The wife of embattled real estate attorney Michael A. Eddings admitted last fall to a pattern of dubious financial transactions that have landed his Columbus law firm in hot water, according to new court documents.
Sonya L. Eddings told the auditors of a title insurance company that she failed to disburse several payoffs after real estate closings and began transferring ?small amounts? from the firm?s escrow account in 2007 to cover the expenses of another business.
?No one at the Law Office of Michael A. Eddings was aware of my actions,? she said in a handwritten statement dated Oct. 27. ?I completely violated the trust of this law firm.?
The statement, filed recently in U.S. District Court, is part of a new federal lawsuit filed by First American Title Insurance Company, a Santa Ana, Calif.-based business at the epicenter of the Eddings fallout. The company is suing the Eddingses for conversion and fraud, saying it faces more than $1 million in claims from sellers, lenders and others who didn?t receive payoffs after closings handled by the firm.
The filings are the latest development in a case that has stunned the local real estate community and affected dozens of people who did business with the Eddings firm. A frozen trust account and a series of missing payoffs have rankled people from north Georgia to Hawaii.
?It?s ruined my last three months,? said Diane Bouffard, who has been paying an additional mortgage on a house she sold in Pine Mountain, Ga., that wasn?t paid off after an October closing. ?There was absolutely no Christmas for us. No holidays. No winter vacation. Our lives are basically on hold.
?If I was in the state of Georgia right now, I would be picketing at the bar association,? she added. ?You can?t believe how furious people are.?
Michael Eddings sought last fall to play down the temporary closing of his law firm, saying audits were ?routine.? Today, he is trying to salvage his reputation and what was once a thriving law practice, even as at least one mortgage company has added the firm to its ?blacklist.?
In a phone interview on Friday, defense attorney Rob Poydasheff said Sonya Eddings diverted funds that haven?t yet been found, and portrayed Michael Eddings, his client, as an unwitting victim who entrusted the firm?s finances to his wife.
?He did have preventive measures to try to prevent fraud, but she circumvented them,? Poydasheff said. ?He is doing everything he can to rectify the situation. He wants to make everybody whole.
?There?s still a lot of mystery surrounding exactly what she did, how she did it and above all why she did it,? he added.
The litigation -- and the specter of disbarment -- is a fall from grace for a well-respected attorney and businessman with a military background. Michael Eddings is widely known in the community and has served on a number of local boards, including the Charter Review Commission, the Greater Columbus Chamber of Commerce, and the Columbus Regional Medical Foundation.
He and his wife also own the Uptown Fish House and two local Coffee Beanery cafes, businesses that have been named in the First American lawsuit.
?It?s a very sad story, actually,? Poydasheff said. ?Any time families get impacted and trust is breached, it has devastating consequences. Honestly, he?s as much a victim in this whole deal as everybody else. He is a victim of a breach of trust of his wife.?
Sonya Eddings couldn?t be reached for comment on Friday, and it wasn?t clear whether she has hired an attorney. Michael Eddings said in an email he didn?t think his wife was ?emotionally prepared to give any statements beyond what?s she?s already said.?
Frozen funds
Signs of trouble emerged in early November after Michael Eddings told local real estate agents he was suspended from closing transactions. Columbus Bank and Trust froze the firm?s escrow account, citing ?considerable uncertainty? as to the ownership of the money.
First American, meanwhile, launched a full-scale inquiry into the Eddings firm?s finances, determining funds hadn?t been disbursed for several loan payoffs. In addition to ?inappropriate? escrow transfers, the insurance company also claims to have discovered the manipulation of records.
?Affirmative steps were taken to conceal the negative escrow account balances from First American by altering the bank statements, including the manipulation of account information provided to First American during its audit of the firm?s financial records,? the lawsuit states.
Poydasheff declined to comment on the lawsuit. He said the irregularities with the escrow account came to light after Michael Eddings changed his firm?s funding policies from using checks to wire transfers.
The change was designed to eliminate the ?float time? associated with checks and represented a ?safer, more accurate way to run his business,? Poydasheff said.
?It basically uncovered activities that his wife/financial manager was engaged in during a period of time,? he added.
The frozen trust funds -- some $470,000 -- were deposited into the Muscogee County Superior Court registry and were recently transferred to U.S. District Court when the ?interpleader? proceedings were removed to federal court. Michael Eddings appeared in court last week with his attorney and about a dozen other lawyers representing various claims.
A judge will be tasked with disbursing the trust money among a pool of respondents who have claimed about three times the available amount.
?There?s not going to be enough money to go around to make everybody whole,? said one attorney involved in the proceedings. ?The sad thing is, there are some sales (Michael Eddings) closed where there?s no title insurance issued, so everybody is out.?
Gregory Watkins, who recently sold local property and closed with the Eddings firm, is among the parties seeking compensation. Watkins, who works at Fort Stewart, Ga., drove to Columbus to sign the seller documents and later received his proceeds check, according to court filings. When Watkins tried to negotiate the check, the account had already been closed.
He also found out his loan was never paid off by Eddings? firm, attorney Wayne Spence said.
?If he had not made his mortgage payments, then it would have gone into default,? Spence said last week. ?In an effort to try to save his credit, he continued to try to pay them.?
Spence said he expects Watkins? claim to be covered by the insurance company.
?Mr. Watkins is kind of a high priority because he?s got a loan that he?s struggling to pay and he?s also got a payment in Hinesville,? Spence said. ?The judge talked about the people who are bleeding the most, and he is one of them. There are several that are bleeding because they?re caught in that situation.?
First American says it has suffered damages because of the money it now owes under insurance policies.
?The exact sum of such loss is not as of this time certain, but the amounts claimed are presently in excess of $1 million,? its lawsuit says.
The lawsuit also takes aim at CB&T, claiming the bank permitted the ?scheme? to continue and failed to investigate irregular escrow account activity despite red flags like negative balances. The bank also is named as a defendant.
?The claims by First American, in our opinion, have no basis in fact or law, and we -- on behalf of the bank -- intend to vigorously defend the matter,? said William L. Tucker, an attorney for the bank.
?Massive issues?
Poydasheff said Michael Eddings was ?hands off? when it came to the accounts, relying on his wife, ?who has a very strong academic and professional background? that includes stints at George Washington University and Synovus.
?She was no dummy,? Poydasheff said.
Still, Poydasheff said his client is ?shouldering the responsibility and trying to do the right thing.?
?As a lawyer, all you?ve got is your reputation,? he said. ?He?s trying to protect his reputation from the standpoint of cooperating with the title company. We?ve sat down many times trying to find out who got hurt.?
Poydasheff acknowledged ?a certain amount of responsibility that lies with any trust account,? saying it?s a ?very sacred obligation.?
?We have no idea how the bar is going to react,? he said. ?We?re in discussions with them right now.?
Poydasheff said he wasn?t aware of any criminal investigation last week involving the missing funds. One law enforcement source said last week investigators were monitoring the civil proceedings to see how they play out.
Despite the litigation, the local Better Business Bureau had only received one complaint against the Eddings firm as of last week.
?At this point we only have one concern and no pattern,? said the bureau?s president, Leonard Crain, who noted an increase in traffic on the firm?s online profile. ?We just sort of have to keep our ear to ground to see what kind of activity may take place in the future.?
For now, Poydasheff said Michael Eddings and his wife are working through ?massive issues? and getting counseling. ?It puts the Bible to the test about forgiveness,? he said.
Source: http://www.ledger-enquirer.com/2012/02/05/1921038/insurance-company-sues-eddings.html
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