IN THE SUPREME COURT OF FLORIDA (Before a Referee)

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1 IN THE SUPREME COURT OF FLORIDA (Before a Referee) THE FLORIDA BAR, Complainant, CASE NO.: SC TFB NOS.: ,112 (13D)(HES) DAVID ERIC HAMMER, Respondent. / REPORT OF REFEREE I. Summary of Proceedings The Florida Bar filed a Petition for Emergency Suspension in the Supreme Court of Florida on August 13, The Florida Bar had previously filed a complaint against the Respondent pursuant to Rule 3-3.2(b) Rules Regulating the Florida Bar. See S.C , TFB. Nos ,594 (13D) and ,460 (13D) on May 20, This Referee was appointed on August 27, 2010 to hear Respondent s Motion for Dissolution of Emergency Suspension and a hearing was scheduled on August 30, The Respondent filed a Request for Approval of Waiver of Time Limit Pursuant to Rule 3-5.2(i) until September 16, This Referee granted the Request for Approval of Waiver of Time Limit and a full day 1

2 hearing on the Motion for Dissolution was rescheduled and conducted on September 16, The pleadings and all other papers filed in this cause are forwarded to the Supreme Court of Florida with this report and constitute the entire record. The Respondent was represented by Joseph A. Corsmeier and Alan Dimond. The Florida Bar was represented by Troy M. Lovell and Karen Lopez. The referee considered the testimony of the following witnesses: David E. Hammer, Respondent Scott Rohledger, financial officer of Carpathian and International Investor s Group (I.I.G.) Michael Peters, part owner of DAER Paul DeCailly, Florida Attorney; former independently contracted lawyer for I.I.G.; Currently handling litigation for DAER; David Hammer; David Hammer s wife; I.I.G. David Lloyd West, CPA; former employee of I.I.G II. Findings of Fact A. Jurisdictional Statement: David Eric Hammer, Respondent, is and at all times hereinafter mentioned, was a member of The Florida Bar, and subject to the jurisdiction and disciplinary rules of the Supreme Court of Florida. 2

3 B. Summary of Case: 1. The Petition for Emergency Suspension filed by the Bar alleges that the Respondent is causing great public harm and that he should be suspended on an emergency basis because he has engaged in dishonest behavior and has misappropriated trust funds. According to the Petition for Emergency Suspension and the affidavit of David Slavinsky, the Respondent made unauthorized transfers of $27, held in trust in his trust account for a client, DAER Holdings, L.L.C., and converted the funds to his personal use. The affidavit and testimony of Scott Rohleder, financial officer for I.I.G., alleges that the Respondent, without prior authorization, withdrew $48, from a bank account for I.I.G. Respondent, David Hammer, was the secretary/treasurer of the company, International Investor s Group (I.I.G.), and was executive director of Carpathian Resources, Limited, an Australia business entity and the parent company of I.I.G. The Florida Bar contends this money was used among other things to repay DAER Holdings when DAER demanded Hammer return the $27, The affidavits of Paul Bilzerian and Paul Slavinsky were not considered by the referee because they did not appear and were unavailable to testify at the rescheduled hearing time. 3

4 2. The DAER Holdings L.L.C. Funds The Respondent testified at length about his position with the corporate entities, Carparthian, I.I.G., Keyapaha, DAER, Winner s Circle and the inner relationships. It is sufficient to conclude that all of the companies were controlled by Paul Bilzerian in his role as consultant. Mr. Bilzerian was not listed as an officer or director of any of the entities, but nevertheless appears to have controlled the finances and employees of all the aforementioned. Winner s Circle is a private networking club whose members paid dues of $15, $20, for membership which entitled them to access to Villarreal, the Bilzerian Mansion. DAER was essentially formed to hold and manage Villarreal, a 30,000 sq. ft. mansion in Tampa, Florida, formerly owned by Paul Bilzerian and his wife Terri Steffen. The real property had been the subject of actions by the U.S. government to seize the property in satisfaction of a judgment against Mr. Bilzerian. The mansion was bought and sold, passing through a number of entities, and in 2006 the Guerrini Family Trust sold the property to DAER. DAER was a limited liability company owned by Michael Peters (25%) and Keyapaha Company (75%), a Florida Corporation owned by Bilzerian s mother-in-law, Lois Steffen. DAER was created to own, manage and maintain Villarreal, which was being used as the private residence of Paul Bilzerian and his 4

5 wife, Terri Steffen, as well as a private networking club rented by the Winner s Circle. When Century Bank of Sarasota froze the bank accounts of DAER in mid- 2009, DAER was unable to pay the expenses at Villarreal. Funds were transferred from the Winner s Circle account to David Hammer s trust account so that DAER could continue to pay bills for Villarreal. Mr. Hammer s own testimony established that he held funds in his trust account for DAER, L.L.C., Winner s Circle, L.L.C., and Keyapaha Company. In May 2009, David Hammer was responsible for managing the expenses of DAER properties (i.e., Villarreal). The testimony of Michael Peters, part owner of DAER, was that the expenses for DAER could only be paid after approval. Peters and Lori or Terri Steffen, were the only individuals who could approve DAER expenditures. (The Referee is uncertain whether Michael Peters was referring to Lois or Terri Steffen in his testimony). Peters maintained that Hammer had no permission to borrow or spend DAER money without pre-approval. When Slavinsky, the manager of DAER, discovered a discrepancy in the accounting of $27,562.16, he demanded Hammer transfer that amount from Hammer s Bank of America trust account being held for DAER Holdings to Keyapaha Company. Hammer transferred the money back to DAER within a few days. Efforts to borrow money from Paul Bilzerian in order to restore the funds were unsuccessful. 5

6 3. I.I.G. Funds Although Hammer returned the DAER money, it appears that he was only able to accomplish the reimbursement by transferring $48, to his personal account from I.I.G. Hammer contends that these were fees and costs owed to him by I.I.G. and later had the invoice ratified by the board of directors of I.I.G. The difficulty this Referee has with the Respondent s explanation is that the invoice was created and the ratification sought after the funds had been transferred and without prior authorization. If Hammer believed he was not being properly or timely compensated, he could have taken other actions, rather than simply taking the money. Scott Rohleder, an employee of I.I.G. and its subsidiary, Carpathian Corporation, testified extensively about the approval process for expenses. Rohleder maintains that only he or Bilzerian could authorize expenditures. When Rohleder discovered the transfer and confirmed with Bilzerian that Bilzerian had not authorized the transfer, Rohleder was able to confirm that the disbursement had been deposited in Hammer s account. See Florida Bar Exhibit 6. A few days later, Rohleder received an invoice for services rendered by Hammer of $48, No approval for payment had been obtained by Hammer from Bilzerian or Rohleder. In addition, Rohleder objected to some of the legal fees, secretary fees, and director s fees listed on the invoice. Rohleder testified 6

7 that while Hammer charged for a director s fee, Hammer had previously agreed not to charge a director s fee. C. Defenses David Hammer contends that all of the fees on the invoice to I.I.G. were owed to him. He further contends that he had signatory authority on both accounts and therefore, the transfers were not inappropriate. Hammer also mentioned that he has transferred funds without approval to pay himself in the past. The invoice to I.I.G. indicates he paid himself fees as secretary in a lump sum. This fact suggests that Hammer had not paid himself routinely. Hammer testified that he withdrew the money from I.I.G. on May 7, 2010 and generated the invoice on May 7, Later, on July 14, 2010 he obtained approval of the invoice from the board of directors of I.I.G. (See Florida Bar Exhibit #9) The Florida Bar has consistently maintained that none of the transfers were authorized by the owners of the funds. The evidence and testimony of Peters and Rohleder established that the monetary transfers were completed without proper authorization. Hammer admitted in his own testimony that he never told DAER he was making the monetary transfer. Hammer s own affidavit never contested the demand from DAER to return the money See Petition for Emergency Suspension, Exhibit D, p (sealed in file). In the same pleading, Hammer admits that the transfer from I.I.G. had not been approved prior to payment. See Petition for 7

8 Emergency Suspension; Exhibit D, p (sealed in file). He acknowledged that he needed the money to support his family. Despite the fact that Hammer held official positions with DAER and I.I.G., it is clear from the evidence and testimony that he did not have authority to expend finds without prior approval. Having signatory authority over an account does not connote ownership of the funds. Mr. Hammer consistently failed to acknowledge this distinction in his testimony. Even if Mr. Hammer is no longer engaged in this conduct, that fact would not provide a valid basis for dissolution of the emergency suspension. Based upon the foregoing factual findings, I find that the Florida Bar is likely to prevail upon the merits of its case against Respondent, should the Bar choose to include misappropriation of funds in an amended complaint. The evidence and testimony support the allegations of misappropriation in the Petition for Emergency Suspension. I further find that the Respondent s conduct exposes the unprotected public to a significant risk of harm. III. Recommendation on Motion for Dissolution of Emergency Suspension Having reviewed all of the evidence, pleadings, exhibits and having considered the testimony of the witnesses, as well as arguments of counsel, I recommend that The Supreme Court of Florida deny Respondent s Motion to 8

9 Dissolve Emergency Suspension, and that the Order of Emergency Suspension, as entered by The Florida Supreme Court, be sustained. Dated this day of September, HON. LAUREN C. LAUGHLIN, REFEREE 9

10 Certificate of Service I HEREBY CERTIFY that the original of the foregoing Report of Referee has been transmitted by Federal Expressed and (e-file@flcourts.org) to THE HONORABLE THOMAS D. HALL, Clerk, Supreme Court of Florida, 500 South Duval Street, Tallahassee, FL , and that copies were transmitted by U.S. mail to the following: STAFF COUNSEL, The Florida Bar, 651 E. Jefferson Street, Tallahassee, FL ; TROY MATTHEW LOVELL, Bar Counsel, The Florida Bar, 4200 George J. Bean Parkway, Suite 2580, Tampa, FL ; JOSEPH A. CORSMEIER, Respondent s Counsel, 2454 N. McMullen Booth Road, Suite 431, Clearwater, FL 33759; ALAN DIMOND, Respondent s Counsel, 1221 Brickell Avenue, Miami, FL ; PAUL DECAILLY, Respondent s Counsel, 3111 W. Dr. Martin Luther King Jr. Blvd., Suite 100, Tampa, FL on the day of September, HON. LAUREN C. LAUGHLIN, REFEREE 10