BEFORE THE HEARING BOARD
OF THE
ILLINOIS ATTORNEY REGISTRATION
AND
DISCIPLINARY COMMISSION

In the Matter of:

STEPHEN EDWARD GARCIA,

Attorney-Respondent, 

No. 6196573.

 

Commission No. 2012PR00080

FILED - July 24, 2012

COMPLAINT

Jerome Larkin, Administrator of the Attorney Registration and Disciplinary Commission, by his attorney, Gina M. Abbatemarco, pursuant to Supreme Court Rule 753(b) and 761(d), complains of Respondent, Stephen Edward Garcia, who was licensed to practice law in the State of Illinois on November 5, 1987, and alleges that Respondent has engaged in the following conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute and which subjects Respondent to discipline pursuant to Supreme Court Rule 770: 

(Criminal conduct in relation to Geneva Steel bankruptcy)

1. In or about 1999, Respondent represented the Official Committee of Bond Holders (hereinafter "the Committee") in negotiating with Geneva Steel (hereinafter "Geneva") to restructure the bonds held by the committee in the matter of In re Geneva Steel, case number 99-21130, filed in the United States Bankruptcy Court for the District of Utah. Albert Fried ("Fried") of Albert Fried & Company of New York (an investment firm) was the Chair of that committee.

2. On or about January 2, 2001, the bankruptcy court approved Geneva's plan of reorganization under Chapter 11. As part of the plan, Geneva was merged into a new entity called Geneva Steel LLC. Geneva Steel LLC became a wholly owned subsidiary of a newly formed corporation entitled, Geneva Steel Holdings Corporation (hereinafter "Geneva Steel Holdings").

3. Between 2000 and 2002, Fried had become a creditor of Geneva, making a $9.8 million term loan to Geneva in exchange for receiving a below-market-price option to purchase Geneva's property known as Williams Farm. During the restructuring of Geneva, Fried had also become a 31% owner of Geneva and director of the board of Geneva Steel Holdings. Respondent knew of Fried's loan and option to purchase the Williams Farm property because he was involved in negotiations related to Geneva's restructuring on behalf of the Committee.

4. Beginning in January 2002, Respondent agreed to represent Geneva Steel LLC, in matters related to the filing of a second Chapter 11 bankruptcy petition, after Geneva had failed to successfully implement its reorganization plan in case number 99-21130. At that time, Respondent was a partner with the law firm of Kaye Scholer LLP in Chicago.

5. On January 25, 2002, Respondent filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Utah on behalf of Geneva Steel LLC. The clerk of the court docketed the matter as In re Geneva Steel LLC, case number 02-21455. At the same time, Respondent filed an affidavit, under Rule 2014 of the Federal Rules of Bankruptcy Procedure, in support of the debtor's application for an order authorizing the retention and employment of Respondent and his firm as attorneys for the debtor and debtor in possession.

6. On September 13, 2002, Respondent filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Utah on behalf of Geneva Steel Holdings. The clerk of the court docketed the matter as In re Geneva Steel Holdings Corporation, case number 02-35385. At the same time, Respondent filed an affidavit, under Rule 2014 of the Federal Rules of Bankruptcy Procedure, in support of the debtor's application for order authorizing the retention and employment of Respondent and his firm as attorneys for the debtor and debtor in possession.

7. In the affidavits referred to in paragraphs five and six above, Respondent disclosed his previous representation of the Committee in case number 99-21130. Respondent further stated that he did not hold or represent any interest adverse to Geneva. He also represented that he did not have an interest "materially adverse to the interest of the estate or of any class of creditors or equity security holders by reason of any direct or indirect relationship to, connection with, or interest in, the debtor or any investment banker, or for any other reason." Respondent acknowledged in the affidavit that he had a continuing duty to supplement the information he had provided about any adverse interest he represented or held. Based on Respondent's representations, the bankruptcy court approved Respondent's application to represent Geneva Steel and Geneva Steel Holdings Corporation.

8. Between 2002 and 2005, Respondent invested $150,000 in a Utah condominium development project ("the Provo project") and invested in a California water filtrations project with Fried. At that time, Fried was a creditor and one-third owner of Geneva and the director of the board for Geneva Steel Holdings.

9. At the time he invested in the Provo project, referred to in paragraph eight, above, Respondent knew that Ken Johnson ("Johnson"), the Chief Executive Officer of Geneva Steel, had an economic interest in the Provo project for work performed or to be performed relating to the project.

10. Between 2003 and 2005, Respondent performed various legal services related to the Provo project. Specifically, Respondent formed two Delaware corporations for Fried related to the Provo project (Steelman Inc. and Steelman Realty). Respondent was a founding member of Steelman Realty. Respondent also reviewed the terms of a lease for Steelman Inc. related to the option Fried had on the Williams Farm property, and prepared a motion to dismiss in a lawsuit that had been filed against Steelman Realty regarding a zoning issue for the Provo project.

11. Between January 2003 and February 2005 Respondent did not supplement his January 23, 2002 or September 13, 2002 original affidavits in case numbers 02-21455 and 02-35385, with information about his connection to Fried, or his investments with Fried and Johnson, as referred to in paragraphs eight through ten, above. Respondent knew that he had a duty to supplement the affidavits with the information referred to in paragraphs eight through ten, above.

12. On or about March 7, 2005, Respondent filed supplemental affidavits in case numbers 02-21455 and 02-35385. In those supplemental affidavits, Respondent falsely stated that another attorney had provided all legal services to the Provo project in which Respondent and Fried were investors. In fact, Respondent had also provided legal services with respect to the project, as described in paragraph ten, above.

13. On July 29, 2010, a federal grand jury, sitting in the United States District Court for the Central District of Utah, returned a three-count indictment against Respondent regarding Respondent's conduct as described above, in the matter entitled United States of America v. Stephen E. Garcia, case number 2:10 cr 673. Counts I, II, and III of the indictment charged Respondent with bankruptcy fraud, mail fraud and false bankruptcy oath based on Respondent's conduct as set forth in paragraphs one through 12, above. A certified copy of the indictment is attached as Exhibit One.

14. On February 1, 2012, Respondent pled guilty to, and was found guilty of, making a false bankruptcy oath in violation of Title 18, United States Code, Section 152(2), as alleged in Count III of the indictment filed in case number 2:10 cr 673. In the plea agreement, Respondent admitted that he engaged in the conduct described in paragraphs eight through ten, above. A certified copy of the plea agreement is attached as Exhibit Two.

15. On February 1, 2012, the Honorable Dee Benson entered a judgment of conviction against Respondent, but imposed no sentence. A certified copy of the judgment of conviction is attached as Exhibit Three.

16. As a result of the order of conviction and the conduct described above, Respondent has engaged in the following misconduct:

  1. making statements of material fact or law to a tribunal which the lawyer knows are false, in violation of Rule 3.3(a)(1) of the Illinois Rules of Professional Conduct (1990);

  2. in appearing in a professional capacity before a tribunal, engaging in illegal conduct or conduct in violation of the Illinois Rules of Professional Conduct, in violation of Rule 3.3(a)(7) of the Illinois Rules of Professional Conduct (1990);

  3. making statements of material fact or law to a third person (the bankruptcy trustee and creditors) which the lawyer knows or reasonably should have known are false, in violation of Rule 4.1(a) of the Illinois Rules of Professional Conduct (1990);

  4. committing a criminal act (by violating Title 18 U.S.C. sec. 152(2)) that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, in violation of Rule 8.4(a)(3) of the Illinois Rules of Professional Conduct (1990);

  5. conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(a)(4) of the Illinois Rules of Professional Conduct (1990);

  6. conduct that is prejudicial to the administration of justice, in violation of Rule 8.4(a)(5) of the Illinois Rules of Professional Conduct (1990); and

  7. conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute.

WHEREFORE, the Administrator requests that this matter be assigned to a panel of the Hearing Board, that a hearing be held pursuant to Supreme Court Rule 761, and that the panel make findings of fact, conclusions of fact and law, and a recommendation for such discipline as is warranted.

Gina M. Abbatemarco
Counsel for the Administrator
130 East Randolph Drive, #1500
Chicago, Illinois 60601
312-565-2600
Respectfully submitted,

Jerome Larkin, Administrator
Attorney Registration and
Disciplinary Commission

By:  Gina M. Abbatemarco