Filed February 15, 2013
In re John Joseph Walsh
Commission No. 2011PR00130
Synopsis of Hearing Board Report and Recommendation
This matter arises out of a one-count complaint filed by the Administrator charging Respondent with misconduct stemming from his role as chief operating officer and managing partner of a title company. The complaint is based upon allegations Respondent misappropriated a total of $537,157.71 by making two unauthorized disbursements from the title company's escrow accounts. Respondent is charged with breach of fiduciary duty, conversion and conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4 of the Illinois Rules of Professional Conduct.
Although Respondent retained counsel, answered the complaint and initially participated in the disciplinary proceedings, he failed to appear for his deposition and did not appear at the hearing. As a result, Respondent's answer was stricken, the complaint allegations were deemed admitted, and Respondent was barred from testifying or presenting any evidence at the hearing.
Based upon the admitted complaint allegations and evidence presented by the Administrator, the Hearing Board found that all of the charges of misconduct were proven by clear and convincing evidence. In light of the serious nature of Respondent's misconduct, the aggravating factors, and the lack of any significant mitigation, the Hearing Board recommended that Respondent be disbarred.
BEFORE THE HEARING BOARD
ILLINOIS ATTORNEY REGISTRATION
In the Matter of:
JOHN JOSEPH WALSH,
Commission No. 2011PR00130
REPORT AND RECOMMENDATION OF THE HEARING BOARD
The hearing in this matter was held on September 24, 2012, at the offices of the Attorney Registration and Disciplinary Commission ("ARDC"), Chicago, Illinois, before a Hearing Board Panel of Henry T. Kelly, Chair, Leonard J. Schrager, and Robert D. Smith. The Administrator was represented by Marcia T. Wolf. Samuel J. Manella appeared on behalf of Respondent, who was not present at the hearing.
PLEADINGS AND PRE-HEARING PROCEEDINGS
On November 9, 2011, the Administrator filed a one-count complaint pursuant to Illinois Supreme Court Rule 753(b) charging Respondent with misconduct stemming from his role as chief operating officer and managing partner of Mercury Title Company, LLC (Mercury). The Complaint alleges that Respondent engaged in conversion and other related misconduct by making two unauthorized distributions from escrow accounts, which held funds that had been entrusted to Mercury in connection with real estate transactions. It further alleges that Respondent used the funds to pay certain business expenses of Mercury, including its obligation
under an outstanding line of credit and its share of a settlement of a class action lawsuit. According to the Complaint, Respondent misappropriated a total of $537,157.71, which resulted in escrow shortages of this same amount.
On November 28, 2011, Respondent's counsel entered his appearance and accepted service of the Complaint and related materials on Respondent's behalf. On January 12, 2012, Respondent filed his Answer, in which he admitted essentially all of the underlying factual allegations in the Complaint, including the allegations that he made the two distributions from Mercury's escrow accounts. Respondent objected to the legal conclusion that the transactions were "improper" and also affirmatively stated that he "personally lent the company well over $500,000." Respondent denied all of the charges of misconduct.
Although Respondent submitted his Commission Rule 253 Report and participated in some written discovery, Respondent failed to appear for his deposition prior to an August 31, 2012 discovery cut-off date set by the Chair. As a result, the Administrator filed a Motion to Bar Respondent from Testifying at the Hearing and a Motion to Strike Respondent's Answer to the Complaint, Deem the Allegations of the Complaint Admitted, and Bar Respondent from Presenting any Evidence at the Hearing. Both of those motions were addressed at the hearing, which was held on September 24, 2012. Although counsel for Respondent was present, Respondent did not appear. Respondent's counsel informed the Hearing Board he had been in recent communication with Respondent and did not expect him to attend. He also indicated he had received an e-mail from Respondent several days prior to the hearing requesting that he "advise the Panel that I do not wish to further contest." (Tr. 5, 13).
With respect to the pending motions, counsel for Respondent requested that the Panel allow Respondent's Answer, including the affirmative matter set forth therein regarding Respondent's use of his own funds to operate Mercury, to stand. The Administrator objected on the basis that the information was irrelevant to the charges and Respondent could not be subjected to cross-examination regarding the matter. Based upon Respondent's failure to appear at his deposition and failure to appear at the hearing, the Chair entered an order granting the Administrator's motions. As a result, Respondent's Answer was stricken, the Complaint allegations were deemed admitted, and Respondent was barred from testifying or presenting any other evidence at the hearing. The Chair noted that he did not believe there was substantial prejudice in striking the Answer because even if it was allowed to stand, most of the Complaint allegations had been admitted and the affirmative matter set forth was not directly responsive to the allegations. (Tr. 9-10).
The Administrator presented the testimony of Ronald Kaplan, Kevin Shevel, and Matthew Singer, and offered Administrator's Exhibits 1 through 3 and 6 through 9, which were admitted into evidence. (Tr. 22).
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In attorney disciplinary proceedings, the Administrator has the burden of proving the charges of misconduct by clear and convincing evidence. Illinois Supreme Court Rule 753(c) (6); See also, In re Ingersoll, 186 Ill. 2d 163, 168, 710 N.E.2d 390 (1999). Clear and convincing evidence constitutes a high level of certainty, which is greater than a preponderance of the evidence, but less than proof beyond a reasonable doubt. See, e.g., People v. Williams, 143 Ill. 2d 477, 484, 577 N.E.2d 762 (1991). 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, as noted, Respondent's Answer was stricken and the Complaint allegations were deemed admitted. Thus, the Administrator was not required to submit evidence in support of the facts alleged or to otherwise prove those allegations in order to establish the misconduct charged. See In re Golden, 09 CH 88, M.R. 25509 (Nov. 19, 2012) (rejecting argument that Administrator was required to "prove-up" the charges of misconduct where answer was stricken and complaint allegations deemed admitted as discovery sanction pursuant to Supreme Court Rule 219).
Respondent is charged with conversion, breach of fiduciary duty, and engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation in violation of Rule 8.4 of the Illinois Rules of Professional Conduct.
A. Admitted Facts and Evidence
From approximately August 1993 through August 6, 2010, Respondent was the chief operating officer and the managing partner of Mercury. Mercury was founded in 1993 and was engaged in business as a title insurance agency, providing title insurance and settlement services to the general public related to real property. Mercury remained in business until August 2010, when it was involuntarily shut down. At the time it ceased operations, Mercury had about 30 members. (Tr. 23-25).
Mercury was an agent of Chicago Title Insurance Company (CTI) and, pursuant to an issuing agency contract (the Contract), Mercury was appointed by CTI to countersign and issue title insurance commitments, policies and endorsements underwritten by CTI. Pursuant to paragraph 3 F. of the Contract, Mercury was required to keep all monies entrusted to Mercury by members of the general public in the course of Mercury's business operations as escrow agent
safely segregated in escrow accounts, separate from Mercury's personal operating accounts. Mercury was further required to disburse those funds only for the purposes for which they were entrusted, in accordance with its fiduciary duties in connection with closings it performed. In addition, pursuant to paragraph 3 I. of the Contract, Mercury was obligated to comply with all statutes and government rules and regulations relating to the licensing, registration and operation of its business. In that regard, Section 16(e) of the Illinois Title Insurance Act, 215, ILCS 155/16(e), provided, in part, as follows:
Funds deposited in connection with any escrows, settlements or closings shall be deposited in a separate fiduciary trust account or accounts in a bank or other financial institution . . . The funds shall be the property of the person or persons entitled thereto under the provisions of the escrow, settlement, or closing . . . The funds shall not be subject to any debts of the escrowee and shall be used only in accordance with the terms of the individual escrow, settlement, or closing under which the funds were accepted.
(Tr. 23; Adm. Ex. 6 at 34).
Monies segregated in such escrow accounts were either disbursed at closings or held after the closings for various purposes including, but not limited to, property taxes, mechanics liens and other miscellaneous problems on titles. Such funds were eventually distributed to the depositors if the money was not needed to resolve the issues for which they were being held.
As chief operating officer and the managing partner of Mercury, Respondent worked full time at Mercury and was the only Mercury partner responsible for Mercury's day-to-day operations. In that capacity, Respondent had a fiduciary duty to CTI and members of the public, whose monies were deposited into Mercury escrow accounts, to exercise at all times the highest degree of honesty, loyalty, and good faith regarding his handling of the escrow funds. As a consequence of that fiduciary duty and relationship, Respondent was prohibited from engaging in actions that gave preference to his own business and personal interests and the interests of
Mercury over the interests of CTI and the general public whose monies were deposited into Mercury escrow accounts. (Tr. 24-25).
Notwithstanding his contractual, fiduciary and statutory obligations, and without the authority or knowledge of CTI or any third parties whose funds had been deposited into Mercury escrow accounts, Respondent caused two unauthorized and improper distributions to be made from two Mercury escrow accounts. These checks, as described below, were issued to pay Mercury business expenses and were not legitimately disbursed from the Mercury accounts which held funds entrusted to Mercury, as escrow agent, by Mercury's escrow depositors and their designated distributees in connection with closings performed by Mercury.
On April 9, 2009, Respondent wrote and delivered check number 100557 from Mercury's Agency Escrow Closing Account at Cole Taylor Bank in the amount of $458,139.39, made payable to Cole Taylor Bank, to retire a line of credit Mercury maintained at that bank. On April 30, 2010, Respondent wrote and delivered check number 013634 from Mercury's Title Indemnity Escrow Account at Bank of America in the amount of $79,018.12, made payable to the law firm of Bock and Hatch, LLC., to pay part of a class action settlement arising out of a lawsuit against Mercury and other title insurance companies. As a result of Respondent misappropriating and misapplying these escrow funds, Respondent caused an escrow shortage of at least $537,157.71, to the detriment of CTI and third parties. (Adm. Exs. 2, 3).
Ronald Kaplan has been an attorney in Illinois since 1976. He was one of the founding members of Mercury, but was not involved in its day-to day operations. Mr. Kaplan testified he first learned CTI was closing Mercury down on August 3, 2010, after Respondent called and asked to meet with him because he had something to discuss. Respondent then came to Mr. Kaplan's office and advised Mr. Kaplan he had written two checks totaling approximately
$530,000 from Mercury's escrow accounts. One check was to retire a line of credit Mercury had with Cole Taylor Bank and the other was to cover legal fees incurred in connection with the settlement of a class action lawsuit pending against Mercury. Mr. Kaplan stated that this was a problem, because the money in the escrow accounts belonged to third parties and did not belong to Mercury. (Tr. 22-26).
Mr. Kaplan explained that there were two types of escrow accounts involved in these disbursements. The larger check was written on an agency escrow closing account, where money had been deposited at closing to cover various obligations related to the closing. The second check was written from a title indemnity account, which is used for money set aside at closing to cover potential obligations related to issuing a clear title. Mr. Kaplan testified that the money in both of these accounts belonged to buyers, sellers, lenders, and others who were owed money in connections with real estate transactions, not Mercury. (Tr. 31-32, 35-39).
At his meeting with Respondent, Mr. Kaplan also learned that Mercury had recently received two letters from CTI's owner, Fidelity National Title Group (Fidelity). The first letter, dated July 27, 2010, advised Mercury that its agency contract was being terminated due to escrow shortages, and Mercury would no longer be allowed to act as agent for Fidelity or CTI. The second letter, dated July 30, 2010, demanded the presence of all Mercury principals at a meeting to be held later that same day at CTI's offices. Mr. Kaplan went to that meeting, which was also attended by Respondent and various representatives of Fidelity and CTI, including several attorneys. Mr. Kaplan explained to those present he had just learned of the situation and could not respond to their questions. Representatives of Fidelity and CTI also questioned Respondent about what had happened to the money and when it was going to be repaid. Respondent did not answer any of these questions. (Tr. 26-30; Adm. Ex. 1 at 3).
Mr. Kaplan was aware that Mercury had, since its inception, maintained a line of credit at Cole Taylor Bank. Mr. Kaplan testified he was informed by Respondent at a meeting of Mercury's managers that Respondent had secured new line of credit from another bank to pay off the Cole Taylor line that was coming due. As a result, Mr. Kaplan was not concerned about paying off the Cole Taylor line of credit, until he saw where the funds had come from. Mr. Kaplan testified that the Cole Taylor line of credit was a non-recourse loan, and there was no personal liability on the part of any of Mercury's members. Therefore, if Mercury had gone out of business, Cole Taylor would have been limited to the assets of Mercury in seeking to recover on that loan. Mr. Kaplan stated that he had no idea why Respondent used the escrow funds to pay off the Cole Taylor loan. (Tr. 32-36).
Mr. Kaplan testified that he initially thought the second check was used for legal fees related to a class action lawsuit against Mercury and other title companies. That lawsuit had been pending for many years and had been discussed periodically at board meetings. Mr. Kaplan later learned the check was part of a class action settlement, which included the payment of attorney's fees. Mr. Kaplan testified he and the other board members were unaware of the settlement and had not voted on the matter. (Tr. 33-34).
After Respondent advised him what had occurred, Mr. Kaplan wrote a letter to the ARDC regarding the matter because he believed he had a duty to notify the ARDC Respondent had taken funds that did not belong to him. (Tr. 26; Adm. Ex. 1).
B. Analysis and Conclusions
Based upon the facts deemed admitted and the evidence presented at the hearing, we find it was established by clear and convincing evidence that Respondent engaged in the following misconduct:
breach of fiduciary duty;
conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4 of Illinois Rules of Professional Conduct.
The admitted facts and evidence clearly established that Respondent breached his fiduciary duty by making two unauthorized and improper disbursements from Mercury's escrow accounts. It was established that the funds at issue in this case did not belong to Mercury, but were being held by it as escrowee on behalf of various third parties. An escrowee is entrusted with funds that belong to others and has a fiduciary duty to hold the money under the terms agreed to and for the benefit of those for which he is holding the funds. See In re Menegas, 03 CH 106, M.R. 21124 (Nov. 17, 2006) (discipline modified by Court). In addition, pursuant to the terms of Mercury's contract with CTI and its obligations under the Illinois Title Insurance Act, Mercury was required to hold those funds in accounts separate from Mercury's own accounts and to disburse them only in accordance with the purposes for which those funds were entrusted to it. Furthermore, Mercury was not permitted to use those funds to satisfy its own debts or obligations. Notwithstanding these duties and obligations, it was undisputed that Respondent invaded Mercury's escrow accounts on two separate occasions and used those third-party funds without authorization to pay certain business expenses of Mercury. In doing so, Respondent breached the terms of Mercury's contract with CTI, violated the statutory provisions of the Illinois Title Insurance Act, and breached his fiduciary duty as escrowee.
These same facts also establish that Respondent engaged in conversion. Conversion has been defined as any unauthorized act that deprives a person of his or her property permanently or for an indefinite period of time. In re Rosin, 156 Ill. 2d 202, 206, 620 N.E.2d 368 (1993). Respondent's disbursements from the escrow accounts to pay various obligations of Mercury
were clearly unauthorized. These disbursements also resulted in substantial shortages in the escrow accounts, which have not yet been repaid. Thus, the third parties entitled to those funds were deprived of their property as a result of Respondent's actions.
Although the facts indicate the funds were used to satisfy Mercury's business obligations and there was no evidence presented that Respondent used the money for himself or otherwise personally benefitted, this does not alter our conclusion that Respondent engaged in conversion. It is not necessary to show that an attorney used the funds at issue for personal purposes in order to establish conversion. See, e.g., In re Lewis , 118 Ill. 2d 357, 363, 515 N.E.2d 96 (1987) (Court rejects argument premised on respondent's purported use of converted funds for business rather than personal expenses); In re Lenz, 108 Ill. 2d 445, 484 N.E.2d 1093 (1985) (conversion found where attorney used funds in his client trust account to purchase a wheelchair equipped van for another disabled client); In re Wells, 92 CH 576, M.R. 11735 (Dec. 1, 1995) (Review Board at 13) (rejecting attorney's efforts to justify use of title company's escrow funds for business rather than personal purposes).
Finally, we also find that Respondent's misappropriation of these funds involved dishonesty. The facts establish that Respondent took large sums of money he was holding in a fiduciary capacity on behalf of others and used those funds without authorization to satisfy certain business obligations of Mercury. Such conduct, on its face, is inherently dishonest. Moreover, since Respondent did not appear at the hearing and did not testify, there was no evidence presented which might provide any justification, excuse, or other explanation for his actions.
Although the Administrator also charged Respondent with engaging in conduct which tends to defeat the administration of justice or bring the courts or legal profession into disrepute
in violation of Supreme Court Rule 770, we do not find a violation of this Rule. The Illinois Supreme Court recently stated, "Rule 770 is not itself a Rule of Professional Conduct" and "one does not 'violate' Rule 770. Rather, one becomes subject to discipline pursuant to Rule 770 upon proof of certain misconduct." In re Thomas, 2012 IL 113035 par. 92. Accordingly, based on the wording of the allegation in the Complaint before us, we find no violation of Rule 770.
EVIDENCE OFFERED IN MITIGATION AND AGGRAVATION
Mr. Kaplan testified that shortly after the meeting on August 3, 2010, CTI filed a lawsuit against Mercury and Respondent, which sought to recover the funds that had been misappropriated from the escrow accounts. Mercury did not defend that suit and a default judgment was entered against it. (Tr. 34-35; Adm. Ex. 6).
Kevin Shevel is an employed as an internal compliance investigator by Fidelity, CTI's parent company. His job involves reviewing financial records of Fidelity and its agents when irregularities are discovered or there are other issues that require further examination. In August 2010, he was asked to investigate Mercury after one of Fidelity's internal auditors discovered several disbursements made from Mercury's escrow accounts, which benefitted Mercury. Mr. Shevel explained that this is improper, because the funds held in an escrow account are the property of the customers that made the deposits, and it is inappropriate for Mercury to pay its own expenses out of those funds. Mr. Shevel was called in after this was discovered to review Mercury's records and ensure there were no other similar disbursements. (Tr. 40-43).
In early August 2010, Mr. Shevel spent several hours at Mercury's offices gathering copies of bank statements, account reconciliations, and other reports. With regard to the two checks identified by the internal auditor, Mr. Shevel testified it was apparent, based upon their
presentation within the escrow reconciliation, they were not related to any of the funds that were on deposit from third-party clients. (Tr. 43-45).
Since visiting Mercury's offices, Mr. Shevel has also been called upon to do additional work on the matter, including responding to requests from Fidelity's counsel regarding settlement of claims that have been made. Mr. Shevel testified that, to date, Fidelity has incurred approximately $11,000 in costs and $64,000 in attorneys' fees related to this matter. Mr. Shevel testified he is also aware of three unresolved claims currently pending against Mercury or CTI, including a $380,000 claim by Bank of America and two additional claims for $19,000 each. (Tr. 45-47).
Matthew Singer and his law firm represent Bank of America in litigation against CTI and Mercury regarding the escrow funds. Mr. Singer explained that Mercury entered into a minimum release price escrow agreement with Bank of America, whereby funds were deposited into an escrow account at Mercury to cover shortfalls that might occur in connection with the sale of certain condominiums. When Bank of America sought to get that money back, it discovered Respondent had written checks from the Mercury escrow account holding the $380,000. Mr. Singer's law firm filed a lawsuit on behalf of Bank of America against Mercury and CTI in an effort to recover those funds. To the best of Mr. Singer's knowledge, neither Mercury nor Respondent has filed an answer to its complaint and none of the escrow funds has been returned to Bank of America. (Tr. 48-51; Adm. Ex. 9).
Respondent has no prior discipline.
Having found that Respondent engaged in misconduct, we must determine appropriate discipline. In making this recommendation, we take into account that the goal of the disciplinary process is not to punish the Respondent, but to safeguard the public, maintain the integrity of the profession, and protect the administration of justice. In re Timpone, 157 Ill. 2d 178, 197, 623 N.E.2d 300 (1993). We also consider the nature of the misconduct, the aggravating and mitigating factors, the deterrent value of the sanction, and whether the sanction will help preserve public confidence in the legal profession. In re Gorecki, 208 Ill. 2d 350, 360-61, 802 N.E.2d 1194 (2003). Although each case is unique and must be resolved in light of its own facts and circumstances, in order to ensure predictability and fairness we generally strive to impose sanctions that are consistent with those imposed in other cases involving comparable misconduct. In re Howard, 188 Ill. 2d 423, 440, 721 N.E.2d 1126 (1999); In re Chandler, 161 Ill. 2d 459, 472, 641 N.E.2d 473 (1994).
Respondent's misconduct in this case was clearly very serious. While acting as chief operating officer and managing partner of a title company, Respondent breached his fiduciary duties and acted dishonestly by converting funds that were being held in the company's escrow accounts on behalf of third parties. The Court has repeatedly made it clear that it views the intentional and dishonest conversion of funds as particularly serious misconduct. See In re Blank, 145 Ill. 2d 534, 555, 585 N.E.2d 105 (1991); In re Rotman, 136 Ill. 2d 401, 423, 556 N.E.2d 243 (1990); In re Stillo, 68 Ill. 2d 49, 54, 368 N.E.2d 897 (1977). The Court has described the wrongful conversion of funds as a "gross violation of the attorney's oath" which, in the absence of mitigating circumstances, calls for the attorney's disbarment. Stillo, 68 Ill. 2d at 54.
We also note that the total amount at issue in this case, which exceeded $537,000, was obviously substantial. Moreover, Respondent's misconduct did not involve an isolated incident, but two separate improper acts that occurred over a period of time. Furthermore, there was no evidence Respondent informed his partners or CTI what he had done until Mercury was being shut down after the irregularities were discovered during an audit.
Although Respondent's misconduct occurred while he was operating a business rather than conducting a traditional law practice, this does not insulate him from responsibility for his actions. It is well-settled that attorneys are subject to discipline for misconduct that occurs while acting in a private or business capacity, as well as that which occurs in a professional capacity as a lawyer. See In re Abbamonto, 19 Ill. 2d 93, 97, 166 N.E.2d 62 (1960). Thus, the Court has disciplined attorneys in circumstances similar to those present here, where attorneys acting as title agents convert funds they are holding in escrow on behalf of third parties. See In re Gwiazdzinski, 95 CH 726, M.R. 12828 (Sept. 24, 1996) (conversion of escrow funds while acting as principal shareholder and president of title company); In re Wells, 92 CH 576, M.R. 11735 (Dec. 1, 1995) (conversion of funds in escrow account while acting as title insurance agent).
There are also several aggravating factors in this case. The most significant of these is the substantial harm that resulted from Respondent's misconduct. See In re Saladino, 71 Ill. 2d 263, 375 N.E.2d 102 (1978). The evidence showed that Respondent's actions resulted in massive shortages in Mercury's escrow accounts of over a half a million dollars. These funds belonged to third parties, who obviously suffered significant financial losses due to Respondent's misdeeds. Some of these third parties are currently pursuing claims against Mercury and CTI to recover the funds that were misappropriated. This includes pending litigation initiated by Bank
of America in an effort to recover $380,000 it is still owed from one of the escrow accounts. The evidence also showed that CTI incurred additional expenses, including $75,000 in attorneys' fees and costs, investigating these escrow shortages and dealing with this situation.
We also note that, at the time of the hearing in this matter, there was no evidence Respondent had replaced any of these funds or paid any amount of restitution to those who were injured by his actions. Respondent's failure to pay restitution is also an aggravating factor. See In re Fox, 122 Ill. 2d 402, 410, 522 N.E.2d 1229 (1988).
Respondent's misconduct is also aggravated by his lack of continued participation in this disciplinary proceeding. The Court has made it clear that attorneys have a duty to cooperate with the Administrator in disciplinary matters. See In re Smith, 168 Ill. 2d 269, 296, 659 N.E.2d 896 (1995). An attorney's failure to cooperate in his or her own disciplinary proceeding is indicative of a lack of respect for the process and is considered a serious factor in aggravation. See In re Samuels, 126 Ill. 2d 509, 531, 535 N.E.2d 808 (1989); In re Brody, 65 Ill. 2d 152, 156, 357 N.E.2d 498 (1976). Here, although Respondent retained counsel and initially participated in this matter, he later ceased cooperating, as evidenced by his failure to appear for his deposition and failure to attend his own hearing. Although Respondent informed his attorney that he would not be attending the hearing and asked him to convey to the Hearing Board that he did not wish to further contest the matter, his absence from these proceedings is nonetheless an aggravating factor.
Since Respondent failed to appear at the hearing and was barred from presenting any evidence, there is very little mitigation to take into account. The parties stipulated that Respondent, who has been licensed to practice law since 1980, has not been previously disciplined. We also note that the facts indicate the funds at issue were used for Mercury's
business purposes, and there was no evidence presented that Respondent used the money for himself or otherwise personally benefitted from his misconduct. See In re Winthrop, 219 Ill. 2d 526, 560, 848 N.E.2d 961 (2006).
With respect to discipline, the Administrator argues that the serious nature of Respondent's misconduct, coupled with the aggravating factors and the lack of significant mitigation, warrants disbarment. After taking into account the nature of Respondent's misconduct, the aggravating and mitigating factors, the discipline imposed in similar cases, and the purposes of the disciplinary process, we agree that disbarment is an appropriate sanction in this case. The precedent relied on by the Administrator supports disbarment for cases such as this, which involve intentional acts of conversion of substantial sums of money with very little mitigation. This is especially true where the misconduct occurs over a period of time, as it did in this case. In support of this recommendation here, we note in particular the following cases.
In In re Feldman, 89 Ill. 2d 7, 431 N.E.2d 388 (1982), the respondent converted money from one client's estate to fund a personal real estate investment. Several years later, in order to repay those funds, he converted approximately $29,000 from a second estate by forging his client's signature on multiple checks. He also made false statements to the second client that the checks had been deposited into a savings account. Despite the presence of some mitigation, including a lack of prior discipline and payment of restitution, the Court concluded that the mitigating evidence could not overcome his improper conduct. The Court noted that disbarment was "particularly warranted since the conversion and fraud involved were intentional and consisted of a series of improper acts over an extended period of time." Feldman, 89 Ill. 2d at 13.
In In re Levin, 04 CH 133, M.R. 20236 (Sept. 26, 2005), the Court disbarred an attorney for converting $243,000 he was holding in escrow for a client. His misconduct took place over a
four-year period, and he also lied about the matter and fabricated bank records when his client inquired about the funds. Even though the attorney had no prior discipline and made partial restitution, he was disbarred.
In In re Manegas, 03 CH 106, M.R. 21124 (Nov. 17, 2006) (discipline modified by Court), the respondent was disbarred for misconduct he engaged in while president of a mortgage broker and residential lender. Respondent initially converted $100,000 he was holding in his client trust account in connection with a pending real estate transaction by making an unauthorized disbursement to his mortgage company to pay down the property owner's mortgage. He subsequently converted an additional $300,000 he held in escrow in connection with the transaction by making unauthorized disbursements to himself and to his business. In addition to converting funds, the respondent was also found to have breached his fiduciary duties as escrow agent and to have acted dishonestly. He also engaged in improper conflicts of interest and failed to explain the basis for his legal fees.
In re Gwiazdzinski, 95 CH 726, the respondent, acting as an escrow agent, was entrusted to hold funds in three separate real estate transactions. Instead of releasing the funds in accordance with the instructions of the parties, the attorney converted more than $138,000 to his own personal or business use. As a result, he breached his fiduciary duty to avoid self-dealing and caused harm to the parties as well as to the title company, which had to assume responsibility for the debts the respondent failed to pay. The respondent was disbarred.
In In re McLaughlin, 99 CH 72, M.R. 17375 (Mar. 23, 2001), the respondent was allowed to strike his name after the Hearing Board recommended that he be disbarred for intentionally converting over $52,000 in client settlement funds, earnest money being held for an estate, and other funds belonging to the estate's beneficiaries. The attorney also failed to file estate tax
returns and made misrepresentations to the administrator of the estate and its beneficiaries regarding these matters. The attorney later made restitution and reimbursed the estate for its costs and expenses, but this did not occur until after disciplinary proceedings were instituted. Although the respondent had no prior misconduct and had done some pro bono work, these factors were given little weight in light of the severity of his misconduct.
The foregoing cases support disbarment for Respondent's misconduct in this case. These cases demonstrate that attorneys have been disbarred for intentionally converting far lesser sums than Respondent converted in this case. Although this is a severe sanction, we conclude it is warranted here, particularly in light of the substantial sums of money involved, the lack of any restitution, and Respondent's failure to participate any further in these disciplinary proceedings.
For the foregoing reasons, we recommend that Respondent, John Joseph Walsh, be disbarred.
Henry T. Kelly
I, Kenneth G. Jablonski, Clerk of the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois and keeper of the records, hereby certifies that the foregoing is a true copy of the Report and Recommendation of the Hearing Board, approved by each Panel member, entered in the above entitled cause of record filed in my office on February 15, 2013.
Kenneth G. Jablonski, Clerk of the
1 Although the Complaint only references Rule 8.4(c), which is contained in the amended Rules of Professional Conduct effective January 1, 2010, we note that the first check at issue in this
case was written in 2009, when the prior version of the Rules was in effect. Since the language in Rule 8.4(c) is the same as that in the former Rule 8.4(a)(4), however, our findings would be the same under either version of the Rules.