A Real Debt

An Illinois Hearing Board recommends that charges of ethical violations be dismissed

The Administrator filed a one-count Complaint against Respondent that charged him with falsely representing in his dissolution proceeding that he owed a client $65,000 and with recording a fictitious mortgage to the client against marital property, after the court ordered that the property be sold. The Hearing Board found that the Administrator did not meet her burden of proving the charged misconduct by clear and convincing evidence. Therefore, the Hearing Panel recommended that the Complaint against Respondent be dismissed.

The allegations involved Respondent’s business dealings with a client 

The charges in this matter are related to Respondent’s dealings with his friend and client, Roman Sacharewycz. Respondent has known Sacharewycz since approximately 1985. (Tr. 46). In April 2007, Respondent began renting office space from Sacharewycz. They had an agreement that Respondent would charge $250 per hour for legal work, and the first two hours of legal work per month would go towards Respondent’s rent. Respondent represented Sacharewycz in numerous matters over the years. He also loaned Sacharewycz money and paid his expenses at times. (Tr. 47-48). Sacharewycz said he would repay Respondent after he sold the building where Respondent rented space. (Tr. 119). On June 29, 2015, Sacharewycz sold that building and received $372,526,79 in proceeds.

On or around July 1, 2015, Sacharewycz gave Respondent a check for $105,000. (Adm. Ex. 2). From those funds, Respondent applied $51,988.12 as repayment of funds he had loaned Sacharewycz or paid on his behalf. Sacharewycz also owed Respondent at least $71,313.06 in legal fees and costs. Respondent did not apply the remaining $53,011.88 toward the outstanding legal fees. Instead, he gave Sacharewycz a $65,000 “credit” toward his outstanding bills. Adm. Ex. 5). Respondent testified he did so because he wanted to remain on friendly terms with Sacharewycz, who was influential in the Ukrainian community and would refer potential clients to Respondent. (Tr. 128). Respondent hoped “at some point in time that we would sit down and he would ask me for like a bigger reduction and that I would have to pay something on his behalf and then eventually that, you know, we would still be friends.” (Tr. 69).

Respondent documented the credit by executing a promissory note on July 2, 2015, which stated he would pay Sacharewycz $65,000, without interest, in monthly installments of $450.

Findings

The timing of the Sacharewycz promissory note and mortgage, as well as the fact that Respondent entered into a similar promissory note and mortgage with Igor Pluta at the same time, significantly undermine the Administrator’s theory of a scheme to mischaracterize the nature of the $105,000 payment from Sacharewycz and deprive Natalia of marital assets. We find it significant that the promissory note and mortgage were executed one year before Natalia filed for divorce. In order for Respondent and Sacharewycz to have schemed to prevent Natalia from obtaining marital assets, Respondent would had to have known or anticipated that a divorce was coming at the time he executed the documents at issue. The Administrator did not establish by clear and convincing evidence that this was the case. The Administrator did not call Natalia or Sacharewycz as witnesses, so the only evidence we have on this issue is Respondent’s testimony. Respondent testified he did not know that Natalia would file for divorce the following year. When asked whether he thought he would ever get divorced, Respondent testified that he “could see it coming.” We take this testimony to mean that Respondent had some concerns about his marriage but did not think divorce was imminent. This testimony alone was not sufficient to rise to the level of discrediting Respondent or establishing that he expected to get divorced and concocted a scheme to deprive Natalia of marital assets.

We also find it significant that Respondent executed a promissory note and mortgage to Igor Pluta at the same time he did so with Sacharewycz. The Administrator did not allege that the Pluta promissory note and mortgage were fictitious, nor has the Administrator provided an explanation for why the Sacharewycz debt was fictitious but the Pluta debt was not. We find it unlikely that Respondent would go to the trouble of creating a false loan agreement with Sacharewycz at the same time he executed a legitimate loan agreement with Pluta. We find it equally unlikely that Respondent recorded a false mortgage that would have defeated not just Natalia’s interest in the sales proceeds but Respondent’s as well. The contentious nature of the dissolution proceedings does not explain why Respondent would act against his own financial interests. The evidence presented did not resolve these issues, and therefore did not clearly and convincingly establish improper conduct.

Insufficient proof

Based on our finding that the Administrator failed to prove by clear and convincing evidence that Respondent’s debt to Sacharewycz was fictitious, we determine that the Administrator did not meet her burden of proof that Respondent’s statements in his financial affidavits, answers to interrogatories, and pleadings in his dissolution matter were false. For the same reasons, we find insufficient proof that the mortgage to Sacharewycz was false. Accordingly, we find that the Administrator failed to prove violations of Rules 3.3(a)(1), 3.3(a)(3), and 8.4(c).

(Mike Frisch)