Filed May 14, 2014
In re Donald Paul Rosen
Commission No. 2012PR00088
Synopsis of Hearing Board Report and Recommendation
The Administrator charged Respondent with misusing funds he agreed to hold in escrow in two matters, submitting false bank statements to the ARDC, making a false statement to the Carpentersville Police Department, and acting dishonestly. The Chair allowed the Administrator to strike certain charges pursuant to In re Karavidas, 2013 IL 115767 (Nov. 15, 2013).
Although Respondent denied committing misconduct, he acknowledged using funds that had been improperly transferred from his IOLTA account into his business account. Respondent claimed his mother, who was 82 years of age at the time of the hearing, transferred the funds without his knowledge. Respondent also claimed his mother was responsible for fabricating the false bank statements he submitted to the ARDC.
The Hearing Board did not believe the testimony of Respondent and his mother and found Respondent committed all of the charged misconduct. Specifically, the Hearing Board found Respondent failed to promptly deliver to a client or third person funds that the client or third person is entitled to receive, engaged in conduct involving dishonesty, fraud, deceit or misrepresentation, knowingly made a false statement of material fact to a third person, knowingly made false statements of material fact in connection with a disciplinary matter, and engaged in conduct prejudicial to the administration of justice.
The Hearing Board found a substantial amount of aggravation, including Respondent's false testimony in this proceeding, pattern of dishonesty, and failure to recognize his misconduct. There was minimal mitigation. After considering the proven misconduct and case law, the Hearing Board recommended that Respondent be suspended for three years and until further order of the court and that he be required to pay restitution within six months of the final order of discipline.
BEFORE THE HEARING BOARD
ILLINOIS ATTORNEY REGISTRATION
In the Matter of:
DONALD PAUL ROSEN,
Commission No. 2012PR00088
REPORT AND RECOMMENDATION OF THE HEARING BOARD
The hearing in this matter was held September 26, 2013, September 27, 2013, December 16, 2013, and January 3, 2014, at the Chicago offices of the Attorney Registration and Disciplinary Commission (ARDC) before a Hearing Board Panel consisting of Kenn Brotman, Chair, Michael C. Greenfield and Joseph C. Vallez. Melissa A. Smart and Peter L. Apostol represented the Administrator. Respondent, Donald Paul Rosen, appeared pro se.
The Administrator filed a five-count Complaint on August 6, 2012, alleging Respondent dishonestly converted funds he was holding in escrow in two different matters, made a false statement to the Carpentersville Police Department, and presented fabricated bank records and gave false testimony to the ARDC during the investigation of this matter. After the hearing began, the Administrator was granted leave to file an Amended Complaint. Pursuant to In re Karavidas, 2013 IL 115767 (Nov. 15, 2013), the Administrator struck charges of conversion,
breach of fiduciary duty, and conduct which tends to defeat the administration of justice or bring the courts or the legal profession into disrepute.
Respondent admitted some of the factual allegations against him but denied committing any misconduct.
The Amended Complaint charged Respondent with violating the following 2010 Rules of Professional Conduct: failing to promptly deliver to a client or third person funds that the client or third person is entitled to receive, in violation of Rule 1.15(d) (Count I); engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(c) (Counts I-V); knowingly making a false statement of material fact to a third person, in violation of Rule 4.1(a) (Count II); engaging in conduct that is prejudicial to the administration of justice, in violation of Rule 8.4(d) (Counts II-IV); and knowingly making false statements of material fact in connection with a disciplinary matter, in violation of Rule 8.1(a) (Counts III-IV).
The Administrator presented the testimony of David Townsend, Lynn Pippenger, Mervin Johnson, Jr., Samuel Valle, Respondent, Robert V. Levin, Roni Martin and Detective John Spencer. Respondent testified on his own behalf and presented the testimony of Terrence L. Donati and Selma Frazin. The Administrator's Exhibits 1-12, 14-23, 25-30, 32, 34, 36-37, 40, 42-43, 46-62 and 64 were admitted into evidence. Respondent's Exhibits 5 (first two pages), 6, 18, 25, and 31 were admitted into evidence.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In attorney disciplinary proceedings, the Administrator has the burden of proving the charges of misconduct by clear and convincing evidence. In re Ingersoll, 186 Ill. 2d 163, 710
N.E.2d 390 (1999). Clear and convincing evidence constitutes a high level of certainty, which is greater than a preponderance of the evidence, but less than proof beyond a reasonable doubt. People v. Williams, 143 Ill. 2d 477, 577 N.E.2d 762 (1991).
We note at the outset that we find the Administrator's witnesses credible and believe their testimony. On the other hand, we find the testimony of Respondent and his mother, Selma Frazin, lacking in credibility and, in large part, untruthful. As we will set forth in greater detail below, Respondent and Ms. Frazin have changed their stories so many times it is impossible to determine when, if ever, they are telling the truth.
COUNT I-DIXIE ROADHOUSE
I. Respondent is charged with failing to promptly deliver to a client or third person funds that the client or third person is entitled to receive, in violation of Rule 1.15(d).
A. Evidence Considered
Respondent has a bachelor's and master's degree in accounting, has been a certified public accountant since the early 1990's, and has worked as chief financial officer for several nonprofit organizations. He has been licensed to practice law since 2003. Respondent was 60 years old at the time of the hearing. (Tr. 75-77, 1169).
Respondent maintains an IOLTA account ending in 3331 at Citibank. He is the only signatory on the IOLTA account and acknowledged giving sworn statement testimony that he was the only person who wrote checks from his IOLTA account. (Tr. 80-82). He testified at hearing, however, that he was not the only person who wrote checks from his IOLTA account. Respondent also has a Citibank business account ending in 3336. He uses this account to pay for business and personal expenses. (Tr. 78-79). He testified that any debits from the business accounts would be his. (Tr. 83).
Respondent met with David Townsend and Lynn Pippenger in February 2011 to discuss their plans for creating a nightclub in Florida, later named Dixie Roadhouse. Respondent and Mr. Townsend have known each other since 2004. Since that time Respondent represented Mr. Townsend in about 20 business matters and approximately 5-10 personal matters. (Tr. 418-20).
Respondent agreed to assist Mr. Townsend and Ms. Pippenger with forming Dixie Roadhouse.
Mr. Townsend and Ms. Pippenger advised Respondent they had investors for Dixie Roadhouse. According to Mr. Townsend, Respondent suggested that he collect the investors' checks, deposit them in an escrow account, and hold them until Mr. Townsend and Ms. Pippenger were ready to begin the project. Mr. Townsend and Ms. Pippenger agreed to this arrangement. (Tr. 425-47).
Respondent prepared a Subscription Agreement between the investors and Colosseum, Inc., (Colosseum) the entity that would operate Dixie Roadhouse. The investors signed the Subscription Agreement contemporaneously with sending Respondent their checks. The Subscription Agreement provided that Respondent would hold the investor funds in escrow until Colosseum had capital of at least $200,000 and had delivered shares to the investors. (Tr. 548; Adm. Ex. 2). The Subscription Agreement did not address payment of Respondent's attorney fees or set forth the existence of an attorney-client relationship between Respondent and the investors, nor did the Subscription Agreement set forth any conditions applicable to the escrow arrangement, which Respondent later asserted, or attempted to assert, in connection therewith. (Adm. Ex. 2).
By May 17, 2011, Respondent received and deposited in his IOLTA account investor funds totaling $110,000 from the following investors: $10,000 each from Leonard Skwiera,
Geraldine Michalak, Brian Michalak, and Mark Michalak; $20,000 from Susanne Deifel-Johnson; and $50,000 from Mervin Johnson, Jr. (Tr. 440-44; Adm. Exs. 4, 52-54).
At some time prior to May 26, 2011, Mr. Townsend asked Respondent for a written statement verifying that he was holding all of the investor funds. Mr. Townsend needed to provide proof of funds in order to obtain a lease for the nightclub space. (Tr. 447-48). Respondent told Mr. Townsend he did not have online access to the "escrow account" but provided what purported to be a redacted bank statement showing a balance of $164,756 in Respondent's IOLTA account. (Tr. 450-52; Adm. Ex. 11). Respondent provided Mr. Townsend with a letter dated May 26, 2011, which stated he was holding $110,000 in investor funds in escrow. (Adm. Ex. 61).
In June 2011, Respondent prepared and submitted to Mr. Townsend a written Escrow Agreement purporting to govern the terms under which Respondent was holding the investor funds in his IOLTA account as escrowee. Mr. Townsend told Respondent he did not want to use the Escrow Agreement because it stated Respondent could hold the investor funds if there was a dispute or tie up the funds in court. On or about June 2, 2011, Respondent sent the Escrow Agreement to the investors without authorization from Mr. Townsend and without advising the investors of the existence or nature of Mr. Townsend's objections. (Tr. 94, 461-62; Adm. Exs. 58, 59). Leonard and Kathleen Skwiera, Geraldine Michalak and Mark Michalak signed the Escrow Agreement. (Tr. 98-99).
The Escrow Agreements contained in Administrator's Exhibits 58 and 59, addressed to Mervin Johnson, Jr., Susanne Deifel-Johnson, Brian Michalak, and Leonard and Kathleen Skwiera, contain the following provision:
ATTORNEY FEES AND EXPENSES
The Corporation is expected to pay the Attorney his reasonable fees and expenses, including all reasonable expenses, charges, and other disbursements incurred by him or by his agents and employees in the performance of his duties and obligations under this Escrow Agreement. If such payment is not made, the Investor shall be contingently liable for said payment.
The unsigned Escrow Agreement addressed to Mark Michalak admitted into evidence contains no provision regarding contingent liability for attorney fees. (Adm. Ex. 5).
Mr. Townsend needed the investor funds to complete and open the nightclub and asked Respondent "many, many times" to release the funds. Mr. Townsend expected to use all of the investor funds for the Dixie Roadhouse startup expenses, including construction, purchasing equipment, and paying employees. He never expected Respondent to take legal fees from the investor funds and did not agree to Respondent doing so. (Tr. 620-21).
Respondent refused to release the investor funds because the $200,000 threshold set forth in the Subscription Agreement had not been met. Mr. Townsend then asked Respondent to return the funds to the investors instead of releasing the funds to Mr. Townsend and Ms. Pippenger, but Respondent refused to do so until all of the investors signed the Escrow Agreement and Mr. Townsend and Ms. Pippenger signed releases. Mr. Townsend advised the investors who had not signed the Escrow Agreements not to do so. (Tr. 566-67). All of the investors and Ms. Pippenger on behalf of Colosseum then signed a "Mutual Agreement to Rescind Subscription Agreement and to Release Funds" (Rescission Agreement). (Adm. Ex. 6). Mr. Townsend sent the signed Rescission Agreements to Respondent on August 3, 2011. (Tr. 467).
Mr. Townsend received an invoice for legal fees from Respondent on August 15, 2011. (Adm. Ex. 13). The invoice showed fees of $17,628.25. Mr. Townsend did not agree with all of the fees and felt Respondent billed him for creating a "fiasco" out of what should have been a
simple transaction. (Tr. 473-74). Mr. Townsend and Ms. Pippenger believed the corporation they formed would be responsible for paying Respondent's fees. (Tr. 425-27, 432, 434).
After numerous email exchanges and the involvement of the Carpentersville Police Department, described below, Respondent eventually released part of the investor funds. He withheld some investor funds for attorney fees, which was not part of Mr. Townsend's and Ms. Pippenger's agreement with Respondent. One of the investors, Mervin Johnson, Jr., never received any money back from Respondent. (Tr. 481-87; Adm. Exs. 19, 21).
The investors who did receive checks from Respondent turned them over to Colosseum, and they were deposited in the corporate bank account. The investment funds Colosseum actually received were "not even close" to the amount entrusted to Respondent. Mr. Townsend estimated Colosseum received $47,000 of the initial $110,000 investment. Colosseum had to borrow $50,000 to make up the difference. (Tr. 492-93). Mr. Townsend and Ms. Pippenger gave the investors credit for the full amount of their initial investment when issuing shares to them. (Tr. 491).
Lynn Pippenger owns Colosseum, LLC, which owns and operates the nightclub on behalf of Dixie Roadhouse Limited. (Tr. 787-88). The investor funds were intended to go to Colosseum, LLC. (Tr. 788-89). She did not anticipate that Respondent would do much work on the Dixie Roadhouse project. She expected him to hold the checks that came in and then send out one check to Colosseum, LLC. She did not have a written fee agreement with Respondent. She understood the corporation was supposed to pay his fees but she and Respondent had not discussed whether his fees were to be paid before or after Respondent disbursed the escrow funds. (Tr. 782-83, 789). Respondent did not provide her with a billing statement prior to the end of the representation. (Tr. 783). It was never Ms. Pippenger's understanding that
Respondent would take attorney fees out of the investor funds. (Tr. 790). Ms. Pippenger considered Respondent to be her attorney and Colosseum's attorney. She did not consider him the investors' attorney. (Tr. 791).
Ms. Pippenger discharged Respondent as escrow agent on August 16, 2011. (Tr. 822). Respondent returned approximately $52,000 of the original $110,000 investments. Ms. Pippenger gave the investors full credit, in terms of stock value, for the full amount of escrowed investor funds they sent to Respondent. (Tr. 826-27).
Ms. Pippenger did not authorize Respondent to use any part of the investor funds for himself or to take legal fees from those funds. (Tr. 797-98). When she received Respondent's invoice showing how much he had taken in fees from the investor funds she felt there was not much she could do, even though she disagreed with many of his charges, because Respondent had already taken the money. (Tr. 820-21). She advised Respondent by email on August 30, 2011, that she did not consent to him withholding fees from the investor funds. (Tr. 831).
Dixie Roadhouse had yearly sales of $2.1 million. Approximately $60,000 went back to the investors. (Tr. 845). Ms. Pippenger takes a salary of $1,000 per week and Mr. Townsend earns $320 per week. (Tr. 848).
Ms. Pippenger filed a report against Respondent with the Carpentersville Police Department related to his failure to return the escrow funds. (Tr. 812-13).
Mervin Johnson, Jr.
Mervin Johnson, Jr. invested $50,000 in Dixie Roadhouse. Mr. Johnson's wife, Susanne Deifel-Johnson, invested $20,000. Mr. Johnson was directed to send his money to Respondent, who would hold it in escrow. (Tr. 633-34). Mr. Johnson testified Respondent never represented him or any of the investors. (Tr. 635). He did not authorize Respondent to use any of his funds. (Tr. 635). It was Mr. Johnson's understanding that if Mr. Townsend and Ms. Pippenger did not
obtain the $200,000 threshold amount of investments, then Respondent would return all of the escrowed funds to the individual investors. (Tr. 642). Mr. Johnson received an escrow agreement from Respondent on June 2, 2011. He did not sign it because he had already deposited his money with Respondent. (Tr. 645).
Mr. Johnson lived in Germany from December 2009 until June 2011, when he moved to Tennessee. He has never received a refund check from Respondent and does not think it is possible Respondent sent his check to Germany, as Respondent says he did. (Tr. 655). Mr. Johnson arranged for any mail directed to his Germany address to be forwarded to his in-laws, who remain in Germany. Mr. Johnson sent two test letters from Tennessee to his Germany address. His in-laws received the test letters within a week to ten days. Mr. Johnson's in-laws informed him when they received mail addressed to him. They never received any mail from Respondent.
As of the date Respondent purportedly mailed Mr. Johnson's check, Mr. Johnson was living in Tennessee. He provided Respondent his Tennessee address by email on August 9, 2011, and in the Rescission Agreement. Respondent sent a cashier's check to Susanne Deifel-Johnson at their Tennessee address at the same time he purportedly sent Mr. Johnson's check to Germany. (Tr. 655, 658; Adm. Ex. 23). Respondent told Mr. Johnson he did not send Mr. Johnson's check by certified mail because certified mail was not available in Germany. (Tr. 667, Adm. Ex. 22). Mr. and Mrs. Johnson sent Respondent numerous emails asking about the status of Mr. Johnson's check and demanding the funds. (Tr. 328; Adm. Exs. 22-24, 26-30).
Samuel Valle is the assistant branch manager of the Citibank located at Michigan and Lake Streets, Chicago. (Tr. 44-45). He identified Administrator's Exhibits 46-57 as bank statements and copies of teller transactions for a Citibank account. Mr. Valle identified
Administrator's Exhibit 10 as a Citibank official check, also referred to as a cashier's check, payable to Mr. Johnson. The check marked as Exhibit 10 was not negotiated by the intended recipient because it is stamped "not used for purpose intended." This indicates the purchaser of the check returned it to the bank. When that happens, the purchaser of the check usually deposits it back into his or her bank account. Mr. Valle could not be certain Exhibit 10 was redeposited into Respondent's account without looking in the Citibank system. (Tr. 53-58).
Selma Frazin, Respondent's mother, was 82 years of age at the time of hearing and lives in Arizona. Before she retired, she owned a collection agency for twenty years. (Tr. 980-81). Ms. Frazin testified she lived with Respondent in Illinois between 2010 and 2012 because Respondent had been injured and could not drive. Respondent was in a lot of pain after being bitten by a dog and undergoing surgery on his shoulder. (Tr. 984). Ms. Frazin occasionally made trips back to Arizona but did not stay there for long periods of time. (Tr. 1159). She testified Respondent came to Arizona to help her in the beginning of April 2011, because she injured her knee. (Tr. 1074-75).
Ms. Frazin could not recall when she began helping Respondent. (Tr. 984). In addition to driving, she helped Respondent in his office with bookkeeping, answering phones, filing, and pursuing collections of fees. She had Respondent's bank card and password, so she was able to make transactions in Respondent's bank accounts. (Tr. 991-92). She testified she went to a Citibank branch to manage Respondent's accounts. (Tr. 993). According to Ms. Frazin, she was the only person who made deposits in Respondent's business account during the time she was helping Respondent. She recalled making specific deposits into the business account in September 2010. (Tr. 1001, 1005-1006; Adm. Exs. 47-48).
Ms. Frazin testified she did not know the purpose of Respondent's IOLTA account when she began helping Respondent, nor did she know she was not supposed to transfer funds from the IOLTA account into Respondent's business account. (Tr. 1008-1009). She would make transfers from the IOLTA account into the business account whenever she felt there was a need. (Tr. 1010). Every time she made a withdrawal from the IOLTA account, she made a deposit of the same amount into the business account. (Tr. 1011, 1037-39). She made the transfers by going to a bank teller, swiping Respondent's bank card, and asking the teller to transfer the money. (Tr. 1015).
Ms. Frazin testified that Respondent asked her to get a copy of the bank statement for his IOLTA account to give to Lynn Pippenger. At that time she learned she should not have been taking funds out of the IOLTA account, but she continued to do so. (Tr. 1043-44). She gave Respondent what purported to be his IOLTA statement in June 2011. (Tr. 1045). Ms. Frazin testified she altered the statement she gave Respondent by changing the numbers on the computer. When asked to describe exactly how she altered the statement, she testified, "I can't describe exactly the name of the machines. The machines are in the office on the computer." (Tr. 1051-52). She later testified, "First I printed the paper. Then I did it all." (Tr. 1053). In response to Respondent's question whether she had help altering the statement, Ms. Frazin said she received help from a person named Sue Wilder. (Tr. 1053-54). A Sue Wilder did not testify as a witness at the hearing, nor was any evidence presented by Respondent concerning the identity, existence, or whereabouts of anyone by that name.
Ms. Frazin testified she met Ms. Wilder at a Kinko's and mentioned she was having problems with an account and did not know how to handle it. Ms. Wilder said she could help. (Tr. 1106). Ms. Frazin initially thought Ms. Wilder worked at Kinko's but now thinks Ms. Wilder may have been a paralegal. Ms. Frazin asked Ms. Wilder to change the numbers on
Respondent's bank statements and Ms. Wilder agreed to do so. Ms. Frazin testified they altered the first statement in Respondent's office but altered other statements at Kinko's. (Tr. 1055-56). According to Ms. Frazin, Ms. Wilder eventually altered "a whole transcript." Ms. Frazin provided the balances that were supposed to be in Respondent's accounts and had Ms. Wilder "straighten it out." (Tr. 1056-57)
When asked whether the statements Respondent provided to the Administrator are the documents she altered, Ms. Frazin testified she was "pretty sure" they were the same documents. (Tr. 1061). She does not know where the original bank statements are now but thinks "Sue may have them." (Tr. 1064).
On cross-examination, Ms. Frazin testified she has Sue Wilder's phone number, social security number and information from her Illinois driver's license, but she did not bring the information with her to the hearing. (Tr. 1096-97). Ms. Frazin made three cash payments to Ms. Wilder that totaled $600. The payments took place at Kinko's. Ms. Frazin could not identify the town where the Kinko's was located. (Tr. 1096-1100).
Ms. Frazin testified she sat at Kinko's for two days while Ms. Wilder worked on the statements. Ms. Frazin does not know how Ms. Wilder made the changes, except that she "did a lot of printing." (Tr. 1105-1106). According to Ms. Frazin, Ms. Wilder knew the statements were balanced correctly because Ms. Frazin showed Ms. Wilder what she took out of the IOLTA account and what numbers should go on the altered statements. (Tr. 1104). When asked to identify what was changed on the bank statements, Ms. Frazin could not remember. (Tr. 1112).
When asked when she stopped making transfers from the IOLTA account into the checking account, Ms. Frazin answered, "[w]hen I found out I shouldn't have been." She could not remember the exact date. (Tr. 1076). Respondent elicited testimony that she stopped making withdrawals in August 2011. (Tr. 1078). Ms. Frazin testified she never went online by herself to
get Respondent's bank statements. (Tr. 1128). She acknowledged testifying in her deposition that she called Respondent's bank to make transfers. (Tr. 1131-33). On re-direct, Ms. Frazin testified she made the alterations to the bank records in 2011 but was not sure. (Tr. 1150). She further testified that when she said she got statements online, she meant she got them at the bank. (Tr. 1156).
Ms. Frazin recalled acquiring the cashier's checks sent to Mark Michalak, Geraldine Michalak, Brian Michalak, Leonard and Kathleen Skwiera, and Susanne Deifel-Johnson. Ms. Frazin testified she deposited money in Respondent's accounts to replace the funds that were improperly used, and to pay for Mr. Johnson's check. (Tr. 1058-59). According to Ms. Frazin, the number on Mr. Johnson's cashier's check is out of sequence with the cashier's checks to the other investors because she purchased Mr. Johnson's check with her own funds. Respondent addressed the envelope to Mr. Johnson, and Ms. Frazin brought it to the post office and obtained a certificate of mailing. (Tr. 1088; Resp. Ex. 5).
After Respondent learned the bank statements he gave the Administrator were falsified, Ms. Frazin told Respondent she had altered them. Respondent then prepared an affidavit, which she signed. In her affidavit, Ms. Frazin averred as follows, in relevant part:
I am Donald Rosen's mother and I have assisted him without compensation in his clerical work and accounting from about November of 2010 after he sustained injuries in his left hand and shoulder to February, 201 after he was released to light duty.
Among the tasks that I did for my son was making deposits and keeping cash and sales reports. I also gave him supporting documents to make reconciliation of his checking accounts. Don gave me the password to his accounts to be able to make deposits and get statements online.
Because Don's bank statements combined both his escrow and business accounts I thought at first that the higher balance (in his escrow account) was his actual business account balance. When I asked at the bank and they informed me that there were two separate accounts I thought that it would
be alright to transfer money from one account to the other to avoid overdrafts.
At some point after a couple of months, before Don needed statements to reconcile his account, I learned that I could not transfer the money out of the escrow account because it belonged to the clients.
I was embarrassed and did not want Don to be upset with me and so I went to Kinko's with the bank statements and changed them with help from one of their employees so that the statements for the escrow account would not show the cash transfers. I told Don that the deposits in his business checking account were from client receivables.
I gave Don the changed statements to do his reconciliation. Don was never aware that the statements were changed or that the cash was transferred from his escrow account into his business account.
Eventually over the next year I was able to replace the money into Don's escrow account before he had to repay his clients. I no longer assist Don in his law practice.
Ms. Frazin testified she may not have mentioned Sue Wilder to Respondent when he prepared her affidavit, which is why her name does not appear in the affidavit. (Tr. 1119). When asked whether her affidavit is entirely truthful, Ms. Frazin asserted her Fifth Amendment privilege as to paragraph 5. She initially asserted the privilege as to paragraph 6, but then answered that paragraph 6 is truthful. (Tr. 1121-23).
Respondent acknowledged he received $110,000 from the Dixie Roadhouse investors and deposited all of the funds in his IOLTA account by May 17, 2011. He further acknowledged that the beginning balance of his IOLTA account in June 2011 was $85,500 and the ending balance for that month was $80,500. (Tr. 85-86, 101). Respondent acknowledged giving sworn statement testimony that all of the investor funds were in his escrow account when he received the Rescission Agreements. (Tr. 108-109). At the time he received the Rescission Agreements, the balance of his IOLTA account was $73,000. (Tr. 110).
When asked who his client was when he prepared the Escrow Agreement, Respondent answered that Mr. Townsend and Ms. Pippenger retained him, but his "loyalties were shared by the investors." (Tr. 1192-93). Respondent felt he was in a quandary with respect to returning the investor funds and at the same time protecting himself because "the whole transaction was out of control." (Tr. 1233-34).
Respondent further testified his mother gave him the statement he provided to Mr. Townsend in May 2011, and she modified the statement. (Tr. 1209). Respondent's mother told him the money that went into his business account was from client receivables, and he had no reason to believe that was false. (Tr. 1212). Respondent explained his sworn statement testimony that he obtained his bank statements online by saying "I never thought of getting statements from my mother as not getting things for myself." (Tr. 1217).
On August 20, 2011, Respondent paid himself $13,903.25 in attorney fees from the Dixie Roadhouse investor funds. (Adm. Exs. 15, 57 at 26). Between August 15 and August 24, 2011, Respondent sent cashier's checks to the investors in the following amounts as repayment of their funds, minus attorney fees: $8,748.71 each to Leonard Skwiera, Geraldine Michalak, Brian Michalak, and Mark Michalak; and $17, 358.38 to Susanne Deifel-Johnson. Respondent retained a total of $7,646.78 from these individuals as attorney fees. The remaining $6,256.46 in attorney fees was withheld from Mr. Johnson's investment funds.
As for the repayment of Mervin Johnson's funds, Respondent testified Ms. Frazin obtained a cashier's check in the amount of $43,743.54, payable to Johnson, but then deposited the check back into Respondent's IOLTA account. Respondent acknowledged his sworn statement testimony that he redeposited and reissued the cashier's check. (Tr. 315-16; Adm. Ex. 10). Respondent testified the first check to Mr. Johnson was deposited back into Respondent's IOLTA account because "there was a question as to the amount." (Tr. 313). Respondent
produced what purports to be a receipt for a second cashier's check payable to Mr. Johnson, which Respondent claims Ms. Frazin sent to Mr. Johnson in Germany. (Adm. Ex. 32 at 10).
Contrary to Mr. Johnson's testimony, Respondent believes Mr. Johnson received his cashier's check and is trying to get additional funds from Respondent. (Tr. 309-310). Respondent further believes that, once he was terminated as the escrow agent and attorney for the Dixie Roadhouse matter "and was taking all the abuse from Mr. Johnson," he did not have a fiduciary duty "to go the extra yard" to make sure Mr. Johnson received his money. (Tr. 311). Respondent agreed that, as of April 3, 2012, he had not asked his bank whether Mr. Johnson negotiated a cashier's check. (Tr. 139). Respondent did not put a stop payment on Mr. Johnson's cashier's check or issue a new check because Respondent "was terminated as his attorney" and was fed up with Mr. Johnson.
Respondent acknowledged the reconciliations and bank statements he submitted to the Administrator in response to the inquiry into the Dixie Roadhouse matter do not accurately depict the activity in his IOLTA account. (Tr. 332-34). Respondent testified he received the bank statements from his mother. (Tr. 336). He acknowledged giving sworn statement testimony that he obtained his bank statements by going online and bringing up the statements on the Citibank website. (Tr. 337).
Respondent further acknowledged that in his sworn statement of April 3, 2012, he said his mother pulled the bank statements online, and she and a Kinko's employee changed the statements. (Tr. 373). In his deposition of May 10, 2013, Respondent stated he was not convinced the ARDC received altered records. (Tr. 372-75). According to Respondent, he did not go online at any time prior to his deposition to look at his actual bank statements. (Tr. 377-78).
Respondent could not pinpoint the dates his mother assisted him because "a lot of that time period is kind of a blur." He believes it was from August or September 2010 until late 2011 or early 2012. (Tr. 1281-83). Respondent's testimony that his mother assisted him was impeached by evidence that, during April 2011, Respondent represented to an Illinois Appellate Court that he was not able to comply with discovery in a case he filed against his former employer, The Larkin Center, because he was in Arizona helping his mother after her knee was injured. Respondent acknowledged that the opinion of the Illinois Appellate Court in that matter states as follows:
On April 26th, plaintiff filed a motion to vacate the April 7th order arguing that his 80-year-old mother's knee collapsed the week before the April 7 hearing. Plaintiff's mother was scheduled for surgery on April 27, and plaintiff went to Arizona to care for her. Plaintiff attached his airline reservations which showed that his flight left Chicago on April 2nd but included no information related to when plaintiff returned." (Tr. 401).
When asked whether his mother was taking care of Respondent in Illinois or he was taking care of his mother in Arizona, Respondent answered, "Well, it was both." Respondent said he "went out to get her convalesced; and when she was sufficiently healed she came back and helped me." (Tr. 401-402).
B. Analysis and Conclusions
We find the Administrator proved by clear and convincing evidence that Respondent failed to promptly deliver to a client or third person funds the client or third person is entitled to receive. Respondent violated Rule 1.15(d) by failing to return any of Mr. Johnson's funds and by retaining part of the investor funds for legal fees, without authorization.
Of the $110,000 Respondent received from the investors, he returned only $52,353.22. For the following reasons, we find credible Mr. Johnson's testimony that he has not received any of his $50,000 investment back from Respondent. We do not find credible Respondent's
testimony that he refunded Mr. Johnson's investment, minus attorney fees, by mailing a cashier's check in the amount of $43,743.54 to Mr. Johnson's former address in Germany. Even if we did believe Respondent, the steps he claims to have taken did not satisfy his obligations under Rule 1.15(d).
We do not believe Respondent or Ms. Frazin obtained a second cashier's check payable to Mr. Johnson or mailed anything to Mr. Johnson in Germany. Respondent or Ms. Frazin purportedly obtained two cashier's checks payable to Mr. Johnson in the amount of $43,743.54. The first cashier's check, issued on August 23, 2011, was obtained with funds from Respondent's IOLTA account but was never sent to Mr. Johnson. Instead, Respondent or Ms. Frazin deposited the first cashier's check back into Respondent's IOLTA account on August 24, 2011.
Respondent produced what purports to be a receipt for a second cashier's check payable to Mr. Johnson (reissued check). Respondent claims he mailed the reissued check to Mr. Johnson and believes, contrary to Mr. Johnson's representations, that Mr. Johnson received it. We give no credence to Respondent's belief, as there is no support for it in the record. There is no evidence Mr. Johnson negotiated the reissued check, and no reasonable explanation why Mr. Johnson might have received the reissued check but not negotiated it. Mr. Johnson repeatedly communicated his desire to get his money back not only to Respondent but to Detective Spencer and this Hearing Panel, so we have no doubt he would have negotiated the reissued check had he received it.
In addition, we are not convinced the purported receipt for the reissued check is authentic. Respondent produced copies of all of the negotiated investor cashier's checks but for the reissued check. The negotiated cashier's checks have legible check numbers. On the purported receipt for the reissued check, however, one of the check numbers is illegible, and the
numbers that are legible are not in sequence with the other cashier's checks Respondent or Ms. Frazin purchased during the same time period. The record shows Citibank cashier's checks bearing the following check numbers were purchased on the following dates with funds from Respondent's IOLTA account. (Adm. Ex. 32, at 5-10; Adm. Ex. 57):
August 23, 2011
Susanne Deifel (redeposited)
August 23, 2011
Merv Johnson (redeposited)
August 23, 2011
August 23, 2011
August 23, 2011
August 23, 2011
Len Skwiera (redeposited)
August 24, 2011
August 24, 2011
Leonard and Kathleen Skwiera
The purported receipt for the reissued check bears the following information:
August 2_1, 2011
Respondent attributes the different check number sequence to the evidence that payment for the reissued check came from Ms. Frazin instead of from Respondent's IOLTA account. This is not a reasonable explanation. Respondent does not explain how a different source of funds would affect the sequence of bank-issued checks that appear to have been drawn during the same time period from the same teller. In addition, the record contains no evidence corroborating Ms. Frazin's testimony that she provided the funds to purchase a cashier's check payable to Mr. Johnson. Respondent has also failed to credibly explain why it was necessary to deposit the first check to Mr. Johnson back into his IOLTA account and obtain a second check. Respondent's explanation that "there was a question as to the amount" of the first check does not ring true when the amounts of the first check and the purported reissued check were identical.
The reissued check also bears suspicious similarities to the first check to Mr. Johnson, including the same typographical error, "REFUN FROM TRUST ACCOUNT," and a similar teller's signature. The numbers of the two checks to Mr. Johnson differ only by the second to last digits. We believe it would not have been difficult for Respondent to have changed the "8" on the first check to a "2" on the reissued check.
The evidence pertaining to the purported mailing of the reissued check similarly lacks credibility. Respondent made excuses every time he was asked for proof he mailed the check. He told Mr. Johnson he could not provide him with a tracking number for the envelope because the post office did not offer certified mail service to Germany. Curiously, though, in June 2011, Respondent sent the Escrow Agreement to Mr. Johnson in Germany by express mail with a tracking number. It does not reflect well on Respondent's credibility or motives that he supposedly used a mailing method that could not be tracked when he knew a tracking option was available, particularly when delivering a cashier's check for $43,743.54. In addition, when Mr. Johnson asked for proof the check was drawn from Respondent's account, Respondent responded only that the check number was not legible via email. Respondent also fails to explain why he purportedly mailed Mr. Johnson's check to Germany but mailed Susanne Deifel-Johnson's check to the correct address in Tennessee. The only reasonable conclusion we can draw is that Respondent never obtained or mailed Mr. Johnson's check.
Respondent's conduct after he claims to have mailed the reissued check reinforces our determination that he had no intention of returning Mr. Johnson's funds. Respondent could have easily resolved the problem of the allegedly lost check by stopping payment on it and issuing a new check to Mr. Johnson. Instead, Respondent did nothing. His inaction leads us to conclude he intentionally kept Mr. Johnson's funds.
However, it should be noted that while the above facts lead us to believe the reissued check is not authentic, we are disappointed that neither party elicited any evidence from Citibank regarding the status of purported cashier's check number 1903_9022. Citibank's records of whether the check was actually issued or cashed would have been dispositive of this issue. Instead, the Hearing Panel was required to undergo an analysis of all of the above facts and make credibility determinations in order to reach its conclusions on this issue. The hearing and the Hearing Panel's decision making process would have been significantly more efficient had either party obtained evidence from Citibank regarding the authenticity of purported check 1903_9022, and/or its payment status.
Regardless, even if we believed Respondent put the supposedly reissued check in the mail, which we do not, the meager efforts he claims to have made did not fulfill his obligations under Rule 1.15(d). Rule 1.15(d) required Respondent to "promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive." Rule 1.15(d) uses the word "deliver," not "send" or "mail." "Deliver" means to ?GIVE, TRANSFER: yield possession or control of; make or hand over," "surrender to another, hand over" or "take to the intended recipient." Northwest Diversified, Inc. v. Mauer, 341 Ill. App. 3d 27, 791 N.E.2d 1162 (2003). We interpret "deliver" to mean something more than dropping an envelope in the mail, particularly once Respondent had notice that Mr. Johnson did not receive his check. Rule 1.15(d) required Respondent to make sure Mr. Johnson received his funds, otherwise the rule would have little effect. The issue is not whether Respondent procured and mailed the reissued check, but whether Mr. Johnson received and negotiated it. Accordingly, we find Respondent failed to promptly deliver to Mr. Johnson any of his $50,000 investment.
We find the Administrator proved by clear and convincing evidence Respondent failed to deliver Mr. Johnson's funds to him, in violation of Rule 1.15(d). Mr. Johnson was a credible
witness, and his testimony that he never received a check from Respondent was not contradicted by any reliable evidence. Respondent's testimony that he obtained and mailed the check was not credible, and we reject Respondent's claim that Mr. Johnson did receive the check as unsubstantiated, self-serving speculation.
The Administrator also charged Respondent with improperly withholding $7,646.78 in attorney fees from investors Leonard and Kathleen Skwiera, Geraldine Michalak, Brian Michalak, Mark Michalak, and Susanne Deifel-Johnson.3 We find Respondent had no legal basis for withholding any part of the investor funds, and his retention of those fees violated Rule 1.15(d). We find no merit to Respondent's assertion that he was entitled to the fees under quantum meruit.
After a client discharges an attorney, the attorney may be compensated under quantum meruit for legal services he "actually performed on the client's behalf" prior to being discharged. In re Smith, 168 Ill. 2d 269, 293, 659 N.E.2d 896 (Nov. 22, 1995). This theory does not apply to the circumstances of this matter because there is no evidence an attorney-client relationship existed with the investors. Mr. Johnson specifically denied that Respondent was his attorney. The Subscription Agreement signed by the investors did not indicate the existence of an attorney-client relationship between Respondent and the investors, nor did it authorize Respondent to pay himself legal fees from the investor funds. There is no legal support for the proposition that a non-client is responsible for fees under a quantum meruit theory.
Respondent relies on the provision in the Escrow Agreement stating the investors could be "contingently liable" for attorney fees. We find this provision is not binding on any of the investors. The investors who did not sign the Escrow Agreement never agreed to the attorney fee provision. The investors who did sign are not liable for fees because the Escrow Agreement provided that "the Corporation is expected to pay the Attorney his reasonable fees and
expenses," and the investors were liable for fees "[i]f such payment is not made." Respondent never attempted to collect his fees from the Corporation, so a contingency that would have transferred liability to the investors never arose.
Accordingly, for the foregoing reasons we find Respondent failed to promptly deliver to the investors $57,646.78 they were entitled to receive, in violation of Rule 1.15(d), which included Mervin Johnson's $50,000 investment and $7,646.78 in attorney fees improperly withheld from investors Leonard and Kathleen Skwiera, Geraldine Michalak, Brian Michalak, Mark Michalak, and Susanne Deifel-Johnson.
II. Respondent is charged with conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(c).
A. Evidence Considered
We consider the evidence set forth in Section I above.
B. Analysis and Conclusions
We find Respondent converted $57,646.78 of the investor funds and tried to cover up his conversion by fabricating false documents and making false statements to his clients and the investors. The only reasonable conclusion to draw from the evidence is that Respondent knowingly used the investor funds for his own purposes, delayed releasing the funds, and invented reasons to retain more than half of the funds because he knew he did not have a sufficient balance in his IOLTA account to pay the investors the full amount owed to them.
We do not believe the testimony of Respondent and Ms. Frazin that Respondent had no idea funds were transferred from his IOLTA account to his business account, and Ms. Frazin was responsible for withdrawing the investor funds and falsifying the bank statements. "In assessing an attorney's conduct, we are not required to be naive, impractical or blind to the intent apparent from the evidence, nor are we required to accept testimony that is inherently incredible or
improbable." In re Mellonig, 2011PR00142 (reprimand issued, April 10, 2013), citing In re Discipio, 163 Ill. 2d 515, 523, 645 N.E.2d 906 (1994).
Respondent and Ms. Frazin's testimony was full of discrepancies and inherently improbable. Respondent initially told the Administrator he obtained his bank statements online but changed his story after he was confronted with his actual bank statements. He then denied looking at his statements online for the entire time Ms. Frazin was helping him. Ms. Frazin said in her affidavit she obtained Respondent's statements online but later said she got them from a Citibank teller.
Ms. Frazin also gave conflicting testimony about how she falsified Respondent's bank statements. Her affidavit states she changed the bank statements with the help of a Kinko's employee. She testified at hearing she changed the statement given to Mr. Townsend by changing the numbers on a computer. When prompted by Respondent, she testified she had help from a person named Sue Wilder, whose identity was not disclosed prior to Ms. Frazin's testimony before this Panel. Ms. Frazin even testified that she had Ms. Wilder's driver's license information. Such information would have been useful in locating Ms. Wilder, yet this was never provided to anyone either before or during the hearing. Ms. Frazin could not provide any detailed information about how she or Ms. Wilder altered Respondent's bank statements.
We believe it was Respondent, not Ms. Frazin, who transferred funds from the IOLTA account to the business account during the relevant time period. Respondent and Ms. Frazin appear to have crafted a story in an effort to shift responsibility from Respondent, but their story is conveniently vague in key respects and changes whenever new information is revealed. Neither Respondent nor Ms. Frazin could pinpoint the dates Ms. Frazin assisted Respondent, and there was evidence Ms. Frazin was not in Illinois during some of the time she claims to have been here. Respondent was the only signatory on his accounts and received the benefit of the
transferred funds. For all of these reasons, we conclude Respondent was responsible for transferring and using the investor funds.
For similar reasons, we conclude Respondent altered the statement he provided to Mr. Townsend as well as the other bank statements. Nothing in the record convinces us that Ms. Frazin, with or without the help of Sue Wilder, had the knowledge or ability to alter Respondent's bank statements. On the contrary, Ms. Frazin's inability to describe any aspect of the process of altering the statements leads us to find she had no part in creating the false statements, including the redacted statement Respondent submitted to Mr. Townsend in May 2011. Based on the evidence before us, Respondent is the only other person who could have altered the statement to Mr. Townsend as well as his other bank statements, and we find that he did so. Respondent is an experienced CPA and could have re-created the figures on the statements necessary to properly balance the accounts.
Respondent's knowing use of the investor funds for his own purposes and his effort to conceal his conversions by providing a false statement to Mr. Townsend were undoubtedly dishonest and deceitful. In addition, Respondent falsely represented to Mr. and Mrs. Johnson and Mr. Townsend that he mailed Mr. Johnson's money to him. Respondent's continued retention of Mr. Johnson's funds, knowing that he never mailed them, is deceitful and fraudulent. Consequently, we find overwhelming evidence that Respondent engaged in conduct involving dishonesty, fraud, deceit and misrepresentation, in violation of Rule 8.4(c).
COUNT II-FALSE STATEMENT TO CARPENTERSVILLE POLICE DEPARTMENT
III. The Administrator charged Respondent with knowingly making a false statement of material fact to a third person, in violation of Rule 4.1(a); engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(c); and engaging in conduct prejudicial to the administration of justice, in violation of Rule 8.4(d).
A. Evidence Considered
In addition to the following evidence, we consider the evidence set forth in Section I. Detective John Spencer of the Carpentersville Police Department investigated Lynn Pippenger's report that Respondent misappropriated the Dixie Roadhouse investor funds. He contacted Respondent by telephone on August 8 or 9, 2011. Respondent came in for an interview on August 12, 2011. During the interview, Detective Spencer asked Respondent if all of the investor funds were still available. Respondent said he had not touched the funds. Detective Spencer asked Respondent if he could return the funds to the investors to resolve the dispute. Respondent said he could do so in fourteen days. Detective Spencer asked why he could not return it in three days. Respondent said he could get hit by a bus when he left the police station and then he would be in violation of his fiduciary duties. (Tr. 257-58, 262, 266).
Detective Spencer later obtained a grand jury subpoena for Respondent's bank accounts and learned Respondent's representation that he had been holding all of the investor funds was not true. (Tr. 271).
In March 2012, Detective Spencer and his partner went to Respondent's home to interview him further in light of his discovery that Respondent was not holding all of the investor funds at the time of his first interview. Respondent went to the police station with Detective Spencer and was read his Miranda rights. Respondent appeared very nervous. (Tr. 272, 275, 277).
Respondent acknowledges the statement he made to Detective Spencer was false, but asserts he did not know it was false at the time he made it because he relied on the bank statements fabricated by his mother. (Tr. 113, 1211-12).
B. Analysis and Conclusions
We find Respondent knowingly made a false statement to Detective Spencer on August 12, 2011, when he said all of the investor funds remained in his IOLTA account. The actual balance of the IOLTA account on that date was $70,000. Given our findings that Respondent knowingly converted the investor funds prior to his meeting with Detective Spencer, it follows that his representation to Detective Spencer was false and Respondent knew it was false. We find he made the false statement to Detective Spencer in an effort to conceal his conversion of the investor funds. Respondent's conduct was unquestionably dishonest.
Respondent's false statement also caused prejudice to the administration of justice. Detective Spencer had to spend additional time and resources to conduct a second interview of Respondent in order to confront him with his actual bank records. This constitutes actual prejudice to the administration of justice. See In re Terronez, 2011PR00085, M.R. 26213 (Nov. 20, 2013) (Hearing Bd. at 22). Accordingly, we find the Administrator proved by clear and convincing evidence that Respondent violated Rules 4.1(a), 8.4(c), and 8.4(d).
COUNT III-PROVIDING FALSE BANK RECORDS TO ARDC
IV. The Administrator charged Respondent with knowingly making false statements of material fact in connection with a disciplinary matter, in violation of Rule 8.1(a); engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(c); and engaging in conduct prejudicial to the administration of justice, in violation of Rule 8.4(d).
A. Evidence Considered
We consider the following evidence, in addition to the evidence set forth in Section I. Respondent submitted a letter dated December 14, 2011, to Administrator's Counsel Peter
Apostol in response to his inquiry into the Dixie Roadhouse matter. Respondent attached exhibits A-J to his letter. The exhibits included, in part, what Respondent represented to be accurate copies of checks to the investors, proof of mailing, and his bank statements and reconciliations for March 1, 2011 through August 31, 2011. (Adm. Ex. 32).4
Respondent testified the reconciliations he submitted to the Administrator accurately depicted the transactions in his IOLTA account at the time he prepared them. (Tr. 32; Adm. Ex. 32). He knows now they were not accurate. Respondent testified he did not know at the time he gave his sworn statement in February 2012 that the reconciliations were not true and accurate. (Tr. 333-34).
Respondent testified he got the bank statements in question from his mother. (Tr. 336). He acknowledged giving sworn statement testimony that he obtained the statements by going online and obtaining the bank statements from the Citibank website. (Tr. 336-37). In his second sworn statement, on April 3, 2012, Respondent explained his mother gave him the statements and he had no idea they were falsified. (Tr. 341).
B. Analysis and Conclusions
We find the Administrator proved by clear and convincing that Respondent knew his bank statements and reconciliations were false when he sent them to the Administrator. For the same reasons set forth in Sections I and II, we find Respondent knew the bank statements he sent were false because he created them. The assertion that his mother created them with the help of Sue Wilder is highly improbable, defies common sense and human experience, and finds no support in the evidence. Respondent's shifting stories about the bank statements are nothing but a continuing effort to conceal his responsibility for converting the Dixie Roadhouse funds.
Providing falsified documents in connection with a disciplinary matter impedes the Administrator's investigation and causes actual prejudice to the administration of justice. In re
Nadenbush, 2011PR00077, M.R. No. 25622 (Jan. 18, 2013), (Hearing Bd. at 31) ("The making of a false statement to the ARDC during an investigation is prejudicial to the administration of justice. It is necessary for Administrator's counsel to perform additional work due to an attorney's false representation during a disciplinary investigation."). Accordingly, the Administrator proved by clear and convincing evidence that Respondent violated Rules 8.1(a), 8.4(c), and 8.4(d).
COUNT IV-FALSE TESTIMONY IN ARDC INVESTIGATION
V. The Administrator charged Respondent with knowingly making a false statement of material fact in connection with a disciplinary matter, in violation of Rule 8.1(a); engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(c); and engaging in conduct prejudicial to the administration of justice, in violation of Rule 8.4(d)
A. Evidence Considered
We consider the following evidence, in addition to the evidence set forth in Section I.
At his sworn statement on February 17, 2012, Counsel for the Administrator asked Respondent if he fabricated the bank statements he sent to the Administrator. Respondent answered, "No. You know what, though? I have a doctor's appointment at 4:00 and we?you know, you told me this would be two hours and I've got to get back to Elgin." (Tr. 339).
B. Analysis and Conclusions
Given our findings that Respondent did fabricate the bank statements and was aware the statements were fabricated when he sent them to the Administrator, we necessarily conclude he knowingly made a false statement on February 17, 2012, when he denied fabricating the bank statements. Based on these findings, we determine the Administrator proved by clear and convincing evidence that Respondent violated Rule 8.1(a). We further find Respondent's denial was dishonest and made with the intent to deceive the Administrator, in violation of Rule 8.4(c).
Respondent's false statement prejudiced the administration of justice, in violation of Rule 8.4(d). An attorney's false statements regarding his or her conduct impede the Administrator's ability to investigate the facts. Nadenbush, 2011PR00077.
COUNT V-CONVERSION OF FUNDS IN PATEL MATTER
VI. The Administrator charged Respondent with engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation, in violation of Rule 8.4(c).
A. Evidence Considered
In 2010 and 2011, Respondent represented Jayesh Patel and the corporate entity J. and Nimisha, Inc. (J. and Nimisha) in the purchase of a Shell gas station from Syam Sunder, Inc. (Syam Sunder). The purchase price was $300,000. J. and Nimisha paid Syam Sunder $50,000 in earnest money and deposited the remaining $250,000 into Respondent's IOLTA account, for Respondent to hold in escrow. (Tr. 118-119; Adm. Exs. 34, 43). Respondent deposited the funds in his IOLTA account on November 16, 2010. On November 23, 2010, the balance of the IOLTA account was $245,000. Respondent does not recall why $5,000 was withdrawn from the IOLTA account. (Tr. 120-21).
The State of Illinois issued a bulk sales stop order on December 28, 2010, requiring that $181,756 be withheld from the $250,000 payable to Syam Sunder (Adm. Ex. 36). Respondent disbursed $64,244 to Syam Sunder on January 14, 2010. (Tr. 125; Answer, para. 46). The State of Illinois released the bulk sales stop order on January 18, 2011. (Adm. Ex. 37). Respondent disbursed $150,000 to Syam Sunder on January 21, 2011. (Tr. 127). After that distribution, Respondent should have been holding $31,756, which he was retaining for a potential lien by the Illinois Department of Employment Security. (Tr. 128). On March 8, 2011, before having disbursed the $31,756, the balance of Respondent's IOLTA account was $4,990. (Tr. 132; Adm. Ex. 52). Respondent disbursed the remaining $31,756 to Jayesh Patel on May 2, 2011.
Terrence L. Donati has done business with Jayesh Patel for 15 years. He testified Mr. Patel asked him to help write the request for an investigation of Respondent that Mr. Patel submitted to the ARDC. (Tr. 166-67; Resp. Ex. 31). Mr. Donati prepared the request, which stated Mr. Patel did not receive all of his earnest money from Respondent in the gas station transaction. (Tr. 168). Mr. Patel later sent a letter asking to withdraw his request for investigation. (Tr. 173; Adm. Ex. 42). According to Mr. Donati, Mr. Patel initiated the request for investigation in an attempt to collect reimbursement money from the Client Protection Fund, even though Mr. Patel knew he was not entitled to any of the escrow funds. (Tr. 184).
Mr. Patel's whereabouts were unknown at the time of hearing, so he was not called to testify. (Tr. 195).
Selma Frazin testified she initiated the creation of a document purportedly written by Jayesh Patel on February 18, 2011, which states, "I give the law office Donald Rosen permission to you use [sic] any money remaining in the escrow trust account for J. and Nimisha, Inc. for any bad check or legal fees." (Tr. 1020-21; Adm. Ex. 64). Ms. Frazin testified she made Mr. Patel come into the office because he owed Respondent money. When he came in, he told Ms. Frazin he had a lot of money in Respondent's trust account. This was the first time Ms. Frazin heard the IOLTA account referred to as a "trust account." She testified Mr. Patel told her she could take funds out of the trust account to pay his legal bills. Ms. Frazin told Mr. Patel to put that in writing, so he created a handwritten document in her presence. (Tr. 1020-24). Ms. Frazin never gave the document to Respondent. She and Respondent found it in one of Respondent's files in September 2013, just prior to Ms. Frazin's deposition. (Tr. 1141-42).
B. Analysis and Conclusions
We find the Administrator proved by clear and convincing evidence Respondent engaged in dishonest conduct by converting funds he was supposed to be holding in escrow in connection
with the Shell Station purchase. Respondent used for his own purposes $27,766 of the escrow funds without authorization. As with the Dixie Roadhouse funds, we find Respondent knew about the transfer of funds from his IOLTA account into his business account and reject as completely implausible Respondent's story that his mother is to blame for these conversions.
For the following reasons, we also reject any assertion that the document purportedly written by Jayesh Patel authorized Respondent to use the escrow funds. Mr. Patel did not verify the note's authenticity because he could not be located and did not testify. Ms. Frazin's testimony that she witnessed him create the document in Respondent's office on February 18, 2011, is suspect. In his response to the Administrator's request for information about the Patel matter and in reference to events taking place in February 2011, Respondent stated, "Due to illness with my mother I was out of town for most of February." Based on this representation, we cannot give any credence to Ms. Frazin's testimony, as we are uncertain whether she was even in Illinois in February 2011.
The only indisputable evidence presented to the Panel is that Respondent's IOLTA account balance was less than the amount he should have been holding in escrow. Considering this evidence and our finding that Respondent's version of events is not credible, we find Respondent dishonestly converted $27,766 from the Shell Station escrow funds. Even though the charge of conversion was stricken from the complaint and we do not consider it as a separate charge of misconduct, we may consider Respondent's conduct as a whole when determining whether he violated Rule 8.4(c). We find that he did.
EVIDENCE OFFERED IN MITIGATION AND AGGRAVATION
Respondent has no prior discipline. At the time of the misconduct, he was taking medication for pain he suffered as a result of hand and shoulder injuries. Because of his medication, he could not drive and it took him longer than usual to complete tasks for clients.
(Tr. 1206-1208). Respondent acknowledged his medical issues did not prevent him from representing clients or traveling out of state. (Tr. 1263-75).
Respondent owes approximately $100,000 in student loans, and believes those loans are "probably" in default. A judgment of almost $12,000 was entered against Respondent on October 13, 2010, for unpaid credit card debt. (Tr. 137-38).
The delay in receiving the investor funds caused a corresponding delay of several months in opening Dixie Roadhouse, caused cost overruns, and caused Mr. Townsend and Ms. Pippenger to lose credibility with the city and other investors. (Tr. 496-97). In order to complete the nightclub without the full amount of investor funds, Colosseum had to take a $50,000 loan at eighteen percent interest and had to rent equipment for the nightclub at a greater cost than if it had purchased the equipment as planned. (Tr. 833-35).
Having found the Administrator proved all of the charged misconduct, we must address the appropriate measure of discipline. Our purpose in recommending a sanction is not to punish Respondent but to safeguard the public, maintain the integrity of the profession and protect the administration of justice from reproach. In re Timpone, 157 Ill. 2d 178, 197, 623 N.E.2d 300 (1993). We consider all of the relevant circumstances in arriving at our recommendation, including the nature of the misconduct and the factors in mitigation and aggravation. In re Gorecki, 208 Ill. 2d 350, 360-61, 802 N.E.2d 1194 (2003). We seek to recommend a sanction that is consistent with sanctions for similar misconduct, but must evaluate each case on its own unique facts. In re Howard, 188 Ill. 2d 423, 440, 721 N.E.2d 1126 (1999).
Respondent's misconduct is extremely serious. His attempts to conceal his misuse of the escrowed funds by making misrepresentations and falsifying documents increase the severity of the misconduct. We are troubled by Respondent's pattern of dishonesty.
There is very little mitigation in this case. We consider the absence of prior discipline, but Respondent had been practicing law for less than ten years when the misconduct at issue began. Consequently, we give little weight to this factor, especially when compared to the amount and nature of the misconduct.
We also take into consideration but place little weight on the evidence regarding Respondent's injuries and use of pain medication at the time of the misconduct. There was no expert testimony linking Respondent's misconduct to his health conditions, and Respondent admittedly was able to continue working, traveling, and participating in most of his usual activities. Therefore, we cannot say his medical problems were so severe that they should significantly mitigate the sanction. We also note the absence of any evidence of Respondent's good character, pro bono work, or community or charitable involvement.
In aggravation, Respondent caused financial harm to the investors and his clients and has not made restitution in the Dixie Roadhouse matter. See In re Saladino, 71 Ill. 2d 263, 375 N.E.2d 102 (1978); Respondent takes no responsibility for his actions nor does he express any remorse for the harm he caused. See In re Lewis, 138 Ill. 2d 310, 347-48, 562 N.E.2d 198 (1990). On the contrary, Respondent attempts to portray his mother, his clients, and Mr. Johnson as the wrongdoers. See In re Samuels, 126 Ill. 2d 509, 531, 535 N.E.2d 808 (1989). The Court has indicated, "An attorney's failure to recognize the wrongfulness of his conduct often necessitates a greater degree of discipline than is otherwise necessary, in order that the attorney will come to appreciate the wrongfulness of his conduct and not again victimize members of the public with such misconduct." In re Mason, 122 Ill. 2d 163, 173-74, 522 N.E.2d 1233 (1988).
Respondent's untruthful testimony before this Panel is another significant factor in aggravation, as is his pattern of dishonest behavior. See Gorecki, 208 Ill. 2d at 366; Lewis, 138 Ill. 2d at 342-43.
We are mindful of cases in which attorneys who have committed misconduct similar to Respondent's received the harshest sanction of disbarment, which the Administrator requests in this case. The Administrator cites the following cases in support of his request: In re Tyer, 04 CH 90, M.R. 20266 (Sept. 26, 2005); In re Levin, 04 CH 133, M.R. 20236 (Sept. 26, 2005); In re Ucherek, 07 SH 33, M.R. 22538 (Sept. 17, 2008); In re Ess, 04 SH 145, M.R. 20675, (Mar. 20, 2006); and In re Conner, 08 CH 119, M.R. 24471 (May 18, 2011).
In Tyer, the attorney converted approximately $14,000 from two clients, committed battery of a sexual nature against an employee, and made false statements to the police and the court in denying the battery. Tyer did not participate in his disciplinary proceeding. The attorney in Levin converted $240,000 from a client over a four-year period. Similar to Respondent, Levin provided false bank statements when his client asked him to verify that he was holding all of the funds. In Ucherek, the attorney converted $55,000 from five bankruptcy clients over a six-year period. He made false statements in two court pleadings and to his clients to conceal the conversions. The attorney in Ess converted approximately $21,000 from four clients. The allegations against Ess were deemed admitted prior to the hearing, but Ess unsuccessfully attempted to blame his ex-wife for the conversions. In Conner, the attorney converted $138,000 from numerous clients and submitted false bank statements to the Administrator. His client trust account was repeatedly overdrawn over a five-year period.
We note that disbarment is not always imposed when an attorney commits conversion and engages in a pattern of dishonest conduct. We find the following cases instructive as well.
The attorney in In re Pelton, 02 SH 67, M.R.19327 (May 17, 2004), was suspended for three years and until further order of the court for converting client funds, failing to return unearned fees, neglecting six client matters, making misrepresentations to clients, failing to cooperate with the ARDC, and engaging in criminal conduct involving dishonesty and moral
turpitude by writing bad checks totaling $6800. Similar to Respondent, Pelton testified untruthfully in her disciplinary hearing, expressed no understanding of or remorse for her misconduct, and had not made any restitution.
In In re Leiter, 2012PR00128, M.R. 26361 (Nov. 20, 2013), the attorney collected$172,515.75 in fees from an elderly client by overcharging her for nonlegal services, converted approximately $77,000 from his client's estate after she died, forged his client's signature on several documents, forged the signature of the executor of his client's estate on a power of attorney, attempted to use the forged power of attorney to open a bank account in the executor's name, and submitted a false accounting of checks drawn on his client's account to the executor of his client's estate. Leiter's misconduct occurred over a three-year period. The Court approved discipline on consent of a three-year suspension until further order of the court.
After carefully considering the foregoing cases, Respondent's misconduct, and the factors in aggravation and mitigation, we decline to recommend disbarment. Several of the Administrator's cases involve greater amounts of converted funds or, in the case of Tyer, a failure to participate in the ARDC proceedings, which is not present in this case. We do not in any way minimize the egregious nature of Respondent's misconduct, but the misconduct in Pelton and Leiter was similarly egregious yet did not result in disbarment. Accordingly, we recommend that Respondent be suspended for three years and until further order of the court. We feel strongly that he should be required to establish his fitness before he is allowed to return to practice. Nothing in the record demonstrates that Respondent is currently willing or able to abide by the Rules of Professional Conduct. A suspension until further order of the court will protect the public and ensure Respondent makes restitution before he is allowed to return to practice.
We recommend Respondent be required to pay restitution in the amount of $57,646.78, which is the amount he converted from the investment funds in the Dixie Roadhouse matter. Specifically, Respondent converted Mervin Johnson's entire investment of $50,000 as well as $7,646.78 that Respondent improperly withheld as attorney fees from the investment funds of Leonard and Kathleen Skwiera, Geraldine Michalak, Brian Michalak, Mark Michalak, and Susanne Deifel-Johnson. Normally, we would recommend that restitution go to the investors who owned the funds deposited in Respondent's trust account. However, this case presents a somewhat unusual situation because Colosseum made the investors whole by issuing shares for the full value of the funds entrusted to Respondent, even though Colosseum received only $52,353.22 of the $110,000 it was supposed to receive. Thus, it was Colosseum that suffered financial harm as a result of Respondent's misconduct. Colosseum has not been made whole, so it is the appropriate party to receive restitution.
Accordingly, we recommend Respondent, Donald Paul Rosen, be suspended for three years and until further order of the court. We further recommend Respondent be ordered to pay restitution in the amount of $57,646.78 to Colosseum and provide proof of payment to the Administrator's satisfaction within 6 months of the Court's final order of discipline.
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 Hearing Board, approved by each Panel member, entered in the above entitled cause of record filed in my office onMay 14, 2014.
Kenneth G. Jablonski, Clerk of the
1The date is not clearly legible on the copy produced by Respondent but appears to be either 08/23/11 or 08/25/11.
2The "_" stands for a number that is not legible on the copy produced by Respondent.
3Respondent also withheld $6,256.46 from Mervin Johnson's funds as attorney fees, bringing the total amount of attorney fees Respondent withheld to $13,903.24. The Administrator charged Respondent with failing to deliver all of Mr. Johnson's $50,000 without distinguishing the amount retained as attorney fees from the remainder of Mr. Johnson's funds. Our finding that Respondent failed to deliver Mr. Johnson's funds encompasses those funds Respondent improperly retained as attorney fees. To the extent necessary, we find Respondent had no authority to retain any of Mr. Johnson's funds as legal fees for the same reasons he had no authority to do so with respect to the funds of the other investors.
4Respondent objected to the authenticity of Administrator's Exhibit 32, asserting he could not be sure the documents in the exhibit were accurate copies of the documents he submitted to Administrator's counsel. The Chair allowed the Administrator to call as witnesses ARDC employees Robert B. Levin and Roni Martin, who testified about their procedures for stamping mail and maintaining files. After considering Mr. Levin's and Ms. Martin's testimony, reviewing the original documents from the file of Administrator's counsel, and noting that Respondent received the Administrator's proposed exhibits prior to the hearing and could have compared them to his copy of the documents he sent, the Chair overruled Respondent's objection and admitted Administrator's Exhibit 32.