Developer Roger D. Shay on witness stand during a malpractice trial against Shutts & Bowen attorneys Bowman Brown and Ricardo J. Souto. (J. Albert Diaz)
Rodger D. Shay exudes big money.
He is the former chairman of the board of Merrill Lynch Government Securities Inc., a multimillionaire with residential and commercial property in Florida, South Carolina, Pennsylvania and elsewhere.
He even has a partnership in a castle in Ireland.
Shay was testifying in Miami-Dade Circuit Court last week in a lawsuit he and his wife, Grace, filed that accused two Shutts & Bowen attorneys of malpractice.
Shay said he hired Miami partners Bowman Brown and Ricardo J. Souto in 2005 to look over contracts for the purchase of an oceanfront lot and a condominium in a planned luxury country club in the Dominican Republic that features a Nick Faldo-designed golf course.
The 2012 lawsuit claims the attorneys failed to recognize blatant red flags in the contracts and ignored the advice of a Dominican Republic attorney who said Shay had tremendous financial risk in buying the properties.
“Brown and Souto lacked sufficient experience, expertise and competence in real estate law to adequately represent the Shays,” according to the amended lawsuit filed by the Shays’ attorney, Brian J. Stack, a partner at Stack Fernandez Anderson & Harris in Miami.
Attorney Sean R. Santini, a partner at Santini Law in Miami, is serving as co-counsel for the Shays.
Brown and Souto never closed contractual loopholes and advised Rodger Shay to wire money from two of his companies to offshore accounts, according to the amended complaint.
It turns out the properties weren’t owned outright by the purported seller, and they went into foreclosure when the real estate bubble burst. Shay said he ended up losing nearly $2.7 million.
Shay also claims Shutts & Bowen had Brown and Souto handle the real estate work when other attorneys would have been better suited to do so.
“Although Shutts & Bowen had a large real estate department specializing in real estate transactions, defendants failed to assign the Shays’ real estate matter to attorneys with that department who had experience,” the lawsuit states.
The lawsuit points out that many of the documents were in Spanish, but Brown and Souto weren’t proficient enough to understand them.
Brown is head of the financial services practice group at his firm and serves as the chairman of Shutts & Bowen’s executive committee.
Souto, a partner, concentrates his practice in taxation, estate planning and corporate planning.
The trial before Judge Jerald Bagley is expected to continue this week. Bagley has ruled the Shays may seek punitive damages.
The Shutts & Bowen lawyers are represented by Coffey Burlington partner Kendall Coffey, a former U.S. attorney Miami.
Coffey politely but stridently grilled Shay on the witness stand Thursday, clearly trying to paint him as someone who was calling his own shots in the disputed real estate transactions.
Coffey got Shay to admit that he gave power-of-attorney not to Brown or Souto, but to a member of the condominium sales staff in the Dominican Republic.
Shay also testified he visited the construction sites several times, knew construction was behind schedule and was aware the beachside development hadn’t been subdivided, which would indicate he couldn’t take title of the plot.
Coffey maintained Shay also didn’t share pertinent documents with his Miami attorneys.
“You thought you could read the letter for yourself and you could make your own decisions,” Coffey said.
He was looking to buy a $2 million homesite and a $1.9 million condominium in the real estate development called Roco Ki Golf Club in Higuey near the northeast tip of the Dominican Republican.
Brown and Souto advised Shay to buy the properties in the name of two limited liability companies and asked a Dominican attorney, Elizabeth Mena of Pellerano & Herrera in Santo Domingo, to review the contracts, the complaint said.
Mena, according to Shay’s complaint, discovered the seller, Macao Beach Resorts Inc., did not actually own title. The contracts obligated Shay to pay a steep transfer tax. There was no deadline for the sellers to deliver clear title to Shay. And the sellers wanted Shay to pay the balance of the purchase price by depositing the money in offshore bank accounts in the Channel Islands and a not a third-party escrow agent.
Shay claims Brown and Souto failed to resolve any of these significant risks and instead advised him in August and September 2005 to wire $1.9 million to an account for the undeveloped beach-front property and another $738,000 for the condominium property.
The jury must decide whether Shutts & Bowen was responsible for Mena’s work or if they had a duty to question Shay’s own decisions.
Shay learned in 2010 several banks had commenced legal proceedings to foreclose mortgages or liens encumbering the properties which were subject of the contracts. In November 2010, Shay called Brown, who told him to hire legal counsel in the Dominican Republic, the complaint states.
It was then Shay learned that the contracts negotiated by Shutts & Bowen had failed to contain provisions to safeguard the purchase funds. He also found out “that the purchase funds he had wired to the sellers’ foreign bank accounting 2005 on the instruction of Brown were gone.”
Coffey, in a pleading filed in 2013 arguing against allowing punitive claims, saying the contracts were already signed by the time Shay hired Shutts & Bowen for four months in 2005. The lawsuit boils down to Shay wanting Brown and Souto to negotiate a better deal for him or advise him “this is just a lousy deal, walk away,” as the millionaire testified in a deposition.
Coffey noted in the pleading Shay’s financial acumen, citing his ownership of a bank and insurance company and his advice to the Federal Reserve and the Archdiocese of Miami. Shay founded Shay Financial Services Inc. and was the first president of the Government National Mortgage Association Dealers Association.
Shay wanted to get a $100,000 cash discount, and that’s why he was in a hurry to deposit money, the pleading states.
Brown and Souto relied on Mena in the Dominican Republic, Coffey said.
“It is undisputed that in fact the record reflects that at every turn the defendants followed the recommendations of the Dominican Republic counsel,” he said.