“You’re Going To Lose Your Butt”

An attorney admitted in 1967 should be disbarred for multiple violations of the business transactions rule, according to a recent report and recommendation of the Louisiana Attorney Disciplinary Board.

The Board quoted the Hearing Committee findings of fact including

In 2008 [attorney] Pierson and others formed 1-40 Properties, LLC. In 2014 the name was changed to Prairie West Holdings, LLC. Pierson was a member, manager, and registered agent of the [sic] Prairie West. His law office was the domicile and mailing address for Prairie West. By 2015 there were 3 members of Prairie West, each with a 1/3 interest. Pierson was one of these three members.

Prairie West was formed to acquire and develop a 200-acre tract of land in Yukon, Oklahoma that was owned by the Catholic Diocese of Oklahoma City. While no contracts, financial records or documents pertaining to the venture were offered, the indications are that some money was spent to pursue development[.] [W]hile Prairie West never secured ownership to the property, but [sic] yet [sic] [Prairie West] had financial obligations to the Diocese that were required to be met.

During this effort a portion of the property was sold at some point at a small profit to Prairie West. [fn 7: 5 acres were sold to Prairie West by the Diocese for $2.90 per square foot. They in turn sold this to a hospital that paid $5 per square foot for a $150,000 profit.] By the time of the Committee Hearing, Prairie West had filed suit in Oklahoma against the Diocese for breach of contract and unjust enrichment.

Pierson’s testimony that in 2015 the venture was “alive and well” and that it should have been lucrative, strains credulity. These statements were unsupported by evidence. It had no income, no accounts receivable, owned no property, and had a bank account with a balance near zero. Prairie West in 2015 had a financial obligation with a “possible” right to complete a purchase agreement to acquire a tract of land, that might “possibly” be developed and “possibly” make a profit. [fn 9: Prairie West had considered a “new urban development” concept for the property. At some point this was abandoned. An architect said there is nothing urban about Yukon, Oklahoma and “you’re going to lose your butt.” ODC Exhibit 10, Pierson Sworn Statement #1, page 48.]

[Client] Bridgette Kraus lived in Lafayette and knew Pierson’s daughter who also lived in Lafayette. While she has a college degree (fashion merchandising) she was not experienced or sophisticated in finance, investments, or business. [fn 10: Pierson did not think Kraus was “into” investing financially in her marriage. ODC Exhibit 10, Pierson Sworn Statement #1, page 20.] During her 21-year marriage her husband handled all financial affairs and she was given an allowance for expenses. She retained Pierson in March 2015 and he filed a petition for divorce. Kraus was in an extraordinarily vulnerable state in 2015 due to the effects of her marriage and the divorce process.

Kraus received a partial community property settlement on September 21, 2015 in the amount of $804,155.52. She deposited this on the same day at 4:12 PM. Kraus was worried about keeping such a large sum of money in her account. Pierson testified he did not perceive Kraus to be nervous about having money, but said “She was more nervous about not having money…” She believed Pierson was good at investing. Within 24 hours Pierson said he had a deal with a development in Oklahoma. He advised Kraus she could be assured of a 10% return.

The client loaned the attorney a half a million dollars and change

Kraus was led to believe the investment was guaranteed. She was assured she could not get 10% elsewhere. She did not understand the concept of a secured loan. She did not understand there were no assets in the event of a default. Kraus was explicit that she made the loan since Pierson was her attorney—”I trusted him.”

To her detriment

Prairie West was in need of money. Pierson flimflammed Bridgette Kraus, his vulnerable and financially unsophisticated client, into providing the much needed money…

Kraus has never been repaid her $500,000 principal. She was paid $50,000 on November 3, 2016. Since Prairie West had no income stream, it logically follows that this interest payment came from the money Kraus loaned to the LLC that did not originally go to the Diocese. Their deal with the Diocese was protected and that was all that mattered.

Two other (but much smaller) such transactions were found.

Sanction

While many of the same rule violations as seen in Bennett are found in the instant matter (Rules 1.8(a), 8.4(a), and 8.4(c)), the mitigating factors of lack of a prior disciplinary history and substantial efforts to make restitution are not present. In fact, the aggravating factors in this matter include a prior disciplinary offense and indifference to making restitution. After considering Bennett, the Board will not deviate from the baseline sanction of disbarment and will recommend that Respondent be disbarred in this matter.

(Mike Frisch)