Filed July 25, 2008

In re Edward Earle Hearn
Commission No. 07 CH 94

Synopsis of Hearing Board Report and Recommendation

Default Proceeding

NATURE OF THE CASE: 1) converting funds; 2) breaching his fiduciary duties; 3) representing a client when the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interest; 4) engaging in conduct involving dishonesty, fraud, deceit or misrepresentation; 5) engaging in conduct prejudicial to the administration of justice; and 6) engaging in conduct that tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute.

RULES DISCUSSED: Rules 1.7(b), 8.4(a)(4), and 8.4(a)(5) of the Illinois Rules of Professional Conduct and Supreme Court Rule 770.

RECOMMENDATION: Suspended from the practice of law for one year and until further order of the Court.

DATE OF OPINION: July 25, 2008.

HEARING PANEL: James B. Pritikin, Chair, Geraldine C. Simmons, and Donald A. Pettis, Sr.

ADMINISTRATOR'S COUNSEL: Dorothy B. Zimbrakos.

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

In the Matter of:

EDWARD EARLE HEARN,

Attorney-Respondent,

No. 6194650.

Commission No. 07 CH 94

REPORT AND RECOMMENDATION OF THE HEARING BOARD

DEFAULT PROCEEDING

The hearing in this matter was held on April 22, 2008, at the Chicago offices of the Attorney Registration and Disciplinary Commission ("ARDC") before a Hearing Board Panel consisting of James B. Pritikin, Chair, Geraldine C. Simmons, and Donald A. Pettis, Sr. Dorothy B. Zimbrakos appeared on behalf of the Administrator of the ARDC. Respondent, Edward Earle Hearn, did not appear and was not represented by counsel.

PLEADINGS AND PRE-HEARING PROCEEDINGS

On August 30, 2007, the Administrator filed a two-count Complaint alleging that Respondent converted funds and breached his fiduciary duties. On October 25, 2007, Respondent was personally served with the Administrator's Complaint.

The first pre-hearing conference was held on December 10, 2007. Respondent participated and requested time to file an answer. An order was entered that day directing Respondent to file an answer to the Administrator's Complaint on or before December 31, 2007. On February 1, 2008, after no answer was filed, the Administrator filed a Motion to Deem the Allegations of the Complaint Admitted Pursuant to Commission Rule 236. On February 4, 2008,

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the Chair granted that motion, thereby limiting the evidence to be presented at hearing to matters of aggravation and mitigation. That order also set the hearing date for April 22, 2008.

On March 19, 2008, due to Respondent's failure to file a report pursuant to Commission Rule 253, his failure to respond to the Administrator's Notice to Produce, and his failure to appear for deposition, the Administrator filed a Motion to Bar Respondent from Testifying, Presenting any Witnesses or Presenting any Evidence at the Hearing. In that Motion, the Administrator stated that on February 7, 2008, a copy of the February 4, 2008, order was personally served on Respondent. On March 25, 2008, the Chair granted the Administrator's Motion to Bar.

THE EVIDENCE

The Administrator presented the testimony of three witnesses, and offered exhibits 1-38 which were admitted into evidence.

Count I

Admitted Facts

At all times relating to the events in this Complaint, Grace Conservative Baptist Church of Chicago was an Illinois not-for-profit organization. Grace Church was established on January 21, 1963, for the purposes of creating a place for its members to assemble, fellowship, and conduct worship services. On June 21, 1963, Grace Church established a constitution setting forth the faith-based guidelines on which the Church was established and outlining, inter alia, the conditions of election and terms of office relating to the election and termination of the pastor. (Adm. Ex. 4).

In June 1990, Respondent was elected by the members of Grace Church to serve as its pastor. As an employee of Grace Church, Respondent was subject to the provisions of the Church's constitution and the provisions of the Illinois General Not-for-Profit Corporation Act,

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805 ILCS sec. 105/108.80 (the Act). (Adm. Ex. 5). The Act stated that regarding loans to directors and officers:

sec. 105/108.80. Prohibited loans to directors and officers.

Except as permitted by subsection (e) of Section 108.75, no loan shall be made by a corporation to a director or officer except that a loan may be made to a director or officer who is employed by the corporation if authorized by a majority of the non-employed directors and either (a) in the case of a corporation organized for and holding property for any charitable, religious, eleemosynary, benevolent, educational or similar purpose, the purpose of such loan is to provide financing for the principal residence of the employed director or officer upon receipt of adequate collateral consisting of marketable real estate or securities readily capable of valuation or (b) the loan is otherwise in furtherance of the purposes of the corporation and in the ordinary course of its affairs. The directors of a corporation who vote for or assent to the making of a loan to any non-employed director or non-employed officer of the corporation, or otherwise prohibited by this Section, and any other person knowingly participating in the making of such loan, shall be jointly and severally liable to the corporation for the amount of such loan until the repayment thereof.

At all times relating to this case, the Grace Church constitution provided that both the pastor and several members of the Board of Deacons were officers of the corporation and that all members of Grace Church who were at least 18 years old were entitled to have a voice in, and a vote on, all matters of business.

While Respondent was the pastor, he conducted his law practice out of the offices of Grace Church and used the Church's address as his business address. Also during this period of time Tanya M. Parks was a member of Grace Church, and as of August 2003, she was the Treasurer and Chair of the Finance Committee. In December 2003, Parks was Respondent's client in a mortgage foreclosure action.

As pastor and as an officer of Grace Church, Respondent was privy to confidential information about the financial condition of the Church, including the availability of funds held in various bank accounts. Respondent had a fiduciary responsibility to the Church, and was obligated to perform his duties as pastor and as an officer of the corporation with the highest

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degree of honesty, fidelity and good faith. Respondent also owed Grace Church and its members a duty to avoid placing himself in a position where his personal interests would conflict with the interests of the Church. As a consequence of the fiduciary duties, Respondent was prohibited from engaging in transactions that gave preference to his own interests above the interests of Grace Church. He was also required to obtain permission from the Board of Deacons before disbursing any funds from the Church's accounts.

Respondent was experiencing personal financial difficulties, and sometime prior to October 20, 2000, requested that Grace Church loan him $25,000. Respondent advised the congregation of his financial difficulties, and the Church members agreed to lend Respondent $25,000. At no time did Respondent prepare a promissory note which disclosed the amount of the loan to be repaid, the amount of the interest, if any, to be paid by Respondent, or what security, if any, Respondent would provide in the event Respondent was unable to repay the loan. At no time did Respondent advise Grace Church that the Act prohibited the Church from lending money to officers of the corporation for personal purposes.

As of October 20, 2000, Grace Church's real property was free and clear of any loans, liens, or debt. On that date, at the request of Respondent, Grace Church applied for a loan, in the amount of $135,000, from Shore Bank, using the Church's real property as collateral for the loan. The purpose of the loan was to acquire and pave two parcels of property adjacent to Grace Church for a parking lot and to fund the $25,000 loan to Respondent. Respondent, along with associate pastor Eduardo Allen, completed financial statements for the loan, and Respondent submitted those statements to the bank. The statements indicated that Respondent practiced law on a part-time basis, that Grace Church was a not-for-profit corporation, and that the loan would be used to supplement congregational donations. Respondent did not disclose in the financial statement that $25,000 of the loan would go to Respondent. (Adm. Exs. 6, 7, 8).

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On December 6, 2000, Shore Bank agreed to lend Grace Church as much as $375,000, the appraised value of the Grace Church real property, which was used as collateral for the loan. On December 18, 2000, unbeknownst to the members of the Church, and without acquiring authority of the Board of Deacons, Respondent asked Shore Bank to fund a loan in the amount of $160,000. The $160,000 loan was comprised of the $125,000 for the Church parking lot, $25,000 for the loan to Respondent, and an additional $10,000. On February 7, 2001, Shore Bank authorized a loan to Grace Church in the amount of $160,000 and Respondent executed a mortgage as a securing instrument on behalf of Grace Church. (Adm. Exs. 9, 10).

On February 9, 2001, Respondent attended the closing on the loan and signed various closing documents indicating that he was the borrower. Shore Bank then disbursed a check to Grace Church in the amount of $157,797.96, which represented the $160,000 loan less closing fees and interest. The monthly payments on the loan were to begin on April 1, 2001, in the amount of $1,622.83, and the loan maturity date was March 1, 2016. On February, 12, 2001, Respondent, or someone at his direction, deposited the loan proceeds into the Church's parking lot fund at Shore Bank. Shortly thereafter, Respondent took $25,000 from that account as his personal loan, and he used those funds for his personal or business purposes. (Adm. Exs. 11, 12).

In a separate matter, on August 26, 2003, a complaint to foreclose on the mortgage was filed against Parks by Household Finance Corporation. The complaint alleged that Parks had defaulted on her mortgage payments as of August 1, 2002, and she owed $230,657.32 on the mortgage note. On December 12, 2003, Respondent filed his appearance on behalf of Parks. On January 13, 2004, the court entered an order granting Parks twenty-one days to file an answer to the complaint. On February 18, 2004, pursuant to Respondent's request, the court granted Parks an additional ten days to respond to the complaint. At no time did Respondent file an answer to

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the complaint. On March 3, 2004, a judgment of foreclosure and order of sale was entered against Parks. On May 17, 2004, a notice of sale was filed, and the property was to be sold at public auction. Parks had until June 14, 2004, to redeem the property. (Adm. Ex. 13).

Between June 10, 2004 and June 21, 2004, Respondent, on behalf of Parks, made contact with a representative of Household Finance and its attorney, Ira T. Nevel, in an attempt to redeem Parks' property. Respondent was told on each occasion that he was required to direct a written request to Household Finance before a reinstatement figure could be calculated. However, after following the directions given, Respondent was unable to obtain the redemption amount. On June 16, 2004, the property was sold. On June 21, 2004, Parks learned that she had failed to redeem the property. (Adm. Ex. 14).

On June 24, 2004, Household Finance filed a motion asking the court to approve the sale and grant an order of possession against Parks. On that date, the court entered an order granting confirmation of the sale and an order of possession to Household Finance. On July 9, 2004, Respondent filed a motion to vacate the order stating that Household Finance had refused to provide Parks with the necessary assistance to redeem her property. Respondent also stated that because of Household Finance's inaction, Parks was deprived of the full statutory period of redemption and that Parks had been fully prepared to pay the arrearage owed to Household Finance. Respondent asked the court to vacate the sale and order of possession and to grant Parks the opportunity to pay the amount required to redeem the property.

On July 16, 2004, the court granted Respondent the opportunity to contact Household Finance to attempt to reinstate Parks' mortgage and to pay all necessary costs associated with the redemption of the property. On July 20, 2004, the court entered an order requiring Household Finance to supply reinstatement figures to Respondent within seven days, and gave Parks seven days thereafter to reinstate the mortgage using certified funds. The order also provided that the

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sale and judgment would be vacated and the case dismissed in the event that Parks was able to reinstate the mortgage.

Some time after July 20, 2004, Respondent left the country and was not scheduled to return until August 9, 2004. Prior to leaving the country, Respondent informed Household Finance's attorney of his impending absence and inability to follow-up in the case until his return. On or about August 9, 2004, Respondent learned that the deadline for payment of the sum required to reinstate Parks' mortgage had passed and that the Cook County Sheriff had been contacted to evict Parks from the property.

On August 19, 2004, Respondent filed an emergency motion for stay of execution regarding the impending eviction. Also on that date, the court entered an order requiring Household Finance to provide the full reinstatement amount to Parks within the next three days and requiring Parks to tender to Household Finance the full amount of the reinstatement funds within twenty-four hours after that amount was obtained. The order also provided that, if Parks failed to comply, an order of eviction would issue. Some time between August 19, 2004 and August 26, 2004, Respondent was informed that the amount necessary to reinstate Parks' mortgage was $59,098.52. (Adm. Exs. 15, 16).

On August 26, 2004, Respondent authorized Grace Church member Stephanie Samuels to draft the following checks on Grace Church's bank accounts, made payable to RESPONDENT:

Check No.

Date

Grace Church Acct. No.

Amount

1027

8/26/04

6092851

$43,000.00

1051

8/26/04

017449100

17,000.00

Total

60,000.00

Respondent characterized the distribution of the $60,000 from Grace Church's account as a loan to him. At no time did Respondent prepare a promissory note which disclosed the amount of the

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loan to be repaid to the Church, the amount of interest, if any, to be paid, or what security, if any, Respondent would provide in the event he was unable to repay the loan.

On August 26, 2004, Respondent negotiated check nos. 1027 and 1051 in exchange for a check in the amount of $59,098.52, made payable to Household Finance. Shortly thereafter, Respondent used the check to reinstate the mortgage on Parks's property. Respondent kept the $902.48 difference between the $60,000 in total funds he received and the $59,098.52 check, and used that amount for his personal or business purposes.

At no time did Grace Church, any of its Board of Deacons, or any other representatives authorize Respondent to use the Church's funds for his own business or personal purposes. As of the date the Inquiry Board authorized the Administrator to file a complaint against Respondent, he had not repaid any portion of the $25,000 loan or the $60,000 he used to pay Parks' mortgage.

Count II

Admitted Facts

Grace Church had three accounts with Shore Bank. The first contained the proceeds of the $160,000 loan to be used for the purchase of property for the Church's parking lots, and was account number 6092851. The second account was designated as the "building fund" to be used for the upkeep of the real property owned by the Church, and was account number 17449100. The third account was used for day-to-day expenses of the Church, including payments to utilities and creditors, and payment of the Church's loan, and was account number 17298000. On many occasions, funds were transferred between accounts to cover expenses or overdrafts as necessary.

In 2004, Respondent's salary as a full time pastor of Grace Church was $31,153.92. From January 22, 2004 through December 28, 2004, Respondent caused at least an additional

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$26,282.79 in checks to be written to himself from two of the Church's accounts, account number 17298000 and account number 1449100. He used these funds for his own personal or business purposes. These checks did not including the $31,153.92 he received as his full time salary.

Account No. 17298000

Check No.

Date

Amount

11282

1/22/04

$3,000.00

11246

2/19/04

1,000.00

11254

2/24/04

2,000.00

11255

2/24/05

2,000.00

11282

3/18/04

1223.46

11284

3/23/04

900.00

11293

4/1/04

765.00

11310

4/22/04

725.00

11315

5/4/04

1,071.60

11336

5/20/04

175.00

11337

5/24/04

50.00

11338

5/25/04

100.00

11345

5/27/04

611.73

11352

6/10/04

1,223.46

11355

6/16/04

125.00

11380

7/19/04

179.49

11420

8/31/04

300.00

11424

9/2/04

611.73

11430

9/7/04

611.75

11436

9/15/04

740.88

11443

9/21/04

740.88

11446

9/28/04

740.88

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Account No. 17298000 Continued

Check No.

Date

Amount

11451

10/4/04

84.89

11452

10/4/04

740.88

11454

10/13/04

740.88

11456

10/18/04

740.88

11459

10/27/04

740.88

11462

10/29/04

275.00

11465

11/9/04

740.88

11471

11/12/04

100.00

Total

$23,060.15

Account No. 17449100

Check No.

Date

Amount

1050

8/31/04

1,000.00

1053

11/23/04

740.88

1055

12/7/04

740.88

1058

12/28/04

740.88

Total

$3,222.64

Total Both Accts.

$26,282.79

At no time did Respondent have the authority of Grace Church or its Board of Deacons to issue these checks. (Adm. Ex. 17).

In June of 2003, Grace Church began experiencing financial difficulties. The payments due to Shore Bank on the $160,000 loan were periodically late through and until July of 2005. Shore Bank also began to assess Grace Church late charges in the amount of $81.14 for each month the loan payment was considered to be past due. In early 2004, Parks, acting as finance committee chairperson of the Church, prepared and released a "Grace Baptist Church Financial Ledger" reporting that the Church had cash of $102,549 on hand at the end of 2003. At a

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meeting in early 2005, Respondent stated that, with respect to income taken in during 2004, "we broke even." A Church income report stated income for 2004 as $163,179.45. Respondent, however, refused to disclose the cash on hand. (Adm. Exs. 20, 21, 22).

On July 14, 2005, Shore Bank sent a letter to Respondent advising him that the loan was 104 days past due and that a past due amount of $6,327.92 was owed toward repayment of the loan. On July 21, 2005, Shore Bank contacted Respondent by telephone regarding the past due amount on the loan. On July 22, 2005, the Church made a $400 payment, less than one-quarter of the scheduled monthly payment, on the loan.

On August 2, 2005, Respondent met with a representative of Shore Bank and assured that person the Church would pay half of the past due payment in two weeks, another payment in the next two weeks, and a payment every two weeks thereafter through the end of September 2005 until the loan was brought current. On or about August 5, 2005, Respondent and Parks issued a document entitled "Financial Disclosure Report," reflecting the financial period of January to June 2005. That document indicated that Grace Church had $68,323.02 in income and $68,466.97 in expenses. The cash on hand reported under the title "current operational amounts" was $1,188.41, more than $100,000 less than the cash on hand at the end of 2003.

An entry entitled "Pastor's Repayment Schedule" on the August 5, 2005 financial disclosure report showed the $25,000 loan made to Respondent in 2001, and also reflected the additional amount of money used by Respondent in the amount of $59,098.32. The report did not disclose how those funds were used. The members of the Church also discovered, for the first time, from the report that the loan from Shore Bank was not being paid.

On August 17, 2005, after failing to receive a payment on the loan from Grace Church, Pamela D. Kenebrew, a Shore Bank representative, sent a 60-day delinquency notice to Respondent, advising him that the payments on the loan were past due and demanding a payment

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in the amount of $7,550.75. After failing to receive any communication from Respondent regarding the delinquency notice, Dennis R. Gleason, Vice President of Shore Bank, sent a letter to Respondent advising him that the loan was in default, that all obligations had been accelerated, and that a payment in the amount of $151,083.02 was due from Grace Church within ten days after the date of the letter. The letter further advised Respondent that the Church would be charged $32.70 per day thereafter if no payment was received.

On September 4, 2005, concerned that church funds were missing, the bank would foreclose on the property, and Respondent had mismanaged church funds, Deacon James Miller requested that Respondent add Miller's name to the Shore Bank accounts. Respondent refused to do so. On September 25, 2005, thirty-four members of the Church, more than half of the Church's voting members, conducted a special meeting, and unanimously voted to dismiss Respondent as pastor of the Church.

On September 28, 2005, attorney Carrie A. Dolan, on behalf of Shore Bank, sent a demand letter to Grace Church and to Respondent, indicating that the full amount of the loan, plus interest, was due and owing, and that Respondent, personally, and as representative of Grace Church, was liable for repayment of the loan. The letter stated that Grace Church was in arrears in the amount of $18,550.43 and that it would institute legal proceedings to foreclose on the loan. The September 28, 2005, letter was the first time members of the Church received notice that Respondent had borrowed $160,000 from Shore Bank instead of the $150,000 he was authorized to borrow.

On or about October 5, 2005, Respondent contacted attorney Dolan by telephone and stated that he would be receiving a donation from a member of the Church and would make the loan current. Respondent stated that he would call Dolan again in a few days. On October 21, 2005, Respondent went to Shore Bank and presented a check made out to Respondent from a

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third party, Laurette H. Martin of Madison, Mississippi, in the amount of $20,000.00. The Bank refused to accept the check and requested that Respondent provide certified funds. Respondent then deposited the check into account number 6092851 and requested that the bank withdraw the $20,000 from the account once the funds cleared and use the funds to bring the loan current. Respondent also stated that he would pay the November loan payment as soon as possible.

On November 3, 2005, Shore Bank applied the entire $20,000 toward repayment of the loan. Also on that date, when Respondent contacted the bank to see if the funds had been applied to the loan, the bank inquired as to whether Respondent had proof of property insurance. Respondent stated that there was insurance on the Church; however, he had not provided proof of insurance since before June of 2002. As a result, Shore Bank had initiated a forced-placed insurance policy that would cost the Church $2,402.00 a year.

Between November 3, 2005 and April 2006, Respondent made sporadic, and in many cases, partial loan payments to the bank, which caused numerous late charges to be assessed on the loan. On November 2, 2005, certain deacons, one pastor, and two other members of Grace Church filed a complaint for injunctive and other relief in the circuit court of Cook County, against Respondent, Parks, and four other members of the Church. The plaintiffs claimed, among other things, that Respondent misappropriated $59,098.52 from the Church's bank accounts to pay the mortgage of Parks, failed to repay the $25,000 personal loan, and wasted and mismanaged $101,360.59 in Church funds, including the checks that were written to Respondent.

On October 23, 2006, the plaintiffs moved for partial summary judgment against Respondent, Parks, and the other defendants, seeking judgment against Respondent in the amount of $25,000 for the personal loan Respondent had not repaid; $26,382.92 for the personal checks written to Respondent in excess of his salary; $14,185.16 in credit card charges

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Respondent had made on the Church's credit cards for such personal expenses, and $59,098.02 for the money Respondent gave Parks for the payment of her mortgage.

On March 15, 2007, the court entered partial summary judgment against Respondent in the amount of $51,382.79, comprised of the $25,000 for the Church's loan, and $26,382.92 for the total of the personal checks Respondent received for the Church's accounts. The court also declared Respondent terminated as pastor of Grace Church, and required him to turn over the keys and all Church property, and vacate the premises by April 30, 2007. The court also entered judgment against Parks in the amount of $59,098.53, and imposed a constructive trust on her property in favor of Grace Church. As of August 20, 2007, Respondent had not paid any portion of the judgment entered against him. (Adm. Exs. 24-30).

Testimony Related to Counts I and II

Vesta Jean Miller

Vesta Jean Miller has been a member of Grace Church since 1963. (Tr. 17). In 1990, when Respondent became pastor of the Church, there were between 120 and 150 members. (Tr. 22). The members understood, and Respondent agreed, that he would give up his law practice while he was pastor. (Tr. 22-23). However, Respondent did not stop practicing law, and he would see some of his clients at the Church. (Tr. 23, 48-49). In addition to the Church building, the Church also owned five or six vacant lots across the street from the Church that the members used for parking. (Tr. 24). After the City began ticketing members for parking in the lots, Respondent told the members he would take care or the problem. (Tr. 24-25).

In 2000 or 2001, the Church was debt-free and had no credit. Respondent told the members that if they wanted to build a larger Church or community center, it needed to establish credit. To do that, he suggested they get a bank loan to pave the parking lot, and have some electrical work done on the Church. (Tr. 25-26). The members authorized Respondent to obtain

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a loan for $125,000 for the paving and electrical work, and $25,000 for a personal loan to Respondent. (Tr. 26-27). Respondent said that he needed the personal loan because he was having financial difficulties relating to his divorce. The members of the Church agreed to give him the loan. (Tr. 50-51).

The members first noticed something was wrong with the Church's finances when there was insufficient funds to do the things they normally did, such as giving money to missionaries and purchasing materials for the Church. (Tr. 28-29). The Church's secretary was Stephanie Samuels. Parks and Samuels were authorized to sign checks from the Church's accounts and all checks had to be signed by both of them. (Tr. 29, 45-48). In 2004, Samuels told a Church elder that Respondent had presented her with checks and told her to sign them without asking any questions. In total, Respondent obtained $60,000 in church funds. (Tr. 29-30). Subsequently, the members learned that Respondent had used $60,000 of the loan to pay Parks' mortgage. (Tr. 31). When some of the members, including Miller, confronted Respondent with these facts, he refused to admit any wrongdoing, and believed as pastor he had the right to use that money. (Tr. 31-32).

In September 2005, the members voted to remove Respondent as pastor of the Church. Even after the vote, Respondent refused to leave, and conducted services on a different floor of the Church for members who voted against his removal. (Tr. 32-35). It was a small Church, with approximately 150 to 175 members. (Tr. 38). Respondent refused to leave the Church until April 30, 2007. During this period of time, the Church was in foreclosure proceedings, and the utilities were shut off because Respondent failed to pay the bills. (Tr. 35). On one occasion, Miller tape recorded a meeting with Respondent, and he threatened her and said he was "praying death" on Miller and her family. (Tr. 36-37). Ultimately, the Church hired an attorney to remove Respondent from the Church, and paid approximately $80,000 in legal fees. (Tr. 37-38).

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Because of the situation created by Respondent, the young members of the Church have left and most of the members are senior citizens. The Church had a kindergarten, a youth ministry and a Sunday school, but no longer has any of those things because there are not enough young members. (Tr. 41-42). The Church has struggled financially to get out of foreclosure, and to pay its legal bills. (Tr. 42-44). Additionally, the Church is still making payments on the loan and the parking lots were never paved. (Tr. 44-45).

Margie Williams

Margie Williams has been a member of Grace Church since 1976. In 2005, the Church members learned that there were problems with the Church's finances. The Church's accounts had low balances, and the mortgage, insurance and some utility bills had not been paid. When some of the members confronted Respondent, he stated that he was the pastor and had discretion on how to use the money. In September 2005, the members learned that the Church could be foreclosed on because of the delinquent mortgage payments. After Respondent refused to disclose any information, the members hired an attorney to remove Respondent as pastor. (Tr. 58-63). On September 25, 2005, the members voted to remove Respondent as pastor. However, Respondent refused to step down, and continued to conduct services. (Tr. 63-65).

Prior to 2002, the Church was in a good financial position, but after Parks became treasurer in 2002, the Church's finances began to decline. (Tr. 65-66). Between 2002 and 2005, the Church raised more than $400,000 from contributions by its members, and was debt free. The Church could have paid for paving the parking lots without getting a loan, however, Respondent insisted that the Church borrow the money to establish a credit history. (Tr. 66-69). In 2004, the Church's financial statement showed that it had $103,000 in cash. By August 2005, it had less than $1,000. (Tr. 69). Prior to 2005, the Church annually donated $20,000 to $25,000 to a missionary program. Beginning in 2005, there was insufficient money to make this

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donation. (Tr. 73-74). After losing so many members, and having to pay the bank loan, the Church can no longer afford to pay a full-time pastor. (Tr. 74-75, 99). The Church is also paying debts Respondent incurred for copy machines and credit card bills totaling approximately $36,500. (Tr. 76).

Ultimately, the Church hired two attorneys to represent it, including to file a lawsuit against Respondent and to stop the foreclosure. The Church paid the attorneys approximately $95,000 in legal fees. (Tr. 71-73). During the period of time when Respondent refused to leave the Church, he threatened some of the members, called the police when the members came to Church, and changed the locks on the Church. He also delayed the court proceedings and made it difficult for members to obtain financial information. (Tr. 71-79).

The Church lent Respondent $25,000 from the bank loan because Respondent needed the money and agreed to pay it back within five years. (Tr. 82-83). Williams was aware that numerous checks were written to Respondent and of his use of church credit cards, but she did not know the specific expenses at issue. Additionally, she stated that the credit cards were sometimes used for church expenses. (Tr. 83-84). Respondent did not write the checks to himself because he had not authority to do so. Parks and Samuels had authority to write, and did write, the checks. (Tr. 86). Also, the Church agreed to pay Respondent an annual salary of $31,000, but Williams discovered that in 2004 and 2005 he was being paid $67,000 annually. (Tr. 88-90). No criminal charges have been filed against Respondent or Parks. (Tr. 91-93).

Christ Stacey

Christ Stacey is an attorney who represented Grace Church in legal proceedings against Respondent. (Tr. 102-103). Stacey was initially hired to remove Respondent as pastor of the Church, and during that process learned that $100,000 in church funds were missing. Stacey filed a lawsuit on November 2, 2005, seeking injunctive and other relief. (Tr. 107-109; Adm.

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Exs. 31, 32). While doing discovery in the case, Stacey learned that Respondent had used church funds for personal and non-church related expenses. Based on these facts, on October 23, 2006, he filed a motion for partial summary judgment. (Tr. 110-116; Adm. Exs. 33, 34). Respondent tried to delay the court proceedings, failed to cooperate with Stacy, and threatened Stacey on two occasions. (Tr. 116-124; Adm. Exs. 35, 38). The evidence showed that in 2003, the Church had $102,549.31 in cash, and in 2004, it had $163,000 in income. As of August 2005, the Church had approximately $1,000 in cash. (Tr. 142-44; Adm. Exs. 18, 19).

The court granted partial summary judgment against Respondent in the amount of $51,382.79, consisting of $25,000 for the personal loan and $26,782.79 for checks that were written to him that he could not account for. (Tr. 126-127; Adm. Ex. 36). The court did not enterer judgment against Respondent for the amounts charged on the Church's credit card. (Tr. 127). The court also entered a judgment against Parks in the amount of $59,098.53. (Tr. 127-128). Stacey believes that Respondent harmed the administration of justice because the Respondent did not have a defense to the lawsuit and should have left the Church when he was supposed to leave. Additionally, Stacey opined that Respondent conduct harmed the reputation of attorneys. (Tr. 131-132).

Prior Discipline

Respondent has not received a prior discipline.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

In attorney disciplinary proceedings, the Administrator must establish charges of lawyer misconduct by clear and convincing evidence. In re Ingersoll, 186 Ill. 2d 163, 168, 710 N.E.2d 390 (1999). Upon consideration of the Complaint filed by the Administrator, the Respondent's failure to file an answer or other responsive pleading, the order entered deeming the allegations of the Complaint admitted, the order entered barring Respondent from testifying, presenting any

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witnesses or presenting any evidence at the hearing, we conclude that the Administrator proved by clear and convincing evidence that the Respondent engaged in the following acts and committed the following misconduct alleged in the Complaint.

Specifically, we conclude that the Respondent:

breached his fiduciary duties;

represented a client when the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interest in violation of Rule 1.7(b) of the Illinois Rules of Professional Conduct;

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

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

engaged in conduct which tends to defeat the administration of justice or which brings the courts or the legal profession into disrepute in violation of Supreme Court Rule 770.

We also find that the Administrator failed to prove that Respondent converted funds as alleged in Counts I and II. Initially, we acknowledge that the Administrator's motion to deem the allegations of the complaint admitted was granted pursuant to Commission Rule 236. Under this Rule, when a Respondent fails to answer the complaint, "upon motion of the Administrator and notice to the respondent, all factual allegations and disciplinary charges shall be deemed admitted, and no further proof shall be required." Comm. R. 236. The Rule further states: "At any hearing in which the allegations of the complaint have been deemed admitted, the respondent and Administrator shall be limited to presenting evidence of aggravating and mitigating factors and arguments regarding the form and amount of discipline to be imposed." Comm. R. 236. However, the Hearing and Review Boards have found that his Rule is not absolute. "When the

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Administrator introduces evidence that tends to negate some of the critical allegations of the complaint, this Panel is not bound by the precepts contained in Rule 236." In re Mattes, 04 CH 56, M.R. 21193 (November 17, 2006) (Hrg. Bd. Rpt at 13); see also In re Reese, 01 CH 51, M.R. 18844 (September 22, 2003); In re McAvoy, 00 CH 4, M.R. 17866 (March 26, 2002). In other words, even though the allegations of the complaint were deemed admitted, where the Administrator presents evidence that contradicts the admitted allegations, the Panel can consider that evidence and make the appropriate findings.

In this case, although the allegations of the complaint were deemed admitted, the Administrator presented the testimony of three witnesses, who testified about the underlying misconduct, rather than testifying strictly about aggravation. Their testimony contradicted some of the admitted allegations of the complaint. We cannot ignore that testimony and have considered it when making our findings. As cited above, this is not the first time admitted allegations have been impacted based on evidence presented by the Administrator at the hearing. The Administrator should have been aware that when presenting evidence beyond aggravation, he does so at his own peril and at the risk of having admitted facts becoming contested facts.

Here, the allegations that Respondent converted funds were deemed admitted. However, after hearing the testimony of the Administrator's witnesses, we find that the evidence is insufficient to find that Respondent converted funds. Conversion is defined as any unauthorized act that deprives someone of their property permanently or for an indefinite period of time. In re Rosin, 156 Ill. 2d 202, 206, 620 N.E.2d 368 (1993). The Administrator alleged that Respondent converted church funds when he failed to repay the $25,000 loan, paid almost $60,000 for Parks's mortgage, and spent more than $40,000 in cash and credit card charges for personal expenses. We find that none of these amounts were converted.

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First, the proceeds from the $25,000 loan, by definition, were not converted. The Church authorized the loan to Respondent. He obtained the money legitimately from the Church. It is undisputed that he did not repay the loan, however, that does not amount to a conversion. Instead, it is a breach of contract. It was dishonest and a breach of his fiduciary duty, but it was not conversion.

Second, the $60,000 of church funds that was used to pay Parks's mortgage was not converted by Respondent. It is undisputed that two checks totaling $60,000 were written from the Church's account, and the proceeds from those checks were used to pay Parks's mortgage. However, Respondent had no authority to write checks from the Church's bank accounts. Only Samuels and Parks had that authority, and in fact, Samuels and Parks signed those checks. Respondent might have asked them to write the checks, but he did not write or sign them. The individuals with authority over the account were the ones who gave Respondent the checks. Accordingly, Respondent did not convert the funds. Again, his actions constituted other misconduct, but not conversion.

Third, the Administrator failed to prove that the money Respondent used for personal expenses, consisting of $26,282.79 from church bank accounts and $14,185.16 in credit card charges were converted by Respondent. Our finding regarding the $26,282.79 in checks, is based on the same reason we applied to the $60,000. Namely, the checks were written and signed by Samuels and Parks, the two individual who were authorized to write the checks, and they gave him the money. Respondent wrongfully used the Church's money, which amounted to dishonesty and fraud, but not conversion. Regarding the credit card charges, the Administrator presented evidence, through Williams's testimony, that it was customary for the credit cars to be used for church expenses, and there was no delineation in the evidence of the expenses that were legitimately charged to the Church and those that might not have been. With only equivocal

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evidence regarding the use of these funds and credit cards, the Administrator failed to meet his burden to prove conversion.

RECOMMENDATION

Having found that Respondent engaged in misconduct, we must determine the appropriate discipline. In determining the proper sanction, we consider the purposes of the disciplinary process. The goal of these proceedings is not to punish but rather 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, 623 N.E.2d 300 (1993). Another factor for consideration is the deterrent value of attorney discipline and the need to impress upon others the repercussions of errors such as those committed by Respondent in the present case. In re Discipio, 163 Ill.2d 515, 645 N.E.2d 906 (1994).

We also take into account those circumstances which may mitigate and/or aggravate the misconduct. In re Witt, 145 Ill.2d 380, 583 N.E.2d 526, 535 (1991). Respondent did not appear at the hearing and did not present any evidence of mitigating circumstances. Nevertheless, the Administrator informed the Panel that Respondent has not received a prior discipline. Generally, the lack of a prior discipline is a significant mitigating factor, however, based on the egregious facts of this case, we give this fact little weight. See In re Demuth, 126 Ill. 2d 1, 14, 533 N.E.2d 867 (1988).

Respondent's misconduct is aggravated by the fact that he caused harm to the Church. As a result of Respondent's misconduct, the Church was placed in a difficult financial situation. Not only did Respondent fail to repay a $25,000 loan from the Church, but during his tenure, the Church's financial situation deteriorated. He convinced the Church to take out a loan to pave a parking lot. However, the parking lot was never paid, the loan was in default, and the proceeds were spent on other things. When Respondent became pastor, the Church had a significant

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amount of money in the bank. When he left, the Church had a substantial amount of debt and almost no assets. Additionally, Respondent refused to leave the Church after he was terminated as pastor and refused to repay what he owed the Church. The members were forced to hire an attorney and paid between $80,000 and $95,000 in attorney's fees. We consider these facts in aggravation. See In re Lewis, 118 Ill. 2d 357, 364, 515 N.E.2d 96 (1987) (harm caused by an attorney's misconduct is an aggravating factor). See In re Uhler II, 126 Ill.2d 532, 535 N.E.2d 825 (1989) (failure to make prompt restitution is a factor for consideration in the determination of discipline.)

We also note, however, that the Church failed to utilize the mechanisms in its constitution to oversee Respondent's actions. We mention this not to lessen the severity of Respondent's misconduct, but to express our view that the Church could have done more to protect its interests and avoid some of the consequences of Respondent's misconduct.

Respondent's misconduct is also aggravated by the fact that he failed to participate in these disciplinary proceedings. Respondent was personally served with a copy of the complaint and was aware of these proceedings. Yet he failed to participate in the hearing. An attorney's lack of cooperation in his own disciplinary proceedings demonstrates a "complete want of professional responsibility," and "indifference toward or even contempt for disciplinary procedures," and a "disregard for the authority and process of the Attorney Registration and Disciplinary Commission." In re Brody, 65 Ill. 2d 152, 156, 357 N.E.2d 498 (1976); In re Pass, 105 Ill. 2d 366, 371, 475 N.E.2d 525 (1985).

Having considered the aggravating facts and lack of mitigating facts, we must now recommend the appropriate sanction. The Administrator recommends Respondent be disbarred, and cites numerous cases supporting this recommendation. See In re Rotman, 136 Ill. 2d 401, 556 N.E.2d 243 (1990) (disbarment); In re Woldman, 98 Ill. 2d 248, 456 N.E.2d 35 (1983)

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(disbarment); In re Feldman, 89 Ill. 2d 7, 431 N.E.2d 388 (1982) (disbarment); In re Arnold, 02 CH 118, M.R. 19149 (March 12, 2004) (disbarment); In re Sather, 03 CH 72, M.R. 19145 (January 20, 2004) (voluntary name strike); In re Gwiazdzinski, 95 CH 726, M.R. 12828 (September 24, 1996) (disbarment).

After reviewing the cases cited by the Administrator, and other cases, and considering all of the evidence, we believe that a one year suspension and until further order of the Court is the appropriate sanction. The Administrator's suggested sanction is substantially based on the assumption that Respondent converted church funds. As discussed above, we have found that the Administrator failed to prove any of the alleged conversion. Accordingly, the appropriate sanction should be less severe than disbarment. A suspension for one year is adequate to accomplish the goals of the disciplinary process and to deter others from engaging in similar misconduct, and is consistent with other cases. See In re Hagerty, 06 CH 95, M.R. 21871 (November 20, 2007); In re Arrigo, 06 CH 45, M.R. 21373 (March 19, 2007); In re Daugherty, 05 CH 51, M.R. 21369 (March 19, 2007); In re Gausselin, 04 CH 123, M.R. 20064 (May 19, 2005).

Although there are no other cases involving similar misconduct, after reviewing analogous cases, we believe our recommended sanction is appropriate. In Daugherty, the attorney engaged in fraudulent conduct in obtaining a bank loan and made false statements in bankruptcy proceedings. All of Daugherty's misconduct was related to his personal financial matters. He was suspended for one year and until further order of the court. In Arrigo, the attorney, while a colonel in the United States military, fabricated his performance evaluation and forged his supervisor's signature on it. He was suspended for one year and until further order of the court.

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In Hagerty, the attorney was acting as an intermediary in a property exchange and had a fiduciary duty to safeguard the taxpayers's funds which were placed in several bank accounts. He breached that duty when someone else made unauthorized withdrawals of those funds after Hagerty failed to exercise the requisite care necessary to safeguard those funds. He was suspended for 90 days.

In Gausselin, the attorney participated in a scheme to defraud third party mortgage holders of property and money. He made false statements on mortgage documents, signed a false verification of employment form for someone else, and assisted another in fraudulently obtaining a mortgage. None of these activities involved the practice of law. Gausselin was suspended for 90 days.

Like these cases, Respondent's misconduct is not related to the practice of law, and involved dishonesty. Respondent's misconduct is also similar to the misconduct in Daugherty, Arrigo and Gausslin because it was done, in part, for his personal gain. However, Respondent's misconduct is more egregious than the misconduct in Hagerty and Gausselin and requires the imposition of a longer suspension, like the one year imposed in Daugherty and Arrigo.

We also believe that because Respondent failed to participate in these proceedings, the suspension should remain in effect until further order of the court. A suspension until further order of the court is appropriate where, as here, the attorney has demonstrated that he is either unable or unwilling to conform to professional standards. See In re Houdek, 113 Ill. 2d 323, 497 N.E.2d 1169 (1986).

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Therefore, in light of Respondent's misconduct, and considering the aggravating factors and relevant case law, we recommend that Respondent be suspended for one year and until further order of the court, and the payment of restitution.

Date Entered: July 25, 2008

James B. Pritikin, Chair, Geraldine C. Simmons, and Donald A. Pettis, Sr., concurring.