Before he retired in 2012, former NFL offensive lineman Leonard Davis spent 11 years helping his teams — the Arizona Cardinals, Dallas Cowboys, Detroit Lions, and San Francisco 49ers — get the ball past the goal line.
But since Davis played his final down, the former ballplayer and his wife have aimed for other targets: specifically, their former financial advisor, Tye Williams, their former broker-dealer Next Financial, their former lawyers and accountants and those professionals’ employers — all of whom helped drain away the $70 million Davis earned in NFL paychecks, according to the couple’s lawsuit pending in a Texas state court.
Williams, a 30-year veteran financial advisor, along with the lawyers and accountants, participated in a scenario that led to Davis and his wife investing $15 million of their assets in franchise contracts for Smashburger eateries, the couple alleges. Almost immediately, those investments began creating huge losses for the couple, but they kept paying management and professional service fees to the FA, lawyers, accountants, and their firms and offered those professional advisors other lucrative advantages, according to couple’s lawsuit.
“All I can say is from where Leonard started to where he ended up, something was fundamentally wrong,” says the Davises’ plaintiff lawyer Graig Alvarez, a partner in Houston’s Alvarez Stauffer Bremer.
With so many professionals named as defendants, the Davises’ lawsuit presents a cautionary tale warning financial advisors, lawyers and accountants who assemble as a team for clients that they must take steps at the outset to delineate -- in writing -- each other’s responsibilities.
According to the couple’s lawsuit, Williams and his assistant received compensation and benefits from the Smashburger venture into which they steered the Davises’ assets — specifically 20% of the profits from one of the restaurants, 15% from four others, a $1,000 car allowance for Williams, healthcare coverage, bonuses, consulting fees with no supporting contracts, and personal expense reimbursements, including money for Williams and his wife’s 2010 Valentine Day escape package at the Ritz-Carlton hotel in Dallas.
So far, the Davises’ litigation has led to a settlement for an undisclosed amount between the couple and Next Financial, the couple’s former broker-dealer, and Williams’ last professional home as a financial advisor.
The couple’s allegations also led to Finra and the CFP Board permanently barring Williams from their rosters.
According to Finra’s BrokerCheck: “Without admitting or denying the allegations, Williams consented to the sanctions and to the entry of findings that he failed to produce documents and information after being repeatedly requested to do so by Finra. The findings stated that the documents and information requested by Finra are related to an investigation regarding a customer complaint alleging that Williams converted over $1,000,000 from customers’ accounts, made unsuitable investment recommendations, and engaged in unauthorized transactions and mismanaged assets.”
Finra also barred from the industry Gwendolyn Berry, identified in the lawsuit as Williams’ assistant, who served as vice president of operations for the Houston, Austin, Dallas and Arizona regions for Tye Williams Financial Services.
In February 2018, Berry entered a guilty plea to counts of mail and wire fraud and tax evasion, after prosecutors alleged she embezzled more than $1.7 million from Davis and his wife’s personal accounts.
In September 2018 a federal judge sentenced Berry to serve a 51-month sentence. Berry will appeal her sentencing, according to her criminal defense lawyer, Michael Essmyer of Houston’s Essmyer & Daniel.
In the Davises' civil law suit in Texas state court, Williams has persuaded a judge to stay proceedings on the Davises’ claims against him and to compel the couple first to arbitrate those claims at a Finra hearing. That hearing has been postponed until the outcome of the Davises’ lawsuit. Prior to getting the Davises’ claims against him stayed, Williams filed an answer in the state court denying the couple’s allegations.
“If Gwendolyn Berry deviated from the performance of her duties as a bookkeeper for her own purposes … there was no actual or apparent authority for her to take such action and no ratification by Williams,” his answer states.
Williams’ lawyer, Craig Nevelow, a shareholder at Austin’s Wright & Greenhill, stresses that his client faces no criminal charges.
The Davises “will try and make the case of a failure to supervise,” based on Berry’s conviction, Nevelow predicts. But such a strategy will fail precisely because Williams had no part in supervision, he adds. For her part, Berry also filed an answer in the state court lawsuit denying the Davises’ allegations.
The law and accounting firm defendants represent potentially the deepest pockets from which the couple seeks damage awards. Those firms and the professionals at them who are named as defendants all filed answers in state court denying the allegations. But so far none have persuaded the court to toss all the couple’s claims — despite an attempt to do so by one of the law firms, Dallas-based Jackson Walker, a well-known, more than 130-year-old Texas institution, which has represented Oprah Winfrey, Warren Buffet and CBS.
On Dec. 26, a Texas state judge agreed to pitch the Davises’ breach of fiduciary duty claims against Jackson Walker because they were not filed in a timely manner based on state securities laws. But, in the same order, the judge let the Davises continue to pursue their malpractice, fraud and conspiracy claims against Jackson Walker.
According to the Davises’ lawsuit, Michael Baldwin, an Austin-based Jackson Walker partner and 20-year veteran lawyer who has a wealth transfer practice, failed to keep the Davises informed about the Smashburger transactions and to explain the matters so the Davises could understand them. His firm also had undisclosed conflicts because of its relationships with other clients, the lawsuit alleges. Baldwin also charged the Davises through the Smashburger venture for excessive personal expenses, including a $468.41 business meal at the Capital Grille restaurant in Plano, Texas, the lawsuit alleges.
When the Smashburger franchisor began asking Baldwin about accounting issues for the restaurants owned by the Davises’ venture, the lawyer didn’t alert Davis to those concerns, the lawsuit alleges.
“Baldwin’s failure to inform Davis about Smashburger’s concerns and to competently investigate Williams’ and Berry’s conduct allowed Williams and Berry to misappropriate funds from the Davises and the Smashburger venture,” the lawsuit states.
But by 2009, Davis and his wife, who had suffered previous, possibly avoidable losses when working with a prior financial planner, “knew or should have known that their second financial planner, Tye Williams, warranted closer scrutiny,” Alistair Dawson, a partner at Houston’s Beck Redden, who represents Jackson Walker, argues in a brief.
Former NFL player Marc Colombo, who was one of Davis’ teammates and also invested in Smashburger franchises, “called Williams a liar, but Davis did nothing to follow up on the accusation,” Dawson writes in the same brief.
In their lawsuit, the couple represents Davis, a native of Wortham, a central Texas town with a population of just more than 1,000, as a man of “humble beginnings” who was “the last of 22 siblings and step-siblings” and majored in Youth and Community Studies at the University of Texas at Austin. “[H]e did not have anyone suited to advise him regarding the financial windfall that his professional football career promised at such a young age,” the lawsuit states. Connections to Christian evangelical ministries prompted Davis to hire both Williams and Jackson Walker partner Baldwin, the lawsuit alleges.
Undoubtedly, the team of professionals who worked for the Davises should have themselves taken more precautions with each other and their clients, lawyers on both sides agree.
“With the benefit of hindsight, if you had documentation of what each advisor’s and lawyer’s responsibilities were, and clearly defined and understood set of responsibilities,” that would give the professional defendants in this lawsuit a more clear-cut story to tell the court, concedes Jackson Walker’s defense lawyer Dawson.
But Dawson expects Jackson Walker to prevail.
“There is a lot of "Monday morning quarterbacking" going on. Ultimately, the Jackson Walker story will be told in court,” Dawson says.