Tuesday, July 28, 2009

Inconsistent Testimony Shows Lack Of Remorse

The New York Appellate Division for the First Judicial Department rejected a proposed one-year suspension and suspended an attorney for three years. The attorney had been convicted of a misdemeanor serious crime involving falsification of business records in the second degree. The court sets out the facts in detail as well as the basis for its sanction determination:

The Hearing Panel found that respondent was vice president and general counsel to Take-Two Interactive Software, Inc., a maker of video games. In early 2002, NASDAQ made an official inquiry regarding the company's financial statements and, in particular, whether any executive officers had received stock options which had not been issued under a stockholder-approved plan ("non-plan" options). Inasmuch as Take-Two had no Chief Financial Officer, respondent responded to the inquiry.

Respondent testified at his deposition and before the Hearing Panel that, after consulting with outside counsel, he found out that two company executives had received "non-plan" options and he and the Chairman and CEO of Take-Two, Ryan Brant, to whom respondent primarily reported, then asked outside counsel whether they could redesignate the "non-plan" options to "plan" options by the company. According to respondent, outside counsel did not object to that approach. Respondent testified that he believed that Brant had then gone back to accounting and had the options redesignated. Two days later, Brant told respondent that the non-plan options had indeed been so redesignated.

Accordingly, in a letter dated March 6, 2002, respondent advised NASDAQ that no "non-plan" options had been issued to any executives of the company; however, within a week, Brant told respondent that the non-plan options had not, in fact, been redesignated. Respondent testified that he then drafted a letter to NASDAQ, dated March 14, 2002, correcting the inaccurate information contained in the March 6 letter but, in several conversations with Brant about the letter, Brant deemed it to not be in the best interests of the company and requested that respondent not send the letter. Respondent acceded to Brant's request and never sent the letter or otherwise corrected the false information given to NASDAQ.

Less than two months later, on May 2, 2002, respondent, on the advice of outside counsel, devised an internal ethics compliance questionnaire and certificate of compliance and had all appropriate employees of the company, including himself, sign it. Two questions asked were if he was aware of any company records that improperly described a transaction and if he was aware of any false entries made in the books and records of the company. Respondent answered "no" to both inquiries. Admitting to the Hearing Panel that those responses were inaccurate, respondent testified that when he filled out the questionnaire, the March 6 letter was not on his mind. However, the Panel commented, "[w]e have difficulty understanding why it was not, but if, indeed it was not, it raises the question of the extent to which Respondent believed it necessary to provide accurate answers to questions whether from Nasdaq or in the internal company inquiry."

Four years later, in June 2006, the New York County District Attorney commenced an investigation into the alleged backdating of stock options by Take-Two. During the course of that investigation, respondent was interviewed. In February 2007, the company's CEO, Brant, pleaded guilty to charges arising from the backdating investigation. In May 2007, respondent was told by his lawyer that the District Attorney's office intended to charge him with falsifying the company's financial statements. Respondent was then offered a plea deal whereby he pleaded guilty to the misdemeanor of falsifying business records —- the false business entry being the March 6 letter to Nasdaq. Notably, the factual basis recited in the plea agreement provided, in relevant part, that on or about March 6, 2002, "Kenneth Selterman knowingly prepared a letter containing false information addressed to Nasdaq and which he caused to be sent...."

As the Hearing Panel found, inasmuch as respondent does not dispute that he has been convicted of a "serious crime" within the meaning of Judiciary Law § 90(4)(d) and the rules of this Court (22 NYCRR § 603.12), the only issue to be determined is the sanction to be imposed.

In that regard, the Committee, in its current motion, as it did during the hearing, contends that respondent's testimony concerning the facts underlying his guilty plea was inconsistent with the factual premise contained in his plea agreement, and, such an attempt to mitigate the seriousness of his criminal conduct constituted an aggravating factor. Specifically, the Committee contends that respondent's testimony that he relied on Brant's representation regarding the conversion of the non-plan options when he wrote his March 6th letter to NASDAQ differed from his admission in the plea agreement, which stated that he acted with intent to defraud NASDAQ in the first instance.

The Hearing Panel disagreed concluding that the facial inconsistency between respondent's testimony and the plea agreement was apparent, but not dispositive, finding that it was certainly conceivable that respondent had always adhered to the substance of what he had testified to, but that for reasons of expediency the District Attorney's Office drafted the factual premise portion of the plea agreement in the simplest and most uncomplicated way possible. If that was what happened, the Panel stated that it had no concern.

In order to resolve the issue, the Panel suggested that respondent's counsel at the time, Mr. Heiss, appear and provide information about the circumstances surrounding the plea but, ultimately, because of a continuing SEC investigation and the uncertain effect of a limited waiver of attorney-client privilege, Mr. Heiss did not appear. Thus, the Panel found:

The question remains —- is respondent endeavoring to mitigate his conduct, thus demonstrating a lack of genuine remorse? On this issue, one which is open to competing interpretations, we decline to find an aggravating factor for two reasons. First, it is just as likely than not that respondent has consistently adhered to his factual recitations and that the plea agreement reflects the District Attorney's streamlined version of events. Second, whether respondent knowingly presented inaccurate information in the first letter or purposefully failed to correct inaccurate information eight days later is a distinction of marginal significance in any event. Under either scenario, the crime has been committed and respondent admits it.

In support of its motion, the Committee argues that a suspension coextensive with respondent's three-year probationary period is justified but in no case less than a one-year suspension. In addition, the Committee asks this Court to reject the Hearing Panel's suggestion that we impose a suspension nunc pro tunc because the Panel did not find that respondent had voluntarily ceased practicing law during that time, only that he was unemployed, and because this Court did not suspend respondent on an interim basis pending the resolution of the serious crime proceeding, therefore, he could have continued to practice law.

In support of censure, respondent points out that the Committee's basis for a one-year suspension is aggravating factors which the Hearing Panel never found, and that respondent's conduct demonstrated a "pattern" of fraud/dishonesty which the Panel similarly did not find. While respondent cites to numerous misdemeanor cases where censure was imposed, he also seems to support the Panel's suggestion of a retroactive suspension as it is "nearly the functional equivalent of a public censure."

Taking into consideration the evidence considered by the Panel in mitigation, e.g., respondent's prior unblemished disciplinary record; his cooperation with the Committee, the prosecutor, and the company's internal investigation; and the character witnesses who attested to his reputation for honesty and integrity, we disagree with the Panel's recommendation that respondent be suspended for one year. We also disagree with the Panel's finding that the facial inconsistency between respondent's testimony and the plea agreement had no bearing as to whether such inconsistency should be an aggravating factor in determining the appropriate sanction. Instead, we find that respondent's inconsistent testimony about his culpability of the intentional fraud should have been construed as a lack of remorse, and his additional conduct of providing false answers on the company's internal questionnaire and certificate of compliance demonstrated a "pattern" of fraud and dishonesty, which should be considered as evidence in aggravation. Therefore, in light of all the circumstances, including respondent's position, his level of sophistication and legal experience, and his apparent lack of remorse, we find that a three year suspension is appropriate.

(Mike Frisch)

July 28, 2009 in Bar Discipline & Process | Permalink | Comments (0) | TrackBack (0)

Attorney's Liens For Patent Prosecution Work

The Massachusetts Supreme Judicial Court decided the following two questions in the affirmative:

We consider in the present case, as a matter of first impression, the scope of the Massachusetts attorney's lien statute (lien statute), G.L. c. 221, § 50, vis-à-vis patent prosecution work. The United States Court of Appeals for the First Circuit has certified the following questions to this court, pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981) [FN2]:

"1. Does [G.L. c. 221, § 50,] grant a lien on patents and patent applications to a Massachusetts attorney for patent prosecution work performed on behalf of a client?

"2. If [G.L. c. 221, § 50,] does grant a lien and the issued patents or patent applications are sold, does the attorney's lien attach to the proceeds of the sale?"

The court concluded:

By its substantial amendment of the lien statute in 1945, the Legislature significantly expanded an attorney's right to recover legal fees for services rendered to a client in a variety of proceedings. The language of G.L. c. 221, § 50, states that an attorney shall have a lien for reasonable fees and expenses not only from the "authorized commencement of an action, counterclaim or other proceeding in any court," but also from the "appearance in any proceeding before any state or federal department, board or commission." When an attorney files a patent application for a client with the USPTO, that action constitutes appearing in a proceeding before a Federal department. [FN6] See 35 U.S.C. § 1 (2006) (USPTO was established as agency of United States, within Department of Commerce); 37 C.F.R. § 10.1 (2008) ("proceeding" before USPTO includes application for patent). Moreover, the broadening of the statute suggests a recognition by the Legislature that attorneys are entitled to be compensated for the work they perform that falls outside the purview of traditional litigation "in any court."

In assessing the scope of an attorney's lien for reasonable fees and expenses, the language of G.L. c. 221, § 50, provides that the attorney shall have a lien "upon his client's cause of action, counterclaim or claim, upon the judgment, decree or other order in his client's favor entered or made in such proceeding, and upon the proceeds derived therefrom." In the context of patent prosecution work, the patent application is the client's "claim." It is a request for recognition of a property right whereby an inventor can exclude all others from making, using, or selling a patented invention for a designated period of time. Therefore, in accordance with the first phrase of the "upon" clause, when rendering legal services to a client to secure a patent, an attorney can assert a lien on the patent application when it is filed with the USPTO, and the lien necessarily remains attached to the subsequently issued patent, protecting the attorney's right to compensation.

Contrary to the argument of the liquidating supervisor, the language of G.L. c. 221, § 50, does not require a "judgment" in order for an attorney's lien to attach. The repetition of the word "upon" in the statute describes three separate and independent bases for the assertion of an attorney's lien, namely (1) "upon [the] client's cause of action, counterclaim or claim," (2) "upon the judgment, decree or other order in [the] client's favor entered or made in such proceeding," and (3) "upon the proceeds derived therefrom." Interpreting the statute as requiring a "judgment" before a lien can attach, would render superfluous the words in the first "upon" clause. As we have already stated, every word of a statute must be given effect. See Bankers Life & Cas. Co. v. Commissioner of Ins., supra. Had the Legislature intended to limit the parameters of the lien statute to only those instances when an attorney has obtained a judgment, then the Legislature simply would have said that the attorney shall have a lien for his reasonable fees and expenses "upon the judgment, decree or other order in his client's favor," and nothing more.

The case is Ropes & Gray LLP v. Jalbert, decided July 28, 2009.  (Mike Frisch)

July 28, 2009 in The Practice | Permalink | Comments (0) | TrackBack (0)

Charges Filed Against Judges

KTAR.com reports:

A magisterial district judge in suburban Philadelphia is accused of reducing a fine her grandson got for underage drinking and screaming at a police officer.

The state Judicial Conduct Board made the allegations Monday in a complaint about District Judge Susan McEwen.

The complaint says McEwen's then-18-year-old grandson was cited for underage drinking at a 2007 party held at her home while she slept. The case was assigned to another judge, who found the teen guilty and fined him $300. The complaint says McEwen reduced the fine to $150.

McEwen is also accused of screaming and swearing at a police officer about being called in to sign a warrant at about 4 a.m.

McEwen's lawyer didn't immediately respond to a phone message left Monday night.

The Examiner.com reports on unrelated charges against another judge:

A state watchdog panel Monday charged a district judge from Erie County with violating the state constitution and ethical rules by harassing women and lying about his qualifications to hold office.

The Judicial Conduct Board alleged that Judge Gerard L. Alonge brought disrepute to the judiciary by making harassing phone calls and having improper contact with more than a half-dozen women, including lawyers and law clerks he worked with.

Erie County's president judge, Elizabeth Kelley, asked the board to investigate after she issued two written warnings to Alonge to stop the harassment. In the most recent letter, written earlier this year, she advised Alonge that he was "well on his way to destruction," the board said in its complaint.

While campaigning for office in 2005, Alonge also misrepresented himself as an adjunct faculty member of the criminal justice department at Mercyhurst College-North East, the board said. Although he was on a list of people available to teach, he never taught a class as an adjunct professor, it said.

(Mike Frisch)

July 28, 2009 in Judicial Ethics and the Courts | Permalink | Comments (0) | TrackBack (0)

Tax Offense Leads To Suspension

An attorney who had entered a guilty plea to one count of failure to file state income taxes was suspended for 90 days by the South Carolina Supreme Court. The court's reasoning:

Respondent admits that by his conduct he has violated Rule 8.4(b) of the Rules of Professional Conduct, Rule 407, SCACR (it is professional misconduct for a lawyer to engage in conduct that is prejudicial to the administration of justice).  We also find respondent violated the following Rules of Professional Conduct:  Rule 8.4(a)(it is professional misconduct for a lawyer to violate the Rules of Professional Conduct); Rule 8.4(b)(it is professional misconduct for a lawyer to commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness); and Rule 8.4(d)(it is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation).

Respondent also admits he has violated the following Rules for Lawyer Disciplinary Enforcement, Rule 413, SCACR: Rule 7(a)(4) (it shall be a ground for discipline for a lawyer to be convicted of crime of moral turpitude or serious crime); Rule 7(a)(5) (it shall be a ground for discipline for a lawyer to engage in conduct tending to pollute the administration of justice or to bring the courts or the legal profession into disrepute or conduct demonstrating an unfitness to practice law).  We also find respondent has violated Rule 7(a)(1), RLDE, Rule 413, SCACR (it shall be a ground for discipline for a lawyer to violate the Rules of Professional Conduct or any other rules of this jurisdiction regarding professional conduct of lawyers).

CONCLUSION

We find a ninety day suspension is the appropriate sanction for respondent’s misconduct.  Accordingly, we accept the Agreement for Discipline by Consent and suspend respondent from the practice of law for a ninety day period.  However, we deny respondent’s request that the suspension be made retroactive to the date of his interim suspension.  Respondent shall not be eligible for reinstatement or readmission until he has successfully completed all conditions of his sentence, including, but not limited to, any conditions of probation.  Rule 33(f)(10), RLDE, Rule 413, SCACR.  Within fifteen days of the date of this opinion, respondent shall file an affidavit with the Clerk of Court showing that he has complied with Rule 30, RLDE, Rule 413, SCACR.

The attorney has paid the taxes, as well as a fine and the costs of prosecution that were imposed in the criminal case. (Mike Frisch)

July 28, 2009 in Bar Discipline & Process | Permalink | Comments (1) | TrackBack (0)

Monday, July 27, 2009

I've Got You Under My Skin

A Three-Judge Panel in Virginia accepted and imposed an agreed 30 day suspension for misconduct in the defense of a first-degree murder case. The attorney had endorsed and filed a motion for permission to issue testimonial subpoenas to two attorneys who represented the person that the defendant had allegedly hired to commit the murder. The motion alleged as a basis that the prosecuting attorney had contacted the two lawyers "for help in fabricating a case against the Defendant."

The attorney had never communicated with either of the lawyers about the allegations prior to the filing of the motion. One testified that the attorney told him he had filed the motion to "either get [the prosecutor] off balance or get under [his] skin during the course of the prosecution of the case..."

A sanctions hearing conducted by the trial court led to a finding that the motion falsely accused the prosecutor of suborning perjury. The attorney had appealed the sanction imposed ($4,000.00) all the way to cert. denied by the U.S. Supreme Court. (Mike Frisch)

July 27, 2009 in Bar Discipline & Process | Permalink | Comments (0) | TrackBack (0)

Power Of Attorney

A summary of a disciplinary matter from the web page of the Massachusetts Board of Bar Overseers:

On January 27, 2009, the respondent pled guilty in the United States District Court for the District of Massachusetts to six felony counts of wire fraud in violation of 18 U. S. C. § 1343 and one felony count of mail fraud in violation of 18 U. S. C. § 1341. The charges arose from the respondent’s representation of a retired educator who held two single-life annuity contracts administered by TIAA-CREF that paid her a monthly sum

In 1989, the respondent was given power of attorney for the woman. The respondent became executor of her estate when she died in 1994. The respondent did not report the woman’s death to TIAA-CREF, and continued to collect the payments for fourteen years. In 1996, the respondent asked TIAA-CREF to change the mailing address for the monthly payments to his post office address. In 1998, he responded to TIAA-CREF’s regarding the woman that she was still alive but was physically incapacitated. The respondent collected a total of $237,291.80 illegally, which he used to pay for family entertainment and other expenses.

TIAA-CREF did not discover that the woman was deceased until March 2008. In June 2008, TIAA CREF called the respondent to inquire about the status of the account. The respondent told the caller that he represented the woman, that she had died, and that he was the executor of her estate. On June 10th, the respondent sent a letter to TIAA-CREF stating that the date of death was April 10th, without providing the year, thereby falsely implying that her death was recent.

The respondent was temporarily suspended from the practice of law on February 19, 2009. He complied with the order of temporary suspension on March 19, 2009. On April 1, 2009, the respondent filed an affidavit of resignation pursuant to S. J. C. Rule 4:01, § 15, with the Board of Bar Overseers. He acknowledged that his conduct violated Mass. R. Prof. C. 8.4(b) and (c). Bar counsel asked the board to recommend that the affidavit of resignation be accepted and an order of disbarment entered effective March 19, 2009.

On April 13, 2009, the Board of Bar Overseers voted to recommend to the court to accept the affidavit of resignation and enter a judgment of disbarment effective March 19, 2009. On April 27, 2009, the Supreme Judicial Court for Suffolk County (Spina, J.) accepted the affidavit of resignation and entered judgment of disbarment effective March 19, 2009.

The case is Matter of Passmore, No. BD 2009-15. A Department of Justice release describes him as an attorney and criminal justice professor. (Mike Frisch)

July 27, 2009 in Bar Discipline & Process | Permalink | Comments (1) | TrackBack (0)

Yes And No

The Pennsylvania Supreme Court granted the reinstatement petition of one applicant and denied that of another. The court granted the petition of an attorney who had consented to disbarment in New York as a result of a fraudulent conveyance designed to shield his marital home from loss in a legal malpractice action against him. He has been employed in a number of positions since the 2002 disbarment, including giving bar and bat mitzvah lessons. He has been treated for depression and was dealing with family health issues at the time of the misconduct.

The court denied the petition of an attorney who had been suspended for a year and a day in 2006 for escrow account violations. He had failed to make full disclosures concerning his post-suspension conduct in the reinstatement petition. He had also been employed as a secretary/legal assistant to an attorney without making required disclosure to the Disciplinary Board. (Mike Frisch)

July 27, 2009 in Bar Discipline & Process | Permalink | Comments (0) | TrackBack (0)