Split Decision

An Illinois Hearing Board found some but not all misconduct charged by the Administrator and a majority favored a six-month suspension.

The Administrator filed a two-count Complaint against Respondent. Count I alleged Respondent neglected a foreclosure matter and made false statements to her clients about the status of the matter. Count II involved a dispute over the sale of a business and alleged Respondent made a statement of material fact or law to a tribunal which she knew or reasonably should have known was false, counseled a client in conduct she knew to be illegal or fraudulent, and engaged in conduct that was dishonest and prejudicial to the administration of justice. Respondent denied all allegations of misconduct.

In Count I, the Hearing Board found the Administrator proved Respondent failed to act diligently and to properly communicate with her clients but did not prove the remaining charges.

With respect to Count II, a majority of the Hearing Panel found Respondent acted dishonestly and counseled a client in conduct she knew to be illegal or fraudulent by opening a bank account that she allowed her client to use to move funds in contravention of court orders. Respondent also acted dishonestly by misrepresenting that her clients’ deposit of approximately $180,000 of corporate funds into Respondent’s business account constituted partial payment of an agreed-upon $250,000 flat fee for legal services. The majority found no such agreement existed at the time the funds were deposited into Respondent’s account, and the evidence showed the funds were transferred to keep them out of reach of the opposing party in the business dispute. A dissenting member of the Hearing Panel did not find any charges in Count II to be proven.

A majority of the Hearing Panel did not find clear and convincing evidence of a false statement of material fact to a tribunal, but a dissenting member of the Hearing Panel did find sufficient proof of that charge.

On Count Two this key finding

We are convinced from all of the circumstances, and despite any testimony to the contrary, that Respondent established and allowed the trust account to be used as a means of transferring funds to the business of her clients while bypassing the First American Bank accounts; that Linda was made a signatory to the trust account to expedite such transfers; and that both the Respondent and Linda participated in and were aware of the transfers into the account. In fact, Respondent made the initial transfer of $46,000 to her trust account and regardless of whether she “directed” the subsequent transfer to her trust account or merely “requested” it, she was aware of the transfer and did nothing to avoid or prevent it. Regardless of Respondent’s desire or motive to save the business of her clients, her actions were intended to allow the transfer of funds to her clients without using the First American Bank accounts, thereby avoiding court orders, and these actions were fraudulent, in violation of Rule 3.3(a)(6).

The dissents

Rowschaun Jones, dissenting in part:

Unlike the majority, I find the Administrator proved Respondent gave false testimony to the McHenry County Court by answering “yes” when asked whether funds were transferred from First American Bank into her trust account. Respondent had to have known the non-IOLTA account she entitled a “trust account” did not exist at the time of the July 31, 2007 transfers because she opened the “trust account” herself on August 4, 2007. Respondent also knew the purpose of the hearing was to determine where the funds at issue went after they left First American Bank and how much of the funds remained. Therefore, the identity of the account into which they were transferred was material. By answering “yes,” Respondent conveniently avoided informing the Court and the opposing parties of the multiple transfers between Respondent’s business account, her “trust account,” and the Multisports account and thereby prevented the Court from learning what actually happened with the funds. As an officer of the court, Respondent had an obligation to provide the Court with accurate information. Instead, she intentionally misrepresented the facts. I do not find Respondent’s explanation of nervousness and memory problems credible and am particularly troubled by her testimony that she answered “yes” because Don Engel told her to answer all of his questions “yes.” For these reasons, I would find a violation of Rule 3.3(a)(1). I concur in the majority’s remaining findings and sanction recommendation.

Cheryl M. Kneubuehl, dissenting in part:

I concur in the majority’s findings on Count I but dissent with respect to the findings on Count II. I do not find clear and convincing evidence of any misconduct in the Mission Bay matter and disagree with the majority’s findings in the following respects. I do not find misconduct related to Linda Post’s transfer of $88,695.86 from the Multisports account to Respondent’s trust account. It is significant that Linda Post took this action, not Respondent. Respondent did not have control over Linda Post and should not be held responsible for Linda Post’s decisions and conduct. I also disagree that this transfer violated the temporary restraining order (TRO) in place until 9:30 a.m. on August 16, 2007. The TRO prohibited the transfer of funds “except as required in the ordinary course of business.” These funds were transferred in order to pay legal and other expenses so Mission Bay could remain in operation. In my view, this qualifies as part of the “ordinary course of business” and therefore did not violate the TRO.

With respect to Respondent’s fee, the purchasers testified they agreed to the fee and were aware of the funds transferred to Respondent. I do not give credence to attorney Heuel’s testimony that a $250,000 fee was exorbitant, given that Respondent paid the fees of at least two other attorneys and a forensic accountant from her own fee. I also do not find Respondent’s fee unreasonable compared to the fees paid to other attorneys involved with the Mission Bay litigation and bankruptcy matters, including Trustee Fogel and Don Engel. The evidence showed Respondent’s fee was reasonable under the circumstances and agreed to by her clients, who were very satisfied with Respondent’s representation. I do not find any misconduct related to her fee.

I do have concerns about the manner in which the stock purchase agreement was drafted and executed, but my concerns involve individuals other than Respondent. In my view, Respondent acted appropriately for her clients under difficult circumstances.

I also disagree with the recommended sanction. Although I believe a period of suspension is appropriate, a six-month suspension is punitive and unnecessary. A lesser suspension will adequately protect the public and the profession without the onerous requirements a six-month suspension will place on Respondent. Therefore, I would recommend a suspension of less than six months and until Respondent completes the ARDC Professionalism Seminar.

(Mike Frisch)