Case 3:18-cv-00866-CWR-FKB Document 82 Filed 06/11/21 Page 1 of 11

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY Case No. 3:18-cv-00866

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER Arising out of Case No. 3:18-cv-252,
PROPERTIES, LLC, Securities and Exchange Commission v.
Arthur Lamar Adams and Madison Timber
Plaintiff, Properties, LLC

v. Hon. Carlton W. Reeves, District Judge

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ,
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT,

Defendants.

RECEIVER’S OPPOSITION TO BAKER DONELSON’S

MOTION FOR RECONSIDERATION

Alysson Mills, in her capacity as the court-appointed receiver for Arthur Lamar Adams and

Madison Timber Properties, LLC (the “Receiver”), through undersigned counsel, respectfully

opposes the motion for reconsideration1 filed by Defendant Baker, Donelson, Bearman, Caldwell

& Berkowitz, P.C. (“Baker Donelson”).

1
Doc. 77.
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Introduction

On May 5, 2021 this Court entered an order2 denying Baker Donelson’s motion to dismiss

the Receiver’s complaint. The complaint asserts claims against Baker Donelson for aiding and

abetting; civil conspiracy; recklessness, gross negligence, and at a minimum negligence; and for

negligent retention and supervision. It also alleges Baker Donelson is vicariously liable for the acts

of its agents Brent Alexander and Jon Seawright.

Baker Donelson does not ask the Court to reconsider its entire order, only its holding as to

Baker Donelson’s vicarious liability. Baker Donelson requests “the Court enter a revised order,

holding that the facts alleged in the Amended Complaint do not state a claim that Baker Donelson

is vicariously liable for the actions of Alexander and Seawright.”3

According to Baker Donelson, the Court’s holding as to Baker Donelson’s vicarious

liability relies on facts that the Receiver has not alleged.

Baker Donelson misreads the Court’s order and the Receiver’s complaint.

Baker Donelson misreads the Court’s order.

Baker Donelson contends the Court’s holding relies on three facts which Baker Donelson

disputes: 1) Alexander and Seawright used “the firm’s escrow account”; 2) the Alexander

Seawright Timber Fund was “part and parcel of a bundle of services Baker Donelson provided to

its preferred transactional clients”; and 3) the Alexander Seawright Timber Fund “served Baker

Donelson’s interests.”4

The Court’s order does refer to those three facts, but Baker Donelson mischaracterizes the

Court’s holding to the extent that it contends that the holding relies on those three facts only.

2
Doc. 70.
3
Doc. 78 at 2.
4
Doc. 78 at 2.

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Relevant to Baker Donelson’s vicarious liability for the actions of Alexander and Seawright, the

Court’s order refers to numerous other facts which Baker Donelson’s motion for reconsideration

does not dispute:

• “Baker Donelson is a regional law firm that employed Alexander and

Seawright in its Jackson, Mississippi office. Alexander was (and is) a ‘Senior
Public Policy Advisor’ at the firm. Seawright was (and is) a transactional
attorney and shareholder of the firm.FN2 Alexander and Seawright own
Alexander Seawright LLC. The LLC was an investment company that the pair
ran out of their Baker Donelson offices.
FN2 At the time the Ponzi scheme collapsed, Seawright was on the firm’s
Board of Directors.”5
• “Alexander and Seawright used Baker Donelson connections and assets to
identify wealthy persons looking for investment opportunities, like Baker
Donelson clients.”6
• “The scheme looked more stable than it was because Baker Donelson was
involved. Alexander and Seawright ran the scheme out of their Baker Donelson
offices. They described it as a ‘friends and family’ fund for preferred Baker
Donelson partners and clients. Seawright, a transactional attorney, drafted
subscription agreements and other investment documents, and sent them to
Adams from his Baker Donelson email account. The pair also targeted clients
who had recently closed transactions with the firm.”7
• “[O]ther Baker Donelson attorneys referred new victims to Alexander and
Seawright, generating clients, while the firm’s runners were used to pick up
investors’ checks, serving the clients. Baker Donelson let Alexander and
Seawright use the firm’s offices for presentations, meetings, and ‘closings.’
The Receiver claims that ‘numerous’ other Baker Donelson employees worked
with Adams ‘for the purpose of finalizing investments in Madison Timber.’”8
• “[T]hese services occurred during Baker Donelson’s working hours and in its
offices …”9

5
Doc. 70 at 2.
6
Doc. 70 at 3.
7
Doc. 70 at 3.
8
Doc. 70 at 4.
9
Doc. 70 at 8.

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• “Far from being an unaffiliated frolic, the receiver’s allegations regarding

consistent, repeated use of Baker Donelson staff and resources—most glaringly
[but not exclusively], the firm’s escrow account—suggest that there was
knowledge of and some benefit to the firm from knowingly facilitating
Alexander and Seawright’s investment activities.”10

In short, setting aside the three facts which Baker Donelson specially disputes, there

remain numerous other facts that are sufficient—standing alone but certainly taken together—to

state a claim for Baker Donelson’s vicarious liability. This case is entirely distinguishable from

the case Baker Donelson repeatedly cites, Baker Donelson Bearman Caldwell & Berkowitz, P.C.

v. Seay, 42 So. 3d 474 (Miss. 2010). In that case the court held a Baker Donelson shareholder’s

affair with a client’s wife was outside the scope of his employment. A romantic affair is “the

quintessential example of an activity that is for purely personal benefit and outside the scope of

employment.” Seay, 42 So. 3d at 488. This case does not involve a private romantic affair between

two persons, one of them a Baker Donelson employee. It involves an investment scheme run by

two Baker Donelson employees (one on the firm’s Board of Directors) out of Baker Donelson’s

office, with the knowledge and assistance of Baker Donelson personnel, and for the benefit of

numerous individuals including Baker Donelson clients and partners.

Baker Donelson misreads the Receiver’s complaint.

Baker Donelson contends the Receiver’s complaint does not even allege the three facts

which Baker Donelson specially disputes. The Receiver addresses each in turn.

1) Alexander and Seawright used “the firm’s escrow account.”

The Receiver’s complaint alleges Alexander and Seawright used “the firm’s escrow

account”:

10
Doc. 70 at 9.

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• Seawright (in an email sent from his Baker Donelson email account) told a
Baker Donelson client: “We would be responsible for papering everything,
liaison with Lamar, monitoring process of sale of timber, acquisition of timber
rights, proper recording of documents, etc., distribution of loan repayments and
otherwise managing the investment.” Seawright added that “running funds
through us or BD escrow is not a problem” and all “legal and other expenses”
would “come out of our share.” (Paragraph 74)
• “Baker Donelson allowed Alexander and Seawright to target clients of Baker
Donelson for whom Baker Donelson had recently closed transactions. In such
instances, Bake Donelson allowed Alexander and Seawright to encourage
client’s investments by representing that they would ‘run[] funds’ through ‘BD
[Baker Donelson] escrow.’” (Paragraph 89)

Baker Donelson contends that the Receiver already “knows how Alexander and Seawright

collected money and which accounts the funds passed through. She appears to have tracked those

dollars in performing her loss calculations. With the benefit of that knowledge, the Receiver stops

short of alleging that even a single dollar ever touched Baker Donelson’s escrow account.”11

Actually, the Receiver does not know which accounts Alexander Seawright investors’ funds

passed through before they made it to Madison Timber. The Receiver has obtained records from

numerous parties, but not yet from Baker Donelson.

What the Receiver does know: Jon Seawright told a Baker Donelson client, in writing, that

“running funds through us or BD escrow is not a problem.” His email leaves no doubt that he

believed using the firm’s escrow account was “not a problem.” Only discovery will show whether

the firm’s escrow account in fact transacted with the Alexander Seawright Timber Fund.

Either way, if a shareholder believes using the firm’s escrow account is “not a problem,” it

follows that the shareholder believes he has the firm’s blessing. That is, the firm knows what the

shareholder is doing and does not object. Baker Donelson cannot credibly contend it did not know

what Seawright (a member of the firm’s Board of Directors!) was doing. Nor can it credibly

11
Doc. 78 at 4.

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contend that Seawright misled the firm. If Seawright had misled the firm, it would not have

permitted him to remain a shareholder, which it did until he was indicted last month.

2) The Alexander Seawright Timber Fund was “part and parcel of a bundle of services
Baker Donelson provided to its preferred transactional clients.”

At all relevant times, Alexander and Seawright were a lobbyist and shareholder of Baker

Donelson, and they pitched the Alexander Seawright Timber Fund to Baker Donelson clients in

Baker Donelson’s offices. Among other things, the Receiver’s complaint alleges:

• Alexander and Seawright “pitched the first investment to a client of Baker

Donelson.” (Paragraph 74)
• Alexander and Seawright “pitched their fund to potential investors, including
Baker Donelson clients, as an exclusive ‘friends and family’ fund.” Alexander
told potential investors “many of the attorneys at Baker Donelson” were in it.
(Paragraph 78)
• Alexander and Seawright “specifically targeted individuals [Baker Donelson
clients] who had recently sold assets because they knew those individuals had
money to invest. Such individuals included clients for whom Baker Donelson
had recently closed transactions.” (Paragraph 81)
• Alexander and Seawright “did not operate their fund separately from the
business of the law firm. Investors reasonably believed that their investment in
Madison Timber, through Alexander and Seawright’s fund, was backed and
promoted by, and had been vetted by, Baker Donelson.” (Paragraph 82)
• Alexander and Seawright “relied heavily on their affiliation with Baker
Donelson to recruit investors. Alexander and Seawright described their fund to
potential investors who were clients of Baker Donelson as a ‘friends and
family’ fund for preferred Baker Donelson partners and clients.” (Paragraph
83)
• Alexander and Seawright “referred potential investors to Baker Donelson’s
website, which showed that Jon Seawright is not merely a shareholder in Baker
Donelson’s Jackson office but an elected member of the firm’s national
governing Board of Directors. Baker Donelson is a law firm, not an investment
advisory firm, but its website touts Jon Seawright’s advanced degree in
taxation, ‘extensive experience’ in business development and capital formation,
and ‘Securities’ and ‘Emerging Companies’ practices. Baker Donelson’s
website presents Brent Alexander as a ‘Senior Public Policy Advisor’ and a

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‘Broker-Dealer/Investment Adviser’ who is qualified by regulators to serve as a

principal in, or advisor to, hedge funds and who has a ‘rapidly growing’
practice in ‘advising venture capital and related investors.’” (Paragraph 84)
• Baker Donelson “knew Alexander and Seawright relied on their affiliation with
Baker Donelson to recruit investors, and Baker Donelson allowed it.”
(Paragraph 85)
• Baker Donelson “allowed Alexander and Seawright to pitch their fund as a
‘friends and family’ fund for preferred Baker Donelson partners and clients.
Baker Donelson allowed Alexander and Seawright to use their affiliation with
Baker Donelson in their fund’s pitchbook.” (Paragraph 86)
• Baker Donelson “allowed Alexander and Seawright to use Baker Donelson’s
Jackson office’s address for official business. Baker Donelson allowed [Lamar]
Adams, Alexander, and Seawright to hold ‘closings’ at Baker Donelson’s
Jackson office and to use Baker Donelson’s runners to pick up investors’
checks. Baker Donelson allowed Alexander and Seawright to use Baker
Donelson’s conference rooms to make presentations to potential investors,
accountants, and advisors.” (Paragraph 87)
• Baker Donelson shareholders, “including in offices in other states, referred
potential investors to Alexander and Seawright. When Alexander and
Seawright asked their Baker Donelson colleagues to ‘[h]elp us get a meeting if
you’re able,’ adding ‘[i]f you can get us in the door, it would mean a great deal,’
their Baker Donelson colleagues obliged.” (Paragraph 88)
• Baker Donelson “allowed Alexander and Seawright to target clients of Baker
Donelson for whom Baker Donelson had recently closed transactions. In such
instances, Baker Donelson allowed Alexander and Seawright to encourage
clients’ investments by representing that they would ‘run[] funds’ through ‘BD
[Baker Donelson] escrow.’” (Paragraph 89)
• Investors “were led to believe that they could rely on Alexander and Seawright
to evaluate each investment using their professional expertise and judgment,
which was backed by Baker Donelson’s reputation.” (Paragraph 92)
• In late 2017 Alexander and Seawright “secured a ‘key investor’ to ‘seed’
Alexander Seawright Timber Fund II, LLC with $6 million.” (Paragraph 116)
• “The ‘key investor’ was a Baker Donelson client who would fund his
investment with the proceeds from the sale of a major asset. Seawright
represented him in the sale.” (Paragraph 117)

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Baker Donelson contends that “[t]he most the Receiver alleges is that Alexander and

Seawright ‘pitched’ the investment to ‘potential investors’ among the firm’s clients”—not that

Alexander or Seawright “provided legal or public-policy advice to [ultimate] investors.” 12

Respectfully, because every firm client receives some “legal or public-policy advice” from the

firm, any firm client who became an investor necessarily also received some “legal or

public-policy advice” from the firm.

One such client-investor spoke at a recent hearing before this Court. He “thought he was

being ‘invited to the club’ of a Baker Donelson-run investment opportunity.” His remarks explain

how the firm and the investment overlapped:

Seawright and another Baker lawyer had helped him and a doctor sell a healthcare
business. Seawright later presented him with an investment opportunity for
proceeds of the deal.
“After we closed the transaction, Seawright was pitching us to be involved in an
exclusive investment at Baker Donelson,” he said.
Rather than hire accountants and others to vet the deal, [he] said, ‘the fact that this
was Baker Donelson and two partners, we made two phone calls. We just didn’t do
any other [due diligence] work.”13

Discovery will show how many client-investors shared his experience, and how many investors

who were not clients nevertheless viewed Baker Donelson’s affiliation “to the good.”

Baker Donelson complains that “the Receiver does not set forth the factual basis for the

Receiver’s belief that ‘numerous’ employees of Baker Donelson worked with Adams.”14 But

Paragraph 91 expressly alleges: “Baker Donelson has compiled records showing numerous of its

employees had contact with Adams for the purpose of finalizing investments in Madison Timber.

12
Doc. 78 at 4-5.
13
Strickler, Andrew, Law360, May 17, 2021, “Timber Scam Victim Says Baker Donelson Lured Him In,”
available at [Link]
him-in (last visited June 10, 2021).
14
Doc. 78 at 5.

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Baker Donelson did not produce these records in response to the Receiver’s request of it for

records in its possession relating to Madison Timber.” Baker Donelson does not dispute that such

records exist. Such records are, of course, a proper subject of discovery.

3) The Alexander Seawright Timber Fund “served Baker Donelson’s interests.”

To the Receiver’s knowledge, Madison Timber did not pay Baker Donelson for its services

or for the use of its resources. That fact, to which Baker Donelson frequently points, distinguishes

Baker Donelson from its co-defendant Butler Snow.

But it does not follow that Baker Donelson gained nothing from the Alexander Seawright

Timber Fund. The Receiver’s complaint alleges facts from which it may be easily inferred that the

Alexander Seawright Timber Fund “served Baker Donelson’s interests.” Baker Donelson “knew

Alexander and Seawright relied on their affiliation with Baker Donelson to recruit investors, and []

allowed it” (Paragraph 85); “allowed Alexander and Seawright to pitch their fund as a ‘friends and

family’ fund for preferred Baker Donelson partners and clients” (Paragraph 86); “allowed

Alexander and Seawright to use Baker Donelson’s Jackson office’s address for official business”

(Paragraph 87); “allowed [Lamar] Adams, Alexander, and Seawright to hold ‘closings’ at Baker

Donelson’s Jackson office and to use Baker Donelson’s runners to pick up investors’ checks”

(Paragraph 87); “allowed Alexander and Seawright to use Baker Donelson’s conference rooms to

make presentations to potential investors, accountants, and advisors” (Paragraph 87); “referred

potential investors to Alexander and Seawright” (Paragraph 88); and even “allowed Alexander and

Seawright to target clients of Baker Donelson for whom Baker Donelson had recently closed

transactions” (Paragraph 89). If the Alexander Seawright Timber Fund had disserved Baker

Donelson’s interests, Baker Donelson would not have encouraged it by permitting Alexander and

Seawright to use Baker Donelson’s personnel and resources. It is reasonable to infer that Baker

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Donelson benefited from its affiliation with the Alexander Seawright Timber Fund because it

enriched client relationships (as one client-investor described it, he felt “invited to the club”) and,

by extension, was good for business.

CONCLUSION

The Court’s order made clear that its holding did not mean Baker Donelson is vicariously

liable for Alexander and Seawright. “Suppose the evidence generated through discovery shows

that Alexander and Seawright were truly out on their own, abusing their positions without their

employer’s knowledge. In that case, Baker Donelson will have strong arguments at summary

judgment.”15 Until then, Baker Donelson is not entitled to dismissal. The Court properly denied

Baker Donelson’s motion to dismiss, and reconsideration is not warranted.

15
Doc. 70 at 14.

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June 11, 2021

Respectfully submitted,

/s/ Lilli Evans Bass /s/ Brent B. Barriere

BROWN BASS & JETER, PLLC FISHMAN HAYGOOD, LLP
Lilli Evans Bass, Miss. Bar No. 102896 Admitted pro hac vice
1755 Lelia Drive, Suite 400 Brent B. Barriere, Primary Counsel
Jackson, Mississippi 39216 201 St. Charles Avenue, Suite 4600
Tel: 601-487-8448 New Orleans, Louisiana 70170
Fax: 601-510-9934 Tel: 504-586-5253
bass@[Link] Fax: 504-586-5250
bbarriere@[Link]

MILLS & AMOND LLP

Admitted pro hac vice
Kristen D. Amond
650 Poydras Street, Suite 1525
New Orleans, Louisiana 70130
Tel: 504-383-0332
Fax: 504-733-7958
kamond@[Link]
Receiver’s counsel

CERTIFICATE OF SERVICE

I certify that I electronically filed the foregoing with the Clerk of Court using the ECF

system which sent notification of filing to all counsel of record.

June 11, 2021 /s/ Brent B. Barriere

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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER Case No. 3:18-cv-00866-CWR-FKB
PROPERTIES, LLC,
Hon. Carlton W. Reeves
Plaintiff,
v.

BUTLER SNOW LLP et al., ORAL ARGUMENT REQUESTED

Defendants.

MEMORANDUM OF LAW IN SUPPORT OF BAKER, DONELSON, BEARMAN,

CALDWELL & BERKOWITZ PC’S MOTION FOR RECONSIDERATION
OR TO ALTER OR AMEND PURSUANT TO RULE 59(E)

Michael W. Ulmer (MSB #5760)

James J. Crongeyer, Jr. (MSB #10536)
WATKINS & EAGER PLLC
400 East Capitol Street, Suite 300 (39201)
Post Office Box 650
Jackson, MS 39205
Tel.: (601) 965-1900
Fax: (601) 965-1901
Email: mulmer@[Link]

Craig D. Singer (pro hac vice)

Benjamin W. Graham (pro hac vice)
WILLIAMS & CONNOLLY LLP
725 Twelfth Street, N.W.
Washington, DC 20005
Tel.: (202) 434-5000
Fax: (202) 434-5029
Email: csinger@[Link]

Counsel for Defendant Baker, Donelson,

Bearman, Caldwell & Berkowitz PC
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INTRODUCTION

Baker, Donelson, Bearman, Caldwell & Berkowitz P.C. (“Baker Donelson”) respectfully

moves for reconsideration of or to alter or amend the portion of the Court’s May 5, 2021 Order

denying its motion to dismiss with respect to vicarious liability. See Order, ECF No. 70, at 7.

The Receiver alleges that Baker Donelson is vicariously liable for the acts of Brent

Alexander and Jon Seawright in connection with alleged investment activity they conducted

through a separate LLC they owned, Alexander Seawright Timber Fund I, LLC. Under

Mississippi law, an employer is not liable for employees’ actions outside the scope of their

employment. Miss. Code § 79-10-67(2).

The Court’s May 5 Order held the Receiver sufficiently alleged that Alexander and

Seawright were acting within the scope of their employment. Order at 8. In support of that

conclusion, the Court cited three alleged facts: (1) Alexander and Seawright used “the firm’s

escrow account”; (2) Alexander Seawright Timber Fund I, LLC was “part and parcel of a bundle

of services Baker Donelson provided to its preferred transactional clients”; and (3) the timber

fund “served Baker Donelson’s interests.” Order at 8.

None of those three things is alleged in the Amended Complaint. The Receiver never

alleges a single dollar related to Alexander’s and Seawright’s timber fund ever touched any

Baker Donelson account. The Receiver never alleges any client retained Baker Donelson to

provide any investment services through Alexander Seawright Timber Fund I, LLC. And the

Receiver never alleges the firm profited by a single penny or otherwise benefited from the timber

fund. The Receiver does not allege these things because they did not happen.

Baker Donelson respectfully seeks reconsideration and requests the Court enter a revised

order, holding that the facts alleged in the Amended Complaint do not state a claim that Baker

Donelson is vicariously liable for the actions of Alexander and Seawright.

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LEGAL STANDARD

On an interlocutory order, such as a ruling on a motion to dismiss, “the trial court [is] free

to reconsider and reverse its decision for any reason it deems sufficient[.]” Zarnow v. City of

Wichita Falls, 614 F.3d 161, 171 (5th Cir. 2010); see also Fed. R. Civ. P. 54(b) (“any order . . .

may be revised at any time before the entry of a judgment adjudicating all the claims and all the

parties’ rights and liabilities). Although reconsideration is proper for any reason within “the trial

court’s discretion,” Wilson v. United States Dep’t of Com., 2021 WL 1083449, at *1 (S.D. Miss.

Mar. 18, 2021), reconsideration is particularly appropriate to “correct[] manifest errors of law or

fact,” Templet v. HydroChem Inc., 367 F.3d 473, 479 (5th Cir. 2004), or where the court has

“misapprehended the facts,” Barber ex rel. Barber v. Colorado Dep’t of Revenue, 562 F.3d

1222, 1228 (10th Cir. 2009).

ARGUMENT

I. The Amended Complaint Does Not Allege Alexander and Seawright Used Baker
Donelson’s Escrow Account.

The Order read the Amended Complaint to allege “Baker Donelson . . . let [Alexander

and Seawright] move money through the firm’s escrow accounts, lending an air of authenticity

and safety to the scheme.” Order at 3; see also id. at 9 (“Alexander and Seawright were using . .

. its escrow account to sell securities”). The Amended Complaint does not make that allegation.

To the contrary, the most it alleges is “Seawright told [a] client that ‘[r]unning funds through us

or BD [Baker Donelson] escrow is not a problem[.]’” AC ¶ 74 (emphasis added). The Receiver

has received and “reviewed records from Alexander Seawright, LLC.” Receiver’s Report (Dec.

21, 2018), ECF No. 70 at 8, SEC v. Adams, Case No. 3:18-cv-252 (S.D. Miss.). She knows how

Alexander and Seawright collected money and which accounts those funds passed through. She

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appears to have tracked those dollars in performing her loss calculations. 1 With the benefit of

that knowledge, the Receiver stops short of alleging that even a single dollar ever touched Baker

Donelson’s escrow account.

The escrow account appears to have been central to the Court’s denial of Baker

Donelson’s motion to dismiss. The Order references it four times and describes it as a “glaring”

use of Baker Donelson’s resources that was “of particular salience” to the Court’s analysis in

holding that Alexander Seawright Timber Fund I, LLC was not “an unaffiliated frolic[.]” Order

at 8, 13. Reconsideration is warranted because the Amended Complaint does not (and could not)

allege Baker Donelson’s escrow account was used in this manner.

II. The Amended Complaint Does Not Allege Alexander Seawright Timber Fund I,
LLC Was a Service That Baker Donelson Provided to Clients.

The Order read the Amended Complaint to allege “this investment scheme” was “part

and parcel of a bundle of services Baker Donelson provided to its preferred transactional

clients[.]” Order at 8. The Amended Complaint does not make that allegation. Alexander and

Seawright worked as, respectively, a lobbyist and a lawyer at Baker Donelson. AC ¶ 72. The

services Alexander and Seawright provided to clients of the firm were legal and public-policy

advice. The Receiver does not allege the following: Baker Donelson’s services include timber

investments; Alexander or Seawright provided legal or public-policy advice to investors who lent

money to Alexander Seawright Timber Fund I, LLC; or any client retained Baker Donelson to

provide any services in connection with Madison Timber or Alexander Seawright Timber Fund I,

1
The Receiver calculates that the loss of investors’ principal attributable to Alexander
Seawright LLC was $469,037.53. See Receiver’s Response to Objections, ECF No. 281, SEC v.
Adams, Case No. 3:18-cv-252 (S.D. Miss.) (stating that $168,853.51 represents 36% of the net
principal owed through Alexander Seawright LLC).

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LLC. The most the Receiver alleges is Alexander and Seawright “pitched” the investment to

“potential investors” among the firm’s clients. See, e.g., AC ¶ 78. 2

The Order states “[t]he receiver claims that ‘numerous’ other Baker Donelson employees

worked with Adams ‘for the purpose of finalizing investments in Madison Timber.’” Order at 4.

The Receiver does claim this, but all of her allegations are made “on information and belief.”

“[W]here allegations are based on information and belief, the complaint must set forth a factual

basis for such belief.” U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899,

903 (5th Cir. 1997). The Receiver does not set forth the factual basis for the Receiver’s belief

that “numerous” employees of Baker Donelson worked with Adams. To the contrary, the

Amended Complaint recognizes that Baker Donelson never represented Adams or Madison

Timber or performed legal work for them and that Alexander and Seawright managed their

investments through their personal and separate LLC.

III. The Amended Complaint Does Not Allege Alexander Seawright Timber Fund I,
LLC Served Baker Donelson’s Interests.

The Order states the Madison Timber “investment scheme . . . served Baker Donelson’s

interests.” Order at 8. But the Amended Complaint does not allege Baker Donelson profited

from Madison Timber in any way. It does not allege the law firm shared in any profits

Alexander and Seawright may have garnered from their LLC, or that the firm stood to do so.

That allegation is missing because Baker Donelson did not profit or stand to profit from the

Alexander Seawright LLC. Nor does the Amended Complaint allege any client retained Baker

Donelson to provide services related to Madison Timber, or the firm generated any business in

connection with Madison Timber.

2
By contrast, the Amended Complaint alleges that Butler Snow employees actually secured an
investment of $1.5 million from one of the firm’s “high net-worth clients in New Orleans,” AC
¶ 49, along with investments from several other “individuals and institutional clients,” id. ¶ 57.

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As the Mississippi Supreme Court held, a lawyer’s conduct is not within his scope of

employment if it was “not motivated by a desire to benefit” the firm. Baker Donelson Bearman

Caldwell & Berkowitz, P.C. v. Seay, 42 So. 3d 474, 489 (Miss. 2010). The Order appears to

conclude Alexander and Seawright were acting within the scope of their employment, in part,

because the Court read the Amended Complaint to allege that Baker Donelson benefited from

Alexander’s and Seawright’s work on the timber fund (with all of the records, including bank

records, in the Receiver’s possession, the Receiver could not allege Baker Donelson ever

touched any moneys related to Madison Timber). Reconsideration is warranted because that is

not what the Amended Complaint alleges.

CONCLUSION

For the foregoing reasons, the Court should reconsider its Order denying Baker

Donelson’s motion to dismiss and enter an amended Order, holding that the facts alleged in the

Amended Complaint do not state a claim for vicarious liability against Baker Donelson because

Alexander’s and Seawright’s personal business activities were outside the scope of their

employment and not on behalf of the firm.

Dated this 28th day of May, 2021 Respectfully submitted,

BAKER, DONELSON, BEARMAN,

CALDWELL & BERKOWITZ PC

/s/ Michael W. Ulmer

Michael W. Ulmer (MSB #5760)
James J. Crongeyer, Jr. (MSB #10536)
WATKINS & EAGER PLLC
400 East Capitol Street, Suite 300 (39201)
Post Office Box 650
Jackson, MS 39205
Tel.: (601) 965-1900

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Fax: (601) 965-1901

Email: mulmer@[Link]

Craig D. Singer (pro hac vice)

Benjamin W. Graham (pro hac vice)
WILLIAMS & CONNOLLY LLP
725 Twelfth Street, N.W.
Washington, DC 20005
Tel.: (202) 434-5000
Fax: (202) 434-5029
Email: csinger@[Link]

Counsel for Defendant Baker, Donelson,

Bearman, Caldwell & Berkowitz PC

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CERTIFICATE OF SERVICE

I hereby certify that on May 28, 2021, I caused the foregoing to be electronically filed

with the Clerk of the Court using CM/ECF, which will send notification of such filing to all

registered participants.

/s/ Craig D. Singer

Craig D. Singer

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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, in her capacity as PLAINTIFF

receiver for Arthur Lamar Adams and
Madison Timber Properties, LLC

V. CAUSE NO. 3:18-CV-866-CWR-FKB

BAKER, DONELSON, BEARMAN, DEFENDANTS

CALDWELL & BERKOWITZ, PC;
ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; JON
SEAWRIGHT

ORDER

Before the Court are motions to dismiss filed by Baker, Donelson, Bearman, Caldwell &

Berkowitz, PC; Alexander Seawright, LLC; and Brent Alexander. Docket Nos. 59 & 63. On

review, Baker Donelson’s motion will be denied, while Alexander Seawright, LLC and

Alexander’s motion will be granted in part and denied in part.

I. Factual and Procedural History

From at least 2010 until April 2018, Lamar Adams operated timber investment companies

called Madison Timber Company LLC and Madison Timber Properties LLC. He told investors

they were purchasing shares of timber tracts that would be harvested and sold to lumber mills at

a significant profit. The demand for lumber was so great, he said, he could guarantee investors a

fixed rate of return in excess of 10%. Investors believed him. They collectively gave him

hundreds of millions of dollars.

Adams was lying. He had, with the help of others, faked everything about the scheme.

There were no timber deeds, tracts of land, or lumber mills. He was actually using new investors’
 Case 3:18-cv-00866-CWR-FKB Document 70 Filed 05/05/21 Page 2 of 18

money to pay old investors—a classic Ponzi scheme. It worked only as long as Adams and his

associates could continue to bring in new money.

The scheme collapsed in April 2018. Adams turned himself in to the United States

Attorney’s Office in Jackson, Mississippi and quickly pleaded guilty to wire fraud. He is now

serving a 19.5-year sentence in federal prison. The sentence reflects the significance of the fraud;

the criminal proceeding established that Adams’ victims lost approximately $85 million.

When the Ponzi scheme collapsed, the U.S. Securities and Exchange Commission asked

this Court to appoint a receiver to take charge of Adams’ companies and provide some measure

of financial relief to his victims. The Court appointed Alysson Mills to be that receiver. To date,

she has sold Adams’ assets, negotiated settlements with Adams’ enablers, and filed lawsuits

against persons and entities that contributed to the fraud. This is one of those lawsuits.

In this action, the receiver alleges that the Baker, Donelson, Bearman, Caldwell &

Berkowitz, PC law firm; Alexander Seawright, LLC; Brent Alexander; and Jon Seawright

facilitated Adams’ fraud.1 “Defendants lent their influence, their professional expertise, and even

their clients to Adams,” the receiver alleges. “They made a fraudulent enterprise a fraternity.”

The four defendants are deeply intertwined. Baker Donelson is a regional law firm that

employed Alexander and Seawright in its Jackson, Mississippi office. Alexander was (and is) a

“Senior Public Policy Advisor” at the firm. Seawright was (and is) a transactional attorney and

shareholder of the firm.2 Alexander and Seawright own Alexander Seawright LLC. The LLC was

an investment company that the pair ran out of their Baker Donelson offices.

The receiver’s amended complaint describes an approximately seven-year-long

relationship between the defendants and the Ponzi scheme. It started in 2011, when Alexander

1
Seawright filed for bankruptcy, so the case is presently stayed as to him.
2
At the time the Ponzi scheme collapsed, Seawright was on the firm’s Board of Directors.

2
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and Seawright were looking for investment deals. They met Adams and a partnership was

conceived.

Alexander and Seawright used Baker Donelson connections and assets to identify

wealthy persons looking for investment opportunities, like Baker Donelson clients. They formed

an LLC to pool investors’ funds and pitched the investment to potential marks. Alexander and

Seawright then funneled the money they raised into Adams’ Ponzi scheme. The scheme

generated a 10% “return” for the LLC and another 6% in profits for Alexander and Seawright.

The amended complaint claims that Alexander and Seawright kept from their victims the true

size of their profit.

The receiver says Alexander and Seawright repeatedly lied to their victims. They lied

when they claimed to have their own money invested in the fund. They lied when they promised

to personally inspect the timber tracts in question. (According to the amended complaint, email

correspondence reveals that “inspection” meant “[grab] a cooler of beer and make a loop.”) And

they lied when they promised to inspect Adams’ contracts with timber mills. No such contracts

existed.

The scheme looked more stable than it was because Baker Donelson was involved.

Alexander and Seawright ran the scheme out of their Baker Donelson offices. They described it

as a “friends and family” fund for preferred Baker Donelson partners and clients. Seawright, a

transactional attorney, drafted subscription agreements and other investment documents, and sent

them to Adams from his Baker Donelson email account. The pair also targeted Baker Donelson

clients who had recently closed transactions with the firm.

Baker Donelson, in turn, let the two move money through the firm’s escrow accounts,

lending an air of authenticity and safety to the scheme. It looked like a sanctioned team activity:

3
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other Baker Donelson attorneys referred new victims to Alexander and Seawright, generating

clients, while the firm’s runners were used to pick up investors’ checks, serving the clients. Baker

Donelson let Alexander and Seawright use the firm’s offices for presentations, meetings, and

“closings.” The receiver claims that “numerous” other Baker Donelson employees worked with

Adams “for the purpose of finalizing investments in Madison Timber.”

The receiver alleges that Alexander and Seawright made approximately $1.6 million from

the scheme, not including the cash bonuses that Adams occasionally gave them. As the money

flowed in, however, neither Alexander, Seawright, nor Baker Donelson ever called a landowner,

checked a title, called a lumber mill, or asked why the landowners’ signatures often looked the

same. They ignored the glaring red flag the guaranteed return represented, and instead marketed

it as a sign of stability. They even ignored feedback from prospective investors that the timber

market simply didn’t work like this, including feedback that this “nearly riskless opportunity”

where “lawyers did the tax work” and “the opportunity was unaudited” was, in truth, suspicious.

No one acted on these red flags, despite the likelihood that some modicum of due diligence

would have brought down the Ponzi scheme.

* * *

The Court appointed the receiver. She has a duty to “identif[y] and pursue[] persons and

entities as participants in the Ponzi scheme to recover funds for distribution to investor-

claimants.” Zacarias v. Stanford Int’l Bank, Ltd., 945 F.3d 883, 891 (5th Cir. 2019). The receiver

now alleges that Baker Donelson, Alexander Seawright LLC, Alexander, and Seawright

“contributed to Madison Timber’s success over time, and therefore to the Receivership Estate’s

liabilities today.” She brings claims of civil conspiracy; aiding and abetting breach of fiduciary

duty; and negligence, gross negligence, and recklessness against all defendants. Alexander and

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his LLC are allegedly responsible for fraudulent transfer, racketeering, and joint venture

liability.3 Baker Donelson, meanwhile, is claimed to also be liable for negligent retention and

supervision.

After receipt of the amended complaint, the defendants filed the present motions to

dismiss. Baker Donelson claims that Alexander and Seawright’s investment activities were

“unaffiliated” with the firm (emphasis in original), and suggests that it merely hosted their

professional biographies on its firm website. Alexander and his LLC contend that they are

victims themselves, that they were “duped by Adams,” and that they undertook “meaningful

evaluations” of the timber investments.

II. Legal Standard

When considering a motion to dismiss under Rule 12(b)(6), the Court accepts the

plaintiff’s factual allegations as true and makes reasonable inferences in the plaintiff’s favor.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To proceed, the complaint “must contain a short and

plain statement of the claim showing that the pleader is entitled to relief.” Id. at 677-78

(quotation marks and citation omitted). This requires “more than an unadorned, the defendant-

unlawfully-harmed-me accusation,” but the complaint need not have “detailed factual

allegations.” Id. at 678 (quotation marks and citation omitted). The plaintiff’s claims must also

be plausible on their face, which means there is “factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation

omitted).

A plaintiff that defeats a motion to dismiss does not automatically prevail. Defeating a

motion to dismiss simply means that the plaintiff is entitled to discovery—a period in which the

3
These defendants do not seek to dismiss the fraudulent transfer count.

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plaintiff and the defendants obtain evidence from each other and non-parties. After the close of

discovery, the defendants are then entitled to file motions for summary judgment, in which they

argue to the Court that, given all of the evidence, they are entitled to judgment as a matter of law.

A plaintiff who defeats a motion for summary judgment also does not automatically

prevail. Instead, the case is set for trial so that a jury may decide whether the plaintiff has proven

her case. Where this Court believes the jury has erred, it has the right to set aside the verdict. If

this Court errs, the court of appeals may have the final say.4

III. Discussion

A. Standing

The defendants first contend that the receiver lacks standing to bring these claims.

The Constitution limits the jurisdiction of federal courts to actual cases and controversies.

U.S. Const. art. III, § 2. Parties seeking to invoke federal-court jurisdiction must therefore

demonstrate standing, which is shown by three elements: (1) an injury in fact that is concrete and

particularized as well as imminent or actual; (2) a causal connection between the injury and the

defendant’s conduct; and (3) that a favorable decision is likely to redress the injury. Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). In a standing analysis, the Court “must

accept as true all material allegations of the complaint, and must construe the complaint in favor

of the complaining party.” Warth v. Seldin, 422 U.S. 490, 501-02 (1975).

The defendants’ standing arguments are unpersuasive in light of the Fifth Circuit’s

decision in Zacarias v. Stanford International Bank. There, the appellate court upheld a federal

equity receiver’s standing to sue professionals who conspired with Allen Stanford to carry out a

4
The lawyers all know this procedure, but these paragraphs are for the benefit of any Ponzi scheme victims who
may read this Order.

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Ponzi scheme. The court found “no dispute” that the receiver had standing to bring such claims.

945 F.3d at 899. It reasoned as follows:

They bring only the claims of the Stanford entities—not of their investors—alleging
injury to the Stanford entities, including the unsustainable liabilities inflicted by the
Ponzi scheme. The receiver and Investors’ Committee “allege that Defendants’
participation in a fraudulent marketing scheme increased the sale of Stanford’s
CDs, ultimately resulting in greater liability for the Receivership Estate,” and that
defendants “harmed the Stanford Entities’ ability to repay their investors.” The
receiver and Investors’ Committee sought to recover for the Stanford entities’
Ponzi-scheme harms, monies the receiver will distribute to investor-claimants. The
district court had subject matter jurisdiction over these claims.

Id.

We are presented with the same essential structure here. The receiver has sued a law firm

and its employees that, she alleges, conspired with the Ponzi scheme principals to further the

Ponzi scheme and cause greater liabilities to the receivership estate. See id. at 901. She seeks to

recover for injuries to the Madison Timber entities’ “unsustainable liabilities inflicted by the

Ponzi scheme,” and distribute that money to investor-claimants. Id. at 899. As in Zacarias, there

can be “no dispute” that she has standing.5

B. Vicarious Liability

Baker Donelson argues that it has no responsibility for Alexander and Seawright because

they acted outside the scope of their employment. Its brief cites caselaw to imply that the pair

may have been involved in “independent criminal conduct.”

“Some actions are so clearly beyond an employee’s course and scope of employment that

they cannot form the basis for a claim of vicarious liability, as a matter of law.” Baker Donelson

Bearman Caldwell & Berkowitz, P.C. v. Seay, 42 So. 3d 474, 488 (Miss. 2010) (citation and

brackets omitted). This is not one of those actions.

5
The Court has not considered whether the receiver also has standing via assignments from investor-victims.

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The receiver has sufficiently alleged that this investment scheme, including the

subscription agreements Seawright drafted for it, was part and parcel of a bundle of services

Baker Donelson provided to its preferred transactional clients; that these services occurred

during Baker Donelson’s working hours and in its offices; and that they served Baker Donelson’s

interests. Far from being an unaffiliated frolic, the receiver’s allegations regarding consistent,

repeated use of Baker Donelson staff and resources—most glaringly, the firm’s escrow

account—suggest that there was knowledge of and some benefit to the firm from knowingly

facilitating Alexander and Seawright’s investment activities. The case is therefore unlike those

where sexual affairs were deemed unrelated to the course and scope of employment as a matter

of law. See id.6

C. Civil Conspiracy

The defendants then argue that the receiver has failed to state a claim for civil conspiracy.

In Mississippi, “the elements of a civil conspiracy are: (1) an agreement between two or

more persons, (2) to accomplish an unlawful purpose or a lawful purpose unlawfully, (3) an overt

act in furtherance of the conspiracy, (4) and damages to the plaintiff as a proximate result.” Rex

Distrib. Co., Inc. v. Anheuser-busch, LLC, 271 So. 3d 445, 455 (Miss. 2019) (quotation marks

and citation omitted). “[D]amages are the essence of a civil conspiracy.” Id. (quotation marks

and citation omitted).

A conspiratorial agreement to commit a wrong can be “tacit.” Gallagher Bassett Servs.,

Inc. v. Jeffcoat, 887 So. 2d 777, 786 (Miss. 2004). The Mississippi Supreme Court adds that a

defendant need not commit an overt act to be liable for civil conspiracy. While the plaintiff “has

to show an unlawful overt act and it has to show damages,” that court held recently, “the overt

6
The Court has not considered whether the receiver has sufficiently alleged that Alexander and Seawright had
apparent authority to act for Baker Donelson.

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act need not be by [the defendant].” Rex Distrib., 271 So. 3d at 455 (citation omitted). Civil

conspiracy “exists as a cause of action to hold nonacting parties responsible,” the court

explained. Id.

To this, the defendants argue that the claim fails because they lacked actual knowledge

that Adams was running a Ponzi scheme.7

The amended complaint plausibly alleges that the defendants had actual knowledge of

wrongdoing. It specifically recites that Alexander and Seawright enticed unwitting investors

through a pattern of lies and omissions: they lied about contracts that didn’t exist, they lied about

inspecting parcels of land, and they omitted from their victims their true compensation. Baker

Donelson knew that Alexander and Seawright were using firm resources, personnel, and its

escrow account to sell securities, and actively assisted them.8 All involved also ignored the

guaranteed rate of return. See Janvey v. Proskauer Rose LLP, No. 3:13-CV-477-N, 2015 WL

11121540, at *5 (N.D. Tex. June 23, 2015) (finding that allegation of defendant’s knowledge of

“unrealistic rates of return,” among other things, stated a plausible claim that defendant had

knowledge of a fraudulent enterprise). The pattern of activities meets Mississippi’s definition of

“actual knowledge,” see Collier v. Trustmark Nat’l Bank, 678 So. 2d 693, 697 (Miss. 1996), and

states a claim for a tacit agreement to accomplish an unlawful purpose.

7
The term “actual knowledge” is not used in these cases. While the Mississippi Court of Appeals has written that
“the alleged confederates must be aware of the fraud or wrongful conduct at the beginning of the agreement,”
Bradley v. Kelley Bros. Contractors, 117 So. 3d 331, 339 (Miss. Ct. App. 2013) (citing a treatise), and the Fifth
Circuit relied on that line in Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507, 519 (5th Cir. 2018), none of
the earlier or later Mississippi Supreme Court cases have adopted that verbiage, see Rex Distrib., 271 So. 3d at 455
and Gallagher Bassett Servs., Inc. v. Jeffcoat, 887 So. 2d 777, 786 (Miss. 2004) (collecting cases).
8
Baker Donelson says this is not enough to state a claim for civil conspiracy, because it is not a tort. But Mississippi
law holds that no tort is required for a civil conspiracy claim. See Rex Distrib., 271 So. 3d at 455.

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Whether the defendants will succeed at summary judgment, as the defendant did in their

preferred case, Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507, 519 (5th Cir. 2018), is

reserved for future proceedings.

D. Aiding and Abetting

Next, the defendants argue that the aiding and abetting breach of fiduciary duty claim

does not exist in Mississippi.

The receiver’s claim for aiding and abetting liability is based on § 876(b) of the

Restatement (Second) of Torts. The section provides, in relevant part, that “one is subject to

liability if he . . . knows that the other’s conduct constitutes a breach of duty and gives

substantial assistance or encouragement to the other so to conduct himself.” The theory here is

that the defendants knew that Lamar Adams’ conduct constituted a breach of his fiduciary duties

toward Madison Timber, but nevertheless provided him with substantial assistance.

The state courts of Mississippi have not expressed an opinion on whether § 876(b)

provides a viable cause of action in this state. It falls to this Court to make an Erie-guess into

how Mississippi courts would rule. As the Fifth Circuit put it, “in the absence of on-point

Mississippi law, our primary obligation is to make an Erie guess as to how the Mississippi

Supreme Court would decide the question before us.” Keen v. Miller Envtl. Grp., Inc., 702 F.3d

239, 243 (5th Cir. 2012).

The standard for making an Erie-guess is familiar.

We base our forecast on (1) decisions of the Mississippi Supreme Court in

analogous cases, (2) the rationales and analyses underlying Mississippi Supreme
Court decisions on related issues, (3) dicta by the Mississippi Supreme Court, (4)
lower state court decisions, (5) the general rule on the question, (6) the rulings of
courts of other states to which Mississippi courts look when formulating
substantive law and (7) other available sources, such as treatises and legal
commentaries. Absent evidence to the contrary, we presume that the Mississippi
courts would adopt the prevailing rule if called upon to do so.

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Centennial Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 382 (5th Cir. 1998) (quotation

marks, citations, and brackets omitted) (emphasis added).

Applying this standard, two colleagues on this Court have concluded that the Mississippi

Supreme Court would recognize a § 876(b) claim for aiding and abetting fraud. See Dale v. Ala

Acquisitions, Inc., 203 F. Supp. 2d 694 (S.D. Miss. 2002); Jones v. KPMG LLP, No. 1:17-CV-

319-LG-RHW, 2018 WL 5018469, at *2 (S.D. Miss. Oct. 16, 2018). The Dale court’s analysis

showed that “the majority of jurisdictions that have addressed the validity of a claim for aiding

and abetting under § 876(b) have held that such a claim exists.” 203 F. Supp. 2d at 700.

Alexander and his LLC argue that this was error. They point to this statement from the

Fifth Circuit: “When sitting in diversity, a federal court exceeds the bounds of its legitimacy in

fashioning novel causes of action not yet recognized by the state courts.” In re DePuy

Orthopaedics, Inc., Pinnacle Hip Implant Prod. Liab. Litig., 888 F.3d 753, 781 (5th Cir. 2018).

The DePuy court rejected a § 876(b) aiding and abetting claim under Texas law, at least in the

particular product liability circumstances that case presented.

Strictly as a textual matter, these defendants’ preferred sentence does not apply.

Jurisdiction in this case is predicated upon a federal question, rather than diversity. More to the

point, though, to the extent aiding and abetting breach of duty in the product liability context is

too “novel,” too close to “inventing a new framework” of state-law liability (and thus

prohibited), the claim in our case is not. Id. Aiding and abetting “has been recognized in the

breach of fiduciary context” in Texas, among other places. In re Houston Reg’l Sports Network,

L.P., 547 B.R. 717, 758 (Bankr. S.D. Tex. 2016).

That said, the undersigned also believes that controlling authority instructs that this Court

must make an Erie-guess, in accordance with the standard recited above, when squarely

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presented with a question of state law over which it cannot decline supplemental jurisdiction.

E.g., Keen, 702 F.3d at 243; Centennial Ins., 149 F.3d at 382; Midwest Feeders, 886 F.3d at 515-

16; Stacy v. Aetna Cas. & Sur. Co., 484 F.2d 289, 292 (5th Cir. 1973) (predicting that “the

Mississippi courts would now adopt the rule of 324A”); Howe ex rel. Howe v. Scottsdale Ins.

Co., 204 F.3d 624, 627 (5th Cir. 2000) (“If the Louisiana Supreme Court has not ruled on this

issue, then this Court must make an “Erie guess” and “determine as best it can” what the

Louisiana Supreme Court would decide.”) (emphasis added).

Here, because there is no evidence that Mississippi would not adopt the prevailing rule,

see Centennial Ins., 149 F.3d at 382, this Court concurs with its colleague that an aiding and

abetting breach of fiduciary duty claim under § 876(b) would likely be adopted by the

Mississippi Supreme Court. See Dale, 203 F. Supp. 2d at 701.

Baker Donelson presses that the amended complaint still fails to state a plausible aiding

and abetting cause of action. Respectfully, the undersigned disagrees. The lies and omissions set

forth above suggest that the defendants knew what they were doing was a breach of duty. The

motions to dismiss this claim are denied.

E. Negligence, Gross Negligence, and Recklessness

Next, the defendants contend that the receiver has failed to state a claim for negligence,

gross negligence, or recklessness.

“To succeed on a claim for negligence, the plaintiff must prove duty, breach, causation

and injury.” Rein v. Benchmark Const. Co., 865 So. 2d 1134, 1143 (Miss. 2004). Negligence is

the failure to use ordinary care. See George B. Gilmore Co. v. Garrett, 582 So. 2d 387, 391

(Miss. 1991).

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“[T]here is no precise definition of gross negligence, but one of the approximate

definitions may be thus expressed: gross negligence is that course of conduct which, under the

particular circumstances, disclosed a reckless indifference to consequences without the exertion

of any substantial effort to avoid them.” Turner v. City of Ruleville, 735 So. 2d 226, 229 (Miss.

1999) (citation omitted).

“Recklessness” has been defined as “that degree of fault which lies between intent to do

wrong, and the mere reasonable risk of harm involved in ordinary negligence.” Maldonado v.

Kelly, 768 So. 2d 906, 910 (Miss. 2000) (citation omitted). The Mississippi Supreme Court

added that recklessness is conduct “so far from a proper state of mind that it is treated in many

respects as if harm was intended.” Id. (citation and emphasis omitted).

The defendants claim that none of the elements of negligence, gross negligence, or

recklessness are sufficiently alleged. The Court disagrees. The defendants had a duty to use

ordinary care. The Mississippi Legislature has further defined “ordinary care” for entities dealing

with negotiable instruments to mean “observance of reasonable commercial standards, prevailing

in the area in which the person is located, with respect to the business in which the person is

engaged.” Miss. Code Ann. § 75-3-103(a)(9). A member of a joint venture has a duty to his

fellow venturers “to refrain[] from engaging in grossly negligent or reckless conduct, intentional

misconduct, or a knowing violation of law.” Id. § 79-13-404(c).

The amended complaint is rife with allegations of the defendants failing to use ordinary

care. The pattern of lies described above, actively allowed and facilitated by Baker Donelson,

states a claim for failure to abide ordinary commercial standards. The allegations set forth a

textbook example of defendants who display “a reckless indifference to consequences without

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the exertion of any substantial effort to avoid them.” Turner, 735 So. 2d at 229. The present

arguments are, therefore, denied.

F. Negligent Retention and Supervision

A “claim of negligent hiring, retention and supervision . . . is simply a negligence claim,

requiring a finding of duty, breach of duty, causation and damage.” Roman Catholic Diocese of

Jackson v. Morrison, 905 So. 2d 1213, 1229 (Miss. 2005). “In Mississippi, an employer will be

liable for negligent hiring or retention of his employee when an employee injures a third party if

the employer knew or should have known of the employee’s incompetence or unfitness.”

Parmenter v. J & B Enterprises, Inc., 99 So. 3d 207, 217 (Miss. Ct. App. 2012) (quotation marks

and citation omitted).

Baker Donelson argues that this claim fails because it didn’t know Alexander and

Seawright were part of a Ponzi scheme. In a similar case arising out of the Stanford litigation,

however, the district court found that “an ordinary degree of supervision” supports an inference

that the employing firm was “aware to some degree of [its employees] tortious conduct.” Janvey,

2015 WL 11121540, at *8. “Any further analysis of this issue requires factual development more

appropriately considered on a motion for summary judgment.” Id. This Court agrees.

Of particular salience, to this claim and others, are the questions about the use of Baker

Donelson’s escrow account. It is one thing to secretly operate a side business out of your office.

An employer cannot know everything you do on company time. Suppose the evidence generated

through discovery shows that Alexander and Seawright were truly out on their own, abusing their

positions without their employer’s knowledge. In that case, Baker Donelson will have strong

arguments at summary judgment. On the other hand, the allegations regarding the use of the

firm’s escrow account presently suggest Baker Donelson’s knowledge and ratification of the

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investment scheme. An escrow account is subject to greater oversight than, for example, one’s

work email account. Discovery is the right place to determine to what extent the evidence bears

out this allegation.

For these reasons, the motions to dismiss this claim are denied.

G. State Racketeering

Alexander and his LLC argue that the receiver has not sufficiently alleged a violation of

Mississippi’s Racketeer Influenced and Corrupt Organization Act (RICO). They are correct.

Under the relevant statute, “[a]ny aggrieved person may institute a civil proceeding under

subsection (1) of this section against any person or enterprise convicted of engaging in activity in

violation of this chapter.” Miss. Code Ann. § 97-43-9(5) (emphasis added).

At present, none of today’s defendants have been convicted of anything relating to this

Ponzi scheme. It follows that the receiver’s state RICO claim cannot proceed.

H. Joint Venture Liability

Alexander Seawright LLC and Alexander next contend that the amended complaint fails

to show that they and Adams entered into a joint venture or partnership.

In Mississippi,

no exact definition could be given of a joint venture, [as] the answer in each case
depended upon the terms of the agreement, the acts of the parties, the nature of the
undertaking and other facts. We broadly defined a joint venture as an association
of persons to carry out a single business enterprise for profit, for which purpose
they combine their property, money, efforts, skill and knowledge. We said it exists
when two or more persons combine in a joint business enterprise for their mutual
benefit with an understanding that they are to share in profits or losses and
each to have a voice in its management. We noted a condition precedent for its
existence was a joint proprietary interest in the enterprise and right of mutual
control. The joint purpose of the enterprise distinguishes it from a mere tenancy in
common. We further held an agreement, express or implied, for sharing in the
profits is essential, but there need be no specific agreement to share in the losses,
and if the nature of the undertaking was such that no losses other than those of time
and labor in carrying it out was likely to occur, an agreement to share in the profits

15
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might stamp it as a joint venture, although nothing was said about the losses. We
said a contract between the parties was necessary, but it need not be embodied in a
formal agreement, but might be inferred from the facts, circumstances and conduct
of the parties. Finally, we said it differed from a general partnership because it
related to a single transaction, while a partnership usually related to a general and
continuing business, and that a joint venture was of a shorter duration, and the
agreement was less formal.

Pittman v. Weber Energy Corp., 790 So. 2d 823, 826–27 (Miss. 2001) (citation omitted).

Here, the amended complaint thoroughly sets forth an association between Adams,

Alexander Seawright LLC, and Alexander to carry out a timber investment partnership or joint

venture. Adams supposedly contributed the timber expertise; the LLC and Alexander actually

contributed the working capital and “papering everything”; and all involved contributed their

time and sales expertise. The parties shared in the profits together, and as for losses, well, this

enterprise fits exactly into the Mississippi Supreme Court’s description, “if the nature of the

undertaking was such that no losses other than those of time and labor in carrying it out was

likely to occur, an agreement to share in the profits might stamp it as a joint venture.” Id.

Whether the evidence will actually bear out a joint venture or partnership, see Boyanton

v. Bros. Produce, Inc., 312 So. 3d 363, 374 (Miss. Ct. App. 2020) (granting summary judgment

given the record evidence), remains to be seen. For present purposes, though, the allegations in

the amended complaint are satisfactory.

I. In Pari Delicto

Lastly, the defendants contend that the doctrine of in pari delicto bars this suit.

“The phrase ‘in pari delicto’ is Latin for ‘in equal fault.’ The doctrine of in pari delicto

refers to the principle that a plaintiff who has participated in a wrongdoing may not recover

damages resulting from the wrongdoing.” Latham v. Johnson, 262 So. 3d 569, 581 (Miss. Ct.

App. 2018) (quotation marks, citation, and brackets omitted). “The doctrine . . . is undergirded

16
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by the concerns, first, that courts should not lend their good offices to mediating disputes among

wrongdoers; and second, that denying judicial relief to an admitted wrongdoer is an effective

means of deterring illegality.” Jones v. Wells Fargo Bank, N.A., 666 F.3d 955, 965 (5th Cir. 2012)

(citation omitted). “In pari delicto is an equitable, affirmative defense, which is controlled by

state common law.” Id. (citations omitted).

The defects with the defendants’ argument were well-explained by the Jones court. The

Fifth Circuit started by reciting that “[a] receiver is the representative and protector of the

interests of all persons, including creditors, shareholders and others, in the property of the

receivership.” Id. at 966. It then explained,

Although a receiver generally has no greater powers than the corporation had as of
the date of the receivership, it is well established that when the receiver acts to
protect innocent creditors he can maintain and defend actions done in fraud of
creditors even though the corporation would not be permitted to do so. The receiver
thus acts on behalf of the corporation as a whole, an entity separate from its
individual bad actors.

Id. (quotation marks, citations, and ellipses omitted). The Jones court declined to apply the in

pari delicto doctrine.

Under this precedent, the receiver and the receivership estate are legally distinct from

Adams and Madison Timber. Where, as here, the receiver is acting on behalf of innocent

investor-victims, she “does not stand in pari delicto to [her bank], even if” Adams would. Id.

And, as in Jones, “[a]pplication of in pari delicto would undermine one of the primary purposes

of the receivership established in this case, and would thus be inconsistent with the purposes of

the doctrine.” Id. (citation omitted).

Mississippi’s wrongful conduct rule is also unavailing. The rule provides that “no court

will lend its aid to a party who grounds his action upon an immoral or illegal act.” Price v.

Purdue Pharma Co., 920 So. 2d 479, 484 (Miss. 2006) (citation omitted). The Mississippi

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Supreme Court long ago explained that the judicial system, “from a consideration of its own

pecuniary interests, and of the interests of other litigants, may wisely refuse to assist in adjusting

equities between persons who have been engaged in an unlawful action.” W. Union Tel. Co. v.

McLaurin, 66 So. 739, 740 (Miss. 1914).

There are no inequities here in permitting the receiver to proceed. Just as with the

doctrine of in pari delicto, the receivership estate is not limited by the wrongful conduct of

Adams and Madison Timber. “The appointment of the receiver removed the wrongdoer from the

scene.” Scholes v. Lehmann, 56 F.3d 750, 754 (7th Cir. 1995). And the equities favor permitting

investor-victims to recover from a receiver’s suit against those culpable in the Ponzi scheme.

For these reasons, the defendants’ equitable arguments for dismissal are denied, without

prejudice to their re-urging at the summary judgment stage.

J. Piercing the Veil

Finally, Alexander and his LLC contend that the allegations are insufficient to pierce the

corporate veil of their LLC. For the reasons stated in Phillips v. MSM, Inc., No. 3:12-CV-175-

CWR-FKB, 2015 WL 420327, at *9 (S.D. Miss. Feb. 2, 2015), the argument is denied without

prejudice.

IV. Conclusion

The Court has considered all arguments raised by the parties; those not addressed in this

Order would not have changed the result. Baker Donelson’s motion is denied, while Alexander

Seawright, LLC and Alexander’s motion is granted in part and denied in part.

SO ORDERED, this the 5th day of May, 2021.

s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE

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UNITED STATES DISTR ICT COURT

SOUTHERN DISTR ICT OF M ISS ISS IPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY 866CWR-FKB

Case No. 3:18-cv-00____
AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER Arising out of Case No. 3:18-cv-252,
PROPERTIES, LLC, Securities and Exchange Commission v.
Arthur Lamar Adams and Madison Timber
Plaintiff, Properties, LLC

v. Hon. Carlton W. Reeves, District Judge

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ,
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT,

Defendants.

COMPLAINT

Alysson Mills, in her capacity as the court-appointed receiver for Arthur Lamar Adams and

Madison Timber Properties, LLC (the “Receiver”), through undersigned counsel, files this

Complaint against Butler Snow LLP; Butler Snow Advisory Services, LLC; Matt Thornton;

Baker, Donelson, Bearman, Caldwell & Berkowitz, PC; Alexander Seawright, LLC; Brent

Alexander; and Jon Seawright (collectively “Defendants”), stating as follows:

 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 2 of 45

INTRODUCTION

For more than ten years, Arthur Lamar Adams (“Adams”), through his companies Madison

Timber Company, LLC and Madison Timber Properties, LLC (“Madison Timber”), operated a

Ponzi scheme that defrauded hundreds of investors. Investors believed that Madison Timber used

investors’ money to purchase timber from Mississippi landowners; that Madison Timber sold the

timber to Mississippi lumber mills at a higher price; and that Madison Timber repaid investors

their principal plus interest with the proceeds of those sales. Investors received timber deeds that

purported to secure their investments—but the deeds were fake. There was no timber and no

proceeds from sales of timber. The money used to repay existing investors came solely from new

investors.

Madison Timber had to continuously grow to repay existing and new investors, and

continuously grow it did. In 2011, Madison Timber took in approximately $10 million from

investors. By 2018 that number had grown by a factor of 16. In the one-year period prior to April

19, 2018, the date Adams surrendered to federal authorities and confessed to the Ponzi scheme,

Madison Timber took in approximately $164.5 million. As of April 19, 2018, Madison Timber

had 501 outstanding promissory notes, reflecting debts to investors of more than $85 million.1

Madison Timber would not have grown without Defendants’ encouragement and

assistance. Defendants lent their influence, their professional expertise, and even their clients to

Adams. They made a fraudulent enterprise a fraternity. Defendants contributed to the success of

the Madison Timber Ponzi scheme, and therefore to the debts of the Receivership Estate to

investors. By this complaint the Receiver seeks to hold Defendants accountable.

1
The evidence at Adams’s sentencing established that of the $164.5 million that Madison Timber received in its last
year of operation, it paid back approximately $79.5 million, leaving an $85 million difference. The outstanding
principal and interest owed to investors is necessarily higher.

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JURISDICTION AND VENUE

1. The Court has jurisdiction over this action and its parties, and venue is proper in

this Court, pursuant to the Securities Act of 1933, 15 U.S.C. § 77v(a); the Securities & Exchange

Act of 1934, 15 U.S.C. § 78aa; 28 U.S.C. § 1692; and 28 U.S.C. § 754.

2. This action arises in connection with and is ancillary to the civil action already

pending in this Court styled Securities & Exchange Commission v. Arthur Lamar Adams and

Madison Timber Properties, LLC, No. 3:18-cv-252-CWR-FKB. In that civil action, the Securities

& Exchange Commission (“S.E.C.”) alleges that “[b]eginning in approximately 2004,” Adams,

through Madison Timber, “committed securities fraud by operating a Ponzi scheme” in violation

of the Securities Act of 1933 and the Securities & Exchange Act of 1934.2

3. The S.E.C. requested that the Court appoint a receiver for the estates of Adams and

Madison Timber.3 As the Court that appointed the Receiver, this Court has jurisdiction over any

claim brought by the Receiver in the execution of her duties. “[I]t is well-settled that when an

initial suit results in the appointment of the receiver, any suit that the receiver thereafter brings in

the appointment court in order to execute h[er] duties is ancillary to the main suit.” U.S. Small Bus.

Admin. v. Integrated Envtl. Sols., Inc., No. 05-cv-3041, 2006 WL 2336446, at *2 (S.D. Tex. Aug.

10, 2006) (citing Haile v. Henderson Nat’l Bank, 657 F.2d 816, 822 (6th Cir. 1981)). See also 28

U.S.C. § 1692 (“In proceedings in a district court where a receiver is appointed for property, real,

personal, or mixed, situated in different districts, process may issue and be executed in any such

district as if the property lay wholly within one district . . . ”).

4. Consistent with that precedent, Chief U.S. District Judge Daniel P. Jordan III has

ordered that all “cases filed by the duly appointed Receiver . . . which . . . arise out of or relate to
2
Doc. 3, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
3
Docs. 11, 21, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 4 of 45

[Securities & Exchange Commission v. Arthur Lamar Adams and Madison Timber Properties,

LLC, No. 3:18-cv-252-CWR-FKB] shall be directly assigned by the Clerk of Court to U.S. District

Judge Carlton W. Reeves and U.S. Magistrate Judge F. Keith Ball.”4 In compliance with Chief

Judge Jordan’s order, the Receiver shall separately file, contemporaneously with this complaint, a

notice of relatedness.

PARTIES

5. Plaintiff Alysson Mills is the Court-appointed Receiver for the estates of Adams and

Madison Timber. The Court’s order of appointment vests in her the power to, among other things:

investigate and . . . bring such legal actions based on law or equity in

any state, federal, or foreign court as the Receiver deems necessary
or appropriate in discharging her duties as Receiver.5

The Receiver brings this civil action in her capacity as Receiver and pursuant to the powers vested

in her by the Court’s orders and applicable law. The Receiver has standing to pursue, inter alia,

claims against third parties whose actions contributed to the success of the Madison Timber Ponzi

scheme, and therefore to the debts of the Receivership Estate.

6. Defendant Butler Snow LLP (with Butler Snow Advisory Services, LLC, “Butler

Snow”) is a Delaware limited liability partnership doing business in Mississippi.

7. Defendant Butler Snow Advisory Services, LLC (with Butler Snow LLP, “Butler

Snow”) is a Mississippi limited liability company doing business Mississippi.

8. Defendant Matt Thornton is an adult resident of Jackson, Mississippi. He is

founder, President, and CEO of Butler Snow Advisory Services, LLC.

4
Doc. 45, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
5
Doc. 33, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss). By order dated
August 22, 2018, the Court eliminated the requirement that the Receiver obtain “prior approval of this Court upon ex
parte request” before bringing any legal action. Doc. 38, Securities & Exchange Commission vs. Adams, et al., No.
3:18-cv-00252 (S.D. Miss).

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9. Defendant Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (“Baker

Donelson”) is a Tennessee professional corporation doing business in Mississippi.

10. Defendant Alexander Seawright, LLC is a Mississippi limited liability company

doing business in Mississippi.

11. Defendant Brent Alexander is an adult resident of Jackson, Mississippi. He is a

“Senior Public Policy Advisor” for Baker Donelson. With Jon Seawright, he owns Alexander

Seawright, LLC.

12. Defendant Jon Seawright is an adult resident of Jackson, Mississippi. He is a

shareholder of Baker Donelson and a member of its national governing Board of Directors. With

Brent Alexander, he owns Alexander Seawright, LLC.

ADAMS AND MADISON TIMBER

13. For more than ten years, Adams, through Madison Timber, operated a Ponzi

scheme that purported to purchase timber from Mississippi landowners and resell it to Mississippi

lumber mills at higher prices.

14. Investors in Madison Timber delivered to Madison Timber large sums of money,

typically in excess of $100,000 dollars, in reliance on the promise that Madison Timber would

repay them their principal plus interest of not less than 12% per annum, and sometimes as much as

20% per annum. The promised interest invariably far exceeded the interest any investor might

receive on any other collateralized investment.

15. Investors believed that Madison Timber would use their money to acquire timber

deeds and cutting agreements from Mississippi landowners; that Madison Timber would then sell

the timber to Mississippi lumber mills at a higher price; and that with the proceeds of those sales

Madison Timber would repay investors their principal and promised interest.

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 6 of 45

16. In exchange for their investments, investors in the Madison Timber Ponzi scheme

received a promissory note in the amount of their investment, payable in twelve monthly

installments together with the promised interest; twelve pre-dated checks, each in the amount of

the installment due under the promissory note; a timber deed and cutting agreement by which a

named landowner purported to grant to Madison Timber the rights to harvest timber on the land

described in the deed; and a timber deed and cutting agreement by which Madison Timber

purported to grant its own rights to the investor.

17. In fact, the timber deeds and cutting agreements were fake. Madison Timber had

no rights to harvest timber and no timber to cut and sell. Because Madison Timber had no

revenues whatsoever, investors were being repaid with new investors’ money.

18. Each month, Madison Timber required more and more new investors to repay

existing investors. Like any Ponzi scheme, Madison Timber had to continuously grow. To grow

Madison Timber, Adams relied on recruiters, including Defendants, to attract new investors.

19. In 2011, Madison Timber took in approximately $10 million from investors. By

2018 that number had grown by a factor of 16.

20. In April 19, 2018, on the heels of investigations of him by the F.B.I. and the U.S.

Attorney’s Office for the Southern District of Mississippi, Adams turned himself in. In the

one-year period prior to April 19, 2018, Madison Timber took in approximately $164.5 million.

As of April 19, 2018, Madison Timber had 501 outstanding promissory notes, reflecting debts to

investors of more than $85 million.6

6
The evidence at Adams’s sentencing established that of the $164.5 million that Madison Timber received in its last
year of operation, it paid back approximately $79.5 million, leaving an $85 million difference. The outstanding
principal and interest owed to investors is necessarily higher.

6
 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 7 of 45

21. Adams pleaded guilty to the federal crime of wire fraud and “admit[ted] to all of the

conduct of the entire scheme and artifice to defraud.”7 On October 30, 2018, he was sentenced to

a term of imprisonment of 235 months.8

22. The S.E.C. separately charged Adams with violations of the Securities Act of 1933

and Securities & Exchange Act of 1934, alleging in its complaint that “[b]eginning in

approximately 2004,” Adams, through Madison Timber, “committed securities fraud by operating

a Ponzi scheme.”9

23. The promissory notes sold by Madison Timber to investors were “securities,” as

that term is defined under 15 U.S.C.A. §78(c)(A)(10) and Miss. Code Ann. § 75-71-102(28).

24. As alleged in the complaint in the underlying action SEC v. Arthur Lamar Adams et

al., No. 3:18-cv-252 (S.D. Miss.), and in the bill of information filed against Adams in U.S. v.

Arthur Lamar Adams, No. 3:18-c-188 (S.D. Miss.), Adams, Madison Timber, and their affiliates,

including Defendants, facilitated sales of promissory notes to investors through material

misstatements and omissions; employed a device, scheme, or artifice to defraud; and engaged in

acts, practices, or courses of business that operated or would operate as a fraud or deceit, all in

violation of Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(A); Section 10(b) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5,

thereunder; as well as the Mississippi Securities Act, Miss. Code Ann. § 75-71-501.

25. The sales furthermore violated the Securities Act of 1933 and the Mississippi

Securities Act because there were no registration statements for the promissory notes, see Section

5 of the Securities Act of 1933, 15 U.S.C § 77e, and Miss. Code Ann. § 75-71-301; and the

7
Doc. 11, United States v. Adams, No. 3:18-cr-00088 (S.D. Miss).
8
Doc. 21, United States v. Adams, No. 3:18-cr-00088 (S.D. Miss).
9
Doc. 3, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 8 of 45

promissory notes were not exempt from registration, see Section 5 of the Securities Act of 1933,

15 U.S.C § 77e, and Miss. Code Ann. §§ 75-71-201 through 75-71-203.

BUTLER SNOW

26. Adams and Madison Timber’s relationship with Butler Snow began in 2009 and

continued until Adams turned himself in on April 19, 2018.

The first engagement

27. Adams had made a name for himself as someone who understood the timber

industry and made money brokering timber sales. For many years Adams brokered legitimate

timber sales—but by 2009 he had figured out that he could fake things, and he saw an opportunity

to go big.

28. Adams previously had done business with Pinnacle Trust, a financial services

company in Madison, Mississippi. He and Pinnacle Trust discussed ways to maximize Adams’s

business. They decided to form an investment fund and engaged Butler Snow law firm to draft the

private placement memorandum, or PPM.

29. The investment fund was named Madison Timber Fund, LLC. Its aim would be to

raise $10,000,000 by selling 100 units at $100,000 each. Lawyers at Butler Snow spent months

working with Adams on the PPM and its accompanying documents.

30. The resulting PPM, drafted by Butler Snow, described the fund as follows:

MADISON TIMBER FUND, LLC, a Mississippi limited liability company (the

“Fund”), has been formed for the objective of achieving income and capital
preservation through investment in timber-producing real estate and other interests
in timber.

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 9 of 45

31. The PPM identified Adams and Madison Timber Company, Inc. as the fund’s

“Manager” and advised that the fund’s “Business Strategy” depended on the Manager’s “network

of contacts”:

[T]he Fund purchases the standing timber directly from the landowner and
then sells or arranges for the sale of the tree harvest. The purchase is made by the
execution of a “Timber Deed,” which is consequently filed in the real estate records
of the county where the land is located. The Timber Deed commonly allows for a
24 to 36 month period to actually harvest the timber. . . .
***
Using its network of contacts cultivated over 20 years, the Manager
regularly receives opportunities to purchase land tracts with timber. Typically, the
Manager has the opportunity to purchase before these tracts go on the “market.”
This gives the Manager a first-look pricing advantage. . . .
***
The Manager also has a number of established relationships with various
lumber mills, which includes knowledge of the mills’ preferred specialty type of
lumber needs from hardwoods to pine. These mills also offer the Manager referrals
for timber purchases. The Manager’s Timber Deeds are designed to protect the
Fund from liability for cleanup, property damage, road repair and other harvesting
challenges.
***
[T]he Manager has developed a timber purchase format that allows the
Manager to control the cyclical aspects of the business. By securing various
term-length contracts, the Manager is able to even out its supplies of timber for its
mill purchasers. The Manager intentionally purchases short-term contracts (3 to 6
month harvest), mixed with mid-term (6 to 12 months) and longer-term tracts (24 to
36 months) to enable the Manager to have a steady three-year supply of harvestable
inventory.
In addition, the Manager tracks the needs of its regular mill customers to
better supply the type of product they need.
***
The Manager believes that its competitive advantage is its flexibility in
choosing both wood sources and wood processing mills. By not having an in-house
mill, the Manager is able to obtain raw timber from various locations and match it
to buyers and mills that are geographically compatible with the mill location. . . .
The Manager’s pricing philosophy is to offer its mills a highly competitive
product. The Manager can offer lower pricing in exchange for a contributing
stream of referrals from its mill customers. The Manager is able to maintain a
highly competitive pricing strategy because it operates with low overhead costs,

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 10 of 45

outsources its harvesting operations with a network of loggers and owns very little
equipment.

32. The PPM identified several “Timber Investment Risks,” including “Timber Price

Volatility.” The PPM explained:

The Fund’s revenues will be affected by the cyclical nature of the forest
products industry. Prices for timber can experience significant variation and have
been historically volatile. The Fund will have little control over the timing and
extent of price changes for timber products. The demand for timber and wood
products is affected primarily by the level of new/residential construction activity,
the supply of manufactured timber products, including imported timber products,
and other uses of timber products. These activities are subject to variation because
of changes in economic conditions, interest and currency rates, population growth
and changing demographics and seasonal weather cycles and storm activity.

33. The PPM also identified several “General Investment Risks,” one of which was

“Reliance on the Manager.” The PPM explained that the fund’s success is “substantially

dependent on the Manager”—therefore the fund might fail if Adams quits or dies. The PPM

disclosed the fund “does not currently own key-person insurance on the life of Lamar Adams” but

will “purchase such a policy within twelve months.”

34. Ultimately the fund itself did not attract any investors, and the PPM was shelved for

the time being.

35. Adams, however, continued to broker purported timber sales and make money

entering “joint ventures” with individual investors to purchase purported stand-alone timber tracts

that he called “standing tracts.” In 2011, Madison Timber took in approximately $10 million from

investors.

36. By this time the Madison Timber Ponzi scheme had been perfected. The consistent,

uniform returns of 12% to 14% attracted dozens of investors with between $100,000 and $200,000

to invest—but like any Ponzi scheme, each month Madison Timber required more and more new

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 11 of 45

investors to repay the old ones. Adams would have to continuously grow Madison Timber to keep

up.

The second and third engagements

37. To continuously grow Madison Timber, Adams turned again to Butler Snow.

38. Butler Snow markets itself to clients as “the only resource you need.” To provide

business services to its law firm’s clients, in 2011 Butler Snow launched Butler Snow Advisory

Services, “a wholly owned subsidiary that provides non-legal business advice.” Butler Snow’s

website boasts that Butler Snow Advisory provides “executive-level strategic guidance” to closely

held businesses:

Closely held businesses face many of the same challenges as large, public
companies without the advantage of strategic advisors. This can make it more
difficult to those business owners to make informed decisions regarding their
business strategy.
Butler Snow Advisory specializes in providing executive-level strategic guidance
to private, family owned and closely held companies. We’ve built a diverse,
experienced team of professionals that are uniquely positioned to leverage industry
knowledge and real-world experience to work for our clients from day one.
Members of the BSA team are dedicated to understanding the goals of your
company and crafting actionable strategies for success, all while identifying
opportunities and mitigating risks.

39. Butler Snow’s website boasts that Butler Snow Advisory “utilize[s] resources from

across the Butler Snow network to match your business needs”:

In addition to our team’s expertise, as a part of the larger Butler Snow family, BSA
has the advantage of access to resources and networks that put our company ahead
of the competition. Our team approach allows us to utilize resources from across
the Butler Snow network to match your business needs with the expertise required.
As a result, our clients benefit from strategic counsel, innovative solutions and
efficient execution – all from an extensive, reputable network of professionals.
A few of the Butler Snow advantages include access to a legal network that boasts:
x 325+ attorneys
x 24 offices across the United States and in Asia and the United Kingdom

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x client representation in all 50 states and the District of Columbia, as well as

internationally in more than 25 countries around the globe
x extensive business knowledge in a wealth of industries, including
telecommunications, technology, banking and finance, healthcare, oil and
gas and manufacturing

40. Under the leadership of Matt Thornton, its President and CEO, Butler Snow

Advisory sought to “fast-track” its own business by acquiring “top-level talent.” In April 2012,

Thornton announced that Mike Billings would join the team as a “strategic advisor”:

Michael Billings is a strategic advisor for Butler Snow Advisory Services,

specializing in strategic business development – helping clients identify optimal
business opportunities, then designing and implementing business development
strategies to gain a competitive advantage within the sector. He has years of
experience serving in a business development, consulting and advisory capacity to
a number of large companies in the Dallas, Texas area.

41. Butler Snow Advisory was young, and Billings was brand new, when in May 2012

the opportunity to “strategically advise” Madison Timber arose. Adams wanted assistance with a

“$30-50 million capital raise.” Thornton alerted Don Cannada and Barry Cannada, a senior

partner and the Vice Chair of Butler Snow, respectively, to the prospects of this new business.

42. A series of meetings followed at Butler Snow’s Ridgeland office. After, Thornton

told Adams “I have thoroughly enjoyed getting to know you and believe we could be a piece of the

puzzle in terms of strategic business growth and the associated financing/capital strategies to

accompany growth.” Thornton proposed that Adams engage Butler Snow Advisory to provide

“strategic business development, strategic financing/capital strategies and overall management

advisory services” and, separately, engage Butler Snow law firm to update the preexisting PPM.

43. Internally Thornton and Billings discussed how Butler Snow Advisory would be

compensated. They proposed a monthly fee of $3,500 “to assist in strategic business

development” plus a “success fee” for “individual projects.” If Thornton and Billings succeeded

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in establishing a fund, they proposed to receive half of Madison Timber’s management fee plus

33% (later reduced to 25%) of Madison Timber’s carried interest. At the time, Billings wrote

Thornton of Adams’s “insatiable appetite for cash”:

As Lamar [Adams] has a seemingly insatiable appetite for cash, all the way up to a
couple hundred $ Million, in theory we would be engage[d] and be paid the $3,500
retainer until he says “uncle” and does not have the capacity to do any more
volume.

Thornton agreed that they should “lock that down for at least a year.”

44. In August 2012, at Thornton’s urging, Adams formally engaged Butler Snow

Advisory to “focus on strategic business development” and, separately, formally engaged Butler

Snow law firm to update the preexisting PPM.10

The pitch

45. While lawyers at Butler Snow updated the preexisting PPM, Thornton and Billings

began pitching Madison Timber to high net-worth clients. During this time they often copied

Barry Cannada on their emails to keep him apprised of their progress.

46. They had early success with a high net-worth client in New Orleans. The investor

was not interested in investing in a fund, but he was willing to entertain a “joint venture” in a

“standing tract.” Billings and Adams made a presentation to the investor that falsely represented

that Madison Timber had “timber sales” of $9,576,252 in 2009; $8,087,072 in 2010; and

$10,034,024 in 2011. The impressed investor wired Madison Timber $450,000, and Madison

Timber delivered to Butler Snow an $8,000 “commission check.” One month later, after the same

10
The “BSA – Standard Terms and Conditions” that accompanied the August 8, 2012 engagement letter for the
“Engagement of Butler Snow Advisory” includes an arbitration clause, but the letter itself, signed by Lamar Adams
for Madison Timber and Martin Willoughby for Butler Snow Advisory, expressly states that “The state and federal
courts in Mississippi shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning this
Engagement Contract and any matter arising from it. The parties hereto irrevocably waive any right they may have to
object to any action being brought in that Court, to claim that the action has been brought to an inconvenient forum or
to claim that that Court does not have jurisdiction.”

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investor wired Madison Timber another $1,050,000, Madison Timber delivered to Butler Snow a

$15,750 “commission check.”

47. Buoyed by this early success, Billings introduced Adams to two “billion-dollar”

“family offices” in Texas. Thornton gushed at this “tremendous ‘start.’” On the same day, eager

to please Adams, and worried his counterparts at Butler Snow law firm were not meeting Adams’s

needs, Thornton complained to Barry Cannada that an associate in Butler Snow’s Memphis office

had failed to return Adams’s call and caused Adams to submit a bid for a tract of land “without

legal review.” Thornton lamented that “we continue to have the same scenario occur

over-and-over again with respect to Advisory asking the law firm to assist in a timely, efficient &

within scope manner.”

48. While lawyers at Butler Snow continued to work on the updated PPM, Thornton

and Billings looked for other investors who, like the high net-worth client in New Orleans, might

prefer to invest in a “standing tract” only. They were aware that Madison Timber offered a

consistent, uniform return of 12% to 14%. They made a list of thirty-plus mostly local individuals

and families to target as “Small Investor Madison Timber Prospects.” Many of the individuals on

their list became investors in Madison Timber.

49. In February 2013 lawyers at Butler Snow finalized the updated PPM. The fund

would now aim to raise up to $100,000,000 by selling 1,000 units at $100,000 each. Notably, the

fund’s “Business Strategy” and “Timber Investment Risks”—reproduced above, both of which

were false or misleading—were unchanged. Nevertheless, Thornton represented that he personally

“reread from a non-legal language standpoint and all business, market and organizational aspects

remain in-tact.”

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50. With the PPM in hand, Thornton made pitches to bigger, institutional clients. He

told them that “Madison Timber (Lamar Adams, President) is a very good client of ours” that “has

been vetted by several $1.5 billion family office(s) in Texas, encompassing a 75+ day due

diligence period [and] as you would imagine, Lamar passed with flying colors!” In fact, the two

“family offices” in Texas had chosen not to invest in Madison Timber.

51. One institutional client to whom Thornton pitched Madison Timber candidly

remarked that “First blush says there has been some inventory build over the last four years.” But

instead of addressing the question raised by the remark, Thornton continued his pitch: “‘Inventory

Build-Up’ . . . great question and one major topic we would like to discuss ‘face-to-face’ . . . we

believe Madison Timber’s business model, strategic partnerships and forward-thinking

supply/demand philosophy is a real differentiator.”

52. Thornton often emphasized non-disclosure agreements both to reinforce the

exclusivity of Madison Timber’s purported “strategic partnerships” and to justify Madison

Timber’s inability to provide requested information. He told one potential investor “we have had

entities sign NDA(s) prior to providing financial information . . . we certainly did this with the two

multi-billion $ family office entities in Dallas.” He told another potential investor, “As we

discussed extremely confidential information relative to Madison Timber’s relationships with

mills, financing structure and the like, we certainly appreciate very much your team’s treating

today’s discussion and information provided in the STRICTLY CONFIDENTIAL category under

the NDA umbrella.” These comments had the effect of impressing upon the potential investor that

Madison Timber represented a uniquely lucrative investment opportunity.

53. Thornton told yet another potential investor who asked about mill contracts:

“Lamar [Adams] has an extremely stringent NDA with his mill partners [and] due to this

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extremely stringent NDA, we have not shared any mill names/profiles with any potential investors

to date.” Of course, this representation was false because Adams did not have any “mill partners”

therefore there was no “extremely stringent NDA” and no “mill names/profiles” to share. But

Thornton went on:

Additionally, as the investor has a contract with Madison Timber (and NOT with
the mill directly) via promissory note issued from Madison Timber that has
assigned timber deed worth twice as much as their invested dollars. So, investors
would be looking to Madison Timber for payment (not the mill), and in the event of
a default by Lamar, the investors simply file the deed / resell the timber.

Thornton thus assured the potential investor that he should not worry about the mills, because his

contract would be with Madison Timber—a company backed by Butler Snow’s reputation.

54. Ultimately, no investor chose to invest in the fund for which the PPM had been

updated and through which Butler Snow and Adams had hoped to raise $100,000,000. But many

individuals and institutional clients to whom Thornton and Billings made a pitch did invest in

purported “standing tracts” only, and for each of these investments, Madison Timber delivered to

Butler Snow a “commission check.”

55. For all of these transactions, Thornton, Billings, and Butler Snow acted as

unlicensed brokers, in violation of federal and state law. A broker is “any person engaged in the

business of effecting transactions in securities for the account of others.” See Section 3(4) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78c. The S.E.C.’s public website states that the

receipt of transaction-related commissions is a key indicator that a broker must be registered.11 A

recent search using the Financial Industry Regulatory Authority’s public online BrokerCheck

confirms that neither Thornton, Billings, nor Butler Snow have ever registered with the S.E.C.

11
Guide to Broker-Dealer Registration, U.S. SECURITIES & EXCHANGE COMMISSION, [Link]
pubs/investor-publications/[Link].

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56. Butler Snow knew or should have known what it was doing was unlawful. Among

the notes in Butler Snow’s Madison Timber files is this comment from Don Cannada in 2009:

“Very broad definition of what a broker is . . . Includes one who for a commission procures a

purchaser or prospect etc. See 73-35-31 for penalties. Says you can’t pay an unlicensed broker,

but doesn’t provide any penalty if you do so.”

57. Investors might fairly question what Butler Snow did for them to earn their

commissions. The answer is not much. While they extolled Madison Timber’s “strategic

partnerships and forward-thinking supply/demand philosophy,” neither Thornton nor Billings, nor

anyone at Butler Snow, conducted an even cursory inspection of Madison Timber’s operations. If

they had, they would have been forced to face the reality that Madison Timber was nothing more

than a Ponzi scheme.

58. Instead, Butler Snow aided and abetted Madison Timber’s growth, lending Adams

and Madison Timber their influence, professional expertise, and clients. Butler Snow’s

imprimatur was powerful, and they knew it. They even agreed to serve as a “referral” for other

firms’ clients. In July 2013 “Baker Donelson” sought “a few referrals” to validate Madison

Timber. Thornton responded within minutes: “No problem by me – thanks!” Billings exclaimed:

“You are more than welcome to include me as a reference for anything at any time . . . highest

marks possible!!”

Red flags

59. Not only did Thornton, Billings, and Butler Snow broker Madison Timber

investments without a license and fail to independently confirm that the timber and rights in

question were real, they also recklessly ignored numerous red flags.

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60. Indeed, the timber deeds and cutting agreements between landowners and Madison

Timber were fake. The landowners’ signatures, forged by Adams, often looked the same. A call to

any one of the purported landowners, or a simple check of the title for any one of the purported

tracts of land, would have confirmed the truth. Neither Thornton nor Billings, nor anyone at Butler

Snow, ever called a landowner or checked a tract’s title.

61. Madison Timber also had no real contracts with any mills. A call to any one of the

mills for which Madison Timber purported to have contracts would have confirmed the truth.

Neither Thornton nor Billings, nor anyone at Butler Snow, ever called a mill. Worse, having

conducted no due diligence themselves, they falsely represented to potential investors that they

could not disclose Madison Timber’s “mill partners” due to an “extremely stringent NDA.”

62. Adams required that an investor agree that he or she would not record the deed by

which Madison Timber purported to grant its own rights to the investor unless and until Madison

Timber failed to make a payment due under the promissory note. Incredibly, notwithstanding the

suspicious “agreement not to record,” neither Thornton nor Billings, nor anyone at Butler Snow,

questioned this requirement.

63. The “profit” that Adams promised was 300% to 400% better than that payable by

any other fully collateralized investment and was uniform and consistent. This fact should have

been a glaring warning sign standing alone, particularly for individuals such as Thornton and

Billings who touted decades of business experience. It is all the more incredible that neither

Thornton nor Billings, nor anyone at Butler Snow, ever questioned it, given that the PPM drafted

by Butler Snow, which Thornton professed to have read, expressly disclosed the risk of “Timber

Price Volatility.”

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Another engagement

64. By December 2013 Adams had grown tired of paying Butler Snow Advisory the

monthly fee of $3,500 plus travel expenses. Separately Billings saw potential to make more money

recruiting new investors to Madison Timber fulltime. Adams and Billings informed Thornton that

they would “proceed on a direct basis,” meaning Billings would leave Butler Snow Advisory to

work for Adams fulltime, effective January 1, 2014. Thornton told Adams he had “thoroughly

enjoyed” Madison Timber” and to “please let me know if I or BSAS can ever be of service again.”

65. Butler Snow, however, did not cease servicing Adams. In 2015 Adams engaged

Butler Snow to assist Oxford Springs, LLC, of which he effectively was the managing member,

with “regulatory permitting and compliance matters.” Butler Snow thus continued to lend its

influence to Adams, this time with government bodies. Indeed, Butler Snow was still sending

invoices to Adams after Adams turned himself in.

66. Notwithstanding its attorney-client relationships with Adams and Madison Timber,

not to mention its own role in perpetuating the Ponzi scheme, after Adams turned himself in Butler

Snow purported to represent investors in their demands of Madison Timber. These investors were

led to believe that Butler Snow could and would represent their best interests. At the same time,

however, Butler Snow also purported to represent Billings—whose interests clearly were adverse

to investors.

67. On May 11, 2018, Butler Snow sent Adams a letter titled “Disengagement”

advising that “recent events” made it “appropriate for us to withdraw from the representation.”

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BAKER DONELSON

68. Adams and Madison Timber’s relationship with Baker Donelson began in 2011 and

continued until Adams turned himself in on April 19, 2018.

A joint venture

69. In 2011, Brent Alexander and Jon Seawright, a lawyer and lobbyist at the Baker

Donelson law firm in Jackson, were looking to start a new investment fund.

70. Alexander and Seawright made acquaintances with Adams and a partnership

quickly formed. Alexander and Seawright would create an LLC that would pool other people’s

money to invest in Madison Timber, and Adams would share the returns with Alexander and

Seawright. From Seawright’s perspective, it was “a virtually risk free deal”:

I feel pretty good about this . . . Please explain to me why this is not a virtually risk
free deal. There is no pricing risk – everything is tied down on the front end. The
only risk I see is (i) mill defaults, but you still own the land, (ii) Lamar is a fraud,
but no evidence of that, or (iii) such a fundamental collapse of the timber industry
that mill defaults and uncut timber is less than purchase price, but investor is
oversecured almost 2:1, so there would have to be catastrophic collapse. Jds

71. Alexander and Seawright saw a big opportunity in Madison Timber, but to raise

“significant capital” for Adams, they needed to do some “smaller investments to prove out the

income earning potential.” They pitched the first investment to a client of Baker Donelson.

Seawright told the client that Alexander and Seawright would be responsible for everything:

We would be responsible for papering everything, liaison with Lamar, monitoring

process of sale of timber, acquisition of timber rights, proper recording of
documents, etc., distribution of loan repayments and otherwise managing the
investment.

Seawright told the client that “[r]unning funds through us or BD [Baker Donelson] escrow is not a

problem,” and all “legal and other admin expenses” would “come out of our share.”

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72. Alexander and Seawright’s “share” would include a portion of each investment’s

return, what Adams called a “birddog fee.” Adams told Alexander and Seawright that he could

ensure a 14% “profit” with a 2% “birddog fee” built-in, but Alexander and Seawright could decide

“how you guys want the split done.”

73. Seawright proposed instead that each investment’s promissory note bear 13%

interest, of which investors would receive 10% and Alexander and Seawright would keep 3%.

Separately Alexander and Seawright negotiated an additional 3% commission for themselves. As

a result, Alexander and Seawright’s “share” of each investment’s return included the 3% they

disclosed to investors, plus an extra undisclosed 3% that Adams paid them directly.

74. Seawright drafted subscription agreements and accompanying documents for the

sales of units in what was then called Alewright Investments, LLC, later renamed Alexander

Seawright Timber Fund I, LLC. From 2011 until April 2018, Alexander and Seawright used their

fund to invest other people’s money in Madison Timber and split the “profits” with Adams.

The pitch

75. Throughout this time period Alexander and Seawright pitched their fund to

potential investors, including Baker Donelson clients, as an exclusive “friends and family” fund.

Alexander often used the phrase “simple, elegant and profitable” to describe the fund. He told

investors that “we are in it”— a lie; neither Alexander nor Seawright invested their own money in

the fund—“our neighbors, lots of physicians, many of the attorneys at Baker Donelson and other

firms, a United States Senator etc.”

76. Alexander was a persistent salesman. His pitch varied slightly depending on his

audience—for some investors the minimum was $25,000; for others, $50,000—but he always

promised a “rock stable” and “oversecured” 10% return, in a fund “safe enough for friends and

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family.” If an investor said he could invest “either 25k or 30,” Alexander responded “$50k would

be better for you . . . The more you get in circulation, the more you can compound each quarter.”

77. If a potential investor was noncommittal Alexander applied pressure. He told

investors the fund “sells out quick” and “is moving fast.” To one such person he texted: “[You]

need to invest in the timber fund. We have figured the math and can get you 14 percent fully

secured if you reinvest your principle [sic] and interest every quarter. It compounds like you

would not believe,” followed by, “Are you going to invest in this timber round? You need to put

your money to work. No pressure at all, just smart advice in this climate.”

78. Alexander and Seawright specifically targeted individuals who had recently sold

assets because they knew those individuals had money to invest. Such individuals included clients

for whom Baker Donelson had recently closed transactions.

Backed by Baker Donelson

79. Investors reasonably believed that their investment in Madison Timber, through

Alexander Seawright Timber Fund I, LLC, was backed and promoted by, and had been vetted by,

Baker Donelson.

80. Alexander and Seawright relied heavily on their affiliation with Baker Donelson in

securing investments. Alexander and Seawright described the fund to potential investors who were

clients of Baker Donelson as a fund for preferred Baker Donelson clients and partners.

81. Alexander and Seawright referred potential investors to Baker Donelson’s website,

which shows that Jon Seawright is not merely a shareholder in Baker Donelson’s Jackson office

but an elected member of the firm’s national governing Board of Directors. Baker Donelson is a

law firm, not an investment advisory firm, but its website touts Jon Seawright’s advanced degree

in taxation and “extensive experience” in business development and capital formation. Its website

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presents Brent Alexander as a “Senior Public Policy Advisor” who is qualified by regulators to

serve as a principal in, or advisor to, hedge funds and who has a “rapidly growing” practice in

“advising venture capital and related investors.”

82. Baker Donelson knew Alexander and Seawright relied on their affiliation with

Baker Donelson in securing investments and allowed it.

83. Alexander and Seawright used Baker Donelson’s Jackson office’s address for

official business. They and Adams held “closings” at Baker Donelson’s Jackson office. They used

Baker Donelson’s runners to pick up investors’ checks.

84. Alexander and Seawright enlisted their colleagues at Baker Donelson, including in

offices in other states, to introduce them to potential investors. They asked their colleagues to

“[h]elp us get a meeting if you’re able,” adding “[i]f you can get us in the door, it would mean a

great deal.” Their colleagues obliged.

Easy money

85. Investors were led to believe that they could rely on Alexander and Seawright to

evaluate each investment using their professional expertise and judgment, which was backed by

Baker Donelson’s reputation. In fact Alexander and Seawright undertook no meaningful

evaluation of the investments they pushed on unwitting persons, including Baker Donelson’s

clients. At the beginning of their partnership with Adams, Seawright asked questions such as

“Who bears the loss with respect to the destruction of timber? For example, if there is fire, beetles,

hurricane, whatever, who is on the hook? Is it an insured risk?” But he accepted Adams’s answers

to his questions without follow-up. Adams told Seawright that Madison Timber had “umbrella

[insurance] on all tracts” (he added, “Expensive, don’t need it but have it”). Seawright never asked

to inspect the insurance, which did not exist.

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86. Investors were led to believe that Alexander and Seawright personally inspected

the timber underlying each investment. Of course they did not. Alexander and Seawright gave

investors “Equity Term Sheets” that described each upcoming investment opportunity. An

“Equity Term Sheet” dated March 5, 2017, for instance, explained that for the “minimum

investment” of $25,000, an investor would share in the “cutting rights on tracts of land in various

counties (the ‘Timber Rights’).” Like all of Alexander and Seawright’s “Equity Term Sheets,” the

“Equity Term Sheet” dated March 5, 2017, expressly represented that Alexander and Seawright

would personally inspect the property in question:

Company [Alexander and Seawright] will inspect the property related to the
Timber Rights, must receive the original, executed Note and timber deed and will
inspect the executed agreement(s) with the timber mill(s).

Alexander and Seawright could not and did not inspect the property in question—nor “the

executed agreement(s) with the timber mill(s)”—because such did not exist. These representations

were patently false.

87. Alexander and Seawright even devised a “Timber Rights Investment Closing

Checklist” that included among its list of things to do “Review Mill Contract” and “Review Land

re Timber.” Alexander and Seawright could not and did not review any “Mill Contract” or “Land

re Timber” because there was no “Mill Contract” or “Land re Timber” to review.

88. On information and belief, Alexander and Seawright “inspected” a purported

timber tract only once or twice, at the very inception of their partnership with Adams. The

“inspection” was hardly professional. Email traffic indicates “inspection” meant “[grab] a cooler

of beer and make a loop.”

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89. Between 2011 and April 2018, Alexander and Seawright withdrew over $980,000

from the Alexander Seawright Timber Fund I, representing their “shares” of investors’ returns. In

addition Adams separately paid them over $600,000 representing undisclosed “birddog fees.”

90. On information and belief, Adams also sometimes paid Alexander and Seawright

bonuses, including Christmas bonuses in cash that he had delivered to Alexander and Seawright at

their Baker Donelson office.

91. For all this time, Alexander and Seawright acted as unlicensed brokers, in violation

of federal and state law. A broker is “any person engaged in the business of effecting transactions

in securities for the account of others.” See Section 3(4) of the Securities Exchange Act of 1934, 15

U.S.C. § 78c. The S.E.C.’s public website states that the receipt of transaction-related

commissions is a key indicator that a broker must be registered.12 A recent search using the

Financial Industry Regulatory Authority’s public online BrokerCheck confirms that neither

Alexander nor Seawright have ever registered with the S.E.C.

92. Investors might fairly question what Alexander and Seawright did to investigate the

investment. The reality is not much. In October 2017, Alexander bragged to a potential investor

that “to our surprise, we have now financed the purchase of about $60 million in timber . . . It has

worked so well that we simply send out an email on the 15th of each month and some hours later

have collected the investment we need for the next round.”

93. Neither Alexander nor Seawright, nor anyone at Baker Donelson, conducted an

even cursory inspection of Madison Timber’s operations. If they had, they would have realized

what should have been obvious—that the money was too good to be true because Madison Timber

12
Guide to Broker-Dealer Registration, U.S. SECURITIES & EXCHANGE COMMISSION [Link]
pubs/investor-publications/[Link]

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was nothing more than a Ponzi scheme. Instead, they aided and abetted Madison Timber’s growth,

providing Adams and Madison Timber their influence and their clients.

Red flags

94. Not only did Alexander and Seawright and Baker Donelson fail to independently

confirm that the timber and rights in question were real, they recklessly ignored numerous red

flags.

95. The timber deeds and cutting agreements between landowners and Madison

Timber were fake. The landowners’ signatures, forged by Adams, often looked the same. A call to

any one of the hundreds of purported landowners, or a simple check of the title for any one of the

hundreds of purported tracts of land, would have confirmed the truth. Neither Alexander nor

Seawright, nor anyone at Baker Donelson, ever called a landowner or checked a tract’s title.

96. Madison Timber also had no real contracts with any mills. A call to any one of the

mills for which Madison Timber purported to have contracts would have confirmed the truth.

Neither Alexander nor Seawright, nor anyone at Baker Donelson, ever called a mill.

97. Adams required that an investor agree that he or she would not record the deed by

which Madison Timber purported to grant its own rights to the investor unless and until Madison

Timber failed to make a payment due under the promissory note. Seawright quipped that “I have

been clear that I am no timber expert”—but he is unquestionably a lawyer to whom his clients and

investors looked to evaluate the investment’s risks. Incredibly, notwithstanding the suspicious

“agreement not to record,” neither Alexander nor Seawright, nor anyone at Baker Donelson,

questioned this requirement.

98. The “profit” that Adams promised was 300% to 400% better than that payable by

any other fully collateralized investment and was uniform and consistent. This fact should have

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been a glaring warning sign but Alexander, who Baker Donelson presents as a qualified and

experienced advisor, turned this warning sign into a selling point. Alexander bragged about his

“six year perfect track record” of consistent uniform returns under his “beautiful, albeit simple,

financial model.”

99. Adams purported to have identified mills with an insatiable demand for timber at

uniform prices. The market price for timber is readily available from multiple sources, and any one

of those sources would have confirmed that the market price for timber actually rises and falls,

sometimes dramatically, over short periods of time. Neither Alexander nor Seawright, nor anyone

at Baker Donelson, ever evaluated the investment in light of such information. To the contrary,

Seawright gloated that “[Adams] has stated that volume is not problem and indicates there are

enough opportunities for him to soak up as much capital as we can raise.”

100. In 2014 Adams decided that he did not want to have to manage Madison Timber

during the month of December. He told his “bird dogs,” including Alexander and Seawright, that

Madison Timber would not issue checks in December going forward; what had been a 12-month

payoff would become a 13-month payoff, skipping the last month of the year. Seawright blindly

passed on to investors the dubious explanation that mills shut down in December for OSHA

inspections:

In December 2014, we were notified that the mills intended to shut down
operations in December to allow a break for the holidays and complete OSHA
required inspections. With their operations down, they requested that no payment
be made in December. The broker we worked with agreed to this, but on the
condition that the interest rate is increased by 1%, which they agreed to. This
increase is passed on to investors, so now all rounds pay out in 12 payments over 13
months, with a total interest of 13%. The result is the annual effective interest rate
increased to 10.15%, so while the payments are stretched out by a month, the
interest rate is better.

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Neither Alexander nor Seawright, nor anyone at Baker Donelson, did anything to verify this false

information.

Alexander Seawright Timber Fund II

101. In 2015 Alexander and Seawright had an idea. They had been making monthly

investments with Adams of between $100,000 and $500,000 using other people’s money.

Alexander proposed that “[we] systemize this a little and take it to the next level.” Over the next

two years Alexander and Seawright would brainstorm a new model that could make Alexander

and Seawright rich. Alexander estimated that if a fund put $1 million in Madison Timber and then

reinvested the principal and interest each month for ten years it would make $17 to $18 million.

What if the fund put $10 million in?

102. The idea consumed Alexander. He texted Seawright, “Woke at [sic] at 2 thinking

about the structure of the timber pool. We pull this off, we get rich.” Using Baker Donelson’s

conference rooms and resources, he hosted meetings with and made presentations to accountants,

investors, and advisors to push his idea and debate the merits of a five-year versus ten-year model.

He reported the models gave people “much more level headed” than he “an orgasm as to its

potential.” Fearing that “now that they have seen up our skirts” people will “try to cut us out,” he

had prospective partners execute a non-disclosure agreement that Seawright drafted.

103. Alexander and Seawright gave their new model a new company and named it

Alexander Seawright Timber Fund II, LLC. They made a pitchbook for prospective investors. As

always, in it they emphasized their affiliation with Baker Donelson:

Brent Alexander is a senior public policy advisor at Baker, Donelson, Bearman,

Caldwell and Berkowitz (“Baker Donelson”) one of the nation’s largest law firms.
He provides strategic business consulting for the firm’s clients and serves as a
national recognized lobbyist both regionally and federally. . . .

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Jon Seawright is a senior shareholder at Baker Donelson and a member of the

firm’s Board of Directors. Seawright has been deemed by peer-reviewed Super
Lawyers as a Rising Star, as well as one of the nation’s top attorneys, and represents
a range of national and regional clients, specializing in complex business
transactions, mergers and acquisitions and taxation. . . .

104. The 15-page pitchbook extolled the “elegant, simple and highly profitable” model

by which Alexander and Seawright had already “invest[ed] more than $20 million to facilitate the

purchase of over $50 million in timber.” The pitchbook falsely represented that an investment

would be “over-secured” and the timber would be “insured.” The pitchbook called the opportunity

to compound both principal and interest in the new fund “a nice trick indeed”:

Similar in almost all respects in operation to Alexander Seawright Timber Fund I,

Alexander Seawright Timber Fund II will use a pool of dedicated funds to allow
Alexander Seawright, not individual investors, the authority to systematically
control the reinvestment of all of the returned principal and interest in each
subsequent round of the fund. This will dramatically increase returns without
increasing risk.
On a fully secured investment.
This is a nice trick indeed.

105. The feedback was not all good. One prospective investor observed that Alexander

and Seawright could count “the respect we have for Baker” “to the good”—but the investment

presented at least ten concrete concerns, the first of which he called the “John Grisham novel

problem”:

To the concerning . . .
1. The structure seems very difficult – bordering on uninvestable in its current form
– for institutional managers, which is to say those managing money for others. Were
this to go bad in any way, there’s a beginning to a John Grisham novel problem here:
two lawyers drove up from Jackson, MS, to Memphis, TN, to pitch yield hungry
investors on a double digit, nearly riskless opportunity. The opportunity was
unaudited, and the lawyers did the tax work. . . .

But Alexander brushed off the criticism. (“I’m not sure he is a particularly artful or cogent writer,”

he told Seawright.)

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106. The same prospective investor questioned why Alexander and Seawright

themselves were not invested in their own fund. “Your interest in the incentive is noteworthy, but,

it is derived from sweat, not money you stand to lose,” he wrote. Alexander replied, “We do have

skin in the game, at least in the way we characterize it”:

We do have skin in the game, at least in the way we characterize it, in that we have
fronted the expenses for the design, implementation, operation and management of
Alexander Timber Fund I, with little direct compensation because we knew that if
we were successful in building a track record, the opportunity to create a larger fund
would follow. . . . [O]ur incentives under this model are perfectly aligned with our
investors. If they don’t make money, we really don’t make money. That’s about the
best we can do.

What Alexander’s reply did not acknowledge was the obvious: Investors stood to lose their own

money, but Alexander and Seawright did not.

107. The same prospective investor pressed Alexander and Seawright on the question of

“margin”—that is, how did their broker (Adams) guarantee such uniform and consistent profits?

He asked “what are we missing to understand here that a broker exists which [sic] such large

spreads/ margins?”:

Gents – in doing some research on this strategy, I spoke to a friend who is more
familiar with timber. I described the model this opportunity works under, which
was foreign to him. What he is used to seeing is the forester working as an agent of
the landowner, where the forester is incented by receiving (if they are really good)
5-10% of the sales price. In this model, the forester markets the timber directly to
the mills and, in some cases, literally opens the bids up in front of everyone. Both
the concept of a broker and the 30ish % margins discussed seemed unfamiliar (and
this is a very experienced guy).

Notwithstanding this meaningful input, neither Alexander nor Seawright, nor anyone at Baker

Donelson, did anything to slow things down, nor even made a cursory analysis of their and

Adams’s business.

108. Instead Alexander and Seawright speeded things up with more forceful

presentations. They now argued Alexander Seawright Timber Fund II, LLC was for investors

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“with brains and balls.” Meanwhile they continued to invest other people’s money in Alexander

Seawright Timber Fund I, LLC.

109. In late 2017, Alexander and Seawright finally secured a “key investor” to “seed”

Alexander Seawright Timber Fund II, LLC with $6 million. Alexander wanted $12 million to start

but figured he would raise the remaining $6 million by “bootstrapping.” Eventually he hoped “to

raise an additional $36 [million] over the life of the fund and let it roll for ten years.”

110. The “key investor” was a Baker Donelson client who would fund his investment

with the proceeds from the sale of a major asset. Seawright represented him in the sale. Alexander

told him, “I think you know us well enough to trust us, and if anything were ever go wrong, the

fund would simply unwind, at a profit.” He continued:

As you know, we are extremely confident in the model which is why we are
investing and reinvesting our earnings along with you under the same conditions.
Every deal has risk, but the only way that the numbers would be affected would be
if we for some reason could not close the rounds on a monthly basis (and I am very
confident we will). . . .

The purchase from the timber owner and the sale to the mill are executed
simultaneously Remember on the sale, we are over-secured by 50 percent. We put
up half the money, but have rights to the entire tract of timber. So, that gives us a
lot of margin to sell to someone else should there be a default. We have never
experienced a default, but we have a lot of wiggle room should one occur.

111. Anticipating their launch, Alexander and Seawright opened a new bank account for

Alexander Seawright Timber Fund II, LLC. Alexander wrote Adams to advise that starting May 1,

2018, they would “start deploying at $1 million a month beginning May 1”:

[W]e have a signed commitment for $6 million that we plan to start deploying at $1
million a month beginning May 1. . . . [I]t is safe to assume that we will invest $1
million an month increasing to $1.5 million a month. . . . Also, this investment,
which will be made under Alexander Seawright Timber Fund II, will be in addition
to the on-going investment in Alexander Seawright Timber Fund I, so plan on an
average of about $350,000 -$500,000 per month in Alexander Seawright Timber
Fund I. We are excited about the opportunity to provide a regular, consistent and

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predictable volume of capital to your company and look forward to growing in

cooperation with you over the next 5 years.

112. Just days before Alexander and Seawright would have deployed their “key

investor” and client’s money, Adams turned himself in. As news spread, the investor sought

information from Alexander. Alexander told the investor that Alexander and Seawright were

victims:

Investor: How did you get hooked with him?

Alexander: My clients are hanging with me. They know I am a victim.
Investor: To think I was almost out of my entire life earnings makes me shiver
Alexander: Everyone knew him. Country club fixture.
Alexander: Would not let you lose your savings.
Investor: Man it was close . . . a day or two . . .
***
Alexander: To be clear, Jon and I were the victims of fraud.

CAUSES OF ACTION
COUNT I
FOR CIVIL CONSPIRACY
AGAINST ALL DEFENDANTS

113. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

114. Mississippi law defines a civil conspiracy as a “combination of persons for the

purpose of accomplishing an unlawful purpose or a lawful purpose unlawfully.” Shaw v.

Burchfield, 481 So. 2d 247, 255 (Miss. 1985).

115. Defendants conspired with Adams to commit the tortious acts alleged in this

complaint.

116. Defendants agreed to assist Adams by recruiting new investors to Madison Timber.

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117. Madison Timber was a Ponzi scheme; therefore Defendants and Adams’s purpose

was unlawful.

118. In addition, Defendants acted unlawfully. Defendants were unlicensed brokers of

securities, in violation of federal and state law. The securities that Defendants sold were not

exempt from registration but were unregistered, in violation of federal and state law.

119. In furtherance of their unlawful purpose, among other overt acts, Defendants

pitched Madison Timber to potential investors, including their clients; consummated sales of

Madison Timber to investors; and received commissions from Adams for their assistance in

growing Madison Timber’s business.

120. Defendants need not have known that Madison Timber was a Ponzi scheme to

unlawfully conspire with Adams. Nevertheless, in view of the numerous red flags described in this

complaint, Defendants knew or should have known that Madison Timber was a Ponzi scheme.

121. Numerous red flags notwithstanding, Defendants lent their influence, their

professional expertise, and even their clients to Adams. They made a fraudulent enterprise a

fraternity. Madison Timber grew from an approximately $10 million-a-year Ponzi scheme in 2011

to an approximately $164.5 million-a-year Ponzi scheme as of April 19, 2018.

122. Defendants were essential to the growth of the Madison Timber Ponzi scheme. But

for Defendants’ encouragement and assistance, Madison Timber would not have continuously

grown—it would have failed before ensnaring hundreds of new unwitting investors.

123. Defendants contributed to Madison Timber’s success over time, and therefore to

the Receivership Estate’s liabilities today. Defendants and Adams’s civil conspiracy is a

proximate cause of the debts of the Receivership Estate.

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124. Defendants are jointly and severally liable for the debts of the Receivership Estate,

which their and Adams’s civil conspiracy proximately caused.

125. Because Defendants acted with reckless disregard of the wellbeing of others, and in

specific instances described in this complaint committed actual fraud, punitive damages are

appropriate.

COUNT II
FOR AIDING AND ABETTING
AGAINST ALL DEFENDANTS

126. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

127. The Restatement (Second) of Torts § 876(b) (1979) provides that a defendant is

liable if he “knows that the other’s conduct constitutes a breach of duty and gives substantial

assistance or encouragement to the other so to conduct himself.” Stated differently, a defendant is

liable for aiding and abetting the wrongful conduct of another.

128. Defendants aided and abetted Adams in committing breaches of duties owed by

Adams to Madison Timber and in other tortious conduct alleged in this complaint.

129. In view of the numerous red flags described in this complaint, Defendants knew or

should have known that Madison Timber was a Ponzi scheme.

130. Numerous red flags notwithstanding, Defendants gave substantial assistance and

encouragement to Adams. Defendants lent their influence, their professional expertise, and even

their clients to Adams. They made a fraudulent enterprise a fraternity. Madison Timber grew from

an approximately $10 million-a-year Ponzi scheme in 2011 to an approximately $164.5

million-a-year Ponzi scheme as of April 19, 2018.

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131. Defendants were essential to the growth of the Madison Timber Ponzi scheme. But

for Defendants’ substantial assistance and encouragement, Madison Timber would not have

continuously grown—it would have failed before ensnaring hundreds of new unwitting investors.

132. Defendants contributed to Madison Timber’s success over time, and therefore to

the Receivership Estate’s liabilities today. Defendants’ substantial assistance and encouragement

is a proximate cause of the debts of the Receivership Estate.

133. Defendants are jointly and severally liable for the debts of the Receivership Estate,

which their substantial assistance and encouragement proximately caused.

134. Because Defendants acted with reckless disregard of the wellbeing of others, and in

specific instances described in this complaint committed actual fraud, punitive damages are

appropriate.

COUNT III
FOR RECKLESSNESS, GROSS NEGLIGENCE, AND AT A MINIMUM NEGLIGENCE
AGAINST ALL DEFENDANTS

135. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

136. “Negligence is a failure to do what the reasonable person would do under the same

or similar circumstances.” Estate of St. Martin v. Hixson, 145 So. 3d 1124, 1128 (Miss. 2014).

137. While negligence is the failure to exercise due care, recklessness “is a failure or

refusal to exercise any care.” Maldonado v. Kelly, 768 So. 2d 906, 910 (Miss. 2000).

138. Defendants were in advantageous positions to discover Adams’s fraud. In view of

the numerous red flags described in this complaint, a reasonable person in the same or similar

circumstances would have discovered Adams’s fraud.

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139. Defendants not only failed to exercise due care, they failed or refused to exercise

any care at all in their dealings with Adams.

140. Defendants’ recklessness, or at a minimum negligence, allowed Madison Timber to

continuously grow. Madison Timber grew from an approximately $10 million-a-year Ponzi

scheme in 2011 to an approximately $164.5 million-a-year Ponzi scheme as of April 19, 2018.

141. But for Defendants’ recklessness, or at a minimum negligence, Madison Timber

would not have continuously grown—it would have failed before ensnaring hundreds of new

unwitting investors.

142. Defendants by their recklessness, or at a minimum negligence, contributed to

Madison Timber’s success over time, and therefore to the Receivership Estate’s liabilities today.

Defendants’ recklessness, or at a minimum negligence, is a proximate cause of the debts of the

Receivership Estate.

143. Defendants are liable for the debts of the Receivership Estate, which their

recklessness, or at a minimum negligence, proximately caused.

144. Because Defendants acted with gross negligence evincing a reckless disregard of

the wellbeing of others, punitive damages are appropriate.

COUNT IV
FOR VIOLATIONS OF MISSISSIPPI’S FRAUDULENT TRANSFER ACT
AGAINST BUTLER SNOW ADVISORY, THORNTON,
ALEXANDER SEAWRIGHT, ALEXANDER, AND SEAWRIGHT

145. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

146. The Receiver may avoid any transfer made in violation of the Mississippi Uniform

Fraudulent Transfer Act (the “Act”), MISS. CODE ANN. §15-3-101, et seq.

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147. Pursuant to § 107 of the Act, the Receiver may recover from any party any funds

that Madison Timber transferred with the actual intent to hinder, delay, or defraud any of its

creditors. Because Madison Timber was a Ponzi scheme, by definition all transfers by Madison

Timber were made with the actual intent to hinder, delay, or defraud its creditors.

148. The Receiver is entitled to avoid all “commissions,” fees, and other such payments

paid by Adams or Madison Timber to Defendants Butler Snow Advisory, Thornton, Alexander

Seawright, Alexander, and Seawright, and to the entry of a judgment against Defendants Butler

Snow Advisory, Thornton, Alexander Seawright, Alexander, and Seawright for the amount of all

such monies received by them.

149. Alternatively, the Receiver is entitled to recover all monies paid to Defendants

Butler Snow Advisory, Thornton, Alexander Seawright, Alexander, and Seawright because

(i) Madison Timber was insolvent when it paid those commissions because its net liabilities far

exceeded the value of its (nonexistent) assets and (ii) Madison Timber received no value for the

commissions paid to Defendants Butler Snow Advisory, Thornton, Alexander Seawright,

Alexander, and Seawright.

COUNT V
FOR VIOLATIONS OF MISSISSIPPI’S RACKETEER INFLUENCED
AND CORRUPT ORGANIZATION ACT
AGAINST BUTLER SNOW ADVISORY, THORNTON,
ALEXANDER SEAWRIGHT, ALEXANDER, AND SEAWRIGHT

150. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

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151. Mississippi’s RICO statute provides: “It shall be unlawful for any person to

conduct, organize, supervise or manage, directly or indirectly, an organized theft or fraud

enterprise.” MISS. CODE ANN. § 97-43-3.1.

152. Madison Timber was a “fraud enterprise” within the meaning of Mississippi’s

RICO statute because “fraud enterprise” includes one conducted by “mail or other means of

communication,” MISS. CODE ANN. § 97-43-3.1, and Adams was convicted of wire fraud.

153. Mississippi’s RICO statute further provides: “It is unlawful for any person

employed by, or associated with, any enterprise to conduct or participate, directly or indirectly, in

such enterprise through a pattern of racketeering activity. . . .” MISS. CODE ANN. § 97-43-5

(emphasis added). “‘Racketeering activity’ means to commit, to attempt to commit, to conspire to

commit . . . any crime which is chargeable under [Mississippi’s RICO statute],” MISS. CODE ANN.

§ 97-43-3, including wire fraud.

154. Defendants Butler Snow Advisory, Thornton, Alexander Seawright, Alexander,

and Seawright participated, directly or indirectly, in the Madison Timber “fraud enterprise.”

155. Their participation allowed the Madison Timber “fraud enterprise” to continuously

grow. Madison Timber grew from an approximately $10 million-a-year Ponzi scheme in 2011 to

an approximately $164.5 million-a-year Ponzi scheme as of April 19, 2018.

156. But for their participation, the Madison Timber “fraud enterprise” would not have

continuously grown—it would have failed before ensnaring hundreds of new unwitting investors.

157. By their participation, they contributed to Madison Timber’s success over time, and

therefore to the Receivership Estate’s liabilities today. Their participation is a proximate cause of

the debts of the Receivership Estate.

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158. Defendants Butler Snow Advisory, Thornton, Alexander Seawright, Alexander,

and Seawright therefore are liable for “threefold the actual damages sustained” by the

Receivership Estate, punitive damages, and attorneys’ fees.

COUNT VI
FOR JOINT VENTURE LIABILITY
AGAINST ALEXANDER SEAWRIGHT, ALEXANDER, AND SEAWRIGHT

159. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

160. “[A] joint venture can be defined as a single purpose partnership.” Duggins v.

Guardianship of Washington ex rel. Huntley, 632 So. 2d 420, 427 (Miss. 1993). “Profit sharing is

the most important factor in determining whether a joint venture exists.” Walker v. Williamson,

131 F. Supp. 3d 580, 591 (S.D. Miss. 2015). “Where a joint venture exists, its members are bound

by the acts of the other members acting in the course and scope of the joint venture.” Braddock

Law Firm, PLLC v. Becnel, 949 So. 2d 38, 50 (Miss. Ct. App. 2006).

161. Defendants Alexander Seawright, Alexander, and Seawright formed a joint venture

with Adams and Madison Timber, as evidenced by their stated intent to form a fund to invest other

people’s money in Madison Timber and to split the “profits” with Adams.

162. Defendants Alexander Seawright, Alexander, and Seawright did invest other

people’s money in Madison Timber and did split the “profits” with Adams.

163. As Adams and Madison Timber’s joint venturers, Defendants Alexander

Seawright, Alexander, and Seawright are liable for debts incurred within the scope of their joint

venture, which was still ongoing on April 19, 2018, the date Adams turned himself in.

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164. Defendants Alexander Seawright, Alexander, and Seawright therefore are jointly

and severally liable for the debts of the Receivership Estate.

COUNT VII
FOR ATTORNEY MALPRACTICE
AGAINST BUTLER SNOW

165. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

166. “Lawyers owe their clients a duty to protect them from liability in every possible

way.” Official Stanford Inv’rs Comm. v. Greenberg Traurig, LLP, No. 3:12-cv-4641, 2014 WL

12572881, *3 (N.D. Tex. Dec. 17, 2014).

167. Adams and Madison Timber had a lawyer-client relationship with Defendant

Butler Snow. Adams twice engaged Defendant Butler Snow to draft a private placement

memorandum, or PPM, for Madison Timber.

168. The PPMs drafted by Defendant Butler Snow contained numerous false and

misleading statements, including but not limited to those described in this complaint, regarding

Madison Timber’s “Business Strategy” and “Timber Investment Risks.”

169. In view of the numerous red flags described in this complaint, a reasonable lawyer

in the same or similar circumstances would have discovered Adams’s fraud.

170. Defendant Butler Snow not only failed to exercise due care, it failed or refused to

exercise any care at all in its dealings with Adams. Defendant Butler Snow was not merely

negligent, but reckless, in its handling of legal affairs to which it was entrusted.

171. Although no investor chose to invest in the funds for which the PPMs were drafted,

many relied on the PPMs in choosing to invest in purported “standing tracts” only.

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172. Defendant Butler Snow’s recklessness, or at a minimum negligence, allowed

Madison Timber to continuously grow. Madison Timber grew from an approximately $10

million-a-year Ponzi scheme in 2011 to an approximately $164.5 million-a-year Ponzi scheme as

of April 19, 2018.

173. But for Defendant Butler Snow’s recklessness, or at a minimum negligence,

Madison Timber would not have continuously grown—it would have failed before ensnaring

hundreds of new unwitting investors.

174. Defendant Butler Snow by its recklessness, or at a minimum negligence,

contributed to Madison Timber’s success over time, and therefore to the Receivership Estate’s

liabilities today. Defendant Butler Snow’s recklessness, or at a minimum negligence, is a

proximate cause of the debts of the Receivership Estate.

175. Defendant Butler Snow is liable for the debts of the Receivership Estate, which its

recklessness, or at a minimum negligence, proximately caused.

176. Because Defendant Butler Snow acted with gross negligence evincing a reckless

disregard of the wellbeing of others, punitive damages are appropriate.

COUNT VIII
FOR NEGLIGENT RETENTION AND SUPERVISION
AGAINST BUTLER SNOW AND BAKER DONELSON

177. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

178. “[A]n employer will be liable for negligent hiring or retention of his employee

when an employee injures a third party if the employer knew or should have known of the

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employee’s incompetence or unfitness.” Backstrom v. Briar Hill Baptist Church, Inc., 184 So. 3d

323, 327 (Miss. Ct. App. 2016).

179. Agents of Defendants Butler Snow and Baker Donelson agreed to assist Adams by

recruiting new investors to Madison Timber, thereby acting as unlicensed brokers of securities, in

violation of federal and state law.

180. In view of the numerous red flags described in this complaint, Defendants Butler

Snow and Baker Donelson knew or should have known of their agents’ incompetence or unfitness.

181. Defendants Butler Snow and Baker Donelson were reckless, or at a minimum

negligent, in retaining their agents and failing to supervise their agents’ dealings.

182. Defendants Butler Snow and Baker Donelson’s recklessness, or at a minimum

negligence, allowed Madison Timber to continuously grow. Madison Timber grew from an

approximately $10 million Ponzi scheme in 2011 to an approximately $164.5 million Ponzi

scheme on April 19, 2018.

183. But for Defendants Butler Snow and Baker Donelson’s recklessness, or at a

minimum negligence, Madison Timber would not have continuously grown—it would have failed

before ensnaring hundreds of new unwitting investors.

184. Defendants Butler Snow and Baker Donelson, by their recklessness, or at a

minimum negligence, contributed to Madison Timber’s success over time, and therefore to the

Receivership Estate’s liabilities today. Defendants Butler Snow and Baker Donelson’s

recklessness, or at a minimum negligence, is a proximate cause of the debts of the Receivership

Estate.

185. Defendants Butler Snow and Baker Donelson are liable for the debts of the

Receivership Estate, which their recklessness, or at a minimum negligence, proximately caused.

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186. Because Defendants Butler Snow and Baker Donelson acted with gross negligence

evincing a reckless disregard of the wellbeing of others, punitive damages are appropriate.

LIABILITY OF BUTLER SNOW

FOR BUTLER SNOW ADVISORY

187. Defendant Butler Snow is liable for the acts of Butler Snow Advisory, and

therefore the acts of Thornton and Billings, because Defendant Butler Snow authorized or directed

those acts; had knowledge of, or gave consent to, those acts; or acquiesced in those acts when it

knew or should have known that it should have taken steps to prevent them.

188. Defendant Butler Snow is liable for the acts of Butler Snow Advisory because the

two effectively operate as a single business enterprise, and Butler Snow and Butler Snow Advisory

are alter egos.

189. The Receiver is entitled to a declaratory judgment holding, inter alia, that

Defendant Butler Snow is liable for payment of all damages or other relief awarded in favor of the

Receiver and against Defendant Butler Snow Advisory.

LIABILITY OF ALEXANDER AND SEAWRIGHT

FOR ALEXANDER SEAWRIGHT

190. Defendants Alexander and Seawright are liable for the acts of Alexander Seawright

because they authorized or directed all acts of Alexander Seawright.

191. Defendants Alexander and Seawright are liable for the acts of Alexander Seawright

because the three are alter egos.

192. The Receiver is entitled to a declaratory judgment holding, inter alia, that

Defendants Alexander and Seawright are personally liable for payment of all damages or other

relief awarded in favor of the Receiver and against Defendant Alexander Seawright.

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BUTLER SNOW’S AND BAKER DONELSON’S VICARIOUS LIABILITY

193. The apparent backing of Defendants Butler Snow and Baker Donelson enabled

Thornton and Billings, and separately Alexander and Seawright, respectively, to recruit new

investors to Madison Timber. Defendants Butler Snow and Baker Donelson are liable for the

negligent and reckless acts of their agents, including but not limited to Thornton and Billings, and

Alexander and Seawright, respectively.

194. The Receiver is entitled to a declaratory judgment holding, inter alia, that

Defendant Butler Snow is liable for payment of all damages or other relief awarded in favor of the

Receiver and against Defendants Butler Snow Advisory and Thornton, and that Defendant Baker

Donelson is liable for payment of all damages or other relief awarded in favor of the Receiver and

against Defendants Alexander and Seawright.

___________________

WHEREFORE, the Receiver respectfully requests that, after due proceedings, the Court

enter judgments:

1. awarding damages in her favor and against Butler Snow LLP;

Butler Snow Advisory Services, LLC; Matt Thornton; Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC; Alexander
Seawright, LLC; Brent Alexander; and Jon Seawright, jointly
and severally;

2. awarding any and all attorney’s fees, costs, and interest

allowed by contract or law; and

3. awarding any and all other relief as may be just and equitable.

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December 19, 2018

Respectfully submitted,

/s/ Lilli Evans Bass /s/ Brent B. Barriere

BROWN BASS & JETER, PLLC FISHMAN HAYGOOD, LLP
Lilli Evans Bass, Miss. Bar No. 102896 Admission pro hac vice pending
LaToya T. Jeter, Miss. Bar No. 102213 Brent B. Barriere, Primary Counsel
1755 Lelia Drive, Suite 400 Jason W. Burge
Jackson, Mississippi 39216 Kristen D. Amond
Tel: 601-487-8448 Rebekka C. Veith
Fax: 601-510-9934 201 St. Charles Avenue, Suite 4600
bass@[Link] New Orleans, Louisiana 70170
Receiver’s counsel Tel: 504-586-5253
Fax: 504-586-5250
bbarriere@[Link]
jburge@[Link]
kamond@[Link]
rveith@[Link]
Receiver’s counsel

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