Monday, October 27, 2008

No Conversion Found

An Illinois hearing board has filed a report recommending the dismissal of all disciplinary charges against an attorney alleged to have converted client funds. The board found the lawyer credible and rejected the testimony of the client:

Respondent earned all of the money he used from the D.C. Services account. On June 1, 2004, Lunn [the client] signed an engagement letter agreeing to pay Respondent $15,000 per month for his services. That agreement was never modified or revoked. In the fall of 2004, Lunn and Lunn Partners were being pursued by several creditors and at least one multi-million dollar judgment was entered against them. By November 2004, the Lunn Partners employees, including Respondent, were not being paid. Respondent continued to work for Lunn until October 2005. Based on Respondent’s engagement letter, between November 2004 and October 2005, Respondent should have been paid $180,000. According to Administrator’s allegations, and the admitted facts, Respondent received $159,000 from the D.C. Services account. Therefore, Respondent earned all of the money he received and, in fact, was paid less than he was owed for the period of time in question.

We also find that Lunn authorized Respondent to use the money in the D.C. Services account. It is clear to us that Lunn knew about the account. In fact, Lunn agreed to open a separate bank account to fund the operations of Lunn Partners. It is undisputed that there was nothing illegal or improper about opening this account. In December 2004, Respondent opened the D.C. Services. Not only did Lunn know about the account, it is undisputed that he gave Respondent the Peer Pederson check in the amount of $106,000 to fund the account, and specifically told Respondent to pay certain expenses with that money, including Respondent’s salary.

We further find that Lunn authorized Respondent to collect other funds belonging to Lunn Partners and to use that money to pay expenses, including Respondent’s salary. For example, in an effort to keep Lunn Partners operating, Leaders Bank agreed to lend it up to $135,000. Schuster testified that the Kelly family had invested one million dollars in Lunn Partners, and thought it could protect its investment if Lunn Partners continued to operate. The Kelly family was a part owner of Leaders Bank. The Bank did not want to lend the money to Lunn, so as a condition of the loan, Lunn executed a power of attorney, which gave Respondent broad powers over the business operations of Lunn Partners and 16 other Lunn business entities. On December 1, 2004, Respondent deposited a check in the amount of $45,000 from Leaders Bank into the D.C. Services account. In January 2005, two additional loan checks from Leaders Bank, totaling $40,000, were deposited into the D.C. Services account. Based on these facts, we find that Lunn knew about the loan and authorized Respondent to use those funds.

Additionally, Respondent testified that he discussed with Lunn all of the checks he received and deposited into the D.C. Services account, and how he used the money. Accordingly, Respondent was authorized to use the money and Lunn knew he was using it. We find Respondent’s testimony credible, and because it is credible, we find the Administrator failed to prove that he engaged in conversion. In re Smith, 168 Ill. 2d 269, 283, 659 N.E.2d 896 (1995) (the Hearing Board is in the best position to determine the credibility of the witnesses).

In finding Respondent’s testimony credible, we find Lunn’s testimony, on almost every material fact, not credible. Lunn testified that he did not know about the D.C. Services account, but also stated that when he gave Respondent the $106,000 Pedersen check, Respondent told him he would go through his brother so they could use the money. In fact, Lunn testified that in December 2004, he gave Respondent the Pedersen check with the "understanding that he [Respondent] would be able to figure out some way to deposit the check with something his brother had. Some entity his brother had." Lunn also admitted he authorized Respondent to use the money to pay Lunn, Respondent and other bills...

One interesting note is that one of the judgment creditors of the client (a financial advisor who ran several business entities that experienced financial losses) was one Scottie Pippen, who is not identified as the noted basketball player. The board also criticizes the Adminstrator for pursuing charges not contained in the disciplinary complaint. (Mike Frisch)

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