Filed September 21, 2010
In re Donald John Pochopien
Commission No. 08 CH 75
Synopsis of Review Board Report and Recommendation
Pochopien was charged with misconduct arising out of his use of confidential client information as the basis for a decision to purchase stock and his misrepresentations concerning his conduct. The Hearing Board found that Pochopien breached a fiduciary duty, used or revealed a client confidence or secret known to him without the client's consent, committed a criminal act that reflects adversely on his honesty, trustworthiness, or fitness as a lawyer by engaging in insider trading, made a statement of material fact to a third person that he knew or reasonably should have known was false, and engaged in conduct involving dishonesty, fraud, deceit or misrepresentation and conduct that tends to defeat the administration of justice or bring the courts or legal profession into disrepute. The Hearing Board recommended that Pochopien be suspended for two years.
The case was before the Review Board on Pochopien's exceptions. Pochopien's primary challenges involved the Hearing Board's sanction recommendation and the factors it did, and did not, consider in reaching that recommendation. The Administrator sought to have the Review Board uphold the Hearing Board's findings of misconduct and its sanction recommendation.
The Review Board majority affirmed the Hearing Board's findings of misconduct. The dissenting member of the Review Board would have reversed the Hearing Board's findings that the Administrator proved that Pochopien committed a criminal act that reflected adversely on his honesty, trustworthiness, or fitness as a lawyer. The dissent would have affirmed the Hearing Board's other findings of misconduct. The Review Board concluded that the Hearing Board's recommendation of a two-year suspension was excessive and that the Hearing Board erred by declining to consider certain evidence in mitigation. The Review Board instead recommended a suspension for one year.
BEFORE THE REVIEW BOARD
ILLINOIS ATTORNEY REGISTRATION
|In the Matter of:
DONALD JOHN POCHOPIEN,
Commission No. 08 CH 75
REPORT AND RECOMMENDATION OF THE REVIEW BOARD
The Administrator-Appellee charged Respondent-Appellant, Donald John Pochopien, with misconduct arising out of his use of confidential client information as a basis for purchasing stock and his misrepresentations about his conduct. The Hearing Board found that Pochopien breached a fiduciary duty, used or revealed a client confidence or secret known to him without the client's consent in violation of Rule 1.6(a) of the Illinois Rules of Professional Conduct (155 Ill. 2d R. 1.6(a)), committed a criminal act that reflects adversely on his honesty, trustworthiness, or fitness as a lawyer by engaging in insider trading contrary to federal law in violation of Rule 8.4(a)(3) (210 Ill. 2d R. 8.4(a)(3)), made a statement of material fact to a third person that he knew or reasonably should have known was false in violation of Rule 4.1(a) (134 Ill. 2d R. 4.1(a)), and engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation in violation of Rule 8.4(a)(4) (210 Ill. 2d R. 8.4(a)(4)) and conduct that tends to defeat the administration of justice or bring the courts or legal profession into disrepute in violation of Supreme Court Rule 770 (210 Ill. 2d R. 770)). The Hearing Board recommended that Pochopien be suspended from the practice of law for two years.
The case is before the Review Board on Pochopien's exceptions. Pochopien primarily challenges the Hearing Board's sanction recommendation and the factors it did, and did not, consider in arriving at that recommendation. Pochopien also challenges the Hearing Board's characterization of his conduct as serious criminal activity, where he was not charged with or convicted of any crime. The Administrator seeks to have the Review Board affirm the Hearing Board's findings of misconduct and its sanction recommendation.
Pochopien was 62 years old at the time of the hearing. He was licensed to practice law in Illinois in 1988 and thereafter worked as a patent attorney. At the time of his misconduct, Pochopien was a partner in the law firm of McAndrews, Held & Malloy. Pochopien resigned from the firm in December 2006, as a result of the incidents at issue here.
In April 2006, American Medical Systems Holding, Inc. (AMS) retained McAndrews to advise AMS as to its proposed acquisition of Laserscope, Inc. Both AMS and Laserscope are publicly traded on the NASDAQ.
Another McAndrews partner was primarily responsible for the AMS account. On May 1, 2006, he circulated e-mails to all of the firm's attorneys which, inter alia, disclosed the proposed acquisition.
After receiving these e-mails, Pochopien looked up information about Laserscope. Based on that information, he expected that the price of Laserscope shares would rise after the acquisition.
On May 1, 2006, Pochopien began purchasing shares of Laserscope. He made seven purchases, for a total of 14,000 shares of Laserscope, between May 1, 2006 and May 15, 2006. Pochopien purchased the Laserscope shares at prices ranging from a low of $20.00 to a high of $22.33.
AMS did not consent to Pochopien's use of information concerning its proposed acquisition of Laserscope. Pochopien testified that, when he bought the Laserscope shares, he knew that he should not have been doing what he did and that he was using a confidence that he should not have been using.
On June 5, 2006, AMS publicly announced its agreement to purchase Laserscope for $31.00 per share. That information had not previously been made public. Laserscope shares had closed at a price of $21.41 on the business day before the announcement. On the day of the announcement, Laserscope shares closed at $30.65.
On June 8, 2006, Pochopien sold all of the Laserscope shares that he had purchased. Pochopien sold most of the shares for $30.65 per share and the remaining shares for $30.69 per share. Pochopien realized a profit on the sale totaling $134,970.
The National Association of Securities Dealers (NASD) subsequently inquired into Pochopien's transactions in Laserscope. The McAndrews firm retained counsel to assist the firm in investigating Pochopien's conduct. When questioned by the firm's counsel, Pochopien denied that he based his purchase of Laserscope shares on the confidential information he had obtained. In a joint stipulation filed prior to the hearing, Pochopien admitted that this statement was false and that he purchased the Laserscope shares based, at least in part, on information he received as a result of his employment at the McAndrews firm.
On April 28, 2008, the Securities and Exchange Commission (SEC) filed a complaint against Pochopien seeking civil penalties as a result of Pochopien's insider trading. No criminal charges were brought against Pochopien.
On May 6, 2008, an agreed final judgment was entered in the SEC case, which stated that Pochopien consented to judgment without admitting or denying the allegations of the SEC complaint (except as to jurisdiction). In addition to permanently enjoining Pochopien from
engaging in acts in violation of the securities laws, the judgment provided that Pochopien would pay $287,854.81, representing disgorgement of his profits plus an equal amount as a civil penalty. Pochopien had paid this amount in full by the time of the disciplinary hearing.
Pochopien does not challenge the Hearing Board's findings of misconduct, although he does object to the Hearing Board's characterization of his conduct as "serious criminal activity." We affirm the Hearing Board's findings of misconduct.
The dissent would reverse the Hearing Board's finding that Pochopien violated Rule 8.4(a)(3). However, by our review, Pochopien's arguments, particularly those in his opening brief, do not clearly challenge the Hearing Board's finding that Pochopien violated Rule 8.4(a)(3). Instead, Pochopien's arguments are directed to the manner in which the Hearing Board considered his conduct in determining the sanction to recommend. Points not argued in an appellant's opening brief are waived. ARDC Rule 302(f)(5) (Dis. Com. R. 302(f)(5)).
Even if there were no waiver, the standard by which we review the Hearing Board's factual findings is deferential. In re Winthrop, 219 Ill. 2d 526, 542, 848 N.E.2d 961, 302 Ill. Dec. 397 (2006). This does not shift the burden of proof away from the Administrator, as Pochopien suggests. At hearing, the Administrator has the burden of proving the misconduct charged and of doing so by clear and convincing evidence. In re Ingersoll, 186 Ill. 2d 163, 168, 710 N.E.2d 390, 237 Ill. Dec. 760 (1999). On review, however, the appellant has a heavy burden of persuasion in challenging the sufficiency of the evidence. See Winthrop, 219 Ill. 2d at 542, 848 N.E.2d 961, 302 Ill. Dec. 397. The Hearing Board's factual findings are not reversed unless they are against the manifest weight of the evidence, and a factual finding is against the manifest weight of the evidence only if the opposite conclusion is clearly evident. Winthrop, 219 Ill. 2d at 542-43, 848 N.E.2d 961, 302 Ill. Dec. 397.
Under this standard of review, there was sufficient evidence to support the Hearing Board's finding that Pochopien engaged in criminal activity that reflected adversely on his honesty, trustworthiness, or fitness as a lawyer, in violation of Rule 8.4(a)(3). The evidence as a whole, including facts to which Pochopien stipulated before the Hearing Board, showed that, in his capacity as an attorney at the firm which was representing AMS in the Laserscope acquisition, Pochopien received confidential information as to AMS's intent to acquire Laserscope. Based on that information, and without the knowledge or consent of AMS, Pochopien purchased a large quantity of Laserscope stock, which he later sold at a significant profit. Such conduct can support a criminal conviction for securities fraud. United States v. O'Hagan, 521 U.S. 642, 652-53, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997).
Given the waiver and the applicable standard of review, we affirm the Hearing Board's finding that Pochopien violated Rule 8.4(a)(3).
However, we share the concerns expressed in the dissent with charging and finding a violation of Rule 8.4(a)(3) in cases, such as this one, where the respondent has never been charged with a criminal offense. We recognize that it is the conduct for which the respondent is disciplined, not the fact of having committed a crime, and that, consequently, discipline can be imposed for the conduct even if the respondent has not been convicted of, or even prosecuted for, a crime. In re Rolley, 121 Ill. 2d 222, 520 N.E.2d 302, 117 Ill. Dec. 141 (1988), citing People ex rel. Chicago Bar Association v. Meyerovitz, 278 Ill. 356, 365, 116 N.E. 189 (1917); see In re Ettinger, 128 Ill. 2d 351, 538 N.E.2d 1152, 131 Ill. Dec. 596 (1989). Even so, the circumstances of each case, including the status of any criminal proceedings that may, or may not, have been brought as a result of the same conduct, should be carefully evaluated before specific disciplinary charges are brought. See generally In re Browning, 23 Ill. 2d 283, 491-92, 179 N.E.2d 14 (1961).
An allegation that a respondent has engaged in criminal activity carries a significant additional stigma. Consequently, charges that conduct also violated Rule 8.4(a)(3) (now 8.4(b)), in addition to any other Rule violations charged, should be brought with care. We question the propriety of including charges under this Rule where, as here, the government officials responsible for prosecuting a particular crime have considered the respondent's activity and opted not to file criminal charges. This is especially true in a case such as this one where the "crime" is not a strict liability offense, but one in which there might be circumstances that indicate a lack of criminal intent or give law enforcement officials other reasons not to seek criminal, as opposed to strictly civil, penalties.
The remaining issues concern the sanction.
The Hearing Board's recommendation as to discipline is advisory. In re Ingersoll, 186 Ill. 2d 163, 178, 710 N.E.2d 390, 237 Ill. Dec. 760 (1999). In fashioning the proper sanction in any given case, the Review Board must consider each case, based on its own particular facts and circumstances, while remaining aware that the system seeks to impose sanctions consistent with those imposed in other similar cases. Ingersoll, 186 Ill. 2d at 177-78, 710 N.E.2d 390, 237 Ill. Dec. 760; In re Timpone, 157 Ill. 2d 178, 197, 623 N.E.2d 300, 191 Ill. Dec. 55 (1993). In imposing discipline, the purpose is not to punish the individual respondent, but to protect the public, maintain the integrity of the profession, and protect the administration of justice from reproach. In re Spak, 188 Ill. 2d 53, 719 N.E.2d 747, 241 Ill. Dec. 618 (1999); Timpone, 157 Ill. 2d at 197, 623 N.E.2d 300, 191 Ill. Dec. 55.
There do not appear to be any Illinois cases that are directly on point in terms of the sanction. The parties and the Hearing Board relied on three cases from other jurisdictions concerning attorneys involved in insider trading.
In two of those cases, the attorneys were suspended for three years. Matter of Greenwald, 239 A.D. 2d 1, 669 N.Y.S.2d 17 (1998); Matter of Woodward, 232 A.D. 2d 22, 661 N.Y.S.2d 614 (1997). Each of those cases involved significantly more serious misconduct than that presented here.
Greenwald was charged with, and pled guilty to, the crime of conspiracy. Greenwald not only received and acted upon confidential information himself, he also provided that information to other persons. Greenwald used confidential information concerning two transactions as the basis for trades. Greenwald realized a very substantial profit on the trades, of $750,000. Greenwald offered no mitigating explanation for his conduct. However, Greenwald cooperated with the government investigation into his activities, expressed remorse, and accepted responsibility for his conduct. The length of Greenwald's suspension was tied into the period of his probation in his criminal case; Greenwald was suspended for three years or until he completed probation, whichever was longer.
Woodward similarly was charged with and pled guilty to conspiracy. Although he did not trade personally based on the insider information, Woodward shared confidential information with two other individuals, one of whom shared it with 11 others. Woodward provided such information on more than one occasion, over a period of four years. The people who obtained confidential information from or through Woodward used it as the basis for stock transactions. The total profits obtained by these individuals were substantial, exceeding $500,000. Woodward presented mitigating evidence, including favorable character evidence. He expressed sincere remorse and accepted responsibility for his conduct. He also cooperated with federal authorities. Woodward was suspended for three years and until further order of the Court.
The misconduct involved in Greenwald and Woodward was significantly more extensive and serious than that here, thus justifying a substantially harsher penalty. While Pochopien engaged in a series of transactions, all involved the same information, concerning a single client, and there was not a pattern of misconduct. Pochopien's misconduct was confined to his own trades; he did not share information with others nor involve others in any improper scheme. In contrast, the respondents in Greenwald and Woodward each engaged in, and were convicted of, conspiracy.
In the third case, Chadwick v. State Bar of California, 49 Cal. 3d 103, 776 P.2d 240 (1989), the respondent was placed on probation, subject to conditions, with a one year actual suspension. Chadwick acquired material, nonpublic information about a tender offer. Based on this information, he purchased stock options in the target corporation, ultimately realizing a profit of approximately $57,000. Chadwick initially lied in an effort to conceal his misconduct from investigators. Chadwick also shared the confidential information he had received with another individual, who purchased additional options with Chadwick. Chadwick agreed with the other individual to lie to the SEC in its investigation. Chadwick later provided the SEC with truthful information and convinced the other person to do so; this was a significant mitigating factor. Chadwick was charged with, and pled guilty to, one misdemeanor count of violating federal securities laws. Chadwick testified that, while he knew otherwise at the time of the disciplinary proceedings, he did not recognize that his conduct was wrong at the time he engaged in it. He expressed remorse and presented favorable character testimony.
In our view, Pochopien's conduct is very analogous to the misconduct in Chadwick and, therefore, warrants a similar sanction. As in Chadwick, Pochopien's misconduct is limited in scope and in time. No other persons were involved here; even in Chadwick, the respondent involved another individual in his misconduct. While we do not condone
Pochopien's conduct in any way, it simply does not reach a level that would justify a two-year suspension, particularly when compared with Chadwick.
Significantly, at the time of the hearing, the Administrator saw things this way as well. At the hearing, counsel for the Administrator argued that Chadwick was the case most analogous to this one and sought to have the Hearing Board recommend a one-year suspension. We agree that Pochopien's misconduct warrants a one-year suspension, rather than a harsher sanction.
A shorter suspension, as Pochopien seeks, is unwarranted. Pochopien engaged in serious misconduct. Pochopien used confidential client information, without authority, to benefit himself. The intent with which an attorney acts is highly relevant to the sanction. See Spak, 188 Ill. 2d 53, 719 N.E.2d 747, 241 Ill. Dec. 618. Pochopien acted knowingly and acted on the information seven times. He reaped a substantial profit from his misconduct. In addition, Pochopien lied when initially confronted about his misconduct.
Aggravating and mitigating factors are relevant in ultimately determining the sanction. In re Witt, 145 Ill. 2d 380, 398, 583 N.E.2d 526, 164 Ill. Dec. 610 (1991). The parties differ as to the propriety of the Hearing Board's treatment of various factors in aggravation and mitigation.
The Hearing Board considered the harm from Pochopien's conduct as an aggravating factor. While Pochopien argues that there was no proof of actual harm, the Hearing Board could legitimately consider the fact that insider trading causes harm, to both the source of the information and the investing public. See O'Hagan, 521 U.S. at 656, 117 S.Ct. at 2209, 138 L.Ed.2d 724. Further, the potential for harm from an attorney's misconduct, as well as harm actually caused, can be considered in aggravation. See In re Gorecki, 208 Ill. 2d 350, 364-65,
802 N.E.2d 1194, 280 Ill. Dec. 673 (2003); In re Discipio, 163 Ill. 2d 515, 530, 645 N.E.2d 906, 206 Ill. Dec. 654 (1994).
Mitigating factors can include a lack of prior discipline, cooperation in the disciplinary process, favorable character evidence, community service, and pro bono legal work. See Gorecki, 208 Ill. 2d at 368-69, 802 N.E.2d 1194, 280 Ill. Dec. 673; In re Twohey, 191 Ill. 2d 75, 90, 727 N.E.2d 1028, 245 Ill. Dec. 294 (2000). Pochopien has no prior discipline. He has performed extensive community service, including service in the unpaid position of village trustee. Pochopien also did some pro bono legal work, although he was a member of the group for which the work was performed. Pochopien cooperated in the disciplinary proceedings and with the SEC in its proceedings. He admitted his wrongdoing and expressed remorse.
Pochopien objects to the Hearing Board's decision not to consider additional evidence that he presented in mitigation, specifically, evidence concerning his family circumstances and the testimony of his character witnesses. We agree with Pochopien that the Hearing Board was overly restrictive in its consideration of this evidence.1
The Hearing Board declined to consider the testimony of the character witnesses at all on the grounds that none of them could testify to Pochopien's reputation for truth and veracity in the community. Generally, testimony from character witnesses should not be simply a statement of the witness's personal opinion, but rather testimony as to the respondent's reputation in the community in which he or she lives or works. See In re Peterson, 98 SH 19 (Hearing Board Sept. 1, 1999), approved and confirmed, M.R. 15331 (Feb. 1, 1999); see generally Cleary & Graham, Handbook of Illinois Evidence, sec.405.2 (8th ed. 2004). However, while rules of evidence apply in disciplinary cases, they are not to be mechanically applied. In re Silvern, 92 Ill. 2d 188, 196, 441 N.E.2d 64, 65 Ill. Dec. 272 (1982). Decisions as to the admissibility of evidence in a disciplinary case should be guided by the purpose of the
proceedings, which is primarily to protect the public from unqualified or unethical practitioners. Ettinger, 128 Ill. 2d at 365, 538 N.E.2d 1152, 131 Ill. Dec. 596.
Although Pochopien's ex-wife may not have discussed his reputation with anyone in the legal community, she knew and testified that he was very well respected in the community in which they had lived. Attorney John McDonnell had known Pochopien since 1968 and had worked with him, before and after Pochopien became an attorney. While McDonnell acknowledged that he had not specifically discussed Pochopien's reputation for truthfulness and veracity with anyone in the legal community, McDonnell testified that Pochopien's practice at the firm where they worked together and at Pochopien's other firm was very highly regarded and that Pochopien was a person of the highest ethics. Such testimony is often offered and allowed in disciplinary cases. See e.g. In re Doyle, 144 Ill. 2d 451, 461-62, 581 N.E.2d 669, 63 Ill. Dec. 515 (1991). In our view, the character testimony presented here should have been considered.
The Hearing Board also declined to consider Pochopien's family problems in mitigation. The Hearing Board discounted this evidence, reasoning that there was no real correlation between Pochopien's misconduct and his family problems. In our opinion, the Hearing Board took too strict a view in assessing this evidence.
Pochopien testified that he committed the acts in question because he was acting irrationally, in response to depression and problems that he was having with a teenaged daughter. Pochopien and his ex-wife testified in detail about serious problems affecting one of their daughters, beginning in July 2004 and continuing through at least May 2006, the time of Pochopien's misconduct. Each testified that their daughter's problems with drugs and problems brought about by persons with whom she was associating caused very significant emotional stress for the family. The family ultimately placed the young woman in remote residential treatment facilities, at significant expense.
Pochopien sought and received treatment for depression between August 2005 and April 2006 and in October and November 2006. In addition, Pochopien's father died, in December 2005, and Pochopien assumed responsibility for his late father's affairs, out-of-state, which added additional stress. Pochopien testified that, as a result of these factors, he was not using his best judgment at the time of his misconduct. He testified that his "life was going down the tubes." The facts which Pochopien and his ex-wife described support that statement.
Pochopien's very difficult family circumstances do not excuse his misconduct. They do, however, provide a framework from which to reasonably assess this respondent's actions. These circumstances were ongoing at the time of Pochopien's misconduct. A temporal connection between a respondent's misconduct, ill mental health, and family problems is properly considered in mitigation. See e.g. In re Berkos, 93 Ill. 2d 408, 414, 444 N.E.2d 150, 67 Ill. Dec. 111 (1982); In re Andros, 64 Ill. 2d 419, 426, 356 N.E.2d 516, 1 Ill. Dec. 325 (1976).
While we do weigh the mitigating factors differently than did the Hearing Board, they are not sufficient in this case to justify a lesser suspension than one year, given the facts of this case as a whole.
For these reasons, we affirm the Hearing Board's findings of misconduct and recommend that Respondent-Appellant, Donald John Pochopien, be suspended for one year.
Date Entered: 21 September 2010
1 Because our consideration of the issues is confined to the record, we do not consider the articles appended to Pochopien's brief. In re Bertuca, 98 CH 129 (Review Board Oct. 11, 2000), petition for leave to file exceptions denied, M.R. 17200 (Jan. 19, 2000).
In re Pochopien, 08 CH 75
I respectfully dissent from that portion of the opinion upholding the charge of "breach of fiduciary duty" for the reasons I have expressed previously. See In re Vano, 04 CH 142 (Review Board, Sept. 1, 2009), petition for leave to file exceptions allowed, discipline modified, M.R. 23410 (Jan. 21, 2010); In re Cutright, 05 SH 106 (Review Board, March 17, 2008), motion to approve and confirm denied, In re Cutright, 233 Ill.2d 474, 910 N.E.2d 581, 331 Ill. Dec. 172 (2009).
I also dissent from the majority's decision to uphold the Hearing Board's findings relative to the Rule 8.4(a)(3) charge.
The Administrator charged Respondent with violating Rule 8.4(a)(3) by "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 SEC Rules 10b-5 and 10b5-1. The Hearing Board sustained the charge although Respondent was neither charged nor convicted, criminally, with "insider trading" or any other crime. In doing so, in my opinion, the Hearing Board failed to distinguish between the Respondent's conduct - which is unquestionably subject to discipline whether or not that conduct was charged criminally - and the specific charge of a violation of Rule 8.4(a)(3), which expressly involves "committing a criminal act."
It is well-established that disciplinary proceedings are sui generis and attorney misconduct can be subject to discipline without regard to criminal prosecution. The Supreme Court has held more than ninety years that "[i]t is not necessary that [an attorney's] misconduct should subject him to indictment, or that, if the misconduct charged amounted to a crime, he should be prosecuted and convicted before disbarment." People ex rel. Chicago Bar Association v. Meyerovitz, 278 Ill. 356, 365 (1917). Even an acquittal of criminal charges is no bar to
disciplinary proceedings because "[i]t is not the conviction of a crime which justifies discipline, but the commission of the act." In re Rolley, 121 Ill. 2d 222, 520 N.E.2d 302, 117 Ill. Dec. 141 (1988); see also People ex rel. Johnson v. George, 186 Ill. 122, 128 (1900) (discipline warranted even where attorney pardoned).
So in In re Howard, 69 Ill.2d 343, 353, 372 N.E.2d 371, 14 Ill. Dec. 360 (1977), an attorney acquitted of charges of bribing a police officer was, nonetheless, appropriately suspended for two years "for engaging in unprofessional and unethical conduct tending to defeat the administration of justice and to bring the courts and the legal profession into disrepute" See Howard, 69 Ill.2d at 346.
A violation of Rule 8.4(a)(3) (now 8.4(b)), however, necessarily involves proof that Respondent "commit[ed] a criminal act that reflects adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer."2 A "criminal act" is defined as "commission of a crime" in the 6th edition of Black's Law Dictionary. Black's Law Dictionary 372 (6th Ed. 1990). An accusation of having engaged in a "criminal act" -- of having committed a "crime" - raises different issues than those raised by the former rule (1-102(a)(3)), which imposed discipline for "illegal conduct involving moral turpitude." "Illegal is not synonymous with criminal though some writers mistakenly assume that it is." Garner, A Dictionary of Modern Legal Usage 416 (2d Ed. 1995) (emphasis in original). "Anything against the law - even the civil law - is, technically speaking, ‘illegal.'" Id.
In this case, the Administrator set out elements arguably constituting a violation of SEC Rule 10b-5 in the Complaint and declared, in the prayer, that the violation of SEC Rules constituted a "criminal act that reflects adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer."3 But Rule 10b-5 does not impose strict criminal liability. "To establish a criminal violation of Rule 10b—5, the Government must prove that a person ‘willfully' violated
the provision." United States v. O'Hagan, 521 US 642, 665-66 (1997) (citing 15 U. S. C. sec. 78ff(a)). "Furthermore, a defendant may not be imprisoned for violating Rule 10b—5 if he proves that he had no knowledge of the Rule." Id.
The stipulation underlying the Hearing Board's findings speaks neither to Respondent's "willfulness" nor his knowledge of Rule 10b-5. So while the Respondent's actions may have violated the Rule and, thus, been "illegal," in my opinion, it was not established by clear and convincing evidence (or beyond a reasonable doubt - as may have been arguably necessary) that Respondent's actions were "criminal." I would, therefore, reverse the Hearing Board's finding that the Respondent violated Rule 8.4(a)(3) and dismiss that charge.
I concur in the balance of the majority's opinion as well as the recommendation of a one-year suspension.
Daniel P. Duffy
1 Aside from the obvious circumstance in which an attorney has been charged and convicted of a crime, the Supreme Court has approved a Rule 8.4(a)(3) charge in a situation in which the criminal conduct occurred during the course of disciplinary proceedings See e.g. In re Rinella, 175 Ill. 2d 504, 677 N.E.2d 909, 222 Ill. Dec. 375 (1997) (lying to the Commission during the course of investigation treated as perjury and a violation of Rules 8.1(a)(1), 8.4(a)(3), 8.4(a)(4), and 8.4(a)(5) of the Rules of Professional Conduct and former Supreme Court Rule 771). This application of the rule to that situation is wholly consistent with criminal contempt of court and different in character from a situation in which the Administrator himself seeks to characterize previously uncharged conduct as "criminal."
2 The SEC filed a civil complaint against Respondent, which was resolved by consent. Under the terms of the Consent, Respondent expressly "acknowledge[d] that no promise or representation has been made by the Commission or any member, officer, employee, agent, or representative of the Commission with regard to any criminal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liability." The Statute of Limitations for criminal charges has not yet expired.