Phoenix Falling

The Florida Supreme Court sustained misconduct findings but increased a referee’s proposed 90 day suspension to two years

This case arises from Phoenix’s involvement with Cay Clubs Resorts and Marinas (Cay Clubs), a company that pitched to investors the opportunity to buy and profit from the management of vacation rental units. Phoenix was Cay Clubs’s lawyer, in one way or another, from 2005 until 2007. The trouble is, Cay Clubs turned out to be a Ponzi scheme: it made so-called “leaseback” payments to initial investors using money from new investors and failed to disclose this practice on federal mortgage loan documents. As Senior Vice President and General Counsel of Cay Clubs, Phoenix knew about and participated in Cay Clubs’s Ponzi scheme. When the scheme collapsed, the U.S. Attorney’s Office for the Southern District of Florida (USAO) investigated and prosecuted Cay Clubs’s executives and legal representatives. Phoenix cooperated with the USAO in exchange for its agreement that he would not be prosecuted. He never told The Florida Bar (Bar) about that agreement. Years later, the Bar found out and initiated disciplinary proceedings against Phoenix for his role in Cay Clubs’s Ponzi scheme. Phoenix has repeatedly denied any wrongdoing. He challenges virtually all elements of the proceedings as improper and specifically alleges that the referee’s findings of fact are not supported by competent evidence.

As to sanction, the court considered his non- prosecution agreement: “we need consider nothing else.”

On its face, in its first paragraph, the NPA provides that the USAO will “not criminally prosecute [Phoenix] for any crimes related to [his] participation in the criminal conduct set forth” in an attachment to the NPA. There is no ambiguity about whether the conduct it recounts is criminal in nature. It is. Phoenix may have avoided prosecution for his involvement in that criminal conduct, but by  entering into the NPA, Phoenix “admits, accepts, and acknowledges responsibility for the conduct set forth” in the agreement.

Here, the court rejected a number of challenges to the proceedings and findings below.

The successor referee characterized Phoenix’s narrative as casting “other Cay Clubs executives in the role as villain, and himself in the role of hero. Essentially, he argues that he alone tried to thwart the illegal practices, did so valiantly, and singlehandedly shut down the sales operations when [his] attempts were ultimately thwarted.” We cannot square that description of his role with his admissions in the NPA or with his .decision not to bring the NPA to the Bar’s attention.

(Mike Frisch)