News

Case files show Neill's trouble mounted

By Bill Moss, Published: June 12, 2012

In hindsight, plenty of clues hinted that Sam Neill was going underwater.

He had loaned his campaign $213,000 when he ran for Congress for a second time, in 2002. The Democratic nominee, Neill counted prominent Democrats among his friends and supporters. He missed both tries when he tried to knock out Charles Taylor, the popular Republican incumbent, but ran respectable campaigns.
As time went on, court records show, Neill's financial difficulties piled high. He was known as the convivial owner of Flight, the popular Main Street restaurant in a historic bank building. Flight used the old bank vault as a wine cellar. He had plenty of legal work in wills, trusts and estates, his firm's specialty. But apparently he did not have enough to support an increasingly extravagant lifestyle or to pay his growing weight of debt.
As the need for money grew more urgent, Neill used his access to the accounts to take millions of dollars for his own use, state and federal prosecutors say. He made "lulling" payments to creditors making the most vocal or most credible threats.
Neill, born in Sylva and raised in Hendersonville, graduated from Wake Forest law school. He served as a former HomeTrust bank director and served on the board of Advantage West, the state's economic development arm in the mountains. A longtime Democrat with the connections to win an appointment on the UNC Board of Governors and eventually become its chairman, Neill helped fund arts council events, socialized around town and moved in circles among the influential. But his public persona as a busy estate lawyer and successful restaurant owner hid the dark side of his work on the trust accounts and estates of older people who came through the door of his office on Third Avenue West. He was stealing from them, state and federal prosecutors say.
Court documents, criminal indictments and trust, estate and land records reviewed by the Hendersonville Lightning shed light on the breadth and depth of Neill's habit of taking money from accounts he was entrusted to protect and his gift for persuading bankers, friends and other creditors that a big check was just around the corner, if they'd just hang on. What the documents don't answer is how, with so many clues freely available in the public record, he got away with it as long as he did.

Income tax evasion
Neill pleaded guilty in April to a federal income tax violation. That count was included among federal charges that he "engaged in a scheme to embezzle from his law firm's trust account." Although his legal duty was to safeguard money from individuals and trusts and make payments to beneficiaries, prosecutors said, he instead ignored his clients' wishes and used the money "to make lulling payments to lenders holding unpaid liens, to satisfy potential debts and demands related to (his) business obligations" and to cover shortfalls in other trust accounts. The federal government charged him with failing to report the ill-gotten gains on his taxes.
Neill's lawyer, Joseph B. Cheshire V of Raleigh, told news outlets that Neill had promised to make restitution to his victims and to pay the back taxes on income he failed to report. The unreported income in 2008 and 2009 was $1,517,125, and the amount he owes the IRS was $511,136 in taxes, federal court records say. He is awaiting sentencing on the federal charges, which carry a maximum penalty of three years in prison and $250,000 fine.
Still pending is a five-count indictment in state court that accuses him of taking almost $900,000 from the estate of Irene Meinke, $55,000 from the Harold R. Talmadge Trust, $247,682 from the Edna R. Davis trust, $884,515 from the Barry E. Clemo trust and $850,000 from the estate of Ruth D. Danis.
One option, legal sources say, is that Neill and defense attorney Cheshire, a renowned litigator who represented former Gov. Mike Easley, will negotiate a package guilty plea to both the federal and state charges.
Federal and state prosecutors did not respond to requests for interviews from the Hendersonville Lightning. Noelle Talley, a spokeswoman for the state attorney general, said no trial date has been set. She said she could not comment on possible plea negotiations.

Barry E. Clemo trust

Neill drew up a charitable remainder trust for Barry E. Clemo, a Hendersonville retiree who was a devoted volunteer at Four Seasons hospice and palliative care. Clemo, who died in February 2009, had directed that half his estate go to the Community Foundation of Henderson County and half to Four Seasons. As months and then years passed after Clemo's death, Community Foundation and Four Seasons officials grew increasingly worried about what had happened to the generous gift.
Shortly after Clemo died, attorneys for the Community Foundation and Four Seasons said in a lawsuit filed last year, Neill directed Merrill Lynch and AXA Equitable to liquidate the Clemo trust assets and forward the money to him. Neill used the money, more than $900,000, for himself or for "the use of others" who were not beneficiaries of the trust, the lawsuit said.
In a petition to remove Neill as trustee, Community Foundation attorney Robert Haggard said the "long and unexplained delay" in disbursing the money constituted a breach of trust. Neill, the court document said, had admitted to making "mistakes" in handling the account and had promised to make the charities whole by using his own "personal funds." Neill tried to go directly to the beneficiaries — the two non-profit organizations — to work out a settlement, bypassing their lawyers.
In January of this year, the court ordered the parties to hold a mediated settlement conference by July 25. The order set a trial date for 2013.
"There's a civil lawsuit and there's a criminal case, and in the civil lawsuit there should be a voluntary dismissal pursuant to a settlement," Robert Deutsch Jr., the court appointed trustee who replaced Neill, said in an interview. How well a settlement treats the two charitable organizations is open to question.
Four Seasons CEO Chris Comeaux said he had heard that lawyers were trying to work out a settlement that would give some money to his organization and the Community Foundation. He expected it to be a fraction of the total the two had coming legally. Including a house and property, the amount should have been about $700,000 for each, he said.
"The bottom line is we have not been made whole and it's very sad situation because if you look at cuts that may be coming in health care, to have a longtime volunteer who absolutely loved Four Seasons want to bless us in this way and then have it absconded" badly hurt the organization, Comeaux said.
The two organizations are holding out hope that some of Neill's assets could be liquidated. One piece of property he owns would have been worth plenty five years ago at the height of the real estate market but now the settlement talk seems "like a hollow promise," he said. "Our perception is there's not much that's unencumbered. It would take a very motivated buyer for us to be made whole."
Lenders foreclosed on Neill's Flight restaurant and law office at 222 Third Avenue. Aside from his home, he owns a half interest, along with his brother, Hendersonville trial lawyer Roy Neill, in the old Joy Drive-In property at the corner of South Grove Street and Spartanburg Highway. The seven-acre piece of commercial property is valued at $2.08 million, according to tax records.

Irene F. Meinke

In her last will and testament, Irene Meinke was specific about leaving her assets and possessions.
Glenn William Rabbe of Waterford, N.Y., would get $100,000. William Christensen, of High Point, would get $35,000 and her color TV set. She bequeathed to other friends and relatives various amounts: $10,000, $25,000, $20,000, $53,000, and so on. To Carl Roemer, of Otega, N.Y., she left eight one-ounce gold pieces. Family albums would go to Frances Rabbe, as would the dishware made in France and Germany. Her organ and all her organ music she left to the Rev. Martin Luecke, who had been her minister at Mt. Pisgah Lutheran Church.
She appointed Sam Neill executor and trustee, and signed the will on Nov. 24, 2004. When she died 3½ years later, Neill was supposed to execute all her promises. It never happened, prosecutors say. One of the state charges accuses Neill of embezzling more than $100,000 from the trust account; trust records in the courthouse say her estate was worth $876,000 when she died.
Dorothy Nus, who lives in Hendersonville, may have been one of the few to receive anything from the estate. Mrs. Meinke left her $35,000.
"I wasn't aware of it until they gave it to me," Mrs. Nus said.
Luecke, the retired minister, had never heard anything about Meinke's organ until a reporter called him. He recalled making a pastoral visit after her husband died, but had had no other contact. As for the organ, "That's the first I've heard of it," he said.
Edward Albecker III, of Georgetown, Fla., was supposed to receive $10,000. Albecker, 74, recalled that Irene and Bill Meinke did not seem wealthy. Bill Meinke worked as a city planner in Islip, N.Y., and she was a homemaker. "I guess they invested well," Albecker said. A lawyer sent him a letter a while back asking if he had received any money. "No," he hadn't, he said. "I sent it back, negative."
"That letter said there's only $60,000 left."
He was philosophical about the loss.
"I wasn't expecting anything so I wouldn't be disappointed," he said. He said he hoped justice would be done. "I have no qualms about putting somebody like that away," he said. "I got no sympathy for them, especially when they take advantage of older people."

'Sham transactions'

Neill was removed as the trustee of the Tallmadge estate after a lawyer filed a motion saying that he had created "sham transactions" to grant himself cash payments of $10,000 and $45,000. One of the five state indictments charges Neill with stealing $55,000 from the Tallmadge trust. Harold Tallmadge died in 1973 and his wife, Pernal S. Tallmadge, died in 1994.
In May 2011, at the time that Neill was admitting to trust violations to state bar officials and surrendering his law license, he resigned as executor of the estates of Irene Meinke, Jessica Claydon, Robert Lee Parker and Ben Hill Webster Jr., and resigned as trustee for the Charles Smith, Tallmadge and Angela R. Watson estates.

 Neill vs. Neill

Court files indicate that Neill needed money, and got it however he could. In April 2007, Neill borrowed $100,000 from his ex-wife, Lynn, promising to pay her back at 7 percent interest. Two years later, in February 2009, Neill gave her a second promissory note and borrowed another $31,000. He had made no payments on either of the loans since May 2011, Lynn Neill said in a lawsuit filed in January of this year.
In the first promissory note, Neill promised to pay $583 a month in interest-only payments from May 2007 to May 2008, at which time he would pay off the loan in a balloon payment. In the second note, which he signed in February 2009, he promised to pay $764 a month. The complaint does not say how much of the $131,000 in loans Neill still owes to Lynn Neill.

'A bad deal'

Paul Taylor, a builder of fine homes, trusted Sam Neill.
"I had been working for him for years and he always paid, but this time he didn't," Taylor said in an interview. "This time" covers a two-year stretch when Taylor and his crew completed more than $250,000 worth of remodeling work on the Lake Summit home where Neill lives with his second wife, Nancy Hayes. Despite Neill's increasingly dire financial picture, he managed to turn a repair job into a major home renovation.
"We started in 2009. We did part of it because of water damage, then we started completely remodeling the house," Taylor said. "We did decks, deck additions. We added an extra room to the house, added a powder room, we tore up all hardwood and replaced it. We redid the master bath and master bedroom, redid all the cabinets in the kitchen, on and on and on."
This time, Neill didn't pay.
"I kept asking him for it and he kept saying he had a big check coming, and we never did get it," he said. "When he paid he only paid part of the draw."
In a lawsuit filed last October, Taylor said that Neill still owes him $149,059. "I got paid for about 40 or 45 percent of it," he said. "We've got him sued, and I got a lien on his house trying to get the money he paid me. Right now Mountain 1st is trying to foreclose on his house and our lien is the first lien."
Four months after Taylor sued Neill, Mountain 1st Bank filed a motion to protect its interest in a $1.69 million deed of trust that encumbers the property.
Taylor said Neill's assets include the home and land it's on but also some other lakefront property.
"The house actually appraised for a lot more money than the loan. He's got one of the biggest boathouses on the lake," Taylor said. "It's brand new, we did that, too."
Taylor said he's read about the Neill case, and hoped those owed money would get it back.
"I think that he needs to be responsible for all the money he had beat people out of and some way or other he should pay 'em all back," he said. As for the last work he did for Neill and his wife, "It was a bad deal and it just didn't work out."
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Even Neill's old law office is a sad reminder of a once-promising career, a local boy made good, who counted powerful state leaders as his friends, and was in turn counted on my clients.
When the city last week released a list of overgrown properties it will assess for mowing costs, one of them was the old D. Samuel Neill office at 222 West Third Avenue. It's now owned by a bank.