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2014-SC-000192-KB
INQUIRY COMMISSION
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V. IN SUPREME COURT
JOHN GREENE ARNE'IT, JR. RESPONDENT
KBA MEMBER NO. 01745
OPINION AND ORDER
The Kentucky Bar Association Inquiry Commission petitions this Court
to enter an order temporarily suspending John Greene Arnett, Jr.
("Respondent") from the practice of law pursuant to Supreme Court Rule
("SCR") 3.165(1)(a) and (b) until such time as the merits of a disciplinary
proceeding can be determined. In support thereof, the Inquiry Commission
claims that Respondent has misappropriated or otherwise improperly dealt
with funds held in trust on behalf of his clients. Respondent's KBA member
number is 01745 and his bar roster address is 6900 Houston Road, Building
600, Suite 23, Florence, Kentucky 41022.
The Inquiry Commission sought Respondent's temporary suspension
after obtaining a bar complaint filed by Linda Tally Smith, the Commonwealth's
Attorney for Gallatin and Boone Counties. Ms. Smith has since provided this
Court with a detailed affidavit listing the factual circumstance giving rise to
this petition.
The facts, according to Ms. Smith, are as follows. In February of 2012,
Robert Shane Hamblin retained Respondent to represent him in a divorce
proceeding in the Boone Circuit Court, Case No. 12-CI-00361. The following
month, Mr. Hamblin provided Respondent with $75,000 in marital funds to be
held in trust pending division of the couple's assets. Respondent placed these
funds in his IOLTA Account held at Fifth Third Bank (the "Trust Account"). As
part of the divorce settlement, the trial court ordered Mr. Hamblin to pay his
ex-wife $37,500. Accordingly, Mr. Hamblin instructed Respondent to release to
him the funds Respondent was purportedly holding in trust. Respondent,
however, refused to disburse the funds to either Mr. Hamblin or his ex-wife.
In November of 2012, Mr. Hamblin retained local attorney Ryan Beck to
finalize the divorce proceedings. After learning that Mr. Hamblin had been
unable to recover his $75,000, Mr. Beck informed Ms. Smith of Respondent's
actions. Ms. Smith in turn requested Detective Joshua Quinn of the Boone
County Sheriff's Department investigate the matter. Detective Quinn obtained
the Trust Account records which revealed that the account had been
completely depleted. As of the filing of this petition, Mr. Hamblin's funds have
not been located.
Ms. Smith's affidavit also alleges that Respondent has misappropriated
funds of other clients. To be more specific, Ms. Smith stated that the Trust
Account records reflected that, between February 1, 2012 and November 30,
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2013, 105 checks or withdrawal slips made payable to Respondent were
executed totaling $178,315. Therefore, it appears Respondent withdrew funds
that were to be held in trust for his clients and converted these funds to his
own personal use. Furthermore, several of Respondent's former clients have
since complained to the Boone County Sheriff's Department that Respondent
failed to promptly provide them with their respective settlement funds.
Respondent allegedly advised these former clients that he would retain their
individual settlements for a period of ten years. As of the time of the petition's
filing, Detective Quinn has been unable to locate the clients' settlement funds.
Notably, however, no one other than Mr. Hamblin has been identified as a
victim to Respondent's alleged misappropriation.
The Inquiry Commission is clearly in the early stages of its investigation.
Indeed, Ms. Smith and Detective Quinn are still in the process of identifying
Respondent's many accounts, obtaining the records of those accounts, and
uncovering potential victims. Ms. Smith explained that her office is planning
on seeking a formal indictment in the near future. In the meantime, the
Inquiry Commission seeks suspension of Respondent's license to practice law
while it gathers the information needed to prepare a complete and all-
encompassing Charge.
SCR 3.165 is the rule governing temporary suspensions. This rule
states, in pertinent part, the following:
(1) On petition of the Inquiry Commission . . . an attorney may
be temporarily suspended from the practice of law [when] .. .
(a) It appears that probable cause exists to believe that an
attorney is or has been misappropriating funds the attorney
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holds for others to his/her own use or has been otherwise
improperly dealing with said funds; or (b) It appears that
probable cause exists to believe that an attorney's conduct
poses a substantial threat of harm to his clients or to the
public . . . .
After reviewing the petition and Ms. Smith's affidavit, we believe the
Inquiry Commission has supplied us with a reasonable basis to believe that
Respondent misappropriated, at the very least, Mr. Hamblin's $75,000. See
Inquiry Comm'n v. Sexton, 102 S.W.3d 512 (Ky. 2003) (concluding that
temporary suspension pursuant to SCR 3.165(1)(a) was appropriate partially
due to the attorney's failure to disburse funds obtained from a settlement
agreement). Considering that Respondent has failed to discredit the petition in
any way and has not even provided a simple explanation regarding the
whereabouts of Mr. Hamblin's funds, we must conclude that probable cause
exists warranting temporary suspension pursuant to subsection (1)(a) of SCR
3.165.
In regards to subsection (1)(b) of SCR 3.165, this Court has consistently
held that proof of an attorney's misappropriation of client funds may also
provide the Court with probable cause to believe that the attorney poses a
substantial threat of harm to his or her clients or the public. See, e.g., Inquiry
Comm'n v. Layton, 53 S.W.3d 70 (Ky. 2000) (finding probable cause to believe
that an attorney poses a substantial threat of harm to his clients or the public
based on his misappropriation of client funds). Moreover, this Court has
suspended attorneys pursuant to 3.165(1)(b) based exclusively on evidence
that the attorney placed his or her client's funds into a trust account after
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which that specific account was depleted without the client's knowledge or
permission. See Inquiry Comm'n v. Friedman, 317 S.W.3d 586 (Ky. 2010)
(ruling that an attorney posed a substantial threat of harm to his clients and
the public after discovering that he deposited his clients' settlement funds into
a bank account which he subsequently emptied without the client's
knowledge); Kentucky Bar Ass'n v. Shelburne, 918 S.W.2d 735 (Ky. 1996)
(stating that an attorney who misappropriated his client's money by depleting
the trust account in which the money was held, posed "a real and present
danger . . . to the public."). Therefore, given the nature of Respondent's actions
and based on the number of potential victims the investigation will yield, we
find that Respondent poses a substantial threat of harm to his clients and the
public.
In summation, this Court concludes that there is probable cause to
believe Respondent "has been misappropriating funds [that he] holds for others
to [his] own use or has been otherwise improperly dealing with said funds," and
that his particular "conduct poses a substantial threat of harm to his clients or
to the public." SCR 3.165(1)(a)-(b). Consequently, the Inquiry Commission's
petition for temporary suspension is granted.
ACCORDINGLY, IT IS HEREBY ORDERED:
(1) Respondent is temporarily suspended from the practice of law in the
Commonwealth of Kentucky, effective upon the date of entry of this
order, pending further orders from this Court;
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(2) Disciplinary proceedings against Respondent may be initiated by the
Inquiry Commission pursuant to SCR 3.160, unless already begun or
Respondent resigns under terms of disbarment;
(3) Pursuant to SCR 3.165(5), Respondent shall, within twenty (20) days
from the date of the entry of this Opinion and Order, notify in writing all
clients of his inability to provide further legal services and furnish the
Director of the Kentucky Bar Association with copies of all such letters;
(4) Pursuant to SCR 3.165(6), Respondent shall immediately, to the extent
reasonably possible, cancel and cease any advertising activities in which
he is engaged.
All sitting. All concur.
ENTERED: August 21, 2014.
CHIEF JUSTICE
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