Filed January 12, 2009

In re Anthony Michael Klytta and John Robert Klytta
Commission Nos. 06 CH 60 and 06 CH 61

Synopsis of Hearing Board Report and Recommendation

NATURE OF THE CASE: 1) conversion; 2) engaging in conduct involving dishonesty, fraud, deceit or misrepresentation; and 3) engaging in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute.

RULES DISCUSSED: Rule 8.4(a)(4) of the Illinois Rules of Professional Conduct and Supreme Court Rules 770.

RECOMMENDATION: Censure.

DATE OF OPINION: January 12, 2009.

HEARING PANEL: Brigid A. Duffield, Chair, Larry R. Kane and Donald D. Torisky.

RESPONDENT'S COUNSEL: Samuel J. Manella.

ADMINISTRATOR'S COUNSEL: Athena T. Taite.

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

In the Matter of:

ANTHONY MICHAEL KLYTTA,
No. 6202582,

JOHN ROBERT KLYTTA,
No. 6202584,

Attorney-Respondents.

Commission No. 06 CH 60

Commission No. 06 CH 61

REPORT AND RECOMMENDATION OF THE HEARING BOARD

INTRODUCTION

The hearing in this matter was held on August 26, 2008, at the Chicago offices of the Attorney Registration and Disciplinary Commission, before a Hearing Board Panel consisting of Brigid A. Duffield, Chair, Larry R. Kane, lawyer member, and Donald D. Torisky, public member. The Administrator was represented by Athena T. Taite. Respondents appeared in person and were represented by Samuel J. Manella.

PLEADINGS

On August 28, 2006, the Administrator filed a five-count Complaint against Respondents pursuant to Supreme Court Rule 753(b). All counts allege that Respondents converted client funds, engaged in dishonest conduct and engaged in conduct which tends to defeat the administration of justice. On October 25, 2006, Respondents filed an Answer to the Complaint in which they admitted all of the factual allegations and denied all allegations of misconduct. However, Respondents admitted that there was a "technical" conversion of all client funds alleged in the Complaint.

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THE EVIDENCE

The Administrator presented the testimony of Respondents as adverse witnesses. The Administrator submitted twenty-two documentary exhibits. Respondents testified on their own behalf and submitted three documentary exhibits. Respondents also presented the character witness testimony of Lee Davis, Mohammed Chowdhury, Albert Giannares and William Zimbrakos. After the Administrator rested his case, Respondents' counsel made a motion for directed finding with regard to any conduct involving dishonesty, fraud, deceit or misrepresentation. The Chair denied the motion for directed finding.

Evidence Common to All Counts

At all times relevant, Respondents Anthony Klytta ("Anthony") and John Klytta ("John") were principals of the law firm of Klytta & Klytta ("the law firm"). Respondents had a client trust account, checking no. 7000235 entitled "Klytta & Klytta at Labe Bank ("the law firm account"). Respondents, as principals of the law firm, were signatories on the law firm account, made deposits to and withdrawals from the law firm account, wrote checks on the law firm account, and were responsible for maintaining the law firm account. (Resp. Ans. p.1-2).

Count I

On September 26, 2002, Slawomir Jankowski ("Jankowski") agreed to purchase real property located at 7227 W. Higgins in Chicago, Illinois ("the Higgins property") from Nawal Daher ("Daher"). Jankowski presented cashier's check no. 661500 from Park National Bank & Trust to Daher in the amount of $3,000 as earnest money. On October 17, 2002, the law firm agreed to represent Daher in his sale of the Higgins property and received the cashier's check. Anthony deposited the cashier's check into the law firm account. As of November 20, 2002, prior to any disbursements related to the Higgins property, the balance in the law firm account

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was $2,914.13. As of November 20, 2002, Respondents used $85.87 of the earnest money for their own business purposes. Jankowski and Daher did not authorize Respondents to use any portion of the earnest money for their business purposes. On November 26, 2002, when Daher had the closing of the sale of the Higgins property, Anthony disbursed check no. 2143 from the law firm account to Daher in the amount of $3,000 as Jankowski's earnest money. (Adm. Ex. 1-5; Resp. Ans. p.2-3).

Count II

Prior to August 7, 2002, the law firm agreed to represent Todd Martini ("Martini") in the sale of real property located at 7433 N. Hoyne in Chicago, Illinois ("the Hoyne property") to Dawn Bach and Edwin Thurman ("Bach and Thurman"). On August 7, 2002, when Martini had the closing of the sale of the Hoyne property; Attorney's Guaranty Fund issued its check number 04418425 in the amount of $3,205.16 payable to the law firm for the benefit of Martini and/or Bach and Thurman. On November 4, 2002, John deposited check no. 04418425 into the law firm account. (Resp. Ans. p. 4).

On November 13, 2002, John disbursed checks from the law firm account in relation to the Hoyne property: check no. 2139 in the amount of $2,208.89 payable to Martini and check no. 2140 in the amount of $996.27 payable to Bach and Thurman. Check no. 2139 posted to the law firm account on November 15, 2002. Check no. 2140 posted to the law firm account on December 5, 2002. On December 2, 2002, prior to the posting of check no. 2140, the law firm account became overdrawn by $85.87. As of December 2, 2002, Respondents had used at least $996.27 belonging to Bach and Thurman for their own business purposes. Bach and Thurman did not authorize Respondents to use any of their funds for Respondents' own business purposes. (Adm. Ex. 4, 6-9; Resp. Ans. p. 5-6).

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Count III

Between December 2, 2002 and December 23, 2002, the law firm account was overdrawn. On December 20, 2002, the law firm agreed to represent Eriberto Rivera in the sale of real property located at 5655 W. Grace in Chicago, Illinois ("the Grace property") to Tom Cigir. On December 22, 2002, Rivera had the closing of the sale of the Grace property. On December 23, 2003, Attorneys' Title Guaranty Fund issued its check no. 04576262 in the amount of $16,000 to Anthony as payoff escrowee for the benefit of Rivera and Department of Housing and Urban Development. (Resp. Ans. p. 6-7).

On December 24, 2002, Anthony deposited check no. 04576262 into the law firm account. On December 24, 2002, as a result of the deposit of check no. 04576262, the law firm account balance was $14,341.36. As of December 24, 2002, Respondents had used $1,658.64 of the payoff escrow to maintain a positive balance in the law firm account. Rivera did not authorize Respondents to use any portion of the payoff escrow for their own business purposes. In January 2003, Anthony disbursed checks totaling $16,000 from the law firm account to Rivera and the Department of Housing and Urban Development as their portion of the payoff escrow. (Adm. Ex. 10-13; Resp. Ans. p. 7-8).

Count IV

Prior to February 7, 2003, the law firm agreed to represent Richard Kazimierski ("Kazimierski") in the sale of real property located at 3227 N. Rutherford in Chicago, Illinois ("the Rutherford property") to Armando and Maria Salgado ("the Salgados"). On February 7, 2003, when Kazimierski had the closing of the Rutherford property, Attorneys' Title Guaranty Fund issued its check no. 0460838 in the amount of $6,200 payable to John as possession escrowee. On February 11, 2003, John deposited check no. 0460838 into the law firm account.

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As of March 25, 2003, prior to any disbursements related to the Rutherford property, the balance in the law firm account was $2,812.36. Respondents had used $3,387.64 of the possession escrow for their own business purposes. Kazimierski and the Salgados did not authorize Respondents to use any portion of the possession escrow for Respondents' own business purposes. On April 25, 2003, John disbursed check no. 2154 from the law firm account to Kazimierski in the amount of $6,200 as his portion of the possession escrow. (Adm. Ex. 12-17; Resp. Ans. p. 8-10).

Count V

On November 20, 2002, the law firm agreed to represent James White ("White") in the purchase of real property located at 643 Linden Avenue in Bellwood, Illinois ("the Linden property"). The "as-is" purchase required White to make repairs or modifications to the property, due to violations of local building code. Before the closing, White was to produce a roof certification, a furnace certification and an air conditioning ("a/c") certification proving completed repairs and/or working order. (Resp. Ans. p. 10-11).

Between November 20, 2002 and January 9, 2003, White was able to produce the roof and furnace certifications. He was unable to produce the a/c certification, because the a/c unit could not be tested during winter. The City of Bellwood thus required White to escrow $4,270 until he produced the a/c certification. On January 9, 2003, when White had the closing of his purchase of the Linden property, Ticor Title Insurance Company issued its check no. 9554011906 in the amount of $4,270 payable to Anthony for the a/c certification escrow. (Resp. Ans. p. 11).

On January 9, 2003, Anthony deposited check no. 9554011906 into the law firm account. On April 25, 2003, prior to any disbursements related to the a/c certification escrow, the law firm

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account became overdrawn by $3,387.64. As of April 25, 2003, Respondents had used $882. 36 of the a/c certification escrow funds for this own business purposes. White did not authorize Respondents to use any portion of the escrow funds for their business purposes. (Adm. Ex. 18-21; Resp. Ans. p. 11-12).

Respondent Anthony Michael Klytta

Respondent stated that the firm received bank statements from 2002 and 2003 but some of those statements had not been opened. In 2002 and 2003, Respondent admitted writing checks without knowing the actual balance in the client trust account. At the time the letter to the ARDC was written, Respondent knew that the client trust account was overdrawn however, Respondent had not yet determined how the account became overdrawn. At all relevant times, the client trust account was with Labe Bank. Respondent stated that it was the bank's procedure to send an overdraft notice in the mail. Respondent admitted that some of the bank's correspondence was not opened. Respondent stated that he wrote the letter to the ARDC. (Adm. Ex. 22; Tr. 23-25, 83).

Respondent John Robert Klytta

Respondent stated that he learned that James White, a former client, was suing his law firm in January 2004. Respondent also learned at that time that White had filed a complaint with the ARDC. The complaint was against Respondent's brother, Anthony. Respondent learned that the Administrator wanted to review the firm's financial records for 2002 and 2003. In 2004, Respondent reviewed that bank statements for the client trust account. Upon review, Respondent learned that the firm's client trust account had not been managed properly in 2002 and 2003. Respondent stated that he found bank statements that had not been reviewed or opened. (Tr. 15-18).

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Respondent found that he had written checks without knowing the actual balance listed in the client trust account. Respondent also determined that the account had been overdrawn. Respondent stated that it took a while to investigate the overdrafts. Respondent stated that he wrote a letter to the ARDC to explain how he and his brother managed the trust account. Respondent further stated that he is not sure whether he wrote the letter to the ARDC or if his brother wrote the letter. The letter is signed by his brother. (Adm. Ex. 22; Tr. 18-22).

Respondent stated that he represented a client who had an illegal basement apartment where he had a tenant. The client also collected large statutes which were placed in the adjacent yard to the apartment building. One of the statutes fell on the child (who lived in the basement apartment) and broke his arm. Building inspectors became involved in the situation. Respondent represented his client against the city counsel. Respondent negotiated a settlement with regard to fines and the personal injury issue. The client settled the issues for $9,400. (Tr. 44-46).

Respondent stated that his client failed to pay the settlement amount. Respondent attempted to contact his client. Respondent wrote a check from the client trust account in the amount of $9,400 and paid the settlement amount on behalf of his client in October 2002. Respondent assumed his client would come to the office and pay back the $9,400. Respondent stated that he failed to follow up with his client. Respondent stated that he did not open the two bank statements nor recognized that the $9,400 overdraft occurred. The bank did not call Respondent regarding the overdraft. Respondent stated that the firm had an excellent relationship with the bank. Respondent stated that the bank honored all the checks written on the client trust account. (Tr. 47-51).

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Respondent stated that when they received the ARDC complaint regarding Mr. White, he began reviewing the bank statements. At that time, Respondent discovered that the money they were suppose to maintain for Mr. White had not been maintained. Respondent learned that the account had been negative for several months. Several months later, Respondent realized that the $9,400 settlement check had gone through but they had never received the money from the client. Respondent requested the money from the client. The client told Respondent that he did not have the money. Respondent and his brother used their personal funds to replace the money in the client trust account. (Tr. 52-53).

Evidence Offered in Mitigation and Aggravation

Lee Davis

Lee Kimball Davis is a semi-retired, self-employed real estate developer. Mr. Davis knows both Respondents. Mr. Davis has known Respondents, personally and professionally for almost ten years. Mr. Davis stated that he is aware of Respondents' reputation in his community. Mr. Davis stated that their reputation for truth and veracity in the community is very good. (Tr. 97-99).

Mohammed Chowdhury

Mohammed Chowdhury stated that he has known both Respondents for over six years. Mr. Chowdhury stated that he is a real estate broker and he refers his clients to Respondents. Mr. Chowdhury has referred nearly 200 clients to Respondents. Mr. Chowdhury stated that he has only heard one complaint about Respondents regarding the difficulty clients have getting in contact with them. He has heard many good things about Respondents. (Tr. 100-102).

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Albert Giannares

Albert J. Giannares is a commercial realtor. Mr. Giannares stated that he has known Respondents for 10 years. Mr. Giannares knows Respondents personally and professionally. Mr. Giannares stated that Respondents have an excellent reputation for honesty in the community. (Tr. 103-105).

William Zimbrakos

William George Zimbrakos is currently retired. He used to own two liquor stores. Mr. Zimbrakos stated that he has known Respondents for thirty years. Mr. Zimbrakos stated that he used to manage a clothing store and Respondents worked at the store while they were students. At the time Respondents worked for Mr. Zimbrakos, they had a reputation of being honest. Since working at the clothing store, Respondents have been "like sons" to Mr. Zimbrakos and his wife. Mr. Zimbrakos stated that Respondents now are known for their honesty and straightforwardness. (Tr. 106-110).

Respondent John Robert Klytta

Respondent stated that he is married with two children. Respondent stated that he and his brothers were raised by their mother. Respondent attended the University of Illinois-Chicago for his undergraduate degree and the John Marshall Law School. After college, Respondent worked for a men's clothing store. Respondent started law school in 1985. Respondent began practicing law in 1989. Respondent and his brother started their own law firm. Respondent stated that their practice has concentrated almost exclusively on real estate matters for the past thirteen years. Respondent stated that he does not have a formal business education. Respondent stated that they also got into real estate development. Respondent stated that there were three projects that he and his brother developed. Respondents also received a $94,000 wrongful death settlement

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referral fee. Respondent stated that, during 2002 and 2003, the law firm was flourishing. (Resp. Ex. 1-3; Tr. 30-40, 42,43).

Respondent stated that he has never stolen money from his clients. Respondent stated that he and his brother have fully cooperated with the Administrator. To prevent future client trust account issues, Respondent and his brother have completed the lawyer skills course offered by the ARDC. Respondent and his brother have revised their client trust account practices. Respondent stated that they reconcile their accounts on a monthly basis. Respondent stated that they open all correspondence upon receipt. Respondent stated that he takes these proceedings very seriously and expressed remorse for all wrongdoing. Respondent stated that his actions were unintentional. Respondent stated that he and his brother perform pro bono services. Respondent is involved in his church and his community. (Tr. 54-61, 64).

Respondent Anthony Michael Klytta

Respondent is married with two children. Respondent stated that the testimony his brother gave regarding their education and work history was duplicative and accurate. Respondent admitted that they made a mistake by not checking the client trust account balance. Respondent stated that they have instituted checks and balances in the office to prevent future wrongdoing. Respondent also stated that they are reluctant to hold client funds and try to avoid doing so. Respondent stated that he performs pro bono work regularly. Respondent is active in his community. Respondent stated that he is remorseful for his misconduct. Respondent stated that he has fully cooperated in these proceedings. He recognizes the seriousness of these proceedings and is willing to do whatever is asked of him. Respondent completed the ARDC Professional Responsibilities course in March 2005. (Tr. 80-96).

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Prior Discipline

Respondents have not been previously disciplined.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

In attorney disciplinary proceedings, the Administrator must prove the alleged misconduct by clear and convincing evidence. Supreme Court Rule 753(c)(6); In re Ingersoll, 186 Ill. 2d 163, 168, 710 N.E.2d 390 (1999). It is the responsibility of the Hearing Panel to determine the credibility and believability of the witnesses, weigh conflicting testimony, draw reasonable inferences, and make factual findings based upon all the evidence. In re Timpone, 157 Ill. 2d 178, 196, 623 N.E.2d 300, 308 (1993). With the above principles in mind and after careful consideration of the testimony, exhibits and Respondents' admissions, we make the following findings:

In Counts I through V, Respondents are charged with:

  1. conversion;

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

  3. engaging in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute, in violation of Supreme Court Rule 770.

Regarding all counts, we find that Respondents committed technical conversions. We find that Respondents actions were neither willful nor reckless. We find Respondents' testimony very credible in that they failed to maintain proper bookkeeping practices. However, we also find their testimony credible in that they did not intend to convert client funds. The evidence shows that Respondents had no motive to intentionally commit conversion. The evidence shows that Respondents did not benefit from the technical conversions which took place. The evidence shows that Respondents were engaged in a very profitable law practice as well as access to a

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credit line if a financial need existed. We also find that issuing the $9,400 check from the client trust account was the appropriate account from which to draw a client check. We find that Respondents fully expected that their client would repay the money they paid on his behalf. We find that the technical conversions occurred due to Respondents' sloppy bookkeeping practices. Therefore, we find that the Administrator failed to meet his burden of proof by clear and convincing evidence that Respondent's engaged in conduct involving dishonesty, fraud deceit or misrepresentation. Therefore, we recommend that all allegations regarding the violation of Rule 8.4(a)(4) of the Illinois Rules of Professional Conduct be dismissed. We find that Respondents' misconduct, committing technical conversions, is conduct which tends to defeat the administration of justice and brings the legal profession into disrepute. Therefore, we find that Respondents violated Supreme Court Rule 770.

RECOMMENDATION

The purpose of the disciplinary system is to protect the public, maintain the integrity of the legal system and safeguard the administration of justice. In re Howard, 188 Ill. 2d 423, 434, 721 N.E.2d 1126 (1999). We should not recommend a sanction which will benefit neither the public nor the legal profession. In re Leonard, 64 Ill. 2d 398, 406, 356 N.E.2d 62 (1976). In determining the proper sanction, we consider the proven misconduct along with any aggravating and mitigating factors. In re Witt, 145 Ill. 2d 380, 298, 583 N.E.2d 526 (1991).

The Administrator recommends that Respondents be suspended from the practice of law for one year, with a suspension stayed after 90 days by two years of probation. During probation, Respondents should show the Commission and the Court that they can and are maintaining records consistent with trust account procedures imposed in In re White, 98 CH 42, M.R. 17246 (March 22, 2001). In support of his recommendation, the Administrator offered the

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following case: In re Moree, 02 CH 96, M.R. 19146 (January 20, 2004). In re Moree, Respondent was found guilty of converting $9,500 in three months and four real estate transactions. The attorney was also found guilty of other misconduct and suffered from depression. The attorney was suspended for 18 months, with the suspension stayed after three months by two years of probation.

Respondents recommend censure. In support of their recommendation, Respondents offered the following cases: In re Young, 111 Ill. 2d 98, 488 N.E.2d 1014(1986) (Censure is appropriate where respondent does not have a dishonest motive, there is a bona fide title problem with respect to his client's property which justified his retention of the money, and respondent has sufficient other assets to repay the money to his clients.); In re McClennon, 93 Ill. 2d 215, 443 N.E.2d 553 (1982) (Commingling of client funds, conversion of settlement funds, and failure to maintain complete records of client funds warrants censure, in light of lack of dishonest motivation and substantial contributions of time and talent in assisting both troubled individuals and handicapped groups.); In re Clayter, 78 Ill. 2d 276, 399 N.E. 2d 1318 (1980) (Commingling and conversion of earnest money deposited with an attorney by parties to a contract for sale of real estate warrants censure, absent evidence of a dishonest motive.); and In re Sherman, 60 Ill. 2d 590, 328 N.E.2d 553 (1975) (Failure to properly remit funds belonging to client warrants censure when full amount is eventually remitted and client ultimately suffers no loss.).

While every case is unique, based on the proven misconduct, we find the cases offered by Respondents to be instructive in determining the proper recommendation for a sanction:

The respondent in In re Young was found guilty of conversion. Upon consideration of the respondent's lack of dishonest motive, outstanding record of involvement in community service

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and twenty years of practice without prior discipline, the Court determined that censure was the appropriate discipline. In re Young, 111 Ill. 2d 98, 488 N.E.2d 1014 (1986).

In In re Clayter, the attorney was charged with commingling and conversion of earnest money that had been deposited with him by the parties to a contract for the sale of real estate. The Court stated that while a technical conversion occurred, the record was devoid of any evidence of dishonest motive. The Court concluded that censure was the appropriate sanction in that case. The Court further stated, "the conclusion is warranted by a record which discloses no evidence of dishonest motive; that the respondent had practiced law for almost 20 years with no other complaints of ethical infractions; that he has an outstanding record of involvement in community service programs; and that there was testimony as to his good reputation by character witnesses of undeniable integrity." In re Clayter, 78 Ill. 2d 276, 283, 399 N.E. 2d 1318 (1980).

Here, we have determined that Respondents have committed conversion. We also have found that Respondents did not have a dishonest motive when they engaged in the misconduct. Given the proven misconduct, we must consider any evidence offered in aggravation and mitigation. There was no evidence offered in aggravation. There was no evidence offered showing that any clients were harmed by Respondents' wrongdoing. There was, however, significant mitigating evidence. Respondents have practiced law in Illinois for almost 20 years and have not been previously disciplined. At the hearing, Respondents admitted wrongdoing and expressed remorse. Respondents have fully cooperated throughout the disciplinary process. Respondents submitted character witnesses that testified to Respondents' good reputation for truth and veracity. Respondents testified to the steps they have taken to improve bookkeeping and accounting practices. Finally, Respondents have completed the ARDC Professional

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Responsibility course. Based on the foregoing, we recommend that both Respondents be censured.

Date Entered: January 12, 2009

Brigid A. Duffield, Chair, with Larry R. Kane and Donald D. Torisky concurring.