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

In the Matter of:

ROBERT ALLAN HOLSTEIN,

Attorney-Respondent, 

No. 1251600.

 

Commission No. 08 CH 81

FILED -  August 27, 2008

COMPLAINT

Jerome Larkin, Administrator of the Attorney Registration and Disciplinary Commission, by his attorney, Dorothy B. Zimbrakos, pursuant to Supreme Court Rule 753(b), complains of Respondent, Robert Allan Holstein, who was licensed to practice law in Illinois on June 4, 1962, 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:

(Bankruptcy Fraud)

1. From about 1981 to 1996, Respondent was an equity partner in a law firm that became known as Holstein, Mack and Klein ("HMK"). In August 1995, attorney Jeffrey M. Goldberg and his law firm, Jeffrey M. Goldberg & Associates, Ltd. ("Goldberg"), entered into an agreement with HMK to serve as co-counsel in product liability litigation concerning the "Norplant" contraceptive device, involving approximately 2,500 plaintiffs, that was pending in both federal and state courts. Pursuant to that agreement, Goldberg paid HMK at least one million dollars and agreed to pay a capped percentage of litigation costs subsequently incurred, and Goldberg was to receive 30 % of all fees and costs HMK recovered.

2. In 1996, American National Bank & Trust Co. of Chicago ("ANB") filed two complaints in the Circuit Court of Cook County, which were later consolidated, and that were entitled American National Bank & Trust Co. of Chicago v. Robert A. Holstein, et al., Case No. 96 L 4043, and American National Bank & Trust Co. of Chicago v. Robert A. Holstein, Robert A. Holstein & Associates, P.C., Barbara Stackler, d/b/a "Stackler & Holstein," and Michael L. Sklar, Case No. 96 L 4927 ("the ANB litigation"). The purpose of the ANB litigation was to recover on loans totaling $1,700,000 made by ANB to HMK, which Respondent personally guaranteed.

3. By September 1996, the Circuit Court of Cook County decertified the Norplant class action. The federal courts also had made adverse rulings that prevented recovery in the Norplant cases.

4. In November 1996, HMK ceased operating, and some of HMK's cases were transferred to a new law firm named Robert A. Holstein & Associates, P.C. ("RAHA"), and Goldberg and Respondent continued to work on the Norplant cases. During the same period, Respondent and attorney Barbara Stackler ("Stackler") lived together and had a personal relationship.

5. Beginning in 1997 until October 2000, Respondent transferred the following stocks and assets of HMK and RAHA to Stackler:

  1. In September 1997, Respondent transferred to Stackler $65,543.31 in cash he received at the closing of a transaction evidenced by an agreement between Respondent and Carriage Services, Inc. ("CSV"), among others.

  2. In September 1997, Respondent transferred 13,993 shares of CSV stock to Stackler, which she surrendered on July 2, 1998 for $354,197.81.

  3. In January 1998, Respondent transferred 973 shares of CSV stock to Stackler, which she surrendered on July 6, 1999 for $18,061.31.

  4. Beginning in 1997 until October 2000, Respondent transferred $32,598.90 in income he received from his interest in the Bloomfield Hills Partnership to Stackler.

  5. Beginning in 1997 until October 2000, Respondent transferred $14,700.00 in income he received from his interest in the Wilmette Office Court Partnership to Stackler.

  6. On December 15, 1997, Respondent transferred most of RAHA's assets to Stackler.

6. On October 1, 1998, ANB won a judgment in the ANB litigation against Respondent in the amount of $748,006.39, plus attorney's fees and costs.

7. On December 21, 1998, ANB served Respondent with a citation to discover assets pursuant to Illinois Supreme Court Rule 277 and Illinois Code of Civil Procedure 2-1402.

8. On July 22, 1999, ANB filed a motion in the ANB litigation for turnover, or, in the alternative, to avoid fraudulent transfers. ANB alleged, inter alia, that Respondent still owned the partnership interests in the Bloomfield Hills Partnership and the Wilmette Office Court Partnership, sought the turnover of those interests, and also sought to avoid Respondent's earlier transfers of partnership income and the proceeds of the CSV stock to Stackler.

9. On September 13, 1999, ANB filed a formal complaint in the ANB litigation incorporating the allegations of its motion for turnover described in Paragraph 5 above. The court in the ANB litigation set the matter for trial on the alleged fraudulent conveyances on June 21, 2000.

10. On June 19, 2000, two days before the scheduled trial on the alleged fraudulent conveyances in the ANB litigation, Holstein filed a petition for relief under Chapter 7 of the Bankruptcy Code, which the clerk of the court docketed as In re Robert A. Holstein, Case No. 00 B 18138 (U.S. Bankruptcy Ct. N.D. Ill.). The filing of Case No. 00 B 18138 resulted in an automatic stay, inter alia, of all litigation pending against Respondent pursuant to the United States Bankruptcy Code, 11 U.S.C. Section 362.

11. At all times alleged in this complaint, the United States Bankruptcy Code, 11 U.S.C. Section 521, provided that a bankruptcy debtor was obligated to file a list of creditors, and, unless otherwise ordered by the Court, a schedule of assets and liabilities, a schedule of current income and expenditures, and a statement of the debtor's financial affairs. The statement of the debtor's financial affairs is a summary which includes, inter alia, all property transfers other than property transferred in the ordinary course of the business or financial affairs of the debtor.

12. On July 18, 2000, Respondent filed his Statement of Financial Affairs in Case No. 00 B 18138, which he signed under penalty of perjury. Respondent did not include his interests in the Bloomfield Hills Partnership and the Wilmette Office Court Partnership in his schedule of personal property, Schedule B. Nor did Respondent disclose any of the property that he had transferred to Stackler as set forth in Paragraph 5 above.

13. Respondent's schedule of personal property, Schedule B, as described in Paragraph 11 above, was false, and Respondent knew or should have known it was false, because he did not disclose his interests in the Bloomfield Hills Partnership and the Wilmette Office Court Partnership and the property he had transferred to Stackler as set forth in Paragraph 5 above in his bankruptcy petition schedules.

14. On June 21, 2000, neither Respondent nor his attorney appeared in the ANB litigation for the scheduled trial on the allegations of fraudulent conveyances. On that day, the court in the ANB litigation entered an order resetting the date for the trial on the alleged fraudulent conveyances to August 20, 2000.

15. On June 23, 2000, to pursue its trial on the alleged fraudulent conveyances in the ANB litigation, ANB filed a motion in Respondent's bankruptcy matter, Case No. 00 B 18138, seeking retroactive relief from the automatic stay. ANB's motion was granted on July 17, 2000.

16. On July 25, 2000, a meeting of creditors was held in Case No. 00 B 18138. Respondent testified under oath that he had included all his assets and liabilities in his bankruptcy schedules.

17. Respondent's testimony under oath that he had included all his assets and liabilities in his bankruptcy schedules as described in Paragraph 16 above was false because he had transferred the assets described in Paragraph 5 above to Stackler, and Respondent knew or should have known that his testimony was false, because he had not included all of his assets and liabilities in his bankruptcy schedules.

18. On August 2, 2000, because it appeared from Respondent's schedules that Respondent's debts exceeded his assets, the bankruptcy trustee in Case No. 00 B 18138 filed a no-asset report.

19. The trial on ANB's allegations of fraudulent conveyances was heard in the Circuit Court of Cook County in August and September 2000. Respondent appeared and testified under oath on three separate days.

20. On October 19, 2000, the court in the ANB litigation entered an order after the trial on the allegations of fraudulent conveyances making findings and entering judgment in favor of ANB and against Respondent. The court found that Respondent had transferred or purported to transfer almost all of his personal assets to Stackler on July 15, 1997, and that he had transferred all of the business assets of his law firm to Stackler on December 15, 1997. The court also found that Holstein in fact continued to control the assets and that he was thus "currently" the owner of the interests in the Bloomfield Hills Partnership, in the Wilmette Office Court Partnership, and 973 shares of CSV stock. The court deemed Respondent's and Stackler's explanation for the transfers, i.e., that the transfers were in consideration for loans Stackler had purportedly made to Respondent and his law firm, "inherently unbelievable." The court ruled that the transfers were fraudulent and made with the "actual intention of hindering, delaying or defrauding [Respondent's] creditors," and that the various agreements executed in connection with the alleged assignment and transfer of Respondent's assets to Stackler "were all executed between [Respondent] and Stackler as an elaborate hoax to put his assets into her hands and shield them from his creditors." The court entered a "charging order" against Respondent's interests in the Bloomfield Hills Partnership and Wilmette Office Court Partnership; the court ordered 973 shares of Respondent's CSV stock to be transferred to ANB; and the court entered judgment against Stackler for the $485,101.33 that the court found she had improperly received from Respondent. The court also declared its order appealable under Supreme Court Rule 304(b)(b).

21. Respondent did not appeal the court's October 19, 2000 order in the fraudulent conveyance trial.

22. On September 22, 2000, Goldberg filed an adversary action against Respondent and HMK which the clerk of the bankruptcy court docketed as Jeffrey M. Goldberg & Associates, Ltd. v. Robert A. Holstein, Adversary No. 00 A 00876 (U.S. Bankruptcy Ct. N.D. Ill.) Goldberg claimed that he lost more than one million dollars because of Respondents alleged fraud and breach of the agreement Goldberg had entered into with Respondent to act as co-counsel in the Norplant product liability litigation. In the adversary action, Goldberg sought an order either denying Respondent a discharge in bankruptcy pursuant to 11 U.S.C. Section 717(a) or, alternatively, holding the debt to Goldberg nondischargeable under various subsections of 11 U.S.C. Section 523(a).

23. In January 2001, the bankruptcy trustee in Case No. 00 B 18138 filed a motion to vacate the no-asset report described in Paragraph 18 above.

24. On July 8, 2002, Goldberg filed a motion for summary judgment in Adversary No. 00 A 00876 claiming, inter alia, that Respondent should be denied a discharge in bankruptcy because he concealed his interests in certain assets, including his interests in the Bloomfield Hills Partnership and the Wilmette Office Court Partnerships, when he purported to transfer those assets to Stackler.

25. On February 20, 2003, Respondent filed a response to Goldberg's motion for summary judgment in Adversary No. 00 A 00876 in which he claimed that he "actually thought that he no longer owned those assets" that the court in the ANB litigation had held he fraudulently conveyed to Stackler, and that it was not until the court entered its October 19, 2000 order that he learned differently.

26. On September 24, 2003, the bankruptcy court in Case No. 00 B 18138 and Adversary No. 00 A 00876 granted Goldberg's motion for summary judgment and denied Respondent a discharge in bankruptcy. In so doing, the bankruptcy court rejected Respondent's argument that he did not realize that he no longer owned the assets he had purportedly transferred to Stackler until the circuit court entered its order on October 19, 2000. The court stated as follows:

The record on summary judgment rapidly dispels any such notion. The Circuit Court's Order establishes conclusively [citation omitted] that [Respondent] owned the partnership interests in 1997, continued to own and exercise control over them after pretending to transfer them to Stackler, still owned them as of October 2000, and between 1999 and 2000 received thousands of dollars in partnership income that he paid Stackler. [Citation omitted.] And as if the findings in the Order were not enough, Goldberg has supplied copies of actual post-1997 checks to [Respondent] from the Bloomfield Hills partnership checks [Respondent] endorsed to Stackler.

No trial is necessary to reject the suggestion that all the while he was receiving partnership checks and endorsing them to his love, [Respondent] - a licensed attorney for nearly 40 years [footnote omitted] - "actually thought" he owned no interest in the partnerships, only achieving enlightenment on the subject three years later at the hands of the Circuit Court. If [Respondent] still controlled the partnership interests after 1997 and from 1997 to 2000 paid the income from them to Stackler, [Respondent] plainly knew he owned the interests. His contrary assertion, frankly, is preposterous. Preposterous factual assertions will not prevent summary judgment. [Citations omitted.]

299 B.R. at 233.

27. On August 31, 2004, the Honorable Charles R. Norgle affirmed the judgment of the bankruptcy court in the matter entitled Jeffrey M. Goldberg & Associates, Ltd. v. Robert A. Holstein, Case No. 03 C 8023. On September 24, 2004, Respondent filed a notice of appeal of Judge Norgle's judgment. On January 27, 2005, Respondent filed a motion to voluntarily dismiss the appeal, and, on January 28, 2005, the Seventh Circuit entered an order dismissing the appeal.

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

  1. made a statement of material fact or law to the tribunal which the lawyer knows or reasonably should know is false in violation of Rule 3.3(a)(1) of the Illinois Rules of Professional Conduct;

  2. failed to disclose a material fact known to the lawyer when disclosure is necessary to avoid engaging in a fraudulent act in violation of 3.3(a)(2) of the Illinois Rules of Professional Conduct;

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

  4. conduct which is prejudicial to the administration of justice or which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute in violation of Rule 8.4(a)(5) of the Illinois Rules of Professional Conduct and 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, and that the panel make findings of fact, conclusions of fact and law, and a recommendation for such discipline as is warranted.

Dorothy B. Zimbrakos
Counsel for Administrator
One Prudential Plaza
130 East Randolph Drive, Suite 1500
Chicago, Illinois 60601
Telephone: (312) 565-2600
Facsimile: (312) 565-2320
Respectfully submitted,

Jerome Larkin, Administrator
Attorney Registration and
Disciplinary Commission

By:   Dorothy B. Zimbrakos