Friday, January 23, 2009

Aiding Fraud Draws Suspension

The Virgina State Bar reports the following sanction order:

On October 17, 2008, a three-judge panel of the Chesterfield County Circuit Court imposed a suspension of one  year and one day on Steven  Scott Biss, effective January 1, 2009. In a corporate and securities matter, he violated professional rules that govern competence, scope of representation, and misconduct that involved deliberately wrongful acts that reflect adversely on his fitness to practice.

The opinion recites findings that the attorney had assisted his corporate client in a fraudulent scheme and made misrepresentations to a judge. The attorney had represented a Hong Kong company that sought to purchase several million shares of a Delaware corporation. He violated securities laws (attributed to incompetence) and improperly released escroed shares to his client, which had not paid for them (attributed to dishonesty). (Mike Frisch)

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This case is facially flawed.

The lawyer violated U.S securities laws by soliciting proxies without first filing the appropriate documentation with the S.E.C. There seems no dispute as to this and the lawyer was clearly incompetent for doing so. As soon as the lawyer was aware of his mistake, he attempted to rectify it by filing the appropriate proxy material but, of course, it was too late.

However, the Virginia court was determined to turn a simple competence case into one which is much more serious. The court then holds that the lawyer’s negligence violates their Rule 1.2(c) because he SHOULD HAVE known that the conduct was criminal or fraudulent. Yet Virginia’s Rule 1.3(c) provides that “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer KNOWS is criminal or fraudulent”. (Emphasis added.)

Finally, the court cites a paragraph of testimony before a U.S. District Court which it holds to be proof of a deliberately wrongful act but fails to explain why it believes so. Does the court think this statement is criminal? Did the U.S. District Court find so? Is the lawyer’s statement even wrong let alone, a deliberately wrongful act? What was the context in which it was spoken? This failure to explain is especially troubling because the statement goes to the thinking of the lawyer and there is nothing in the opinion which would contradict that statement. In fact, given the obvious manoeuvrings going on at the time, the statement actually appears to be a very candid and honest statement of the lawyer’s thinking.

All of which leaves me wondering why the Virginia court has tried so hard to turn a simple mistake into so much more. The impression I have is that the lawyer had stepped on some very powerful toes and that, for whatever reason, the Virginia court has allowed itself to become their tool for vengeance.


Posted by: FixedWing | Jan 24, 2009 6:34:57 AM

This article provides a good flavour for the case which has already gone to the Second Circuit once:

Note also that the Hongkong company, Cyberian, appears to share its name with the Virtual Commonwealth of Cyberia (a.k.a. the Federal Republic of Cyberia). You can find them listed on a virtual version of Wiki:

How appropriate that a virtual company would be named after a virtual country.

No wonder the U.S. District Court judge was getting pissed off. One has to wonder why the Virginians would allow themselves to become embroiled in this insanity.


Posted by: FixedWing | Jan 24, 2009 7:27:05 AM

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