Southern Holdings Interpleader in Court Today

By Paul Gable

Another hearing on litigation funds held over from the Southern Holdings case will be held in court in Richland County today.

This case has been ongoing since 2008, after the Southern Holdings plaintiffs tried to get the remaining funds held by their attorneys, Lexington chief magistrate judge John Rakowsky and co-counsel Adrian Falgione, released.

However, as with everything that touches the Southern Holdings case, this hearing will inevitably leave more questions than it will provide answers.

Even the amount of the funds in question remains very much a mystery. There appears to be at least $60,000 missing from Rakowsky’s accounting.

After the Southern Holdings case was allegedly “settled” in court in May 2007, the plaintiffs tried to get a full accounting of the money they had provided to attorneys Rakowsky and Falgione.

Such a “full accounting” is required under Rule 1.15(e) of the South Carolina Rules of Professional Conduct. Additionally, the scope of a “full accounting” is defined under Rule 417 of the South Carolina Judicial Department. A full accounting as defined under Rule 417 is exactly what was
requested by the Defendants.

The following is a time line of important events in the attempt to get the accounting.

On February 21, 2008, in response to Defendants’ requests for return of the remaining litigation funds and an accounting of funds provided to Plaintiff Rakowsky and Defendant Falgione, attorney Stephanie Weissenstein and/or her firm filed an ex-parte motion to interplead the remaining litigation funds in
South Carolina Federal District Court in the case captioned Southern Holdings, Inc., et al. vs. Horry County, et al.

On August 12, 2008, the South Carolina Federal District Court denied Weissenstein’s and/or her firm’s ex-parte motion to interplead the remaining litigation funds.

On August 22, 2008, attorney Weissenstein and/or her firm informed Defendant Spencer by mail that she had taken control of the remaining litigation funds and informed Defendant Spencer that he and the other former clients of John Rakowsky and Adrian Falgione in the Southern Holdings case, were not to have any contact with their former attorney John Rakowsky and that if Spencer and the other former clients wanted access to the remaining litigation funds and the financial records, Defendant Spencer and the other former clients of John Rakowsky and Defendant Adrian Falgione would have to bring a lawsuit against John Rakowsky.

On September 12, 2008, after the South Carolina Federal District Court ruled against Rakowsky’s filing an Interpleader action with the remaining litigation funds in Federal District Court, Plaintiff Rakowsky filed an Interpleader Complaint in the South Carolina Court of Common Pleas in Richland County, South Carolina. Included in the filing was a claim by Rakowsky that he held $9,855.00 of remaining litigation funds in his trust account.

Twice in the ensuing years Weissenstein and/or her firm asked for several continuances to amend Plaintiff Rakowsky’s Interpleader Complaint based on the “stigmatized defendants” answers to each successive filed Interpleader Complaint.

On December 1, 2009, Defendant Spencer submitted his first request for production and his first round of interrogatories to Weissenstein to be answered by Plaintiff Rakowsky. Weissenstein failed to respond to the request for production and the interrogatories.

On January 7, 2011, Defendant Spencer again submitted both his first request for production and his first round of interrogatories to Plaintiff Rakowsky as Weissenstein stated she never received the first requests for production and interrogatories.

On February 10, 2011, Pro Se Defendant Spencer learned from Weissenstein that Defendant Rakowsky was not going to respond to the “stigmatized defendants” requests for production or the Defendants’ interrogatories. Spencer issued a subpoena for the documents that Rakowsky and his lawyers refused to provide to the defendants.

The documentation requested including copies of records of disbursements on the former clients behalf, bank statements, and records of deposits and withdrawals of the funds provided for by the “stigmatized defendants” for the litigation of the Southern Holdings case.

On July 25, 2011, Judge William Seals of the SC 5th Judicial Circuit signed an order prepared by Weissenstein that quashed the subpoenas issued by Spencer claiming the records sought were “privileged financial records” of Rakowsky and Falgione.

This brings the absurd conclusion that financial records with respect to the use of funds provided to attorneys for litigation are not required to be disclosed to the individuals that provided these funds because they become “privileged financial records” of the attorneys. This ruling is in direct contradiction of the above mentioned Rule 1.15(e) of the South Carolina Rules of Professional Conduct and Rule 417 of the South Carolina Judicial Department.

Some of these funds were provided by legal funding organizations LawMax, Lit Funding and Resolution Settlement Corporation.

In the Interpleader filing, LawMax and Lit Funding were listed as defendants but Resolution Settlement Corporation was not listed even though it provided approximately $60,000 in funds to help pay for litigation costs in the Southern Holdings case.

During a September 15, 2011 court hearing, Rakowsky explained his reason for the Interpleader action was to settle the question of who the remaining $9,855.00 belonged to. He stated there “were lending institutions that paid funds into the case prior to the settlement. And our position was that they
might or might not have a claim. So, that’s why we included them all.”

However, only LawMax and Lit Funding were named in Rakowsky’s Interpleader. Where are the $60,000 in funds provided by Resolution Settlement Corporation? Why was that agency not named in the Interpleader? Why does Rakowsky refuse to provide a full accounting of the funds provided for the case
and why does his attorney claim these are “privileged financial records?”

When those questions are answered, we may begin to find out just what went on with the attorneys of record in the Southern Holdings case.

 

 

 

 

 

 

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