The Haircut

The California State Bar Court Review Department recommends disbarment of an attorney convicted of crimes

TerBeek first met Daniel Rush at an Instituto Laboral de la Raza (Instituto) dinner in late 2002 or early 2003. The Instituto is an organization that protects the rights of workers with little or no access to legal services. Rush was on the Board of the Instituto, was affiliated with the United Food and Commercial Workers Union (UFCW), and had a private investigation business. TerBeek had just become a partner in the law firm of Mehlman and TerBeek, where he focused on real estate matters. Over the next few years, TerBeek became friends with Rush, who took an interest in TerBeek’s personal and professional life. They saw each other socially a few times a month at Instituto dinners as well as at political and union events. As it turned out, this relationship marked the beginning of TerBeek’s path to serious criminal activities and unethical conduct.

In 2004, Rush began raising the idea of TerBeek acquiring a workers’ compensation practice. By 2006, TerBeek became interested, and Rush introduced him to a lawyer who handled a large volume of workers’ compensation case referrals from the Instituto. TerBeek acquired this practice. Rush facilitated a steady stream of workers’ compensation referrals through the Instituto to TerBeek. Between 2003 and 2006, TerBeek made a number of personal loans to Rush, which Rush paid back with interest.

By 2007, TerBeek’s 20-year marriage was ending and he had a drinking problem. Rush encouraged him to join Alcoholics Anonymous (AA), which TerBeek did on September 1, 2008. TerBeek began his sobriety that day, and Rush was his AA sponsor.

In 2009, TerBeek and Rush began working together to develop business in the emerging medical marijuana industry. TerBeek familiarized himself with local and state cannabis laws. In 2010, Rush began pitching the idea of unionizing medical marijuana workers through the UFCW. Rush helped marijuana business owners set up their businesses and obtain necessary permits. In approximately February 2010, TerBeek entered into a business relationship with Rush to refer those business owners to him in exchange for a portion of the money he earned.

In late 2009 or early 2010, Rush began making aggressive demands for “resources” from TerBeek. Rush insisted TerBeek owed him because he was responsible for TerBeek’s successful practice and his sobriety, and for facilitating referrals of Instituto workers’ compensation cases. Rush and Instituto referrals to TerBeek totaled 1.3 million dollars in attorney fees as of November 2013. TerBeek testified that to pressure him for money, Rush eventually became abusive and threatened to reveal personal information TerBeek had told him as part of the AA process.

The crimes

Between 2010 and 2014, TerBeek paid at least $418,618.71 either to Rush or on Rush’s behalf. TerBeek wrote checks to Rush or to Rush’s family trust. He made notations on the checks such as “H-Cut,” “H/C,” or “H/Cut,” code words for “haircut,” or the share of fees he gave Rush for referrals. On two checks, TerBeek falsely stated that the payment was for professional services. At Rush’s request, TerBeek did not issue 1099 tax forms for these payments so Rush’s income would not be reported to the Internal Revenue Service. TerBeek also paid the monthly balance on a credit card he had provided to Rush. TerBeek testified in federal court that he shared legal fees with Rush until 2015.

Another matter

In 2007, Rush’s uncle died intestate, leaving several heirs, including Rush and his cousins. Rush retained Mehlman and TerBeek to represent his uncle’s trust during the probate process. TerBeek concluded the representation on his own after his law firm dissolved in 2009. At the conclusion of the probate process in January 2010, the probate court approved the creation of the 472 Rush Family Trust (the Trust), of which Rush was trustee. The deeds for several parcels of real property, including 472 West MacArthur Boulevard in Oakland (the property), were transferred into the Trust at its creation.

In early December 2009, TerBeek learned that Rush had encumbered the property with a $420,000 loan, which was due in March 2010. Rush was anxious to pay off the loan because he did not want to lose the property that had been in his family since the Civil War.

Around the same time, in late 2009, Martin Kaufman retained TerBeek to represent him. Kaufman had significant personal assets, including revenue unlawfully obtained from the medical marijuana industry. Kaufman told TerBeek he wanted to invest those funds. TerBeek drafted a sham consulting agreement between Kaufman and the Trust to facilitate Rush’s ability to pay off the loan on the property. The agreement, signed by Kaufman and Rush as trustee, provided that the Trust would pay $500,000 to Kaufman for consulting services. The $500,000 was payable in monthly installments of $3,000, with a lump sum payment of $220,000 due at the termination of the agreement. In fact, Kaufman did not provide any consulting and gave the $500,000 to Rush and the Trust as a loan.

Kaufman delivered the $500,000 in cash, in a shopping bag, to TerBeek’s office in January 2010. Rush took $80,000 and instructed TerBeek to use the rest to pay off the $420,000 loan on the property. TerBeek deposited the cash at Wells Fargo and Bank of America, intentionally making deposits of less than $10,000 to avoid regulatory detection by the banks. He testified that, in this process, he used his client trust account for deposits. TerBeek then obtained a cashier’s check for $420,000 and paid off the loan. Early on, Rush told TerBeek that he could not make the monthly $3,000 payments to Kaufman, so TerBeek made them, writing checks to the Trust, which then paid Kaufman. TerBeek was not happy about covering Rush’s payments and told him to consider them his split of the fees TerBeek made from the Instituto referrals.

He also provided “bad advice” to another client to benefit Kaufman and negotiated a forgiveness of the Kaufman loan.

When the FBI raided his law office, he cooperated and wore a wire 

 According to the United States Attorney’s Office’s sentencing memorandum, TerBeek cooperated for two and one-half years by “covertly recording his interactions with Rush and then assisting the government with trial preparation.”

The review board found moral turpitude

In sum, we find that all of TerBeek’s misconduct stems from his relationship with Rush. TerBeek paid kickbacks to Rush through 2015. He laundered money to protect and please Rush. He paid Rush’s debts as referral payments. And he lied to Anderson to protect Rush’s and Kaufman’s interests. TerBeek’s entire course of conduct was designed to maintain a financially beneficial relationship with Rush and constitutes facts and circumstances involving moral turpitude that surround both convictions.

As to mitigation

We find TerBeek is not entitled to mitigation for physical or emotional difficulties. He began a period of sobriety in September 2008, when he started to attend AA—nearly two years before his criminal conduct began. Thus, there is no nexus between TerBeek’s substance abuse and his misconduct; completing LAP does not establish one. As to pressure by Rush, we assign no mitigation credit. As noted, TerBeek made clear to the federal court and to the hearing judge that he acted freely despite Rush’s conduct toward him.

Sanction

The reasons TerBeek engaged with Rush may be many and complicated, but they boil down to his desire for money and power. By associating with Rush, he became wealthy and enjoyed increased status and power. At some point in TerBeek’s unblemished career, he chose to become Rush’s criminal accomplice. He used his legal skills to draft fraudulent documents and his attorney trust account to help facilitate his money laundering. TerBeek acted freely and any pressure he felt from Rush does not make his dishonest misconduct less serious or excusable. In the practice of law, honesty is absolutely fundamental. Without it, “the profession is worse than valueless in the place it holds in the administration of justice.” (Tatlow v. State Bar (1936)

(Mike Frisch)