BEFORE THE HEARING BOARD

OF THE

ILLINOIS ATTORNEY REGISTRATION

AND

DISCIPLINARY COMMISSION

In the Matter of:

ROBERT M. STEPHENSON,

Attorney-Respondent,

No. 6278523.

Commission No. 2014PR00073

FILED --- July 1, 2014

 

COMPLAINT

Jerome Larkin, Administrator of the Attorney Registration and Disciplinary Commission, by his attorney, Robert J. Verrando, pursuant to Supreme Court Rule 753(b), complains of Respondent, Robert M. Stephenson, who was licensed to practice law in the State of Illinois on November 7, 2002, and alleges that Respondent has engaged in the following conduct which subjects Respondent to discipline pursuant to Supreme Court Rule 770.

COUNT I
(Taking Children's Trust Funds for Respondent's Own Benefit)

1. In May 2007, Respondent agreed to serve as trustee of the Robert McCreary Stephenson and Martha LaFon Stephenson Annual Exclusion Gifting Trust ("the children's trust"), which had been created and funded in Florida at that time by Respondent's parents, Robert McCreary Stephenson and Martha LaFon Stephenson.

2. In May 2007, the beneficiaries of the children's trust were Respondent's minor sons, Madison and Jack, who were 13 and seven years old, respectively.

3. As trustee of the children's trust, Respondent owed fiduciary duties to his parents, and to Madison and Jack, including a duty to exercise the utmost good faith and fair dealing in all of his transactions involving the trust's assets, a duty of undivided loyalty, a duty of care and a duty to avoid using trust assets for Respondent's own personal or business purposes.

4. The children's trust agreement contained a provision requiring that the trust's income and principal "be used only for the personal benefit of the designated beneficiaries of the trust," and prohibiting distributions or expenditures of trust assets "except to or for the benefit of a trust beneficiary."

5. The children's trust agreement contained a provision prohibiting either Madison or Jack from withdrawing from the trust principal until he reached age 30.

6. At all times alleged in this complaint, the assets of the children's trust were held at the Charles Schwab Bank in trust accounts with account numbers ending in the four digits 5802 and 3649 ("the Schwab trust accounts").

7. On October 10, 2011, Respondent's father, Robert McCreary Stephenson, died. After that date, Respondent's mother, Martha LaFon Stephenson, communicated with Respondent regarding the children's trust and the Schwab trust accounts.

8. As of July 24, 2013, the total balance in the Schwab trust accounts for both children was $230,591.16.

9. On July 24, 2013, Respondent drew check numbers 1358470 and 1358471, which were drawn on Charles Schwab Bank account numbers 5802 and 3649, respectively, and which were made payable to the order of Respondent, as trustee of the children's trust, in the total amount of $230,591.16, from the accounts, leaving a balance of $0 in each account.

10. On July 24, 2013, Respondent deposited check numbers 1358470 and 1358471 into his JPMorgan Chase "Platinum Checking" account bearing an account number with the last four digits "4318." Chase account number 4318 was titled "Robert M. Stephenson," and was one of Respondent's personal checking accounts.

11. In the weeks following July 24, 2013, Respondent used the entire proceeds of check numbers 1358470 and 1358471 for his own personal purposes, largely for personal travel and casino gambling.

12. At no time did Respondent inform his mother or his sons of his withdrawal of the funds contained in the children's trusts, although he communicated with his mother regularly during 2013.

13. In 2007, Respondent was custodian of Uniform Transfers to Minors Act ("UTMA") accounts which Respondent's parents had created and funded for the benefit of Respondent's sons, Madison and Jack, in 1995 and 2000, respectively ("Madison's UTMA account" and "Jack's UTMA account"). Madison's UTMA account was held at the Charles Schwab Bank and bore an account number ending in the four digits 6908. Jack's UTMA account was held at the Charles Schwab Bank and bore an account number ending in the four digits 1031.

14. Under the provisions of the UTMA, the funds in Madison's and Jack's UTMA accounts were their property. Respondent owned no interest in the money and, as custodian of the accounts, was prohibited from using the funds for any purpose other than his sons' benefit.

15. The UTMA required Respondent to at all times maintain the proceeds of Madison's and Jack's UTMA accounts separate and distinct from all other property in a manner sufficient to identify it clearly as custodial property.

16. On July 26, 2013, the balance in Madison's UTMA account was $57,981.26. On that date, Respondent drew check number 1358487, which was made payable to the order of Respondent, as custodian of Madison's UTMA account, in the amount of $57,981.26, from the account, leaving a balance of $0.

17. On July 26, 2013, the balance in Jack's UTMA account was $50,728.55. On that date, Respondent drew check number 1358485, which was made payable to the order of Respondent, as custodian of Jack's UTMA account in the amount of $50,728.55, from the account, leaving a balance of $0.

18. On July 26, 2013, Respondent deposited check numbers 1358487 and 1358485 into a JPMorgan Chase bank account bearing an account number with the last four digits "1904." Chase account number 1904 was titled "Robert Stephenson," and was one of Respondent's personal checking accounts.

19. In the weeks following July 26, 2013, Respondent used the entire proceeds of check numbers 1358487 and 1358485 for his own personal purposes, largely for personal travel and casino gambling.

20. At no time after July 26, 2013, did Respondent return any of the proceeds of check numbers 1358470, 1358471, 1358487, and 1358485 to Madison or Jack or to any other person or entity, for their benefit.

21. In September 2013, Respondent, in response to requests for information from attorney John F. Kennedy ("Kennedy"), who represented Respondent's mother, Madison and Jack, Respondent sent several email messages in which he falsely stated that he had used the proceeds of check numbers 1358470, 1358471, 1358487, and 1358485 to purchase a house for the benefit of Madison and Jack.

22. Respondent's statements, described in paragraph 21, above, were false. By September 2013, Respondent had used the entire proceeds of the four Charles Schwab Bank checks for his own personal purposes.

23. At no time since July 24, 2013, has Respondent used any portion of the proceeds of the four checks for the benefit of Madison or Jack.

24. By reason of the conduct outlined above, Respondent has engaged in the following misconduct:

  1. conduct involving dishonesty, fraud, deceit or misrepresentation, by conduct including taking for his own use funds that he held as a fiduciary for his sons, in violation of Rule 8.4(c) of the Illinois Rules of Professional Conduct (2010); and

  2. conduct involving dishonesty, fraud, deceit or misrepresentation, by conduct including breaching his fiduciary duty to Respondent's parents, and to Madison and Jack, his taking and using the funds of Madison and Jack and trust assets to which he was not entitled, and misrepresenting his use of these funds to an attorney employed to determine the status of those funds, in violation of Rule 8.4(c) of the Illinois Rules of Professional Conduct (2010).

COUNT II
(Theft from Children's Trusts and UTMA Accounts)

25. The Administrator realleges paragraphs One through 24 of Count I, above.

26. When Respondent negotiated check numbers 1358470, 1358471, 1358487, and 1358485, he intended to permanently deprive Madison and Jack of the funds.

27. At no time after July 24, 2013, did Respondent repay any portion of the proceeds of the four checks to Madison, Jack, or the children's trusts, or use any portion of the proceeds for their benefit.

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

  1. committing a criminal act that reflects adversely on his honesty, trustworthiness or fitness as a lawyer in other respects, by committing the criminal offense of theft, by taking his sons' assets for his own personal use, in violation of 720 ILCS 5/16-1(a)(1)(A) and Rule 8.4(b) of the Illinois Rules of Professional Conduct (2010);

  2. conduct involving dishonesty, fraud, deceit or misrepresentation, by conduct including taking for his own use funds that he held as a fiduciary for his sons, in violation of Rule 8.4(c) of the Illinois Rules of Professional Conduct (2010); and

  3. conduct involving dishonesty, fraud, deceit or misrepresentation, by conduct including breaching his fiduciary duty to Respondent's parents, and to Madison and Jack, his taking and using the funds of Madison and Jack and trust assets to which he was not entitled, and misrepresenting his use of these funds to an attorney employed to determine the status of those funds, in violation of Rule 8.4(c) of the Illinois Rules of Professional Conduct (2010).

COUNT III
(Failure to provide accounting to trust beneficiaries)

29. The Administrator re-alleges paragraphs One through 28 of Counts I and II, above.

30. At all times alleged in this complaint, the Florida Trust Code, F.S.A. Section 736.0813, required Respondent, as trustee of the children's trust, to inform and account to Madison and Jack regarding the status of their UTMA accounts and the children's trust.

31. On September 3, 2013, attorney Kennedy sent a letter to Respondent demanding an accounting of all transactions occurring since 1995 relating to each of Madison's and Jack's UTMA and trust accounts, and restoration of all funds removed from the account. Respondent received the letter shortly after it was sent.

32. At no time after September 3, 2013 did Respondent provide Kennedy with any accounting regarding the transactions which had occurred in connection with the children's trust or the children's UTMA accounts during 2013

33. On September 17, 2013, in response to litigation initiated by Kennedy on behalf of Respondent's mother, which bore Circuit Court of Cook County docket number 2013CH21344, the Hon. Thomas R. Allen, a Judge of the Circuit Court, entered an order requiring Respondent to, among other actions, provide on or before September 19, 2013, a detailed accounting regarding the transactions which had occurred in connection with the children's trust or the children's UTMA accounts during July 2013. Respondent received a copy of the order shortly after it was entered.

34. At no time did Respondent comply with Judge Allen's September 17, 2013 order.

35. Respondent's failure to comply with Judge Allen's order was a continuation of Respondent's effort to conceal Respondent's personal use of the children's trust and UTMA account assets from his mother, his sons, and their attorney.

36. Respondent's failure to comply with Judge Allen's order prejudiced the administration of justice by delaying the Court's provision of relief to the beneficiaries of the children's trust and the children's UTMA accounts and by concealing Respondent's misuse of the assets from the Court.

37. By reason of the conduct outlined above, Respondent has engaged in the following misconduct:

  1. conduct involving dishonesty, fraud, deceit or misrepresentation, by conduct including concealing and misrepresenting his use of the trust assets and the UTMA account assets, in violation of Rule 8.4(c) of the Illinois Rules of Professional Conduct (2010); and

  2. conduct that is prejudicial to the administration of justice, by failing to comply with Judge Allen's order to account for his use of his sons' trust and UTMA assets, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct (2010).

 

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.

Robert J. Verrando
Counsel for the Administrator
130 East Randolph Drive, Suite #1500
Chicago, Illinois 60601
Telephone: (312) 565-2600

Respectfully submitted,

Jerome Larkin, Administrator
Attorney Registration and
Disciplinary Commission

By:  Robert J. Verrando