Filed September 13, 2012

In re Robert Allan Holstein
Respondent-Appellee

Commission No. 08 CH 81

Synopsis of Review Board Report and Recommendation
(September 2012)

This matter arises out of a one count complaint charging Respondent with bankruptcy fraud by attempting to transfer certain assets to his law partner and friend, Barbara Stackler; by intentionally omitting the disclosure of certain assets on his personal bankruptcy schedules filed with the court; and by falsely stating to the court that his schedules included all of his assets and liabilities. Respondent did not deny many of the factual allegations of the complaint, but denied that he intended to defraud the court or his creditors.

Following a hearing, two members of the Hearing Board concluded that Respondent violated Rule 8.4(a)(5), prior to filing his bankruptcy petition, by transferring his assets in violation of the Illinois Uniform Fraudulent Transfer Act. That violation caused American National Bank, one of Respondent's creditors, to initiate judicial proceedings to overturn the transfers, thereby resulting in conduct that was prejudicial to the administration of justice. The Board concluded that the Administrator failed to prove by clear and convincing evidence that Respondent acted with the intent to defraud his creditors, engaged in intentionally dishonest conduct, or made false statements to the court in violation of Rules 3.3 or 8.4 (a)(4). The Board recommended that Respondent be reprimanded. One member of the Hearing Board dissented, finding that Respondent did not engage in any misconduct and recommending that the charges be dismissed.

Upon review, the Administrator requested that the Review Board reverse the Hearing Board findings that Respondent did not engage in intentional misconduct and recommend to the Court that Respondent be suspended for three years. The Respondent asked the Review Board to affirm the Hearing Board Report in its entirety and reprimand Respondent.

The Review Board concluded that the Hearing Board erred in failing to find that Respondent engaged in the misconduct as alleged in the Administrator's Complaint. The Review Board found that the Hearing Board's findings were against the manifest weight of the evidence. The Review Board found that the evidence at hearing clearly and convincingly demonstrated that Respondent made knowingly false statements to the bankruptcy court in violation of Rules 3.3(a)(1), 3.3(a)(2), and engaged in conduct involving dishonesty and prejudicial to the administration of justice in violation of Rules 8.4(a)(4) and 8.4(a)(5) of the Illinois Rules of Professional Conduct. The Review Board recommended that Respondent be suspended for a period of two years.

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

In the Matter of:

ROBERT ALLAN HOLSTEIN,

Respondent-Appellee,

No. 1251600.

Commission No. 08 CH 81

REPORT AND RECOMMENDATION OF THE REVIEW BOARD

SUMMARY

The Administrator charged Respondent in a one count complaint with bankruptcy fraud, by attempting to transfer certain assets to his law partner and friend, Barbara Stackler, by intentionally omitting the disclosure of certain assets on his personal bankruptcy schedules filed with the court and by falsely stating to the court that his schedules included all of his assets and liabilities. Respondent did not deny many of the factual allegations of the complaint, but denied that he intended to defraud the court or his creditors.

After a three day hearing, the Hearing Board issued a report and recommendation. Two members of the Hearing Board concluded that Respondent violated Rule 8.4(a)(5), prior to filing his bankruptcy petition, by transferring his assets in violation of the Illinois Uniform Fraudulent Transfer Act. That violation caused American National Bank, one of Respondent's creditors, to initiate judicial proceedings to overturn the transfers, thereby resulting in conduct that was prejudicial to the administration of justice. The Board concluded that the Administrator failed to prove by clear and convincing evidence that Respondent acted with the intent to defraud his creditors, engaged in intentionally dishonest conduct, or made false statements to the court in

PAGE 2:

violation of Rules 3.3 or 8.4 (a)(4). The Board recommended that Respondent be reprimanded. One member of the Hearing Board dissented, finding that Respondent did not engage in any misconduct and recommending that the charges be dismissed.

The Administrator filed exceptions to the Hearing Board's report and recommendation, requesting that this Board reverse the Hearing Board findings that Respondent did not engage in intentional misconduct and recommend to the Supreme Court that Respondent be suspended for three years. The Respondent did not file exceptions and asks that this Board affirm the Hearing Board report in its entirety and reprimand Respondent.

We find that the Hearing Board erred in concluding that Respondent did not engage in the misconduct as alleged in the Administrator's complaint. We find that Respondent made knowingly false statements to the bankruptcy court in violation of Rules 3.3(a)(1), 3.3(a)(2), and engaged in conduct involving dishonesty and conduct that was prejudicial to the administration of justice in violation of Rules 8.4(a)(4) and 8.4(a)(5) of the Illinois Rules of Professional Conduct. We recommend that Respondent be suspended for a period of two years.

FACTUAL BACKGROUND

While Respondent's conduct in his bankruptcy proceedings occurred in 2000, the filing for bankruptcy was the result of financial difficulties that Respondent and his law firm faced in the previous decade.

In approximately 1981, Respondent formed the law firm of Holstein, Mack and Klein ("HMK"). The firm concentrated its practice in civil litigation. From the mid-1980's to 1995, the firm received loans from American National Bank ("ANB"). Respondent testified that HMK financed contingent fee cases by going into debt. From 1986 to 1995, the firm was financed by ANB through a series of loans. The loans matured every 18 to 24 months, and were

PAGE 3:

either renewed or increased at the end of each period. Some HMK partners, including Respondent, gave unlimited personal guarantees for the ANB loans.

In the mid-1990's, the firm began to experience more serious financial difficulties. In April 1995, HMK had only $2,000 in its operating account, could not pay its Westlaw bill and other operating expenses, and owed ANB approximately two million dollars. In 1995, ANB began to demand payment on the principal of the loans.

Some time before August 1995, Respondent approached attorney Jeffrey Goldberg to assist HMK by serving as co-counsel in a large class action product liability lawsuit concerning the Norplant contraceptive device. Pursuant to an agreement between Goldberg and HMK in August 1995, Goldberg paid HMK $1 million and agreed to pay a capped percentage of incurred litigation costs. In exchange, Goldberg was to receive 30 percent of all fees and costs recovered by HMK in the Norplant litigation.

During the discussions leading up to the agreement, Goldberg testified that Respondent told him the firm was doing fine and had a lot of business, and that they were interested in asking Goldberg to join them because of Goldberg's expertise in medical malpractice cases. Goldberg never asked for any documentation of the firm's financial condition. He paid the one million dollars to the firm with no conditions for its use and the money was not earmarked for the Norplant litigation.

With the one million dollars, HMK paid $500,000 toward the debt at ANB, $120,000 to the landlord for back rent, $76,000 to another lawyer for a referral fee and $22,000 to Respondent. The firm continued to experience financial difficulties, however. By 1996, HMK was in default on the ANB loans for approximately $2 million, and the firm stopped making payments. ANB then filed lawsuits against Respondent, HMK and several of the other partners.

PAGE 4:

When Goldberg realized the firm was in financial trouble, he attempted to recover the money he had paid to the firm. Eventually, the Norplant class was decertified, and Goldberg filed approximately 50 individual lawsuits. He then attempted to find substitute counsel for the plaintiffs and ultimately was able to withdraw from all the cases. He eventually was able to recover some money from another partner by filing an action in the partner's bankruptcy case. As noted below, he also attempted with no success to obtain some funds from Respondent.

Late in 1996, Respondent formed the law firm of Robert A. Holstein and Associates (RAHA). ANB granted an extension to Respondent allowing him additional time to repay the outstanding loans in exchange for attorney's fees from Respondent from his cases. In December 1996, HMK closed its doors.

Some time in late 1996 or early 1997, Respondent met Barbara Stackler. A mutual friend introduced them at a social function. Stackler was the sole principal of the law firm of Stackler and Stackler in Chicago. Shortly after they met, Respondent asked for money to help keep the law firm RAHA afloat. Stackler loaned RAHA $10,000. Stackler began making additional loans both to Respondent personally and to the firm. At that time, both Stackler and Respondent contemplated the merger of the two firms; Respondent viewed the firms as a "perfect fit", with Stackler's ability to financially assist Respondent and RAHA's more experienced litigation staff.

In November and December 1997, Stackler began to pay Respondent's expenses, including law firm expenses such as salaries for the attorneys at RAHA and medical insurance expenses for the employees. She also paid other expenses, such as Respondent's country club dues and dental expenses. She estimated that these expenses for the two months totaled about $250,000.

PAGE 5:

In December 1997, Respondent and Stackler executed an Employment Agreement. The agreement stated that Stackler had loaned Respondent and RAHA in excess of $300,000. The agreement stated that Stackler and Respondent agreed to discharge RAHA's debt on the loans through the assignment of RAHA's interest in future contingent fees to Stackler's law firm. Stackler stated that she was not told by Respondent that ANB had already placed liens on the same contingent fees and the agreement does not mention ANB's liens or interest in the contingent fees. After execution of the Employment Agreement, Respondent began working at the firm in early 1998 with an annual salary of $50,000 and the firm was called Stackler and Holstein. Any client matters that Respondent brought into the firm were assigned to Stackler.

Stackler and Respondent claimed Stackler also provided additional loans to Respondent, although neither produced any documentation or notes evidencing the loans. Stackler also arranged for a line of credit, initially for $100,000, to Respondent and RAHA at Private Bank, where Stackler maintained accounts. Respondent did obtain loans from Private Bank, but the total amount of the loans was unclear from the record. Four documents were prepared which reflected Respondent's transfers of assets to Stackler as collateral for the purported loans from Stackler to Respondent. The dates on which the documents were actually signed were the subject of some dispute. The documents purported to have been executed in 1997. The documents were entitled Collateral Assignment Agreement, dated March 15, 1997; Amendment to Collateral Assignment Agreement, dated May 1, 1997; Assignment in Lieu of Foreclosure, dated July 15, 1997; and Transfer and Assignment Agreement, dated December 15, 1997. Stackler initially testified at her evidence deposition that some of the documents were signed in 1997, but later she testified that even though the documents were dated in 1997, the documents were not executed until 1998 and did not contain the dates on the documents at the time they were signed.

PAGE 6:

Stackler's testimony that the documents were not executed until 1998 was supported by the testimony of Thomas Zimmerman, a former associate in Stackler's firm, who was hired in November 1997. Stackler testified that Respondent told her that Zimmerman had drafted the agreements. However, in his deposition in litigation with ANB he said he had drafted the first agreement. Zimmerman testified that Respondent asked Zimmerman to create the documents in 1998, and he identified the documents as the documents he drafted based on notes he received from Respondent. There were no dates noted on the documents when he gave the documents to Respondent. Computer records from the law firm indicated the documents had last been modified in 1999 but Zimmerman testified he did not modify the documents. During Respondent's case at hearing, his counsel asked him when the Collateral Assignment Agreement had been executed. Respondent did not answer the question and there was no testimony offered to rebut Stackler and Zimmerman's testimony.

As reflected in the documents, as collateral for the loans and the guarantees by Stackler at Private Bank, Respondent gave Stackler an assignment of certain personal assets, including shares in Cemetery Enterprises, Inc.; stock in CMA Holdings; stock in Color Me Coffee; shares in Metro Golf; and an interest in two partnerships, the Bloomfield Hills Limited Partnership and the Wilmette Office Court Limited partnership. Respondent continued to have full legal title to the assets as reflected in the documents but beginning in about September 1997, he began to transfer the income he received from these assets to Stackler. With regard to the Bloomfield Hills Limited Partnership and the Wilmette Office Court partnership, Respondent did not initially inform his partners of the assignments because he knew that would be considered a breach of the partnership agreement. Stackler later learned that the partnerships were closed partnerships and that Respondent could not transfer his legal interest to her. She believed

PAGE 7:

Respondent had transferred his legal interest to her and she paid taxes on the income derived from the two partnerships.

In February 1998, Respondent moved into Stackler's home because his condo had been sold. Respondent did not pay rent and did not contribute toward any of his living expenses. Stackler provided Respondent with a car, paid for Respondent's meals and paid his country club dues. Stackler and Respondent lived together until July 2000. In July 2000, Stackler learned from her housekeeper that Respondent had entertained a girlfriend, Marilyn Paul, at the home and she asked him to leave.

On October 1, 1998, ANB obtained a judgment against Respondent for approximately $750,000. The outstanding principal on the ANB loans was $64,000; the remaining amount was interest and accrued attorney's fees. In December 1998, in an effort to collect the judgment, ANB filed a citation to discover assets against Respondent and Stackler. As a result of discovery related to the citations, ANB learned of Respondent's transfer of assets to Stackler. In September 1999, ANB filed a complaint for turnover or to void fraudulent transfers asking the court to void the transfers and turn over the assets to ANB pursuant to the Illinois Uniform Fraudulent Transfer Act (UFTA). The bank claimed the assets were transferred as a result of actual fraud and constructive fraud.

Thomas Cunningham, the attorney for ANB, testified that the bank viewed Respondent and Stackler as "de facto husband and wife." After learning of the agreement between Respondent and Stackler for Stackler to receive the contingent fees earned by Respondent pursuant to the employment agreement, ANB attempted to receive those fees pursuant to its liens and the earlier agreement with Respondent. Cunningham testified that Stackler engaged in protracted litigation regarding the validity of the ANB liens. During the litigation regarding the transfers, Stackler continually fought the bank. Cunningham said

PAGE 8:

Stackler's relationship with the bank was not good, whereas Respondent's relationship with the bank was better. While Respondent was aggressive in his positions and his posturing required ANB to engage in much negotiation, Cunningham never believed that Respondent concealed anything from the bank during the litigation.

The court in the citation to discover assets litigation set a trial date for June 21, 2000. Three days before trial, Respondent filed a bankruptcy petition. The filing resulted in an automatic stay of the litigation. Respondent was represented by attorney Barry Chatz in the bankruptcy matter. Respondent hired Chatz at the recommendation of David Epstein, his attorney in the citation to discover assets litigation. Respondent testified that he had met with Chatz several times beginning in 1997 to discuss filing for bankruptcy. Chatz denied meeting with Respondent until shortly before the petition was filed, but his records revealed he met with Respondent once in February 1999. Respondent provided all of the information to Chatz regarding his assets and liabilities and provided a personal financial statement. None of these documents disclosed Respondent's interests in his various partnerships that were the subject of the agreements entered into with Stackler. Chatz relied upon the information provided by Respondent to prepare the petition.

On July 18, 2000, Respondent filed his Statement of Financial Affairs. The statement did not include his interests in the Bloomfield Hills Partnership and the Wilmette Office Court Partnership or his other property he had transferred to Stackler. Respondent signed the Statement under penalty of perjury.

Respondent testified under adverse examination at hearing that Chatz had made the determination that Respondent did not need to include the assets he had transferred to Stackler on the petition because those assets were the subject of pending litigation and he no longer owned them. Upon direct examination, he testified that David Epstein had the

PAGE 9:

conversation with Chatz outside of Respondent's presence regarding the disclosure of the transfers to the bankruptcy court. Epstein said he did discuss the assets with Chatz, but he was mistaken about the date of the conversation. His conversation with Chatz occurred after the petition and statements were filed in bankruptcy court. Both Epstein and Chatz agreed the transfers should have been listed on the documents filed with the court. Respondent admitted under examination that at the time he filed his bankruptcy petition, he was receiving checks from Bloomfield Hills Limited Partnership and was endorsing those checks to Stackler.

Respondent's bankruptcy petition reflected a federal tax debt of more than $500,000; unsecured priority claims including HMK debts of almost $9 million including a debt of HMK to Ronald Stackler; approximately $53,000 in personal credit card debt; a personal loan of $25,000; and at least five judgments against him for more than $184,000.

ANB filed a motion in Respondent's bankruptcy matter seeking retroactive relief from the automatic stay. The court granted the motion. On July 25, 2000, at the first meeting of creditors, Respondent testified under oath that he had included all of his assets and liabilities in his bankruptcy schedules. Cunningham was present at this meeting and he then informed the bankruptcy trustee of ANB's security interests and the litigation seeking a turnover of assets fraudulently transferred by Respondent.

ANB's litigation proceeded and the trial began on August 22, 2000. Respondent testified he did not have any interest in the litigation because the fight was really between Stackler and ANB. However, he attended the trial, and participated by moving for the stipulation as to certain documents.

On October 13, 2000, Judge Thomas Quinn entered judgment in favor of ANB. The court found that Respondent had transferred assets to Stackler with the intent to defraud his creditors. The judge stated that at the time Respondent transferred his interests in the Bloomfield

PAGE 10:

Hills Limited Partnership and the Wilmette Office Court Limited Partnership to Stackler, there were a number of lawsuits pending against Respondent and judgments were "foreseeable and likely". In addition Respondent owed substantial sums to the IRS and the Illinois Department of Revenue. The court stated that Respondent and Stackler transferred the assets as part of an "elaborate hoax to put the assets into her hands and shield them from his creditors." The judge also found that the transfers violated Section 5 of the Illinois Fraudulent Transfer Act, by making a transfer with the actual intent to defraud a creditor and violated Section 6 by making a fraudulent transfer because the transfer was made without the debtor receiving equivalent value in exchange for the transfer. The court entered judgment against Stackler for $485,101.33, the amount Stackler received as a result of Respondent's fraudulent transfers to her.

After entry of the judgment, Marzy, Inc. offered to purchase ANB's interest in the judgment against Respondent for $308,000. ANB accepted the offer. Marzy, Inc.'s principal is Marilyn Paul, with whom Respondent has a personal relationship. Respondent testified he was engaged to Paul at the time of hearing.

In September 2000, Jeffrey Goldberg filed a complaint against Respondent in Respondent's personal bankruptcy case, objecting to the discharge of Respondent's debt to him. Goldberg alleged that Respondent had engaged in intentional fraud by inducing him to invest in the Norplant litigation and concealing his ownership of assets in his bankruptcy petition. He also filed a state court action which was later non-suited after Goldberg decided his debt could not be collected. On July 8, 2002, Goldberg filed a motion for summary judgment asking that Respondent be denied a discharge in bankruptcy due to his concealment of the assets transferred to Stackler. On September 24, 2003, the court granted summary judgment in favor of Goldberg based on the doctrine of continuing fraud. The court found that although Respondent had transferred his assets more than one year prior to the filing of the bankruptcy petition, he

PAGE 11:

continued to conceal the fraudulent transfer. The court relied upon the Circuit Court's decision, stating, "the Circuit Court's order, then, leaves no doubt that Holstein concealed property with the intent to hinder, delay or defraud his creditors for purpose of [the Code]." The court denied Respondent's discharge in bankruptcy. The court noted:

No trial is necessary to reject the suggestion that all the while he was receiving partnership checks and endorsing them to his love, Holstein-a licensed attorney for nearly 40 years {footnote omitted}-"actually thought" he owned no interest in the partnerships, only achieving enlightenment on the subject three years later at the hands of the Circuit Court. If Holstein still controlled the partnership interests after 1997 and from 1997 to 2000 paid the income from them to Stackler, Holstein plainly knew he owned the interests. His contrary assertion, frankly, is preposterous. Preposterous factual assertions will not prevent summary judgment. {citations omitted}.

The bankruptcy decision was affirmed on appeal by Judge Norgle. Goldberg did not receive any monies from the bankruptcy court or from Respondent, and paid attorney's fees of more than $200,000 to attempt to recover some of the $1 million he paid to Respondent's firm.

ANALYSIS

We recognize that upon review, the factual findings of the Hearing Board are entitled to deference and should not be disturbed unless they are against the manifest weight of the evidence. In re Timpone, 157 Ill.2d 178, 196, 623 N.E.2d 300 (1993). Questions of law, including determinations as to whether or not there have been violations of the Rules of Professional Conduct, have been considered by this Board under a de novo standard of review. See, e.g., In re Hoffman, 08 SH 65 (Review Bd., June 23, 2010) at 12, recommendation adopted, No. M.R. 24030 (Sept. 22, 2010).

In examining the Administrator's Complaint, there is no question that the Administrator proved, by clear and convincing evidence, the factual allegations of the

PAGE 12:

Complaint. As found by the Hearing Board, from 1997 to 2000, Respondent transferred certain assets, including stock in CSV and income from the Bloomfield Hills Limited Partnership and the Wilmette Office Court Limited Partnership, to Barbara Stackler. However, Respondent continued to maintain full legal title to the Bloomfield Hills Limited Partnership and the Wilmette Office Court Limited Partnership. In 2000, Respondent made false statements when he filed his State of Financial Affairs with his bankruptcy petition and failed to disclose his interests in the Bloomfield Hills Limited Partnership, the Wilmette Office Court Limited Partnership and the other property he had transferred to Stackler. There is also no question that Respondent made false statements to the trustee when he testified he had disclosed all of his assets in his petition.

Although the Hearing Board did not find that that the Administrator failed to prove the actual factual allegations of the Complaint, the Hearing Board concluded that Respondent did not act with dishonest motive when he transferred the assets, when he failed to list certain assets on his bankruptcy petition, and when he testified in his bankruptcy proceedings that he had disclosed all of his assets and liabilities. We conclude that this finding as to Respondent's motives is against the manifest weight of the evidence.

Motive and intent are rarely susceptible to direct proof and must generally be inferred from the attorney's conduct and the surrounding circumstances. See, In re Stern, 124 Ill.2d 310, 315, 529 N.E.2d 565 (1988). In assessing an attorney's conduct, this Board is not required to be naive, impractical, or blind to the intent apparent from the evidence. In re Krasner, 32 Ill.2d 121, 127, 204 N.E.2d 10 (1965). With regard to the findings regarding Respondent's motives when he transferred assets to Stackler, the Circuit Court in the ANB litigation listened to days of testimony, including the testimony of Respondent. Clearly the testimony before the Circuit Court, as opposed to Respondent's testimony at his disciplinary hearing, occurred closer to the time of the alleged transfers of assets from Respondent to Stackler and the Circuit Court

PAGE 13:

was in a better position to weigh Respondent's credibility. The Circuit Court found Respondent's and Stackler's explanations regarding the transfers of assets to be "inherently unbelievable", concluding that Respondent engaged in an "elaborate hoax" designed to put his assets out of the reach of his creditors.

These findings by the Circuit Court are consistent with the Hearing Board's ultimate conclusion that Respondent violated the UFTA. The UFTA provides creditors with a means to invalidate a debtor's fraudulent transfers. Pursuant to UFTA, there are 11 factors to consider when determining whether a transfer of an asset was made with actual intent to hinder, delay or defraud a creditor. The factors are called "badges of fraud." While the Hearing Board did not clarify what badges of fraud were present in this matter, the conclusion of the Hearing Board that Respondent violated the Act by making intentionally fraudulent transfers to Stackler is inconsistent with the Board's findings that Respondent did not engage in intentional fraud or dishonest conduct.  

The evidence also clearly and convincingly demonstrates that Respondent knowingly made false statements to the bankruptcy court. Although the Hearing Board stated they believed Respondent when he testified at the disciplinary hearing, his testimony was refuted by the testimony of his attorney, by the overwhelming circumstantial evidence surrounding his actions, and by the findings of the bankruptcy court.

Barry Chatz, Respondent's bankruptcy counsel, testified at the hearing that Respondent provided Chatz with the information to use to prepare Respondent's bankruptcy petition. A document was admitted into evidence that demonstrated the Respondent provided Chatz with a financial statement to use in filing the petition, and the financial statement notably does not include any reference to the assets in question or the transfers to Stackler. Chatz stated that Respondent did not tell him he had retained an interest in assets he had transferred to

PAGE 14:

Stackler. Chatz testified that had Respondent told him that he had retained an interest in assets he transferred to Stackler, he would have told Respondent to include those assets on his schedules. The Hearing Board inexplicably ignored this testimony, and when viewed with the circumstantial evidence, the Hearing Board's findings were against the manifest weight of the evidence.

At the time Respondent filed his bankruptcy petition, Respondent knew, at the very least, that the validity of his transfers and the ownership of the assets were in question. Respondent had continued to receive income checks from the partnerships and up until 1999 he had not told the partnerships of Stackler's involvement. It strains credulity and common sense to conclude that Respondent would have believed he did not have to disclose to the court the very assets that were the subject of the ANB litigation, litigation Respondent sought to stay once he filed the petition. Further, if Respondent did not believe that the assets should have been disclosed on the petition as assets, then he was required to list the transfers under other inquiries in the documents given to the bankruptcy court. For example, Respondent answered "none" to the question as to whether he had made payments within the year preceding the filing of the petition for the benefit of creditors who were insiders or whether he had transferred any property within the preceding year. If Respondent truly believed that Stackler owned the assets in question, then he should have disclosed the transfer of his income from his partnerships in the preceding year.

The bankruptcy court found Respondent's claims that he did not know he owned the assets at the time he filed his petition to be "preposterous". While the Hearing Board and this Board are not bound by the decision of the bankruptcy court, the boards can properly take the decision into account along with all of the other evidence that was presented in determining

PAGE 15:

whether misconduct has been established. In re Owens, 144 Ill. 2d 372, 378-79, 581 N.E.2d 633 (1991).

Finally, while this Board gives deference to the Hearing Board, this Board has not always upheld similar findings as to a lawyer's intentions. The case of In re Ross, 98 CH 70 (Review Bd., Dec. 28, 2000), petition for leave to file exceptions allowed and sanction increased, No. M.R. 17404 (May 25, 2001), is illustrative. In that matter, the respondent made a false statement in a loan application that there were no outstanding judgments against her. In fact, a judgment had been entered against her more than seven years prior to the loan application. She believed that there were no outstanding judgments. She testified she believed that a judgment was only good for seven years, and therefore did not disclose it. The Hearing Board concluded that the Administrator did not prove by clear and convincing evidence that the respondent intentionally lied on the application and the Board recommended that charge be dismissed. Upon review, the Review Board found that the Hearing Board's finding was against the manifest weight of the evidence. This Board noted that the attorney admitted that under Illinois law that although a judgment can't be the subject of enforcement proceedings after seven years unless the judgment is revived, a judgment can be revived and enforced for up to twenty years. This Board stated there was therefore no question that the judgment should have been disclosed given the purpose of a loan application, noting:

Respondent is not just an ordinary borrower, but is also an attorney. It is well established that attorneys are held to a high standard of personal and professional integrity in connection with all of their actions. In re Alschuler, 388 Ill. 492, 503, 58 N.E.2d 563, 568 (1945). Thus, they are required to exhibit good faith and honesty in all of their dealings and to shun even the appearance of any fraudulent design or purpose. Alschuler, 388 Ill. at 503, 58 N.E.2d at 568.

PAGE 16:

Likewise, in this matter, Respondent's purported belief that he did not have to report the transfer of assets to the bankruptcy court was unreasonable. The Court recently rejected a similar argument in In re Thomas, 2012 IL113035 (Jan. 20, 2012). In that matter, Thomas continued to practice law after he was suspended. He argued that he believed the suspension order had been stayed when he filed a petition for rehearing. The Court stated that his belief was unreasonable and his reading of the rules was incorrect. The Court stated, "The fact that he may have convinced himself that his suspension was stayed does not alter the underlying dishonesty because his belief, even if sincere, was entirely unreasonable." Id. at 123.

Respondent, a lawyer, knew he had an obligation to be truthful with the court when he filed his bankruptcy petition. Instead, Respondent was not truthful and he knowingly made false statements to the court in his Financial Statement filed with the court and in his testimony to the bankruptcy trustee. We find the Hearing Board's conclusions that Respondent did not violate Rule 3.3(a)(1), 3.3(a)(2), 8.4(a)(4) and 8.4(a)(5) to be against the manifest weight of the evidence.

The Administrator also asked in his brief filed in December 2011 that this Board find that Respondent violated Supreme Court Rule 770. In January 2012, the Illinois Supreme Court stated in the case of In re Thomas, 2012 IL 113035 (Jan. 20, 2012), that an attorney who commits misconduct does not "violate" Supreme Court Rule 770. Accordingly, in light of the Court's decision, this Board finds Respondent did not violate Supreme Court Rule 770.

RECOMMENDED SANCTION

The Hearing Board's recommendation as to a sanction is advisory. In re Ingersoll, 186 Ill.2d 163, 178, 710 N.E.2d 390 (1999). However, the sanction imposed should be "consistent with those imposed in other cases involving comparable misconduct." In re Chandler, 161 Ill.2d 459, 472, 641 N.E.2d 473 (1994). The purpose of the attorney disciplinary system is

PAGE 17:

not to punish the attorney for his misconduct, but "to protect the public, maintain the integrity of the legal profession, and protect the administration of justice from reproach." In re Winthrop, 219 Ill.2d 526, 559, 848 N.E.2d 961(2006). In determining the appropriate sanction, this Board considers the nature of the misconduct charged and proved, and any aggravating and mitigating circumstances shown by the evidence. In re Gorecki, 208 Ill.2d 350, 360-61, 802 N.E.2d 1194 (2003).

As found by the Hearing Board, Respondent presented significant mitigation. At hearing, Respondent offered the testimony of several witnesses who testified that Respondent enjoyed a good to excellent reputation for truth and veracity in the community. They had all known the Respondent for decades, but were not aware of the nature of the charges against Respondent in the disciplinary proceeding. In addition, in mitigation, Respondent testified he engaged in bar activities and performed pro bono work for clients. He also testified he had donated money to charities and performed charitable work. Most importantly, he has practiced law since 1962 and has never been disciplined.

In aggravation of his misconduct, Respondent violated the UFTA, as found by the Hearing Board. We agree with the Hearing Board that Respondent violated the UFTA by fraudulently transferring his assets to Stackler and causing needless and protracted litigation on the part of his creditor, ANB, to attempt to collect those assets transferred to Stackler. We also find in aggravation that Respondent failed to recognize or acknowledge any wrongdoing on his own part. See, e.g., In re Samuels, 126 Ill.2d 509, 531, 535 N.E. 2d 808 (1989).

The Administrator asks this Board to recommend that Respondent be suspended for a period of three years. In In re Holz, 125 Ill.2d 546, 533 N.E.2d 818 (1989), the Court suspended the attorney for three years and until further order of court for conversion of client funds, charging an excessive fee, and failing to report monies owed to a client and money in a

PAGE 18:

bank account on his personal bankruptcy petition. While Holz provided substantial evidence in mitigation like Respondent, his charged misconduct was more serious than the misconduct with which Respondent was charged.

In In re Carlson, 96 CH 880 (Review Bd., Dec. 27, 2000), petition for leave to file exceptions denied, No. M.R. 17398 (June 15, 2001), the Court suspended the attorney for three years for his misconduct in providing incompetent representation in two matters and for intentionally omitting information in his personal bankruptcy matter. Carlson reported to the bankruptcy court that he had no assets and no equitable or future interests. In fact, he had entered into a financial agreement with another attorney to take over his law practice that would provide him with a substantial monthly sum and a percentage of fees. The bankruptcy court found that the agreement was invalid because it was intended to hide Carlson's assets from his creditors. The court also found that Carlson made false statements in his testimony in a deposition. This Board concluded that Carlson, who had been previously disciplined, engaged in conduct involving dishonesty, fraud, deceit and misrepresentation and recommended a suspension of three years. The Court adopted that recommendation.

Lawyers have received suspensions of less than three years for making false statements to the bankruptcy court or for engaging in similar misconduct. In In re Rayle, 04 CH 21 (Review Bd., July 12, 2006), petition for leave to file exceptions denied, No. M.R. 21117 (Nov. 17, 2006), like Respondent, the attorney violated the UFTA by fraudulently transferring assets to his girlfriend to avoid his creditors. He also was found to have made false statements in a deposition in a citation to discover assets proceeding. Rayle was suspended for one year. In In re Snowden, 91 CH 188 (Review Bd., Jan. 14, 1994), approved and confirmed, No. M.R. 10039 (May 19, 1994) the attorney neglected three client matters and made false statements to a bankruptcy court about whether his client was employed and whether her car was insured. He

PAGE 19:

presented the testimony of several judges of his good reputation and testified about his pro bono service. He had not been previously disciplined. He was suspended for one year.

We conclude that Respondent's conduct is more serious and aggravated than the conduct in In re Snowden and In re Rayle, but less serious than in the cases cited by the Administrator in support of a three year suspension. We believe a suspension of two years from the practice of law is warranted given the serious nature of the misconduct

Respectfully Submitted,

Chrystel L. Gavlin
Anna M. Loftus
Claire A. Manning

CERTIFICATION

I, Kenneth G. Jablonski, Clerk of the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois and keeper of the records, hereby certifies that the foregoing is a true copy of the Report and Recommendation of the Review Board, approved by each Panel member, entered in the above entitled cause of record filed in my office on September 13, 2012.

Kenneth G. Jablonski, Clerk of the
Attorney Registration and Disciplinary
Commission of the Supreme Court of Illinois