Opinion ID: 1652426
Heading Depth: 1
Heading Rank: 7

Heading: Payments to Sheffield Nelson

Text: Ms. Skokos also maintains that she is entitled to a 50-percent surcharge against $645,000 that Mr. Skokos transferred to Sheffield Nelson by payments made both before and after the filing of her complaint for divorce. Mr. Skokos acknowledges that he paid that amount to Mr. Nelson in three installments: $450,000 on October 2, 1991; $100,000 in April or May of 1993; and $95,000 in November of 1993. Ms. Skokos claims the payments were improper, and therefore subject to a surcharge, because they were part of a secret and illegal referral fee that Mr. Skokos paid to Mr. Nelson in return for an attorney-referral to him of a shareholders' derivative case involving Worthen Bank, a case for which Mr. Skokos received an attorney's fee following a settlement hearing in February 1988. Ms. Skokos claims that any payment of fees by Mr. Skokos to Mr. Nelson for referring the Worthen Bank case would have been illegal and unethical because Mr. Skokos, during the settlement hearing, did not disclose that Mr. Nelson would be sharing in the fees awarded and represented to the presiding judge that he would not share the fees with anyone who was not disclosed. Ms. Skokos appears to base her theory upon written correspondence not admitted into evidence in which Mr. Skokos and Mr. Nelson, in the months following the settlement of the Worthen Bank case, discussed the possibility of Mr. Nelson receiving a $50,000 referral fee. At trial, however, both Mr. Skokos and Mr. Nelson explained that the $645,000 payment had no relationship to the Worthen Bank case and was not a referral fee of any kind. According to their testimony, the payment was made pursuant to an agreement they reached concerning Mr. Skokos's operations in the cellular-telephone market. Mr. Skokos testified that he received a cellular-telephone franchise through a lottery conducted by the Federal Communications Commission. Under the terms of the license approved on May 7, 1990, Mr. Skokos was required to commence operations within 18 months or else face forfeiture of the license. Concerned that he would not be able to obtain adequate financing within the allotted time, Mr. Skokos turned to Mr. Nelson for assistance in June 1990. They reached a verbal agreement whereby Mr. Skokos promised to pay a loan-commitment fee to Mr. Nelson in return for Mr. Nelson's promise to loan Mr. Skokos several million dollars if called upon to do so. Mr. Skokos did not call upon Mr. Nelson for a loan, as he found other backing for his cellular-telephone venture. Although he had secured the financing promise of Mr. Nelson, Mr. Skokos hired the firm of Daniels and Associates to locate an investor. That firm located Atlantic Cellular, which paid $11.5 million to Mr. Skokos for a 50.01-percent controlling interest in the cellular-telephone franchise. The purchase and sales agreement, signed on February 28, 1991, by Ms. Skokos while Mr. Skokos was overseas, included a covenant on Mr. Skokos's part that no one, aside from Daniels and Associates, would receive a commission or finder's fee in connection with the transaction contemplated by this agreement. The deal closed in April 1991, and Daniels and Associates received a finder's fee of $250,000. Mr. Skokos testified that he could have walked away from the agreement with Mr. Nelson, as it would not have been necessary for him to rely on the line of credit that Mr. Nelson had promised to make available. Mr. Skokos testified that he discussed the matter with Ms. Skokos and indicated to her that he felt he should honor the agreement. According to Mr. Skokos, Ms. Skokos advised him to do whatever you think is right. Thereafter, Mr. Skokos and Mr. Nelson agreed in writing that Mr. Skokos would pay a negotiated fee of $650,000. The Chancellor received into evidence a written memorandum, dated October 2, 1991, that Mr. Nelson wrote to Mr. Skokos recounting the terms of their agreement on the New Hampshire Cellular matter. Mr. Skokos promised to pay $450,000 on October 2, 1991; $100,000 in April 1993; and $100,000 in April 1994. In his memorandum, Mr. Nelson referred to the payments as a finder's fee/legal fee. Mr. Skokos testified that he discussed the agreement with Ms. Skokos. According to Mr. Skokos, She told me to do whatever I thought was right, and I said, I think this is right. I owe the money, and I paid it. Ms. Skokos acknowledged in her deposition that she viewed the obligation that Mr. Skokos had incurred as a marital debt. Mr. Skokos testified that he made the first two payments more or less as scheduled but that he renegotiated the terms regarding the third payment so that Mr. Skokos paid only $95,000 but did so in November 1993, earlier than originally scheduled. Mr. Skokos testified that he sought to make a reduced payment ahead of schedule because I wanted to get my affairs in order before my divorce trial started. Thus, the total amount paid to Mr. Nelson was $645,000. It appears that some, if not all, of these payments were (1) reported by Mr. Nelson as income on his tax returns; and (2) reported by Mr. and Ms. Skokos as business-expense deductions on joint tax returns that each of them signed. Mr. Skokos and Mr. Nelson acknowledged in their testimony that they had discussed in 1988 the possibility of Mr. Nelson receiving a $50,000 fee for having referred the Worthen Bank case. They testified, however, that they ultimately dropped the matter when Mr. Skokos refused to pay a referral fee and that the payment of $645,000 bore no relationship to the Worthen Bank case. In one of the memoranda cited by Ms. Skokos, Mr. Skokos makes clear his intention not to pay any fee for Mr. Nelson's referral of the case. Ms. Skokos's accountant testified that the $645,000 payment did not pass the smell test, noting that a reasonable fee for a $1,000,000 line of credit would only be $100,000. Our understanding of the testimony is, however, that Mr. Nelson was ready to advance several million dollars. The Chancellor, evidently relying on the above testimony, and the acknowledgement by Ms. Skokos in a deposition that the obligation to Mr. Nelson was a marital one, rejected Ms. Skokos's contention that the payment to Mr. Nelson was subject to a surcharge: Plaintiff seeks to surcharge Defendant for funds paid to Sheffield Nelson. Plaintiff previously acknowledged the debt to Sheffield Nelson pursuant to an agreement made years before the parties separated. The debt was a marital responsibility. There is insufficient evidence in this record to establish any impropriety regarding the agreement and payments. The propriety or lack of propriety, other than in the context of the relationship between Mr. and Ms. Skokos, of the payments to Mr. Nelson is not at issue in this appeal. Rather, as noted above, we are concerned with whether the payments were made to defraud Ms. Skokos of her marital interest in the funds. Ordinarily, we do not reverse a chancellor where the decision turns largely on disputed facts and witness credibility, as we accede to [her] superior position to observe the witnesses and gauge their demeanor. Dopp v. Sugarloaf Mining Co., 288 Ark. 18, 21, 702 S.W.2d 393, 394 (1986). The ruling was not clearly erroneous.