any investor or lender involved in his or her decision. These claims do not relate to any firm matter or file. We are of the considered opinion that the claims filed against the firm are meritless.”
Requests for comment from Seawright and Alexander went unanswered.
As it relates to Butler Snow, the complaint alleges that in 2011, the law firm launched Butler Snow Advisory Services. According to the complaint, the new advisory firm stood to reap significant profits from its relationship with Madison Timber. The firm’s CEO, Thornton, and a newly hired strategic adviser, Mike Billings, allegedly proposed a $3,500 monthly fee “to assist in strategic business development” along with a “success fee” allocated on an ad hoc basis.
Upon establishing a fund for their client, Thornton and Billings would get half of Madison Timber’s management fee along with 33 percent of Madison Timber’s carried interest. (The figure was later adjusted to 25 percent.) In August 2012, Adams hired Butler Snow Advisory and the Butler Snow law firm. Thornton and Billings allegedly made extensive efforts to pitch Madison Timber to wealthy investors, but Thornton, the complaint alleges, cited nondisclosure agreements as a pretext for withholding information about the lumber mills with which Madison Timber claimed to be doing business. Butler Snow allegedly received commission checks from Madison Timber for investments made by individual and institutional clients.
“For all of these transactions, Thornton, Billings, and Butler Snow acted as unlicensed brokers, in violation of state and federal law,” the complaint alleges.
Butler Snow denied the allegations in a statement issued on behalf of the law firm, the advisory firm and Thornton.
“We understand that one of the roles of a receiver is to recover as much money as possible, and, in this instance, for the defrauded individuals related to Arthur Lamar Adams and Madison Timber Properties,” the statement reads. “We have cooperated fully with the receiver and provided all information she has requested. Therefore, she is well aware of our limited involvement with Mr. Adams and Madison Timber. Under these circumstances, filing a lawsuit against us and making these unfounded claims is disappointing. We will defend this lawsuit vigorously and look forward to ensuring the facts are brought to light during the course of this litigation.”
According to the docket in Mills v. Butler Snow, none of the defendants have hired attorneys to represent them. Lawyers at Brown Bass & Jeter in Jackson, Mississippi are also representing Mills.