Filed October 19, 2011
BEFORE THE HEARING BOARD
ILLINOIS ATTORNEY REGISTRATION
|In the Matter of:
ROY D. KESSEL,
Commission No. 2010PR00043
REPORT AND RECOMMENDATION OF THE HEARING BOARD
The hearing in this matter was held on September 1, 2011, at the Chicago offices of the Attorney Registration and Disciplinary Commission ("ARDC"), before a Hearing Board Panel consisting of Mark L. Karasik, Chair, Jessica A. O'Brien, and Steven J. Casey. The Administrator was represented by Meriel R. Coleman. Respondent appeared in person and was represented by Samuel J. Manella.
On April 21, 2010, the Administrator filed a one-count complaint against Respondent pursuant to Supreme Court Rule 753(b). The Complaint alleges that Respondent breached his fiduciary duty, engaged in dishonest conduct and engaged in conduct which tends to defeat the administration of justice. On May 5, 2010, Respondent's attorney, Samuel J. Manella accepted service of the Complaint on behalf of Respondent. On November 17, 2010, Respondent filed his Answer to Complaint. Respondent failed to comply with the Administrator's Notice to Produce. On July 28, 2011, the Hearing Board Chair granted the Administrator's Motion to Strike Respondent's Answer and Deem the Allegations of the Complaint Admitted.
At all relevant times, Respondent owned and operated a law firm in Arlington Heights styled as "Bassetti Kessel," which was sometimes also known as the "Law Office of Roy Kassel" or "Capital Law Group P.C." AG Capital Partners, LLC, was a New Mexico company that sometimes conducted business as "The Omicron Group, LLC" ("Omicron"). Respondent was a partner in Omicron and his law firm acted as Omicron's legal counsel.
Beginning in November, 2007, and continuing through November 2008, Respondent participated in a scheme by which he and others advised 93 individuals ("the investors") of a purported opportunity to invest in Omicron by making "investments loans" to Omicron. Respondent and others told the investors those "investment loans" were to be used for purposes of "trading platforms" and other purported investment opportunities. Respondent and his business associates also told the investors, both orally and in writing: that Omicron would use the investors' money to invest in trading platforms; that the investors could expect an annual return of the greater of fifteen percent paid quarterly, or sixty percent of the net profits generated by Omicron; that their initial investments would be secure because none of the money obtained from the investors would be placed directly in trade; that the funds in the trading account would be leveraged by the trader and never touched; and that investors could request withdrawals from their account which would be paid out within 72 hours.
Between November 2007 and November 2008, Respondent and others agreed to accept at least $1,915,205 in purported "investment loans" from the investors; provided those individuals with purported loan agreements and promissory notes relating to investments platforms; and promised to repay the loans with investment returns one year after the loan agreement. Pursuant
to the agreements for the investment loans, the term of the purported "investments loans' were to be one year, calculated from the first day of disbursement, or on demand of the lender.
Between November 2007 and November 2008, as part of the purported investment opportunity, Respondent entered into escrow agreements with the investors in which he agreed that Bassetti Kessel, the Law Office of Roy Kessel, or Capital Law Group P.C. would act as escrow agent for funds that the investors gave to Respondent to fund the purported "investment loans" to Omicron. Respondent requested and received at least $500 from each investor in consideration for his agreement to act as escrow agent.
By agreeing to act as "escrow agent" in connection with the purported investment loans, Respondent created a fiduciary relationship between himself and the investors whose funds he agreed to receive and hold in a separate, secure account. Therefore, Respondent owed those investors the duty to exercise the highest degree of honesty and good faith in receiving and holding their funds in connection with the purported "investment loans."
Between November 2007 and November 2008, Respondent caused $22,693,162.89, which included $1,915,205 that Respondent received from investors pursuant to the escrow agreements, to be deposited into one of the following accounts he controlled: National City account 985684151; National City account number 985683781; Chase Bank account number 773237185 (and three associated savings accounts); or Chase Bank account number 733236559. Respondent was the sole signatory on all those accounts.
Between December 2007 and March 2009, Respondent made a series of disbursements and directed a series of transfers to various accounts maintained by Respondent and his business associates. Respondent also used the account to make periodic payments of purported interest and principal to investors. Those payments were not made from the purported profits of the
Omicron investments, but were instead made with money obtained from other investors in what is commonly referred to as a "Ponzi scheme". As of March 31, 2009, Respondent's activities had drawn the balances to account number 985684151, account number 985683802, account number 985683781 and account number 773237185 (and the three associated savings accounts) to zero and the balance of account number 733236559 to $44.42. At no time after receiving the funds from the investors did Respondent invest in their funds in a secure investment opportunity from which any of the investors benefitted. To date, Respondent owes various investors $1,866,316.31, which represented the difference between the amounts Respondent, had received from the investors and the amounts that have been repaid to one investor.
Respondent has no prior discipline.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In attorney disciplinary proceedings, the Administrator must prove the alleged misconduct by clear and convincing evidence. Supreme Court Rule 753(c) (6); In re Ingersoll, 186 Ill. 2d 163, 168, 710 N.E.2d 390 (1999). It is the responsibility of the Hearing Panel to determine the credibility of the witnesses, weigh conflicting testimony, draw reasonable inferences, and make factual findings based upon all the evidence. In re Timpone, 157 Ill. 2d 178, 196, 623 N.E.2d 300, 308 (1993). In this case, based on the admitted facts, we conclude the Administrator proved, by clear and convincing evidence, Respondent engaged in all of the alleged misconduct.
Specifically, we find Respondent engaged in the following misconduct:
breach of fiduciary duty;
engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, in violation of Rule 8.4(a) (4) of the Illinois Rules of Professional Conduct;
engaging in 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.
The purpose of the disciplinary system is to protect the public, maintain the integrity of the legal system and safeguard the administration of justice. In re Howard, 188 Ill. 2d 423, 434, 721 N.E.2d 1126 (1999). We should not recommend a sanction which will benefit neither the public nor the legal profession. In re Leonard, 64 Ill. 2d 398, 406, 356 N.E.2d 62 (1976). In determining the proper sanction, we consider the proven misconduct along with any aggravating and mitigating factors. In re Witt, 145 Ill. 2d 380, 298, 583 N.E.2d 526 (1991).
The Administrator recommends that Respondent be disbarred. In support of his recommendation, the Administrator offered the following cases: In re Hopkinson, 07 CH 132, M.R. 22445 (Sept. 16, 2008) ( From 1998 through 2007, the attorney made false statements to investors, collecting over $4 million and using funds for professional and personal purposes. The attorney's name was stricken from the roll of attorneys); In re Minneman, 98 SH 38, M.R. 17352 (Mar. 22, 2001) (Attorney disbarred as a result of federal conviction to commit income tax fraud); and In re Foos, 94 CH 521, M. R. 10390 (Sept. 1994) (From 1988 through 1993, the attorney received approximately $8 million from individuals or entities based on his assurances that he would invest those funds. The attorney used at least $2 million of the investors' funds for his own purposes. The attorney requested that his name be stricken from the Master Roll of Attorneys.)
While every case is unique, in addition to the precedent offered by the Administrator, we find the following cases instructive in determining the proper recommendation for a sanction:
In In re Conner, 2008 CH 119, M.R. 24471 (May 18, 2011), the attorney was found guilty of converting client funds and submitting false information to the Administrator. The
Hearing Board found that the attorney intentionally converted $138,000 from numerous clients and submitted falsified bank statements to the Administrator. In affirming the Hearing Board's recommendation, the Review Board stated that disbarment was appropriate because of the attorney's lengthy pattern of intentional and dishonest conversion, his fraudulent attempts to deceive the Administrator and the harm he caused to his clients. The Supreme Court ordered that the attorney be disbarred.
The attorney in In re Vavrik, 117 Ill. 2d 408, 512 N.E.2d 1226 (1987) was convicted of grand theft, first degree. Over a six month period, the attorney embezzled $53,000 from his employer. The Supreme Court stated that the attorney's conduct indicated a disregard for personal integrity and honesty. Further, the Court stated:
his misconduct, while not in his professional capacity, strikes at the very heart of an attorney's duties of trust and loyalty. In order to protect the public and maintain the integrity of the legal profession, we therefore conclude that respondent be disbarred from the practice of law.
Along with the above stated case law and proven misconduct, we consider factors of mitigation and aggravation. In mitigation, Respondent has no prior discipline. In aggravation, we consider the financial harm that Respondent caused his clients.
Based on the proven and egregious misconduct, precedent and factors of mitigation and aggravation, we recommend that Respondent be disbarred.
Date Entered: October 19, 2011
|Mark L. Karasik, Chair, Jessica A. O'Brien, and Steven J. Casey, Hearing Panel Members.|