Filed October 25, 2017
In re Michael Leonard Loprieno
Commission No. 2016PR00082
Synopsis of Hearing Board Report and Recommendation
The Administrator charged that Respondent improperly created, signed and notarized two documents regarding a security interest in real estate. The Administrator alleged Respondent thereby engaged in dishonest conduct.
Respondent prepared and executed one document, which purported to subordinate the interests of one lender in property pledged as collateral for a loan to the interests of another lender, which made a subsequent loan secured by the same property. Respondent filed the document with local authorities and delivered it to the second lender. Respondent prepared and executed a second document, which purported to cancel the subordination agreement. He also filed that document with local authorities. Respondent did not have any authority to act on behalf of the affected parties or to sign the names of any of the individuals whose names he signed on those documents. Respondent also had no authority to use the name and notary stamp of another attorney to purportedly notarize those signatures.
The Hearing Board found the Administrator proved Respondent engaged in dishonest conduct. The Hearing Board recommended that Respondent be suspended for five months.
BEFORE THE HEARING BOARD
ILLINOIS ATTORNEY REGISTRATION
In the Matter of:
MICHAEL LEONARD LOPRIENO,
Commission No. 2016PR00082
REPORT AND RECOMMENDATION OF THE HEARING BOARD
SUMMARY OF THE REPORT
Respondent prepared and executed a document which purported to subordinate one lender's interest in property pledged as collateral for a loan to the interests of another lender, who made a subsequent loan secured by the same property. Respondent prepared and executed a second document which purported to cancel the subordination agreement. Respondent did not have any authority to act on behalf of the affected parties. Respondent also did not have authority to affix signatures of any of the individuals whose names he signed on those documents or to use the name and notary stamp of another attorney to purportedly notarize those signatures. Respondent then filed those documents with local authorities and delivered one of those documents to a lender.
The Hearing Board found the Administrator proved Respondent engaged in dishonest conduct. The Hearing Board recommended that Respondent be suspended for five months.
The hearing in this matter was held on August 7, 2017, at the Chicago offices of the Attorney Registration and Disciplinary Commission (ARDC) before a Panel of the Hearing
Board consisting of Heather A. McPherson, Chair, Michael L. Hahn and David A. Dattilo. Scott Renfroe represented the Administrator. Respondent appeared at the hearing and was represented by James A. Doppke, Jr.
The Administrator filed a one-count Complaint, alleging that Respondent engaged in misconduct based on documents he prepared in relation to a loan. In his Answer, Respondent admitted the factual allegations of the Complaint and denied misconduct.
Respondent was charged with engaging in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4(c) of the Illinois Rules of Professional Conduct (2010). The charges are based on allegations that Respondent knowingly and without authority created and signed documents that contained false signatures and notary stamps.
The Administrator presented testimony from Rick Francois, Mark Tarinelli and Respondent, as an adverse witness. Administrator's Exhibits 1 through 7 were admitted into evidence. Respondent testified on his own behalf.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In an attorney disciplinary proceeding, the Administrator has the burden of proving the misconduct charged by clear and convincing evidence. In re Thomas, 2012 IL 113035, par. 56. The Hearing Board determines whether the Administrator has met that burden. In re Edmonds, 2014 IL 117696, par. 35.
In this case, Respondent's Answer admitted all the factual allegations of the Complaint. Therefore, we consider whether the admitted facts constituted the misconduct charged. In re Paganucci, 06 CH 48, M.R. 21727 (Sept. 18, 2007).
Respondent is charged with engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, by knowingly and without authority creating and signing documents that contained false signatures and notary stamps, in violation of Rule 8.4(c) of the Illinois Rules of Professional Conduct (2010).
In an effort to obtain a loan, secured by property already subject to a mortgage, Respondent prepared a document that purported to subordinate the interests of the original lender to the interests of the second lender. Acting without authority, Respondent signed the names of employees of the first lender on this document and used another person's name and notary seal to notarize those signatures. Respondent also prepared a second document, which purported to cancel the subordination agreement. Again acting without authority, Respondent signed the names of other persons on that document and used another person's name and notary stamp to notarize those false signatures. Respondent's conduct was dishonest and violated Rule 8.4(c).
B. Admitted Facts and Evidence Considered
Before becoming a lawyer, Respondent worked as a realtor and loan originator. He saw a business opportunity in the need of some real estate purchasers for short term loans until they could obtain long term financing. Consequently, Respondent formed LOP Capital, LLC (LOP). LOP made short term loans at a relatively high interest rate, until the borrower could get a conventional loan at a lower rate. The arrangement presupposed that the buyer would quickly obtain other financing and repay the loan from LOP. (Tr. 17-20, 89-93).
Respondent's father and grandfather co-owed LOP with Respondent. They provided the funds with which to begin LOP's operations, by taking out loans from American Community
Bank and Trust (American Community). The loans exceeded $1.5 million. Respondent's father and grandfather each owned real estate, which they pledged to secure these loans. Respondent was to make the payments due to American Community, which included monthly payments of approximately $10,000. (Ans. at par. 1; Tr. 18-23).
LOP enjoyed some initial success. However, beginning in 2008, widespread economic recession caused sharp declines in the real estate market and property values. This created significant problems for LOP, in bringing in revenue and in maintaining its loans from American Community. (Ans. at par. 1; Tr. 20-25, 42-43, 92-93).
As time went on, American Community began to require that its loans be renewed at increasingly shorter intervals. In the renewal process, American Community would assess the adequacy of existing collateral and sometimes required additional collateral to renew a loan. In that context, in 2009 or 2010, LOP executed a deed in trust to American Community, pledging property LOP owned in Stephens County, Georgia as additional collateral for LOP's obligations to American Community. (Ans. at par. 1; Tr. 24-25, 43-44).
LOP's financial problems continued over time. It became increasingly difficult for Respondent to make the payments due to American Community. Respondent described his concern with avoiding foreclosure, particularly on property owned by his father or grandfather. Respondent also described his reluctance to inform his father of the situation. (Ans. at par. 1; Tr. 23-26, 32-34, 42-45; Adm. Exs. 3-6).
In an effort to obtain funds to pay American Community, Respondent tried to sell property and borrow additional funds. Respondent received some loans from individuals, but found only one commercial lender willing to lend funds to him. That lender, Prime Equity of Atlanta, Georgia, agreed to lend LOP $25,000, at eighteen percent interest, provided it received a
first security interest in LOP's property in Georgia. That was the same property LOP had pledged to American Community. (Ans. at par. 2; Tr. 25-28, 79-80, 112, 114).
Respondent assumed American Community would not agree to subordinate its interest to Prime Equity, and he did not ask anyone at American Community about this issue. Instead, on or about January 10, 2011, Respondent created a document entitled "Subordination Agreement." According to this document, American Community agreed to subordinate its rights in the Georgia property to the interests of Prime Equity. Respondent signed the document, using the names of American Community's vice president, Rick Francois, and its chief financial officer, Robert W. Getty. Respondent then signed Mark Tarinelli's name and used Tarinelli's notary stamp to purportedly notarize the other signatures. (Ans. at pars. 3, 4; Tr. 26-30; Adm. Ex. 1).
Respondent attempted to mimic the signatures of each of these individuals. He did not have authority from any of them to sign their names to this document and did not have authority to use Tarinelli's notary stamp. Tarinelli was an attorney with whom Respondent was working, and Respondent had access to Tarinelli's office. Respondent likewise did not have any authority from American Community to take action on its behalf in relation to the Georgia property. Respondent knew the purported Subordination Agreement was false and that his conduct was wrong. (Ans. at pars. 4, 5; Tr. 26-30, 59, 64-65, 77-78).
Respondent tendered the Subordination Agreement to Prime Equity and caused the document to be filed with the local court clerk. Respondent obtained the loan and used the proceeds to pay amounts past due to American Community. (Ans. at par. 6; Tr. 30-31, 36-37).
Respondent also created a document entitled "Cancellation of Subordination Agreement" (Cancellation), which purported to show that American Community cancelled the Subordination Agreement. On this document, and without authority, Respondent signed Francois's name and
purported to notarize that signature using Tarinelli's name and notary stamp. Respondent knew the Cancellation was false. Respondent recorded the Cancellation, on or about June 1, 2012, by filing it with the local court clerk. (Ans. at pars. 7, 8, 9; Tr. 31, 53, 64-65, 77-78; Adm. Ex. 2)1.
At that time, Respondent had not fully paid the loans from Prime Equity or American Community. According to Respondent's testimony, he intended to record the Cancellation as soon as the loan from Prime Equity was ready to go and the purpose of the Cancellation was to put things back in order, with American Community in a first position. Respondent did not notify anyone at American Community of the Subordination Agreement or Cancellation. Respondent knew if he did so the documents would be discovered as forgeries. (Tr. 53, 57, 113).
The Subordination Agreement and Cancellation came to light when American Community later foreclosed on the Georgia property. Francois first learned of those documents when they were sent to him in 2015. (Tr. 63-68). Francois sent the documents to Tarinelli, who likewise first saw them at that time, in August 2015. (Tr. 77, 85, 87).
C. Analysis and Conclusions
It is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation. Ill. Rs. Prof'l Conduct R. 8.4(c) (2010). Rule 8.4(c) is broadly construed, to include anything calculated to deceive, including the suppression of truth and the suggestion of falsity. Edmonds, 2014 IL 117696 at par. 53.
There is no issue as to what occurred. Respondent prepared two documents, which purported to affect American Community's existing interest in property pledged as security for a loan. Respondent knew those documents were false, as he knew he did not have any authority to act on behalf of American Community. Respondent also knew that the persons whose names appeared on those documents had not signed them and that he did not have any authority to sign
their names or use Tarinelli's notary stamp. Respondent's conduct was clearly dishonest and violated Rule 8.4(c).2
EVIDENCE OFFERED IN MITIGATION AND AGGRAVATION
Respondent was licensed to practice law on December 1, 2010. When he created the false Subordination Agreement, Respondent was twenty-three or twenty-four years old and had been licensed to practice law for six weeks. (Tr. 30, 51-52, 111).
Respondent is a sole practitioner and works from his home. He handles various types of matters, except criminal law and family law. Over the last two years, Respondent has performed occasional pro bono work for the pastor of a church he joined in 2014. (Tr. 102-105).
Respondent met Mark Tarinelli in 2010, after Respondent had completed law school, but before he was licensed to practice law. Tarinelli, who was an attorney and a real estate broker, hired Respondent to work for him, initially as a realtor and law clerk. After Respondent was licensed to practice law, he worked for Tarinelli on an of counsel basis. Tarinelli considered himself a mentor to Respondent and felt betrayed by Respondent's use of his name and notary stamp. (Tr. 75-78).
Respondent acknowledged this reaction by Tarinelli was a natural one. Respondent also acknowledged his behavior was wrong and characterized his conduct as extremely stupid. Respondent testified this experience taught him to address problems when they arose, rather than trying to hide them. (Tr. 106-110).
Ultimately, Respondent paid off the Prime Equity loan, but could not keep up payments on the loans from American Community. Respondent discussed the matter with his father, who Respondent testified took the situation very well. By that time, Respondent's grandfather had passed away. (Tr. 35-36, 47-49, 54-55).
As executive vice president of American Community, Rick Francois was familiar with the bank's loans to Respondent, LOP and members of the Loprieno family. Based on Francois's testimony, those loans totaled about $3 million. Some, but not all, of the loans involved LOP. Francois provided an overview of how some of that debt had been resolved. A portion of the debt remained outstanding. (Tr. 61, 63, 65-71).
Respondent was not able to repay the amount still owed to American Community, which he estimated at $500,000. Respondent described the efforts to resolve the debt to American Community. (Tr. 38-41, 94-97, 116). Respondent also had debts outstanding to a number of individuals, including Tarinelli. (Tr. 79-80, 98-101, 114).
By the time of the hearing, American Community owned the Georgia property, through foreclosure. Some issues remained unresolved, which apparently involved the impact, if any, of the fraudulent documents on title. (Tr. 38, 66-68).
Respondent has no prior discipline.
In determining the sanction to recommend, we consider the proven misconduct, as well as any aggravating and mitigating factors. In re Gorecki, 208 Ill. 2d 350, 360-61, 802 N.E.2d 1194 (2003). We also consider the purpose of discipline, which is not to punish the attorney, but to protect the public, maintain the integrity of the profession and protect the administration of justice from reproach. In re Edmonds, 2014 IL 117696, par. 90. While the system seeks some consistency in sanctions for similar misconduct, each case is unique and the sanction must be based on the circumstances of the specific case at issue. Edmonds, 2014 IL 117696 at par. 90.
Respondent engaged in serious misconduct, which entailed clear dishonesty. Respondent prepared and signed two documents, which he knew he had no authority to execute. Each document purportedly affected the right of a lender in collateral pledged to secure its loan. Respondent also falsely notarized the two documents, which ratcheted up the level of dishonesty present in this case.
Respondent's misconduct was not a momentary lapse of judgment. Preparing, executing and purportedly notarizing these two documents involved a number of steps. Respondent also filed each document, filing the Cancellation a year and a half after the Subordination Agreement.
There was little mitigation. Respondent described some limited pro bono work. He did not present any character testimony.
Respondent suggested the Cancellation was mitigating, because it undid the Subordination Agreement. We disagree. Respondent's theory suggests he does not understand the impact of his conduct. The Cancellation, if genuine, would have affected Prime Equity, whose loan had not been repaid when Respondent recorded the Cancellation. More fundamentally, the Cancellation constituted a second fraudulent document, which Respondent prepared knowing it was false and which provided a way to conceal the Subordination Agreement.
Respondent acknowledged his conduct was wrong and expressed remorse. However, to us, Respondent's remorse appeared less related to his misconduct than to the overall situation involving the failure of LOP.
Testimony was presented about the scope of the debts owed to American Community and Respondent's obligations to other persons. We considered that evidence as a reflection of Respondent's financial condition, which clearly contributed to his misconduct. Based on his
own testimony, Respondent cannot pay what remains due to American Community. We found it unnecessary to heap blame on Respondent based on the amounts involved or the number of creditors, particularly since the evidence suggested some of the debt to American Community may have been unrelated to LOP.
Based on Respondent's testimony, his reluctance to tell his father of LOP's financial problems contributed to his decision to prepare the false documents. While the emotion is understandable, it is not uncommon for a lawyer to have to deliver bad news. Lawyers must be able to address such situations in an honest, straightforward manner, even if the situation might entail negative consequences for the lawyer. The sanction we recommend is intended to be sufficiently significant to deter future similar misconduct by Respondent.
We were troubled by the circumstances surrounding the false notarizations. Tarinelli had employed Respondent and given Respondent access to his office. Respondent breached Tarinelli's trust by taking Tarinelli's notary stamp and using Tarinelli's name to notarize false signatures on fraudulent documents.
However, the most troubling aspect of this case is the timing of Respondent's misconduct in relation to the start of his professional career. See generally In re Isaacson, 2011PR00062, M.R. 25805 (Mar. 15, 2013). Respondent was admitted to practice law in December 2010. His misconduct began the following month, in January 2011. Literally within weeks after receiving his law license, Respondent created and executed false documents, conduct he knew was wrong.
The Administrator requested a suspension for at least five months. Respondent suggests a shorter suspension, of not more than ninety days. The parties cited cases to support their respective positions, all of which we reviewed. Those cases provided a useful framework from which we determined the discipline to recommend.
Respondent cited cases in which the attorneys were suspended for sixty to ninety days. This case merits a longer suspension, since Respondent's misconduct was more serious and less mitigation is present here. For example, in In re Ross, 98 CH 70, M.R. 17404 (May 25, 2001) (sixty days), the attorney made false statements on two loan applications, but did not create fraudulent documents, sign the names of other persons without authority or use another person's notary stamp. In In re Jacobs, 2013PR00064, M.R. 26759 (Sept. 12, 2014) (sixty days), the attorney had practiced law for twenty-nine years with no prior discipline. Jacobs, who was disciplined on consent, would have presented favorable character testimony if the case had gone to hearing. Similarly, in In re Heilgeist, 103 Ill. 2d 453, 469 N.E.2d 1109 (1984) (three months), the attorney had a long, otherwise unblemished career and did not stand to benefit from his misconduct.
The Administrator cited cases in which attorneys were suspended for periods which ranged from five to nine months. The cases cited by the Administrator in which attorneys were suspended for six or nine months involved misconduct which was more serious or pervasive and/or significant aggravating factors not present here. Therefore, by comparison, this case would merit a shorter suspension. For example, the attorneys in In re Passman, 93 CH 573, M.R. 12249 (Mar. 26, 1996) and In re Niew, 98 CH 113, M.R. 17491 (May 25, 2001) were suspended for nine months. Passman made multiple, repeated misrepresentations, including false statements to a tribunal and the ARDC. Niew's misconduct included false statements under oath to the ARDC, in addition to notarizing false signatures in more than one matter. Niew also had prior discipline for dishonest conduct. In In re Ruben, 2012PR000120, M.R. 26989 (Jan. 16, 2015) and In re Reynolds, 32 Ill. 2d 331, 205 N.E.2d 429 (1965), the attorneys were suspended for six months. Ruben had engaged in an active and purposeful effort to conceal his own
significant involvement in a series of fraudulent transactions with persons who had defrauded his client. Ruben did not accept any responsibility for his misconduct and used improper tactics to inappropriately delay litigation brought by his former client. Reynolds submitted false affidavits to the bankruptcy court in nine separate matters. The Court observed Reynolds routinely used fraud and falsity and described his conduct as a fraud on the bankruptcy court. Reynolds, 32 Ill. 2d at 336-37. In re Magar, 99 CH 79, M.R. 16581 (Apr. 21, 2000), in which the attorney was suspended for five months, seemed more analogous to this case. Like Respondent, Magar created two fraudulent documents in seeking to obtain a loan and signed the name of another person to those documents without that person's knowledge or authority. Based on the case law, we concluded a five-month suspension was appropriate, given Respondent's misconduct and the aggravating and mitigating factors present here.
For these reasons, we recommend that Respondent be suspended for five months.
Heather A. McPherson
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 October 25, 2017.
Kenneth G. Jablonski, Clerk of the
1 In his Answer, Respondent admitted he created the Cancellation on June 1, 2012. (Ans. at par. 7). Respondent testified he thought he prepared and executed both documents at the same time, but filed the Cancellation later. (Tr. 52-53, 113, 118). Respondent is bound by the factual admissions in his Answer. In re Paganucci, 06 CH 48, M.R. 21727 (Sept. 18, 2007). The difference does not change our decision.
2 The fact that Respondent's conduct did not occur in the context of an attorney-client relationship did not change our decision, given the nature and extent of the dishonesty we found present in that conduct. See generally In re Moran, 2014PR00023, M.R. 27812 (Mar. 22, 2016).