One-time colleagues will testify against former company head in S.C. suit

John O'Brien May 5, 2008, 2:37pm



COLUMBIA, S.C. (Legal Newsline) - South Carolina's Supreme Court on Monday allowed state Attorney General Henry McMaster to use the former leaders of two collapsed companies as witnesses against the man charged with misleading the companies' shareholders.

A trial court had decided that Larry Owen, Anne Owen, Don Bobo and Danny Sharpe could not testify against the former chairman of Carolina Investors, Inc., and HomeGold Financial, John Sterling, because of a potential conflict of interest with an attorney.

Chief Justice Jean Hoafer Toal called the trial court's decision "somewhat puzzling" and was backed by the rest of the justices.

Attorney Bill Bannister had briefly represented the leaders of the companies in a 2003 interview with South Carolina Law Enforcement Department that followed the demise of the companies. His services were terminated in 2004.

Sterling's attorneys argued successfully before Lexington County Circuit Judge James Johnson that a conflict of interest existed because Bannister had represented all of them in the early stages of the State's investigation.

"(W)e hold that Respondent suffered no Sixth Amendment violation of his right to counsel and that Respondent failed to show he was otherwise prejudiced by Bannister's representation," Toal wrote.

"Therefore, we further hold that the trial court erred as a matter of law in granting Respondent's motion to exclude the witnesses' testimonies."

More than 8,000 investors lost $277 million when the companies went under. Sterling was charged with three counts of securities fraud faces up to 25 years in prison.

The group of witnesses have testified that Sterling misled them in other trials.

Toal had a hard time understanding the trial court's ruling.

"As a practical matter, the trial court's remedy of excluding witness testimony based on a Sixth Amendment violation is somewhat puzzling," she wrote. "Typically, in cases involving a violation of the Sixth Amendment right to counsel, the defendant has suffered a violation of his right to counsel during the adjudication proceeding (i.e., a trial or a plea hearing), and the remedy granted as a result of the constitutional violation is a new trial.

"In the instant case, however, the trial court applied a broad remedy that effectively operated as an expansive version of the exclusionary rule, a remedy typically applied to Fourth Amendment violations.

"For such a rule to be the appropriate remedy in this case, we think several additional circumstances would need to be present, such as the former attorney intentionally conveying privileged information to other witnesses or to the State or some form of prosecutorial misconduct.

"While this conduct may implicate any number of constitutional rights, we are unaware of any jurisprudence analyzing such violations under the Sixth Amendment rubric."

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