Longtime local attorney pleads in embezzlement case involving store's lease money

A former local attorney pleaded guilty Tuesday to embezzling money a local sporting goods store's owners had set aside for lease payments. The case led to James Kevin Reed's disbarment in Maryland and Pennsylvania.

Reed, 59, pleaded guilty in Washington County Circuit Court to one misdemeanor count of a fiduciary embezzling or misappropriating trust funds from clients Lance and Kristy Hendershot, who own Hendershot's Sporting Goods.

Reed allegedly bilked the Washington County couple out of more than $100,000. The Hendershots used a trust with help from Reed to buy out a lease with a landlord for their store when it was located at 19828 National Pike southeast of Hagerstown, according to court documents and officials.

More local news:Maryland Election 2022: Get to know the candidates for governor

"It's been a long process from the time we first put money into that escrow account," Lance Hendershot said Tuesday in a phone interview. "Now four years and three (years) since his disbarment and indictment. It's good to get closure with this and see things come to an end."

The end hasn't come quite yet.

Reed's sentencing is scheduled for Feb. 21, according to the online case docket.

Deputy State's Attorney Sarah Mollett-Gaumer, in an interview after the Tuesday plea hearing, said the state is asking for Reed to be sentenced to three to 18 months in prison, depending on how much of the more than $103,000 owed in restitution is paid.

Reed has been out on bail.

Mollett-Gaumer said Judge Brett W. Wilson is not bound to the state's sentencing recommendation. On the embezzlement charged that Reed pleaded guilty to, he faces a maximum penalty of up to five years in prison.

Wilson, not to be confused with local Circuit Court Judge Brett R. Wilson, is a retired judge from Dorchester County on the Eastern Shore, Mollett-Gaumer said. Judge Brett W. Wilson is hearing Reed's case because Reed had been a lawyer in Western Maryland and parts of Central Maryland, she said.

Defense attorney John Salvatore, in a phone interview Tuesday, said he will try to minimize the "impact on sentencing" and Reed will "obviously get an opportunity to help himself" by making restitution.

Salvatore said the Hendershots were "made whole" by the Client Protection Fund and that Reed owes restitution to that fund for the payout to the Hendershots. The restitution total included reimbursing legal fees Reed charged the Hendershots, Salvatore said. The Client Protection Fund receives revenue from sources such as court cost payments and is used to compensate victims of various crimes, particularly cases involving attorneys stealing money, he said.

Hendershot said he and his wife were reimbursed by the fund in the spring of 2021. They were reimbursed by the fund earlier in the process than usual because the COVID-19 pandemic had delayed many cases in court and there was enough evidence for them to get the payout, he said.

The sporting goods business left the National Pike store in early 2019 and returned to Hancock, where it is at 65 W. Main St., Hendershot said.

Former attorney pleads to embezzling lease funds

The Hendershots hired Reed to help them with a trust used to buy out a lease with a landlord for the National Pike store.

Between Oct. 30 and Nov. 16, 2018, the Hendershots deposited installments totaling $125,000 into the trust.

Bank statements showed multiple disbursements went out during that time to unidentified sources or those uninvolved with the Hendershots, Mollett-Gaumer has said previously.

When the account was supposed to reach $125,000, she said bank statements showed only around $77,000.

By March, the account was closed and the money appeared to be gone, Mollett-Gaumer said in November 2019.

Mollett-Gaumer, in a previous story, alleged Reed counterfeited a wire transfer authorization in June 2019 to make it look as though there were no banking issues. She said the transfer made the Hendershots suspicious and the Washington County Sheriff's Office began a criminal investigation involving four different bank accounts.

Reed was indicted by a Washington County grand jury on Nov. 20, 2019, on felony charges of stealing more than $100,000 of the Hendershots' money and counterfeiting a wire transfer authorization as well as misdemeanor charges of possessing a counterfeit wire transfer authorization and — as a fiduciary — embezzling or misappropriating trust funds.

Reed pleaded guilty Tuesday to the last charge, according to Mollett-Gaumer and the online case docket.

The three other charges against Reed will be dismissed pursuant to the plea agreement, Mollett-Gaumer said.

At the time of the indictment, Reed was listed as having an address in Hagerstown's North End. According to the online court docket on Tuesday, a Frostburg, Md., address was listed.

Reed disbarred in Maryland and Pennsylvania

Reed consented on Oct. 24, 2019, to disbarment for "failing to adequately communicate with his client, failing to safekeep funds in an attorney trust account, knowingly failing to respond to a request for information by Bar Counsel, knowingly making false statements to Bar Counsel, committing a criminal act that reflects adversely on his honesty, trustworthiness, or fitness as an attorney, and engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, and that is prejudicial to the administration of justice," according to the fiscal year 2020 attorney license sanctions listed through the Attorney Grievance Commission and Office of Bar Counsel.

Reed "misappropriated client funds and provided falsified bank statements during Bar Counsel’s investigation," the sanction summary states.

Reed was temporarily suspended in November 2019 from practicing law in Pennsylvania. He was later disbarred in the commonwealth, per a Feb. 28, 2020, order in the Supreme Court of Pennsylvania, according to the website for the court's Disciplinary Board.

The disbarment came when Reed "indicated" he wasn't objecting to reciprocal discipline in the commonwealth, according to the order.

This article originally appeared on The Herald-Mail: Longtime Maryland attorney pleads to embezzling money from clients