Mashed Potatoes: Bad Lawyer's Bad Lawyering
 Begets Bilking Buddies of $2 Million-With-an-M

By R. Robin McDonald
Daily Report
New York Lawyer
July 13, 2009

ATLANTA - For nearly four years, McDonough attorney Steven H. Ballard capitalized on his credibility as a real estate and business law attorney to bilk friends and clients of more than $2 million in what federal prosecutors say was a Ponzi scheme in which Ballard siphoned more than $200,000 for his personal use.

But the fraud scheme, to which Ballard pleaded guilty in U.S. District Court on Thursday, was only one symptom of his failure as a lawyer.

In 2005, after a complaint to the State Bar of Georgia by a former client, Ballard voluntarily agreed to a two-year suspension of his law license for misappropriating client money from his firm's escrow accounts and paying himself unearned fees.

While that complaint was under investigation by the bar, Ballard's lawyering generated six additional complaints—including one from a friend, former Clayton County Attorney Donald M. Comer II. The grievances included allegations that Ballard had siphoned tens of thousands of dollars from longtime clients that were entrusted to his firm's escrow accounts; attempted to repay victimized clients with personal checks that bounced; neglected clients' cases and then generated elaborate lies to cover up those failures, according to formal grievances on file at the Supreme Court of Georgia.

After his license was suspended, Ballard continued to practice law in McDonough and perpetuate the fraudulent real estate scheme that ultimately led to the federal charges against him, said Assistant U.S. Attorney Gale McKenzie, who prosecuted Ballard in federal court in Atlanta.

In the face of a growing number of bar complaints, the Georgia Supreme Court disbarred Ballard in 2006. By then, the troubled lawyer had been jailed in Florida for taking money from a fabricated real estate sale (which eventually resulted in a probated sentence). He also was facing a theft by deception charge in Cobb County, criminal investigations in Henry and Fayette counties and civil litigation cases by former clients he had bilked, one of which eventually generated a $1.57 million Henry County judgment.

On Thursday, Ballard pleaded guilty to one count of wire fraud in a criminal information (a federal charge filed either prior to or in lieu of a grand jury indictment) that accused him of stealing $1,910,827 from 24 clients and investors in Georgia, Florida and Tennessee between September 2002 and May 2006.

Ballard could face as much as 20 years in prison, but McKenzie told U.S. District Judge Thomas W. Thrash Jr.—before whom Ballard appeared on Thursday—that the government is asking for a lesser sentence based on Ballard's acceptance of responsibility for his crimes. The federal government has also waived a fine (which could have climbed as high as $250,000) in lieu of Ballard's promise to repay the $1 million he still owes to his victims. Ballard remains free on his own recognizance until his scheduled sentencing Sept. 29.

McKenzie said that Clayton County has informally agreed to dismiss the pending charge against Ballard once he has been sentenced in federal court. But Clayton County District Attorney Tracy G. Lawson, who attended Ballard's plea hearing, said afterwards that the nature of Ballard's federal punishment will influence how she ultimately resolves the Clayton County case.

On Thursday, U.S. Attorney for Georgia's northern district, David E. Nahmias, said Ballard's actions constituted "a criminal violation of trust."

But Ballard's lawyer, Fayetteville attorney T. Michael Martin, on Friday called the disintegration of Ballard's career and the criminal charges that resulted "just sad. He was a very successful lawyer, and it's sad to see not only what has happened to him but also what has happened to friends of his. Most of these people [victims of Ballard's fraud scheme] were friends of his. … On his behalf, when this thing first came to light, he accepted responsibility from Day One."

Martin said that when Ballard was disbarred, he not only lost his career, he also lost his home to foreclosure and his car has been repossessed. He now lives in a rental home, drives a $500 car he bought at a sheriff's sale, and works part-time at a convenience store while organizing golf tournaments for a living.

Ballard, according to Martin, used the monies he secured from defrauding friends and clients to pay his own debts, compensate clients where Ballard's neglect had led to case defaults and dismissals and repay those from whom he already had misappropriated money.

"I think a lot of these victims think he has all this money somewhere," Martin continued. "That is not true. … He doesn't have the money."

Ballard said little during Thursday's hearing other than to acknowledge that he understood the nature of the charges against him and to affirm his decision to plead guilty.

The Clayton County theft by deception accusation against Ballard and the criminal warrant that prompted it had been pending for more than two years when Lawson was elected as Clayton D.A. last November. Lawson said that after she took office in January, she learned of the still open investigation of Ballard during a conversation with Donald Comer, who had filed a bar complaint against Ballard after he was bilked of $127,500. . Lawson said that when she realized the extent of Ballard's fraud scheme, she contacted McKenzie, who initiated the federal prosecution.

McKenzie described Ballard's crime as a Ponzi scheme. Named for famed swindler Charles Ponzi, a Ponzi scheme collects money from legitimate investors but pays returns on those investments only by luring in additional investors and using their contributions to pay the scheme's original participants. A Ponzi scheme eventually collapses because it requires more and more investors and an increasing flow of cash to pay returns required to sustain the fraud.

McKenzie said Ballard's scheme relied primarily on his ability to lure friends and clients into what he billed as real estate investment opportunities. Ballard collected thousands of dollars from investors that he claimed to have used to buy properties and then resell at a significant profit.

Ballard's credibility also was enhanced by the fact that from 1986-1990 he had shared a law practice with current Clayton County Superior Court Chief Judge Matthew O. Simmons at Simmons, Ballard & Thompson in Forest Park, several fraud victims who attended Thursday's hearing agreed.

But Ballard rarely, if ever, made the promised real estate purchases, McKenzie said. Instead, he forged sales contracts, deeds, settlement statements and sellers' signatures to trick his clients into believing the promised real estate transactions had taken place. He then appropriated those funds for his personal benefit or to repay clients and investors he had already bilked and who were threatening legal action, McKenzie said.

Martin said that no banks were defrauded by Ballard's phony transactions because he secured money primarily from longtime clients and friends, many of whom dipped into their retirement funds with the promise of quick, lucrative returns.

Several of the transactions included in Ballard's federal plea were among the State Bar complaints that led to Ballard's disbarment.

Among them was a formal grievance Comer filed against Ballard with the State Bar in 2005 after Ballard solicited $127,500 from Comer to buy 60 acres in Jasper County for what was supposed to be a quick, lucrative resale. According to Comer's grievance, which is included in files on Ballard's disbarment at the state Supreme Court, Ballard told Comer he had already lined up a buyer for the property in question that would result in a $25,000 profit.

But Ballard never bought the property. When Ballard failed to return Comer's initial investment and the promised profits on the promised date, Comer told Ballard he wanted out of the deal. Ballard assured Comer the purchase had been made and the money was forthcoming. Instead, Ballard gave Comer a personal check for $152,500 (which included Comer's investment plus the promised profit). The check bounced.

Comer, who attended Ballard's plea hearing with his wife on Thursday, said, "We've been hurt by it, but we've been able to recover." But others—including a retired Atlanta firefighter living in Florida and a retired chiropractor—lost their savings as a result of Ballard's fraud, he said.

Comer said he trusted Ballard with his money not because he was a lawyer, but because he was a friend. When Comer began trying to recover his investment, Comer said he was confronted with a string of excuses: Ballard's secretary had misplaced the check. The lawyer had been in a traffic accident. He had a flat tire. His mother was in the hospital.

Comer said he never got his money back. "We've never spoken since," he said.

Martin said that the criminal charges against Ballard had their inception in 2002 when Ballard found himself in financial straits because he needed to pay off a line of credit secured by a piece of property owned by his mother.

"All of a sudden, he found himself $120,000 in debt," Martin said. "In order to cover that, he had to borrow that money. In order to borrow it, he had to promise an astronomical return because it was going to be an unsecured loan."

What resulted was a string of short-term, high-interest loans that ballooned in value as Ballard sought to cover previous debts, often at interest rates as high as 50 percent, Martin explained.

Martin said Ballard was willing and did pay $50,000 interest on a three-month $100,000 loan and other similarly structured transactions because, "He felt that the only way he could get these people to agree to do it was to pay them this exorbitant amount of interest."

But Martin continued, "In order to keep the thing going, he had to obtain more money. To obtain more money, he did it under false pretenses. … It finally mushroomed to the point he couldn't keep up. … He never lived an extravagant lifestyle. He didn't have a fancy auto and take fancy vacations. The money was used to repay people he had taken money from in the first place."

The case is U.S. v. Ballard, No 1:09-cr-00307.