A Superior Court judge has determined a Dawsonville accountant did not break any laws when he transferred more than $60,000 from a client’s escrow account to pay other expenses.
As the client’s qualified intermediary, charged with holding taxes in escrow from a previous property sale in a 1031 tax exchange, Warren Pennington had control over what the court determined was a loan agreed to be repaid in a promissory note.
Following the conclusion of the prosecution’s case July 14, attorney Brett Turner asked Judge John Girardeau to render a directed verdict on grounds the state had not presented adequate evidence to find his client guilty of theft by conversion.
“When we take out a loan, we can do with that money what we chose to do,” Girardeau told the jurors after his decision. “I don’t see any criminal liabilities.”
Had Pennington failed to repay the loan, he could have been sued by the client over the unfulfilled promissory note.
Lee Darragh, district attorney for the Northeastern Judicial Circuit, said his office received evidence in favor of the defendant about 10 days prior to the trial.
The court denied his office’s motion for a continuance to review the information.
“The state has no quarrels with the court’s decision in that particular incident in light of the new information,” Darragh said.
“However, there remain other significant charges against the defendant which the state will continue to pursue. Because it is a pending matter, I would not be able to comment further.”
Pennington, 60, was arrested July 16, 2008, on one count of theft by conversion.
Three months later, he was charged with nine additional counts of theft by conversion.
Pennington said last week he is confident he will be cleared on the remaining criminal charges. No court date has been set.
“We’re going to fight them as vigorously on the additional charges as we did on the first one and expect the same outcome,” Pennington said.
Last week’s proceedings focused only on the original charge.
Testimony in court revealed that Pennington had used $64,000 that was being held in escrow for a client to pay another client’s payroll taxes.
When the first client needed the escrow money to complete a real estate deal, Pennington was forced to borrow $64,000 from another local accountant to replenish the account. He has since repaid both loans.
Pennington said he also has reimbursed thousands of dollars to other clients, who were victims in a series of thefts allegedly involving one of his former employees.
In fact, the initial investigation into Pennington followed the arrest of his former office manager Vivian Miles, who faces nearly two dozen counts of computer theft.
Authorities believe Miles, 45, redirected funds from the escrow accounts of several Pennington clients to the accounts of three of her acquaintances.
Warrants show the unauthorized transactions, ranging from $1,000 to $9,000, began on July 1, 2006, and continued on the first of each month for the next 22 months.
Although warrants were issued for thefts totaling $93,300, Pennington said close to $180,000 was missing from his business accounts.
Pennington described Miles, who handled the business’ day-to-day operations, as his most trusted employee.
It was not until clients told Pennington their payroll taxes had not been paid that he began to suspect an internal problem.
Turner said Pennington discovered the missing funds when Miles was trying to cover up the thefts.
“Pending theft charges against Vivian Miles remain under investigation in the district attorney’s office,” Darragh said.
Miles, who is out on bond, has not been to court on her charges. Darragh said he expects that a formal accusation document will be filed soon.