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

In the Matter of:

DONALD JOHN POCHOPIEN ,

Attorney-Respondent, 

No. 6197470.

 

Commission No.  08 CH 75

FILED -  August 14, 2008

COMPLAINT

Jerome Larkin, Administrator of the Attorney Registration and Disciplinary Commission, by his attorney, James A. Doppke, Jr. pursuant to Supreme Court Rule 753(b), complains of Respondent Donald John Pochopien, who was licensed to practice law in Illinois on May 13, 1988, and alleges that Respondent has engaged in the following conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute:

COUNT I
(Breach of fiduciary duty and use of client confidence)

1. Between December 1988 and August 1993, Respondent worked at the Chicago law firm of McAndrews, Held & Malloy ("the McAndrews firm"). Respondent rejoined the McAndrews firm as a partner in August 1997, and remained there until he resigned on December 28, 2006.

2. As a partner in the McAndrews firm, Respondent owed a fiduciary duty to the firm and to the other partners in the firm to exercise the highest degree of honesty and good faith in his dealings with the firm and in his handling of information relating to the firm's clients.

3. At all relevant times, the United States Code, 15 U.S.C. 78j, was in effect. 15 U.S.C. 78j provides, in relevant part:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange-

[]

(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act), any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

4. At all relevant times, SEC Rule 10b-5, 17 C.F.R. 240.10b-5, was in effect. 17 CFR 240.10b-5 provides, in relevant part:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

5. At all relevant times, SEC Rule 10b5-1, 17 C.F.R. 240.10b5-1, was in effect. 17 CFR 240.10b5-1 provides, in relevant part:

(a) General. The "manipulative and deceptive devices" prohibited by Section 10(b) of the Act (15 U.S.C. 78j) and 240.10b-5 thereunder include, among other things, the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information.

(b) Definition of "on the basis of." Subject to the affirmative defenses in paragraph (c) of this section, a purchase or sale of a security of an issuer is "on the basis of" material nonpublic information about that security or issuer if the person making the purchase or sale was aware of the material nonpublic information when the person made the purchase or sale.

6. In April 2006, American Medical Systems Holding, Inc. ("AMS") retained the McAndrews firm to provide advice in connection with AMS's proposed acquisition of Laserscope, Inc. Both AMS and Laserscope were publicly traded on NASDAQ.

7. On May 1, 2006, Leland G. Hansen, another partner in the McAndrews firm, sent an e-mail message to all of the firm's attorneys entitled "Confidential Conflict Check." In the e-mail message, Hansen requested that the firm's attorneys provide him any information that might suggest that a conflict would arise if the firm were to represent AMS in connection with its potential acquisition of Laserscope. Respondent received that e-mail message shortly after it was sent.

8. Also on May 1, 2006, Hansen sent a separate e-mail message to all of the firm's attorneys inquiring as to whether they could identify other matters in which the firm conducted due diligence for a client during an acquisition, including in matters relating to medical device companies. Respondent received to that e-mail message shortly thereafter, and he responded by indicating that he had previously worked on similar matters.

9. The information contained in the e-mail messages described in paragraphs seven and eight, above, was material, nonpublic information pertaining to AMS and Laserscope.

10. Between May 1, 2006 and May 15, 2006, Respondent bought 14,000 shares of Laserscope at approximately $20 per share. He held 13,000 of the shares in a personal brokerage account, and 1,000 of the shares in a brokerage account titled in the names of his parents, both of whom were deceased as of May 2006.

11. Respondent determined to purchase the Laserscope shares referred to in paragraph 10, above, based on the material, nonpublic information contained in the e-mail messages referred to in paragraphs seven and eight, above.

12. Prior to June 5, 2006, neither AMS nor Laserscope made any information concerning AMS' potential acquisition of Laserscope public.

13. On June 5, 2006, AMS publicly announced that it had reached an agreement with Laserscope by which AMS would acquire Laserscope at a price of $31.00 per share of common stock. On that day, Laserscope's common stock price closed at $30.65, a 43% increase from its price of $21.41 on June 4, 2006.

14. On June 8, 2006, Respondent sold all of the shares of Laserscope he had acquired between May 1, 2006 and May 15, 2006. As a result, on the basis of the material, nonpublic information referred to in paragraphs seven and eight, above, Respondent realized a profit from the sale of the shares in the amount of $134,970.

15. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. breach of fiduciary duty;

  2. using or revealing a confidence or secret of a client known to the lawyer without the consent of the client, in violation of Rule 1.6(a) of the Rules of Professional Conduct;

  3. committing a criminal act that reflects adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer in other respects by engaging in insider trading in violation of the United States Code, 15 U.S.C. 78j, and SEC Rules 10b-5 and 10b5-1, 17 C.F.R. 240.10b-5 and 10b5-1, in violation of Rule 8.4(a)(3) of the Illinois Rules of Professional Conduct;

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

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

COUNT II
(Making a false statement of material fact)

16. In October 2006, outside counsel for AMS communicated with the McAndrews firm concerning an inquiry by the National Association of Securities Dealers ("NASD") in connection with the June 5, 2006 announcement of AMS' acquisition of Laserscope. The NASD had identified various people who had engaged in stock transactions at or about the time of the June 5, 2006 announcement of AMS's acquisition of Laserscope. AMS's counsel provided the McAndrews firm with a list containing the names of individuals about whom the NASD had inquired, including Respondent.

17. Thereafter, the McAndrews firm retained the law firm of Arnstein & Lehr to assist it in investigating the matters referred to in Count I, above.

18. In October 2006, in a meeting with Arnstein & Lehr attorneys concerning the matters referred to in Count I, above, Respondent denied that he premised his purchase of Laserscope shares on any confidential information he gained as a result of his employment at the McAndrews firm.

19. As Respondent knew, the statement referred to in paragraph 18, above, was false. Respondent's purchase of the Laserscope shares was based, at least in part, on information he received as a result of his employment at the McAndrews firm.

20. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. making a statement of material fact to a third person which statement the lawyer knows or reasonably should know is false, in violation of Rule 4.1(a) of the Rules of Professional Conduct;

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

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

WHEREFORE, the Administrator respectfully requests that this matter be assigned to a panel of the Hearing Board, that a hearing be held pursuant to Supreme Court Rule 753, and that the panel make findings of fact, conclusions of fact and law, and a recommendation for such discipline as is warranted.

James A. Doppke, Jr.
Counsel for Administrator
One Prudential Plaza
130 East Randolph Drive, #1500
Chicago, Illinois 60601
Tel: (312) 565-2600 
Respectfully submitted,

Jerome Larkin, Administrator
Attorney Registration and
Disciplinary Commission

By:   James A. Doppke, Jr.