Friday, February 27, 2009

Moonlighting Dishonest?

An Illinois Hearing Board has recommended a four-month suspension based on findings of dishonesty by an attorney who "moonlighted" while employed by a firm. The charges arose from circumstances described in the board's report:

Respondent was employed as an associate in the spring of 1998 at Altheimer & Gray and then as a non-equity partner for approximately five months until the firm dissolved on June 30, 2003. Respondent concentrated his practice at Altheimer & Gray in estate planning. Respondent provided accounting and legal services to clients while he was employed at Altheimer & Gray as an individual and not as a lawyer of the firm, which the Administrator referred to throughout the ARDC hearing as his "moonlighting business." Respondent received income for those services.

In July 2003 Respondent submitted an application to the law firm of Holland & Knight LLP and Holland & Knight LLC ("Holland & Knight"). Respondent did not disclose the existence of his moonlighting business or the clients from his moonlighting business on the application. Respondent also prepared and attached altered versions of his federal income tax returns for 2000, 2001 and 2002 to the application, which displayed only the income he had received from Altheimer & Gray and omitted the income he had received from his moonlighting business.

Respondent was employed as a senior counsel in the Private Wealth Services group of Holland & Knight from August 1, 2003 to May 13, 2005. Respondent entered into an employment contract with Holland & Knight entitled "Senior Counsel Agreement" which provided that Respondent was to devote his full time and attention to the practice of law, not undertake or continue any representation except in accordance with Holland & Knight practices and procedures and that all client income with respect to Respondent's service as an employee of Holland & Knight was the property of the firm. The agreement also acknowledged Respondent's receipt of a copy of Chapter 6 of Holland & Knight's office manual which stated that employment could not be accepted until a conflicts check was conducted for the client and the opposing party and that all compensation for all services performed by a firm lawyer were the property of the firm.

Respondent continued to conduct his moonlighting business while he was employed at Holland & Knight; Respondent provided accounting and legal services to clients individually, not as clients of the firm. Respondent received income for those services directly from the clients. Respondent also co-owned and co-managed residential apartment buildings with Sean Gallagher under the Caulfield Realty Group LLC ("Caulfield LLC") and formed Caulfield Realty and Management Company ("Caulfield Co.") with Mr. Gallagher while he was employed at Holland & Knight. Respondent performed all of the accounting and tax work for the companies and did not disclose his interest in Caulfield LLC or Caulfield Co. to Holland & Knight.

In early May 2005, Respondent gave notice to Holland & Knight of his intent to terminate his employment with the firm on May 13, 2005. Respondent was informed of the approval procedure necessary to obtain a copy of his computer documents. On May 13, 2005, Respondent caused over 400 documents to be exported from Respondent's computer at Holland & Knight to his personal computer at his residence. Respondent did not seek approval or otherwise comply with Holland & Knight's procedures for removing electronic copies of the documents.

The board majority found that the accused lawyer had breached fiduciary obligations in some but not all charged respects. The moonlighting was not dishonest:

We do not find Respondent breached his fiduciary duty to Holland & Knight by preparing individual tax returns for his moonlighting clients because the preparation of tax returns is primarily an accounting function and the evidence presented showed Holland & Knight did not provide that type of service to its clients. Mr. Gelman testified that no attorneys in the Private Wealth Services group at Holland & Knight prepare individual income tax returns for clients. Mr. Kinasz also admitted that he does not actively promote the preparation of tax returns as part of his practice, but testified that attorneys in the tax team at Holland & Knight prepare tax returns similar to the types of tax returns Respondent prepared in his moonlighting practice. However, we conclude from Mr. Kinasz's testimony that he does not regularly prepare tax returns as a part of his practice at Holland & Knight, but as a favor to a few of his longstanding clients.

We also find Respondent's management of Caulfield Realty Group, LLC and Caulfield Realty and Management Co. did not breach his fiduciary obligations to Holland & Knight. Respondent's involvement in Caulfield LLC and Caulfield Co. during the time he was at Holland & Knight was for his own investment purposes. Respondent and his partner, Mr. Gallagher, both credibly testified that Respondent did his share of the work to manage the buildings they own under Caulfield on the nights and weekends.

The dishonesty findings related primarily to the computer-related conduct. A dissenting member would  find additional misconduct and impose a one-year suspension. (Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2009/02/an-illinois-h-2.html

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