| Printed Page 1850, Feb. 10 | Printed Page 1870, Feb. 10 |

At that point in time, I did not know what the laws of South Carolina was, but now I do, but Mr. Steinert did and he informed me several times that they couldn't do that, that was against the law.
Q. Previous -- excuse me. Go ahead. I'm sorry.
A. And when I would ask him what he mean -- what he meant, he said, "You know, you don't need to concern yourself with that. They've wrongfully terminated you. We've got the proof that they have. Mr. Solomons sold you something that he didn't own."

Now, this is back at the beginning of the lawsuit before he knew who Solomons was. I think he explained to me sometime -- if I'm wrong here, correct me. He explained it to me one time that we've got like a tripod. If one leg is gets broken out from under it, we're going to still win anyway the way we're suing. If USF&G is found guilty, then Algie is innocent. If USF&G is found innocent, then Algie is guilty. I don't know what that meant, but he was the attorney and I was very impressed with the lawsuit that they filed, although I don't know whether Steve Steinert actually done the lawsuit or Gail Lovett.

After talking to several people, I'm more inclined that Ms. Lovett done the lawsuit because they said it was a very good lawsuit.
Q. Had you been in the insurance business prior to buying this agency?
A. Yes, sir.
Q. In the same town or what?
A. No, sir, in Virginia. I was an agent for Nationwide Insurance for 19 years up there.
Q. And were you living down in Hampton and Jasper wherever this --
A. This area I had decided to retire in. That's the reason I bought the agency. I owned a piece of property in Myrtle Beach. I some friends in Beaufort who live in Beaufort.
Q. But you had never sold insurance in South Carolina previous to this, I mean as an agent?
A. Not as an agent, but as a nonresident agent, I had -- yes, I done some brokerage stuff down here from Virginia because I had sold a lot of -- I was involved in Hugo. I had a lot of insurers there at Myrtle Beach.
Q. And how did you learn about this particular agency being for sale?
A. I came down to spend a couple of weeks with friends of mine and I just went around to offices and knocked on doors and asked them was the agency for sale. I went to the one in Ridgeland and I asked the girl -- the clerk at the desk, was the agency for sale. She looked at me and

We -- you know, we originally were scheduled to be at the Blatt Building at 2:00 o'clock. We're going to have to move the things over there anyway, we might as well do it.
MS. MCNAMEE: And move back there.
THE CHAIRMAN: We'll move back to the Blatt Building. We will be 516, which is the Judiciary Committee Room in the Blatt Building. Does everybody know where that is?
MR. ROSEN: Mr. Chairman, would it proper for me to ask a question before we adjourn? We have a couple of these lawyers who were in the firm representing this gentleman.
THE CHAIRMAN: Yes.
MR. ROSEN: But they have an attorney-client privilege.
THE CHAIRMAN: Yes.
MR. ROSEN: They can't talk about what they talked to this gentleman about and I just wonder if he would waive that privilege, so we can put them on the stand, if you all would want to have it.
MR. MCDANIEL: Sir, I'm not ever going to waive anything that has anything to do with a lawyer anymore.
THE CHAIRMAN: I think you've --
MR. ROSEN: That's fine, your Honor.
THE CHAIRMAN: -- answered my question.
MR. ROSEN: When they take the stand, they'll be able to testify, but not as to any communications.
THE CHAIRMAN: Right.
MR. ROSEN: But there is a lot of other stuff there.
THE CHAIRMAN: All right.
MR. STEINERT: Mr. Chairman, just so there is no misunderstanding on the part of the committee, I certainly do want an opportunity to respond.
THE CHAIRMAN: Yes, sir.

(A lunch break was taken)
THE CHAIRMAN: We'll continue the screening for Mr. Steinert. For purposes of the other candidates who are here, we are several hours behind. I think it's fair to say that we hope we'll be able to move -- to work through the afternoon and hopefully into the early evening, so we can get as much of this done as possible. Our desire is to finish today, if we can.

We are -- we have two candidates. We have -- we need to conclude this hearing and then Mr. Stevens is next on Seat 1 and then we will pick Seat 2 up where we have four candidates, I believe, to screen. Two of them have already been screened and so for purposes of the other candidates, that's where we are now. We have two -- the remainder of testimony on one candidate and then we have one more after that and then we'll pick up Seat 2.

We're to start again on the Steinert hearing. I believe, Mr. McDaniel, said that you had about a two-minute statement that you wanted to conclude with that you thought might help narrow the focus of your -- the issue you wanted to raise with us.

The documents that we spent some time on this morning such as the covenant not to sue is really immaterial to what I'm up here for. Mr. Steinert doesn't know, as the two candidates this morning spoke to very eloquently, the importance of appearance of impropriety. You know, he couldn't wait -- I think that's all been proven. He couldn't wait six months, a year or what have you, to resign the Finkel firm.

Within minutes after he read the covenant not to sue, he stands up and says, "I'll be leaving this firm. I'm gone." I think that's what I'm trying to get to. A judge needs to know his -- and like those two candidates spoke to this morning, appearance of propriety ought to be there. Thank you. That's all I wanted to say.
THE CHAIRMAN: Yes, sir. Are there any -- does anyone have any questions that were raised with Mr. McDaniel? Thank you very much. Mr. Steinert, you're still under oath.
MR. STEINERT: Thank you, Mr. Chairman, for the opportunity to reply. Obviously, the allegations made this morning I take very seriously and for that reason and only for that reason, I have asked my attorneys to be with me. Not to interfere in the proceeding, but to give me whatever counsel they might and with me, I have Morris Rosen and Brewton Hagood of the firm of Rosen, Rosen & Hagood in Charleston.

I also had submitted at break to the committee three affidavits, an affidavit from Stephen Husman, an affidavit from Gail Lovett and an affidavit from Drew Epting.

Mr. Husman and Ms. Lovett are here. They are available for your questions after I conclude my remarks if you so choose.
THE CHAIRMAN: Let me just say this, I have read their affidavits and I don't have any questions about them. If other members do, we'll be glad to ask questions, but they basically summarize the dates and times of -- with regard to the execution of these documents and the firm's representation; is that correct.
MR. STEINERT: That's correct. And the role that they played and they essentially will corroborate -- do corroborate what I'm about to tell you in terms of the reasons for the covenant and the timing of the covenant. I think those are the two substantive issues to be addressed and then we can talk about some other allegations Mr. McDaniel made this morning.

Jerry Finkel reviewed the case, thought it was good and also thought that I was not prepared to handle the case and assigned Steve Husman who is the senior litigator -- who was the senior litigator in our firm to really manage the case and develop the strategy. I maintained client contact with Mr. McDaniel.

It is also true that at the outset of the lawsuit, we all felt we had a very good case against both USF&G and the Solomons family. As lawsuits evolve, information available becomes available, strategic decisions need to be made and I'd like to begin by telling you we felt that the covenant not to sue was critical for Mr. McDaniel in the development of this lawsuit.

When Mr. McDaniel came to us, he gave us amongst other documents, the Buy-Sell agreement prepared by Algie Solomons. The thrust of our lawsuit against the Solomons was misrepresentation, fraud, fraudulent inducement to contract, conspiracy due to the fact that Algie Solomons knew and did not tell Mr. McDaniel that USF&G would no longer write policies for him.

In the course of the lawsuit going through all the documents, box after box after box of documents, we discovered the original draft of the Buy-Sell agreement prepared for Mr. McDaniel by Algie Solomons. I have provided that to the Committee during the break. If you have a copy or if you don't, let me just call your attention to Paragraph 6 on Page 5. This is a document prepared by Algie Solomons for Mr. McDaniel. You will see that Paragraph 6 has been scratched out and replaced with some other language. The scratching out and language replacement was done by Mr. McDaniel.

Mr. McDaniel took this draft, scratched out Paragraph 6. Paragraph 6 says, "The buyer" -- that is Mr. McDaniel --"acknowledges that the seller" -- the Solomons family -- "has made no representations with respect to any right on the part of the seller to sell or deliver any of its agency contracts with the various insurance companies that it has represented during the course of the conduct of its insurance agency business. The buyer" Mr. McDaniel, "assumes the risk that all such agency contracts and other arrangements may be canceled at will and without notice by any of the insurance companies with which the seller has

Once we discovered this draft in which Mr. Solomons clearly has told Mr. McDaniel there are some problems I can't warrant what I'm selling you, we felt that we had a Rule 11 obligation, if you will, to dismiss the Solomons. There was no reason to keep them in. Ethically, we couldn't keep them in. And it also, however, provided us with an opportunity to do some real good for Mr. McDaniel in this case.

There was a critical meeting that Mr. McDaniel had on April 15th prior to the purchase of the agencies at USF&G. The only people attending this meeting were Mr. Solomons -- Algie Solomons, Mr. McDaniel and several USF&G officials. It was Mr. McDaniel's contention that at that meeting USF&G committed to remain with him, to stick with him, that he could turn these agencies around, they would do what they could to help him. We took the depositions of all the USF&G officials who were at that meeting.

Every one of them, arm and arm, denied that any such conversations took place, so all we had was Mr. McDaniel on the one hand, several USF&G officials on the other saying we never said that. The only other person at the meeting was Algie Solomons. We were suing Algie Solomons, but we needed his testimony.

I will point out to you just parenthetically that the decision to buy this agency was really based on what USF&G said at that April 15th meeting, not on anything Algie Solomons said. So we had an ethical reason to -- that we had to get -- dismiss the lawsuit against the Solomons. We have a good pragmatic reason. We'd like to get testimony from Mr. Solomons to corroborate Mr. McDaniel and, thirdly, Mr. McDaniel is facing foreclosure.

He is facing being thrown out of every piece of property that he owns. In fact, let me just set the record -- I never told him not to pay Algie Solomons. No lawyer would do that. I never did it. The fact of the matter is he didn't pay because he couldn't pay. He was in over his head. He was hocked up to his neck and he was about to be foreclosed on.

We did, in fact, sign and get an order and the order is attached to Mr. Epting's affidavit, to stay the foreclosure. He was not kicked out of his home. The agreement was that the foreclosure would be stayed until the conclusion of the case against USF&G.

Now, I don't know what happened after January. I do know in spite of what Mr. McDaniel will tell you, that that case was settled. The case was settled at the courthouse. The jury was impaneled, the lawsuit was ready to start and they settled. The settlement is sealed. I don't know

But as to my responsibility, we got a signed order of foreclosure and the committee -- a signed order staying the foreclosure and the committee has that. We were afraid of the foreclosure proceeding, not only because it would create incredible personal hardship on Mr. McDaniel and we honestly felt that in Hampton County we were not going to win this matter, we would have had to raise as defenses to the foreclosure those arguments that we would assert in the underlying case. We were concerned about issue preclusion, we were concerned about res judicata. We were concerned that we would make those arguments, lose and not be able to preserve them for the underlying case. So for all of those reasons, it was important that we get rid of that foreclosure issue.

Finally, we had, if you will, a mixed bag of defendants. I went -- I did go to Estill. I went one time, not four times as Mr. McDaniel testified. I went one time to meet with the Solomons, to interview them, to size them up and I can tell you that there is not a jury in this state that would have found against this nice little old lady who bakes apple pies in her house in Estill. And it was going to confuse the jury and from a strategic point of view, we were much better off focusing on USF&G, the big insurance company from Baltimore, and not mix the jury up with allegations against the Solomons. So for all of those reasons, a decision was made and it was -- to execute this covenant not to sue.

Now, I think the next substantive question that we need to address is the timing. First of all, let me say that this decision was not my decision. I participated in the decision. The strategy, if you will, was that of Steve Husman who is in the hearing room today and Gail Lovett and I together -- Steve was really the architect of the strategy. It was developed on August the 6th in a meeting that we had in Columbia.

We have memos that I would like to provide the Committee in Gail Lovett's hand from our meetings on August 6th and August 7th and our meeting with the client in the afternoon of August 7th.

On -- at the meeting on August the 7th, Ron McDaniel agrees that he will execute the covenant not to sue. He's very concerned about the foreclosure. He understands where we're going. He agrees, but he doesn't trust Algie Solomons and he says, "I don't want to sign a covenant not to sue until you take Solomons' deposition." And I said,

We scheduled that deposition for August 30th. The deposition is held in Charleston on August 30th. Ron is correct. I suggested he not come and I suggested that he not come because I thought that if he did come, the deal would blow up. The bad blood between Mr. Solomons and Ms. -- Mr. McDaniel was so deep that we were dealing with a very fragile, fragile relationship and we needed to hold it together.

He told you this morning that Gail Lovett was told by me not to be there, the fact of the matter is that's not true. Gail was there and we have her deposition notes that I will hand into the Committee. I think nine pages of notes to show, in fact, that she was there.

We weren't hiding anything from Mr. McDaniel. It took us a little while to get him the transcript. Something happened in Charleston a few weeks after this August 30th deposition. It was Hurricane Hugo. My office was destroyed. All of our files were gone. I can assure you I don't know when I sent the transcript to Ron McDaniel, but you can be certain that he got it as soon as I did. I assume that the court reporter took a little longer than normal.

Anybody who knew Charleston at all during that period can testify to the chaos we were in. This is not a Hurricane Hugo defense. It is simply the reality of what we were facing.

But August the 30th when we took that deposition that was Ron McDaniel's contingent criteria. If Algie Solomons does okay under oath, then we've got a deal. In fact, we had a deal as far as I was concerned and as far as every lawyer in this case was concerned on August 30th. In fact, Drew Epting with the firm of Wise & Cole performs. We get the consent order to stay the foreclosure. We do every--- he does everything that he agreed to do.

It is important again to understand that this is August 30th. We have Hugo somewhere around September 21st, I think it was. There was no consideration on my
part at this point of leaving the Finkel law firm and certainly of going with Wise & Cole.

I have a good friend, a colleague, a partner of mine in the Finkel law firm, Gregg Meyers. Gregg for personal reasons had become disenchanted with where he was and wanted to move on. Gregg is not from Charleston. He didn't know a lot of lawyers. He asked if I would make inquiries on his behalf with some of the major firms.

My first -- and I'm not splitting hairs. I'm not talking about I had a conversation, I really -- the first contact with Dewey Wise is the end of October and it was on Gregg Meyer's behalf. At that meeting, Dewey says,
"Are you interested in coming with me?" And I said,
"Well, to tell you the truth, I'm kind of wavering. I'm not sure what I'm going to do. We've got some problems, but I'm going to stick it out with the Finkel firm for a while, but thank you. But in any event this isn't a package deal, I want you to consider Gregg."

December 2nd, we have a meeting at the Finkel law firm. Gregg Meyers has been offered a job by Wise & Cole. He tells the partners in the Finkel law firm that he's leaving. Fairly traumatic, not terribly pleasant meeting. And I tell them, "Guys, you know, I've really -- I've given this a lot of thought. I'm not going to leave you high and dry." We were the only two lawyers in the Charleston office. "I'll stay with you as many months as you want, but this thing is just not working. The hurricane has destroyed the office. We just got -- there is too much going on and I want to start looking myself." They say to me, "Well, if you want to start looking, start looking, but we think you need to be out of here soon. We -- you know, we'll make arrangements."

It was at that point that I went back to Dewey and said, "Listen, essentially I'm going to be on the street. I'd like you to consider hiring me."

I also interviewed with two other firms and their date -- the daytimers of the partners will reflect that. I had a lunch with Wade Logan at Holmes and Thomson essentially looking for a job at the same point in time. And I also had a meeting with Dick Riley at Nelson, Mullins looking for a job, so the idea that somehow I believe Mr. McDaniel said I cut a deal with Drew that if I got his cousin out of the case, they would give me a job, anybody who knows Drew Epting or knows how law firms work, that's -- it just doesn't make any sense. The dates aren't right.

I would also point out to you that Mr. McDaniel was not left high and dry. The Finkel firm continued to represent him, represented him for several months. He then -- they asked to be a relieved of counsel. He got additional counsel from Augusta. I believe his case was continued and then settled. That settlement has been sealed.

Just in terms of miscellaneous things that were said this morning, let me make the record clear that I never ever suggested Ron McDaniel would

I never advised him not to pay the Solomons. I never told Gail Lovett not to come to the deposition. I did provide him a transcript as soon as it was possible. And in a nutshell, there was absolutely no -- no collusion on the part of any lawyers.

I was part of a team of lawyers that provided Ron McDaniel with the highest quality representation that we could. Thank you. I'll answer any questions and -- excuse me.

Mr. Rosen did point out that I neglected to tell you that when we took the deposition of Algie Solomons, it did, in fact, confirm Mr. McDaniel's story and was very important for us to have.
THE CHAIRMAN: Questions from the Committee Members?
SENATOR MOORE: Mr. Chairman?
THE CHAIRMAN: Yes, sir. Senator Moore.
MR. STEINERT - EXAMINATION BY SENATOR MOORE:
Q. Sir, you may -- you went over part of the answers to the questions I'm going to give you, but also in sort of a litany of explanation and it would help me to hear them, so I --
A. Sure.
Q. -- to those specific questions. You made mention of the Buy-Sell agreement that you had to, you know, rummage through boxes and finally found it. When did the Buy-Sell agreement you talked about become known to you?
A. I honestly can't give you a date, but it would have been prior to the August 6th meeting, so sometime in the summer after the lawsuit had been brought prior to the August 6th meeting.
Q. The covenant not to sue --
A. Excuse me. Excuse me just a minute. The consensus is June or July, but we don't know.
Q. June or July?
A. Yes, sir.
Q. The covenant not to sue is dated October 31, 1989. I believe earlier Mr. McDaniel had stated that he received it early November. Do you recall when you first began to draft that covenant?
A. That covenant was drafted by Gail Lovett and reviewed by Steve Husman, both of whom are here. I did not draft the covenant.
Q. All right.
A. We were all lawyers on the case and frankly what had happened at that point, I was out of an office in Charleston. We were in temporary

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