Filed May 12, 2010
In re Mark Maciasz
Commission No. 06 CH 80
Synopsis of Review Board Report and Recommendation
The Administrator-Appellant filed a three-count complaint against Respondent-Appellee Mark Maciasz, charging him with misconduct related to his operation of a "moonlighting" law practice and his misrepresentations on an employment application. Specifically, all three counts charged him with engaging in conduct involving dishonesty, fraud, deceit and misrepresentation, in violation of Rule 8.4(a)(4) of the Illinois Rules of Professional Conduct; conduct prejudicial to the administration of justice, in violation of Rule 8.4(a)(5), and conduct tending to defeat the administration of justice or bring the courts or legal profession into disrepute, in violation of Supreme Court Rule 770 or Rule 771. Counts I and III also charged him with breach of his fiduciary duty of good faith and honesty to the law firms that employed him and their partners. The Respondent admitted almost all of the factual allegations, but denied the allegations of misconduct.
The majority of the Hearing Board found that the Respondent engaged in conduct involving dishonesty in all counts and breached his fiduciary duty in Counts I and III, but that his conduct was not prejudicial to the administration of justice and did not tend to defeat the administration of justice or bring the courts or the legal profession into disrepute. It recommended that the Respondent be suspended for a period of four months.
Concurring in part and dissenting in part, one panel member agreed with the findings of dishonesty concerning the Respondent's moonlighting practice, but disagreed with the majority's finding that one of the acts alleged in the complaint was dishonest.
A second panel member also concurred and dissented in part. She considered the Respondent's use of his law firms' addresses on invoices sent to some of his moonlighting clients in Counts I and III to be deceitful and violative of his fiduciary duty to the firms. Further, she viewed the Respondent's falsification of his employment application and alteration of his tax returns to be extremely egregious and violative of Supreme Court Rule 770. The second dissenting panel member recommended that the Respondent be suspended for one year.
The case was before the Review Board on the exceptions of the Administrator, who objected to the Hearing Board's finding that there was no violation of Supreme Court Rule 770 or Rule 771 in any count, and argued that Respondent should be suspended for two years. The Respondent disagreed with the Hearing Board's finding that he breached his fiduciary duty in Counts I and III, and argued that the complaint should be dismissed or that at most, he should be censured.
The Review Board affirmed the Hearing Board's findings of fact and misconduct. It recommended that Respondent be suspended from the practice of law for one year.
BEFORE THE REVIEW BOARD
ILLINOIS ATTORNEY REGISTRATION
|In the Matter of:
Commission No. 06 CH 80
REPORT AND RECOMMENDATION OF THE REVIEW BOARD
The Respondent-Appellee Mark Maciasz was charged with misconduct by the Administrator-Appellant in a three-count complaint, which resulted from his operation of a "moonlighting" law practice, in violation of the fiduciary duty he owed to the law firms that employed him, and from misrepresentations, including his submission of altered tax returns as part of an employment application. Specifically, all three counts charged him with engaging in conduct involving dishonesty, fraud, deceit and misrepresentation, in violation of Rule 8.4(a)(4) of the Illinois Rules of Professional Conduct; conduct prejudicial to the administration of justice, in violation of Rule 8.4(a)(5), and conduct tending to defeat the administration of justice or bring the courts or legal profession into disrepute, in violation of Supreme Court Rule 770 or Rule 7711. Counts I and III also charged him with breach of his fiduciary duty of good faith and honesty to the law firms that employed him and their partners. The Respondent admitted almost all of the factual allegations, but denied the allegations of misconduct.
The majority of the Hearing Board found that the Respondent engaged in conduct involving dishonesty in all counts and breached his fiduciary duty in Counts I and III, but that his conduct was not prejudicial to the administration of justice and did not tend to defeat the
administration of justice or bring the courts or the legal profession into disrepute. The majority of the Hearing Board recommended that the Respondent be suspended for a period of four months.
Concurring in part and dissenting in part, one panel member disagreed with the majority's finding in Count III that the Respondent acted deceitfully in exporting documents to his home computer on the last day he was employed, finding that this was merely a dispute over office procedures for copying office documents and did not violate client confidentiality. He did not disagree with the finding of dishonesty concerning the Respondent's moonlighting practice, however.
A second panel member also concurred and dissented in part. She considered the Respondent's use of his law firms' addresses on invoices sent to some of his moonlighting clients in Counts I and III to be deceitful and violative of his fiduciary duty to the firms. Further, she viewed the Respondent's falsification of his employment application and alteration of his tax returns to be extremely egregious and violative of Supreme Court Rule 770. After considering the circumstances, including what she considered to be a lack of significant factors in mitigation, the second dissenting panel member recommended that the Respondent be suspended for one year.
The case is now before the Review Board on the exceptions of the Administrator, who objects to the Hearing Board's finding in all three counts that the Respondent's misconduct did not tend to bring the legal profession into disrepute in violation of Supreme Court Rule 770. He also objects to the majority's recommended sanction, arguing instead that the Respondent should be suspended from the practice of law for two years. The Respondent disagrees with the Hearing Board's finding that he breached his fiduciary duty to the law firms that employed him
in Counts I and III. He argues that the complaint should be dismissed or that at most, he should be censured.
Pertinent facts, for the Review Board's purposes, are summarized below. Further details can be found in the Report and Recommendation of the Hearing Board.
The Respondent became a certified public accountant in 1989. He became a lawyer in 1992 and shortly thereafter, began what is referred to in this case as his "moonlighting practice." The Respondent defined "moonlighting" as earning revenue other than from an employer. Generally, that practice consisted of accounting services, compliance services, estate planning, drafting of wills and trusts, formation of corporations and other business entities and preparation of tax returns. The Respondent agreed that at least part of his moonlighting practice involved the practice of law.
In 1998, after employment involving estate planning or tax related work at several other places, the Respondent became an associate at the law firm of Altheimer & Gray. The firm represented clients who averaged a personal net worth of between $40,000,000 and $50,000,000. The Respondent was employed as part of the trusts and estates group. He had a very busy practice, sometimes working evenings and weekends to finish the work he was assigned.
The Respondent was highly thought of at Altheimer and Gray. In the opinion of David Fargo, a partner who worked closely with him, the quality of his work was very high. He had a good relationship with clients. Debra Doyle considered him her mentor. John Buttita, head of the Estate Planning Group, thought that he did his work very well. In February 2003, the Respondent was voted an equity partnership with the firm.
On or about May 27, 2003, less than four months after the Respondent had become a partner, he was informed that Altheimer & Gray would be disbanding as of June 30, 2003 and he would be unemployed.2
The Respondent's moonlighting practice continued the entire time that he was at Altheimer & Gray, without the firm's knowledge. According to David Fargo, attorneys were not allowed to conduct a side business without the firm's approval, but the firm had no written policy on the subject. According to John Buttita, the firm's practices and policies required attorneys to devote their full time to the practice of law. Attorneys were required to bill for all legal work through, and remit all fees and costs collected to Altheimer & Gray. The firm also required its attorneys to conduct a conflicts check before agreeing to represent a client. The Respondent did not subject any of his moonlighting clients to a conflicts check.
After the collapse of Altheimer & Gray, the Respondent applied for a job at Holland & Knight at the urging of Fargo and Don Gillies, another Altheimer & Gray lawyer. Both men had become of counsel to Holland & Knight. As part of the application process, the Respondent was required to complete a "Confidential Lateral Entry Lawyer Due Diligence Questionnaire" and a "Confidential Lateral Entry Lawyer Conflicts Questionnaire and Checklist."
The due diligence questionnaire asked for a brief description of the Respondent's law practice and employment history, to which the Respondent responded, "See attached resume." The conflicts questionnaire asked for a list of "all law firms, partnerships, legal departments, agencies, etc., with which you have been affiliated in the past ten years," to which the Respondent made the same reply. It also asked for a list of "all clients for whom you have rendered legal services, and as to whom you have obtained information subject to your ethical
duties of loyalty or confidentiality, in the past five years." In response to that question, the Respondent attached Altheimer & Gray time records listing the firm's clients whose matters he worked on from January 2001 through July 8, 2003.
Nowhere in his answers to either questionnaire did the Respondent disclose any information about his moonlighting practice. Holland & Knight's employment application also required submission of the Respondent's federal and state tax returns for 2000-02, and the Respondent deleted his Schedule C's from the copies that he submitted. The computer program that he used reduced his income accordingly.
The Respondent explained that he believed the reason for providing this information was to negotiate his starting salary, and therefore his moonlighting income, as well as income from a rental real estate business in which he had a fifty percent interest, which he also deleted, were not pertinent. He also admitted that he deleted his moonlighting income because he did not want Holland & Knight to know about it. It was the opinion of senior partner Robert Schnitz that the firm would have been unlikely to hire an attorney with a moonlighting practice, especially one who concealed it from his former firm.
On July 30, 2003, the Respondent entered into an employment agreement with Holland & Knight, whereby he would be employed as "a full-time lawyer," as senior counsel in the Private Wealth Section, beginning August 1, 2003. His initial billing rate would be $320 per hour. The employment agreement provided in part that the Respondent agreed "to devote full time and attention to the practice of law," and that he would not "undertake or continue any representation except in accordance with [Holland & Knight] practices and procedures." The Respondent further agreed that all client income and expense reimbursements related to his service as an employee were property of the firm.
The Respondent acknowledged receipt of the Holland & Knight Office Manual in the agreement. Section 601 of the manual provided in part that "[n]o employment will be accepted until a conflicts check has been made for the client and opposing party." Section 602.4 addressed the issue of outside compensation for services, and provided that:
Except in extraordinary circumstances approved in advance by the Directors Committee upon the affirmative recommendation of the Managing Partner, all compensation for services of every kind rendered by a firm lawyer, (including fees for service as a fiduciary, literary or other royalties, speaking honoraria, and other compensation for services of every kind and from any source, (but excluding fees for service as a corporate director) shall be deemed income of the firm. A firm lawyer receiving compensation for services (whether or not approved as an exception as provided above) that is not received by the firm's accounting department shall report to the firm's executive director the amount of such income quarterly, on or before the fifth business day of each calendar quarter.
Nevertheless, the Respondent continued his moonlighting practice during the entire time he was employed by Holland & Knight, without disclosing it to the firm or conducting a conflicts check concerning any of his moonlighting clients.
The Respondent's abilities continued to be viewed favorably at his new firm. Equity partner Andrew Gelman, the regional team leader of the Private Wealth Section, considered him a bright and capable person, whom he valued for his expertise and workmanship. David Fargo and Don Gillies, who were nearing retirement age, thought that the Respondent would be the perfect person to take over their practice, as he was such a good lawyer. However, the Respondent was not putting in the hours that the firm expected, and he received several "soft warnings" about that. The Respondent did not want to be in the position of being unemployed again, and contacted a firm that had previously offered him a job.
In early May 2005, the Respondent gave notice of his intention to terminate his employment with Holland & Knight as of May 13, 2005. Andrew Gelman was assigned to be
the Respondent's transition partner, to make sure that proper procedures were following when the Respondent departed. Gelman advised the Respondent to consult with the firm's Intellectual Technology Department regarding the procedures to be followed if he wished to remove any documents from his computer when he left.
After doing so, the Respondent concluded that he did not have enough time to follow those procedures. Instead, the morning of his last day at the firm, the Respondent exported more than four hundred documents from his Holland & Knight computer to his computer at home. He did not have authority from Holland & Knight to do so.
The Respondent did not delete the documents from his office computer. He merely sent copies of them to the other location. He explained that his intent was not to conceal the documents, but to have samples of his work that he could use as forms in the future. When he came to Holland & Knight, he brought a CD given to him by Altheimer & Gray that contained various documents developed by its trusts and estates group, which he used as forms that he further refined at Holland & Knight. The Respondent had misplaced the original CD.
Some of the exported documents concerned the Respondent's rental real estate management and development business. Many were related to the Respondent's moonlighting practice, from the time that he was at Altheimer & Gray and at Holland & Knight. The documents were examined when the firm became aware of their exportation, and the moonlighting practice was discovered.
Invoices found on the Respondent's computer at Holland & Knight indicated that approximately half of the Respondent's moonlighting practice involved tax services only, while several matters involved both tax accounting and legal work. Approximately two-thirds of the invoices involved fees of $1,000 or less. Holland & Knight did not find that any of its clients had been diverted to the moonlighting practice, and the firm did not attempt to recover any of
Respondent's moonlighting income. There was no allegation that any of the Respondent's moonlighting business had been performed in less than a competent, professional manner.
The Respondent argues initially that the complaint in this case should be dismissed. He characterizes the matter as merely a dispute between employers and their employee, rather than a disciplinary issue, and suggests that the Rules of Professional Conduct do not provide "clear ethical guidelines" indicating that his conduct was wrong.
The professional rules "are not intended to be a manual designed to instruct attorneys what to do in every conceivable situation." In re Rinella, 175 Ill.2d 504, 514, 677 N.E.2d 909, 222 Ill. Dec. 375 (1997). The rules make it clear, however, that dishonest conduct is prohibited. The Respondent does not claim that his conduct was not dishonest.
Additionally, this is not the first case in which an attorney has been disciplined for breaching his fiduciary duty to a law firm. See, e.g., In re Michod, 97 CH 99, (Review Bd., Nov. 29, 2000), petitions for leave to file exceptions denied, M.R. 17317 (Mar. 22, 2001); In re Cresto, 02 CH 75, M.R. 20219 (June 13, 2005). The purpose of a disciplinary proceeding is to protect the public from unqualified or unethical attorneys. In re Ettinger, 128 Ill.2d 351, 365, 538 N.E.2d 1152, 131 Ill. Dec. 596 (1989). As we recently noted, "if a licensed attorney, practicing at one firm as a partner believes he can conduct other law business outside of that firm and in breach of his fiduciary duty, he is an unethical practitioner from whom the public should be protected." In re Vano, 04 CH 142 (Review Bd., Sept. 1, 2009), Respondent's petition for leave to file exceptions allowed; sanction modified, M.R. 23410 (Jan. 21, 2010).
The Hearing Board found that the Respondent had a fiduciary duty to disclose his moonlighting clients to the law firms and their partners who employed him, to allow them the opportunity to accept or decline to represent them. The Respondent diverted that opportunity,
and the legal fees that might have resulted, by providing legal services independently, without the firms' knowledge. The Hearing Board found that in doing so, the Respondent breached his fiduciary duty of good faith and honesty, in Counts I and III.
The Respondent does not deny that he owed a fiduciary duty to both firms. As a partner of Altheimer & Gray, the Respondent had a fiduciary relationship with the other partners of the firm and was prohibited from "all forms of secret dealings and self-preference in any matter" connected with the partnership. Winston & Strawn v. Nosal, 279 Ill. App 3d 231, 239, 664 N.E.2d 239, 215 Ill. Dec. 842 (1st Dist. 1996). As an employee of Holland & Knight, he owed them a duty of fidelity and loyalty. Corroon & Black of Illinois, Inc. v. Magner, 145 Ill. App. 3d 151, 160, 494 N.E.2d 785, 98 Ill. Dec. 663 (1st Dist. 1986).
As a fiduciary relationship exists, the burden shifts to the Respondent to show by clear and convincing evidence that his transactions were equitable and just. Labovitz v. Dolan, 189 Ill. App. 3d 403, 413, 545 N.E.2d 304, 136 Ill. Dec. 780 (1st Dist. 1989). The Respondent attempts to do so by arguing that none of his moonlighting clients would have been willing or financially able to pay the fees charged by Altheimer & Gray or Holland & Knight. Therefore, he argues that a breach of fiduciary duty was not sufficiently proved in either Count I or Count III, as there was no evidence that these opportunities were ones that the law firms would have been interested in acquiring.
The Hearing Board's legal conclusions, including whether the facts found constitute the charged misconduct, are subject to de novo review. In re Discipio, 163 Ill. 2d 515, 527, 645 N.E.2d 906, 206 Ill. Dec. 654 (1994).
The Respondent's argument misses the point. His fiduciary duty included the duty of full and fair disclosure. Peskin v. Deutsch, 134 Ill. App. 3d 48, 479 N.E.2d 1034, 89 Ill. Dec. 28 (1st Dist. 1985). The right to evaluate whether the Respondent's moonlighting clients
were realistic client opportunities belonged to Altheimer & Gray and Holland & Knight. They were entitled to the opportunity to provide services to those clients, even if the offer to do so was rejected. It is the Respondent's usurpation of that opportunity, and not of the clients themselves that puts him in breach.
The Respondent further violated his duty of loyalty and good faith in that by representing undisclosed clients for whom he had not conducted conflicts checks, he created the risk of a conflict of interest between those clients and the clients of the firms that employed him. The Respondent's breach of fiduciary duty was sufficiently proved in both counts.
Next, the Administrator objects to the Hearing Board's findings in all three counts concerning Supreme Court Rule 770. As there was no evidence presented that the Respondent's misconduct tarnished the reputation of the legal profession, detracted from the integrity of the legal system or harmed any clients, or that anyone outside of the legal profession knew of his misconduct, the Hearing Board determined that there was no violation of the rule. As we have concluded that a contrary finding would not affect our recommendation as to the appropriate sanction, we decline to address that issue and turn to the sanction itself.
The Hearing Board recommended that the Respondent be suspended for four months, but its recommendation is advisory only. In re Imming, 131 Ill.2d 239, 260, 545 N.E.2d 715, 137 Ill. Dec. 62 (1989). The Administrator argues that the period of suspension should be two years, while the Respondent suggests that he deserves no more than censure.
In determining its own recommendation, the Review Board must consider the case based on its own particular facts and circumstances, while keeping in mind that the purpose of discipline is not to punish the individual respondent, but to protect the public, to maintain the integrity of the profession and to protect the administration of justice from reproach. In re Timpone, 157 Ill.2d 178, 197, 623 N.E.2d 300, 191 Ill. Dec. 55 (1993). Mitigating and
aggravating factors are also relevant. In re Witt, 145 Ill.2d 380, 398, 583 N.E.2d 526, 164 Ill. Dec. 610 (1991).
The Hearing Board found that the Respondent breached his fiduciary duty to Altheimer & Gray and Holland & Knight by depriving them of the opportunity to provide legal services to, and to earn income from, his moonlighting clients. He engaged in deceitful conduct over a long period of time, in order to earn income from the practice of law in breach of his duties to his employers. He engaged in dishonesty by failing to disclose his outside practice to the firms, by making misrepresentations on his employment application to Holland & Knight, by submitting altered copies of tax returns, and according to the majority of the panel, by exporting documents to his home, rather than following the firm's procedure.
We affirm the Hearing Board's findings. We are particularly troubled by the Respondent's dishonesty concerning Holland & Knight. Respondent willfully altered his tax returns with an intent to deceive the law firm. He signed his employment application representing that its contents were accurate when he knew that they were not. In signing the employment agreement, the Respondent agreed that he would not "undertake or continue any representation except in accordance with [Holland & Knight's] practices and procedures," which included that unless the firm approved otherwise, "all compensation for services of every kind rendered by a firm lawyer….shall be deemed income of the firm." He signed the agreement while fully intending to continue his moonlighting practice. The Respondent does not appear to be remorseful for this misconduct. He apparently does not view his dishonesty as a violation of the professional rules, as he argues that the proceedings should be dismissed.
While the facts and circumstances of every disciplinary case are unique, the sanction imposed should be "consistent with those imposed in other cases involving comparable
misconduct." In re Howard, 188 Ill. 2d 423, 440, 721 N.E.2d 1126, 242 Ill. Dec. 595 (1999). We do not find an Illinois disciplinary case that presents a comparable situation.
We have examined the cases cited by the Administrator and conclude that they indicate that the two-year suspension that he proposes is not appropriate. Most involve significantly more egregious misconduct that what has occurred in this case. That misconduct includes an attorney's failure to disclose his transfer to inactive status due to mental illness when applying for employment, In re Epstein, 92 CH 515 and 93 CH 112 (Hearing Bd., Oct. 26, 1993), Administrator's motion to approve and confirm allowed in part, M.R. 8984 (Jan. 25, 1994); an attorney's failure to disclose her involvement in a mortgage fraud scheme on her bar application, In re Chandler, 161 Ill.2d 459, 641 N.E.2d 473, 204 Ill. Dec. 249 (1994); an attorney's attempt to conceal conversion of more than $90,000 from his law firm, In re Goble, 98 CH 16 (Hearing Bd., Mar. 16, 1999), Administrator's motion to approve and confirm allowed, M.R. 15877 (May 25, 1999); conversion of a $126,000 fee that his employment contract provided should have belonged to the attorney's firm, In re Gillespie, 03 SH 111, petition for discipline on consent allowed, M.R.19139 (Jan. 20, 2004) and an attorney's elaborate scheme to fraudulently bill the investment firm that employed him, which resulted in federal criminal charges and disbarment of all the Illinois attorneys involved, In re Quinlivan, 95 CH 338, motion for disbarment on consent allowed, M.R. 11283 (May 26, 1995).
Moonlighting cases from other jurisdictions also do not provide significant guidance. The respondent in Iowa Supreme Court Board of Professional Ethics and Conduct v. Irwin, 679 N.W.2d 641 (Ia. 2004), whose license was revoked, not only failed to disclose a three-year private practice to his firm, but to the Iowa Client Security & Attorney Disciplinary Commission. His misconduct included dishonesty and a willful misappropriation of funds due his employer. In In re Cupples, 979 S.W.2d 932 (Mo. 1998) the respondent's prior discipline
and his use of his employer's resources in conducting a much more extensive moonlighting practice were significant factors in the court's decision to suspend his license indefinitely, with leave to apply for reinstatement after six months. The respondent in The Florida Bar v. Kossow, 912 So.2d 544 (Fla. 2005), advised the firm that he conducted a private practice at the time he was hired. He continued to do so after he was instructed three months later that all legal services that he provided had to be as an employee of the firm. When Kossow's employer discovered his moonlighting practice, he lied about it and was fired. Kossow admitted his misconduct, which the court found to be blatantly dishonest and deceitful. He was suspended for thirty days.
We also have considered the recent case of In re Vano, supra, 04 CH 142, M.R. 23410. In that case, Vano became a minority shareholder in a firm that focused its practice on insurance defense work. He brought 36 cases with him when he joined the firm, and the shareholders agreed that he would receive a substantial portion of the fees generated by those cases. Any new legal business that Vano acquired, and their resulting fees, would belong to the firm. This included referral fees from cases involving limited work on Vano's part.
The Hearing Board found that in eight cases, the respondent obtained referral fees totaling more than $339,000. The fees were sent to him at home and were not disclosed to his firm. After this was discovered, Vano's employment was terminated. His misconduct was reported to the ARDC and he was sued civilly for the fees. A Hearing Board majority recommended a suspension for one year with the last six months stayed with probation.
The majority of the Review Board upheld the Hearing Board's findings that the respondent had breached his fiduciary duty to the firm and engaged in dishonesty, and found in addition that he had converted the fees and violated Rule 770, as his misconduct had caused a reasonably foreseeable impact on the administration of justice when he engaged in conduct that required his firm to bring litigation that otherwise would have been unnecessary. However, the
Review Board eliminated the stay with probation. On further review, the Supreme Court adopted the Hearing Board recommendation.
After consideration of all the circumstances, we conclude that a suspension of one year is appropriate in this case. Unlike the situation in Vano, we find no indication that probation is appropriate here. It would serve no purpose. The Respondent's conduct was deliberate and not the type of activity that would be remedied through supervision. Additionally, and unlike the situation in Vano, there was no ambiguity as to what was required of the Respondent in this case. In Vano, the aggrieved law firm allowed, as part of a settlement, the entry of a summary judgment order against it which stipulated that the agreement governing Vano's obligation could "be interpreted" so as to make Vano's conduct innocent.
We therefore affirm the Hearing Board's findings of fact and findings of misconduct and recommend that the Respondent, Mark Maciasz, be suspended from the practice of law for one year.
Date Entered: 12 May 2010
Stuart R. Lefstein
1 Former Supreme Court Rule 771 was renumbered as Rule 770, effective April 1, 2004. To avoid confusion, the rule is hereafter referred to as Rule 770.
2 As he had been a partner for almost five months, the Respondent was named as a defendant in lawsuits against the firm and contributed toward payment of the firm's debts.