Saturday, October 3, 2009
Posted by Jeff Lipshaw
I am not delighted that Michigan State just scored, but I was delighted to see just now that an old friend, Ron Torbert (left), is the referee. He was a first year associate at Dykema Gossett in Detroit (out of Harvard Law School and Michigan State), and wrote the brief in Borman's v. MPCGA, a reported 6th Circuit decision. He was one of the star young litigators at Dykema until I cheesed off some of my former partners when I hired him as the General Counsel of the AlliedSignal Safety Restraints Division (I only hired the best). Ron eventually returned to Dykema as a partner, and I believe is now the general counsel of Barton-Malow, a large construction firm in the Detroit area.
I knew that Ron had started refereeing high school football many years ago, and had moved up through the ranks of small colleges, then the MAC, and now is at the pinnacle of college refereeing. Many Big Ten referees (Jerry Markbreit, for example) have gone on the NFL.
Great job, Ron, and call a few more penalties on your alma mater.
Posted by Jeff Lipshaw
There's a theory in cognitive science (Mark Turner's, primarily, but I have to continue reading to know how he and Gilles Fauconnier collaborate)* that what makes us uniquely human is the ability to take ideas from two influencing spaces and create new distinct meanings. My dogs, for example, clearly see meaning in my putting on my boots and jacket at 6:00 a.m. (that "means" we are going for a walk), but, as far as I know, they aren't able to create metaphors from that influencing space into, say, poetry, or symbolism, or invention. I, on the other hand, impart so much metaphorical meaning into a bunch of young men beating the crap out of themselves 800 miles from here this afternoon (Hail to the Victors!) that I will either be elated or depressed come about four o'clock.
I want to juxtapose thoughts about justice from two widely separated spaces. The first set of thoughts comes from the Carnegie Report, the recent study of legal education. (I'm working here with the sixteen page summary, not the whole book.)
At a deep, largely uncritical level, the students come to understand the law as a formal and rational system, however much its doctrines and rules may diverge from the common sense understandings of the lay person. . . .
The task of connecting these conclusions with the rich complexity of actual situations that involve full-dimensional people, let alone the job of thinking through the social consequences or ethical aspects of the conclusions, remains outside the case-dialogue method. Issues such as the social needs or matters of justice involved in cases do get attention in some case-dialogue classrooms, but these issues are almost always treated as addenda. Being told repeatedly that such matters fall, as they do, outside the precise and orderly “legal landscape,” students often conclude that they are secondary to what really counts for success in law school—and in legal practice. In their all-consuming first year, students are told to set aside their desire for justice. They are warned not to let their moral concerns or compassion for the people in the cases they discuss cloud their legal analyses.
This warning does help students escape the grip of misconceptions about how the law works as they hone their analytic skills. But when the misconceptions are not addressed directly, students have no way of learning when and how their moral concerns may be relevant to their work as lawyers and when these concerns could throw them off track. students often find this confusing and disillusioning. The fact that moral concerns are reintroduced only haphazardly conveys a cynical impression of the law that is rarely intended.
Note the issue of integration raised here. It's not just a question of practice skills; it's a question of being able to step back from a particular rational and analytical way of thinking. There are two other issues that poke out (for me) from this. First, the report, I suspect not coincidentally, cites "the desire for justice" as one of the things set aside while learning this particularly rational and analytical way of thinking. Second, what does "justice" or the desire for it mean? It's easy to think of justice in the sense of criminal justice, or juvenile justice, or other images of idealistic lawyers spearheading litigation in vindication of rights, but what does justice mean, if anything, in the quotidian lives of most of the business or patent or ERISA or government contracts lawyers we will be training?
Go below the fold (if you can stand it) for the second influencing space.
Friday, October 2, 2009
Call for Papers: Golden Gate & SALT Teaching Conference on Vulnerable Populations and Interdisciplinary Law Teaching
The conference is March 2010 in San Francisco, but the call for papers has an approaching deadline. Here is the conference announcement. [--Alan Childress]
Golden Gate University School of Law and the Society of American Law Teachers—SALT—are presenting a two-day teaching conference in San Francisco on March 19/20, 2010. This event will bring together new data and theories from the social sciences, communications and media, and legal education about our most vulnerable populations for use in law teaching across the curriculum. The conference will explore questions such as: how can law teachers integrate economic issues precipitated by class, race, and gender into a broad range of courses, including, for example, first-year Contracts or Professional Responsibility, Health or Environmental Law, Clinics and Externships? What types of nontraditional classes would most effectively focus student interest on the economic needs of vulnerable populations? How do law schools initiate and encourage collaborative alliances to broaden discussions and promote positive change? The conference will consider these issues from the perspectives of interdisciplinary academics, practitioners, and activists.
Persons interested in participating as speakers and/or in publishing a piece in a forthcoming academic press publication should submit an abstract of their proposed presentation or article to Professor Michele Benedetto Neitz, by October 16, 2009. Abstracts should be no longer than three pages. Presenters will be selected on or before December 15, 2009. Materials for distribution at the conference must be submitted by March 1, 2010, and will be available to conference participants and posted on the SALT website. Scholars and practitioners from all disciplines are welcome to contribute. Limited funds for travel expenses may be available to presenters.
The Mississippi Supreme Court imposed a public reprimand and 30 day suspension of a justice court judge based on complaints of inappropriate actions in his official capacity. The judge admitted having ex parte contacts with a litigant and then ruling in that litigant's favor, continuing a case where no one either appeared or moved for a continuance, attempting toget two traffic tickets dismissed that were assigned to another judge, improperly dismissing cases and ordering contempt warrants against individuals where there were no pending charges. The court majority found the agreed sanction to be "reasonable and supported by boththe record and our precedent."
The dissenters felt that the sanctions were "woefully inadequate and nearly naught to the offenses, as opposed to 'ought to fit the offense.' " The ex parte contact led "one litigant [to go] home falsely believing that the court was considering the merits (or lack thereof) of her case, foolishly assuming that the decision would be based on the evidence adduced at trial." Other conduct amounted to ticket-fixing.
The court majority had adopted the proposed sanction of the Commission on Judicial Performance. The dissent states: "This Court has clearly signaled to the Commission that it is time for the sun to set on the 'good ole boys' days, as this Court increasingly has shown its disdain for judicial misconduct and has enhanced sanctions beyond those recommended by the Commission...considering the quantity, character and consequences of [the judge's] misconduct, a more severe sanction is warranted." (Mike Frisch)
The Louisiana Supreme Court granted the conditional admission of an attorney licensed in Wisconsin and Illinois. The problem with admission involved allegations of unauthorized practice when the attorney enrolled pro hac vice in several cases without complying with court rules. The court appointed a commissioner to consider the matter. The commissioner took evidence and heard testimony on a variety of issues and had recommended conditional admission.
The conditions will apply for two years. The admittee must repay student loans as per agreement with a student loan coordinator, perform 200 hours of community service, complete more CLE than is mandatory for all Louisiana lawyers and enter into a formal plan with the Office of Disciplinary Counel. (Mike Frisch)
The New York Appellate Division for the Second Judicial Department has imposed disbarment as reciprocal discipline for his resignation with bar charges pending in Connecticut. One notable aspect of the decision:
...the respondent submitted a verified statement setting forth each of the three enumerated defenses to the imposition of reciprocal discipline and requested a hearing. The hearing was conducted with the understanding that it was not a proceeding to relitigate the underlying merits of the misconduct.
The essence of the respondent's defenses is that he believed, based on his claims of off-the-record discussions with an assistant disciplinary counsel for the State Bar of Connecticut, that his resignation would end matters completely and that it would be as if the subject complaint and the Connecticut proceeding never existed. The respondent maintains that in order to reassure him, the disciplinary counsel indicated that only the resignation would be reported to other jurisdictions. From this, the respondent extrapolated that there could be no reciprocal discipline inasmuch as the underlying complaint had been completely erased. In effect, he analogized his resignation to a decision to retire from a corporation.
The Special Referee accepted the respondent's arguments and found that he had sustained his burden of proof with respect to all three of the enumerated defenses by a fair preponderance of the credible evidence.
While acknowledging that the respondent had notice of the Connecticut proceedings and an opportunity to be heard, the Special Referee found the respondent's account to be credible and found that misleading information given to him by the representatives of the Connecticut State Bar constituted a deprivation of due process.
The court here rejected the claims:
The record establishes that the respondent was well aware of the possibility of the imposition of reciprocal discipline after this jurisdiction received notification of his Connecticut resignation, particularly since it also contained a waiver of the privilege of reapplying at any time in the future. The testimony of the respondent and his life partner provide ample support of the misconduct which led to his resignation.
Under these circumstances, we conclude that the imposition of reciprocal discipline would not be unjust and that the Special Referee erred in concluding that the respondent had sustained his burden of proof with respect to that defense. Accordingly, the respondent's cross motion to confirm the Special Referee's report and dismiss the reciprocal proceeding is denied and the Grievance Committee's motion, in effect, to impose reciprocal discipline and cross motion to disaffirm the Special Referee's report and impose such discipline as the court may deem just and proper are granted.
In determining an appropriate measure of discipline to impose, the Grievance Committee points out that the respondent has no prior disciplinary history in this jurisdiction. He was previously reprimanded in Connecticut for delay in returning escrow funds, similar to the underlying charges which led to his resignation. The respondent's counsel conceded the existence of professional misconduct. Nevertheless, the record reveals an attempt by the respondent to extricate himself from a Connecticut grievance yet retain full privileges of Bar membership in New York. Having chosen to forgo a hearing on those charges and enter a substantive defense in Connecticut, the respondent is now attempting to undo the consequences of his choice. Under the circumstances, the respondent is disbarred in New York on the basis of his Connecticut resignation.
Another tale of professional ruin from the current California Bar Journal:
The State Bar Court found that [the attorney] committed seven acts of misconduct in a single client matter in which he represented a woman who was hit on the head by a slot machine in a casino in Reno. The woman and her husband first hired an attorney who filed a personal injury case, which resulted in a $100,000 settlement offer. When the clients rejected the offer, the attorney withdrew.
They had difficulty finding a new lawyer, and found [the attorney] in the phone book. He initially declined to represent them, but eventually changed his mind when the clients agreed to lower their expectations about the worth of their case. Because [he] is not a Nevada lawyer, he enlisted the help of an attorney licensed there.
The lawyers negotiated a $250,000 settlement for the clients, which [he] deposited in his client trust account. He disbursed $100,000 to the clients, $300 to a doctor and $75 to the Nevada lawyer. The State Bar Court found that [he] was entitled to a $60,000 fee and should have maintained nearly $90,000 in his trust account. However, the balance in the account dropped to about $500. The bar court found that he misappropriated $89,072.
[The attorney] and the other lawyer also represented the couple in a malpractice action that settled for $30,000. The bar court found that [he] misappropriated the entire amount.
At a meeting with his clients, [he] confessed he spent the money he was holding in trust for the clients, and gave them a check for $50,000 from his trust account. He also later sent them a check for $30,000. None of the money came from settlement funds received on his clients’ behalf.
After the couple filed a complaint with the State Bar, [he] gave them another $30,000 that was part of a loan he took, and he settled several outstanding liens.
After [he] filed for bankruptcy, he gave his clients another $30,000 and asked them to hold the check until he had money in his bank account. He also told the clients he might file for bankruptcy, even though he already had done so.
When one of the clients had open heart surgery five months later, [the attorney] visited him in the hospital and left a cashier’s check for $30,000. He later asked the clients to tell the State Bar they had given their permission for him to use the funds he held in trust for them. He eventually paid the clients the full amount they were owed and paid their liens. He also visited the couple at their home and gave them his collection of old comic books and an antique gun belonging to his father. He wanted the clients to consider this as an exchange for whatever remaining funds they thought he owed them.
The State Bar Court found that [the attorney] committed acts of moral turpitude by misappropriating nearly $120,000 from his clients and by making misstatements to his clients and the bankruptcy court, he failed to maintain client funds in trust or keep his clients informed of significant developments in their case, and he improperly offered to pay his clients’ personal expenses.
In mitigation, the court gave minimal weight to [his] 17 years of practice without any discipline. It did consider his emotional and financial difficulties at the time, including heavy debts incurred by the Belli law firm, where he worked, as a result of several hundred breast implant cases, his acrimonious divorce, the deaths of three people close to him and foreclosure on his house.
In recommending [his] disbarment, Judge Pat McElroy wrote, “his own financial difficulties do not outweigh his fiduciary duty to his clients . . . Instead of accepting responsibility for his misconduct, respondent asked the (clients) to tell the State Bar that they loaned him the settlement funds he had misappropriated, although they had not loaned respondent any funds.”
Thursday, October 1, 2009
The Oklahoma Supreme Court has reinstated an attorney who had resigned after misappropriating $50,000 from his firm. The petitioner had support from a number of character witnesses including a state representative:
Fourteen witnesses appeared before the trial panel in support of Mumina's reinstatement. State Representative Mike Shelton (Shelton/Representative) testified that the attorney's earlier misdeeds had not affected adversely the attorney's leadership in the community and that he would have no hesitation in employing him as an attorney. Not only did Shelton provide an unqualified recommendation for reinstatement, he testified that the attorney's inability to practice was a detriment to the Representative's constituents. A retired long-time prosecutor in the United States Attorney's Office for the Western District of Oklahoma stated that he would welcome Mumina's reinstatement and was confident that the attorney would be a valuable contributor to the city, to the judicial system, and to the Bar. Two sitting District Court Judges, with knowledge of both the complaint filed against the attorney and the federal indictment, recommended reinstatement. One of the judges actively encouraged Mumina to seek the same. The lawyer for whom Mumina has been doing para-legal work testified that, during the five years of their association, the attorney has been forthright, honest, and completely trustworthy. In addition, the lawyer testified that throughout the same time period, Mumina had demonstrated his fitness, moral character, and competency in the law.
Three attorneys testified against Mumina's reinstatement. Two of the three were members of the firm from which the attorney misappropriated funds and the third was the attorney hired to handle the firm's bar complaint against the attorney. Despite their concerns about reinstatement, one of the attorneys testified that Mumina was one of the most qualified attorneys he had ever encountered.The other stated that he believed that Mumina's actions had been out of character for the attorney and that he had no knowledge of Mumina's present fitness to return to the practice of law. The third witness for the Bar Association was the attorney hired by the firm to prosecute the bar complaint. He took no position on the issue of reinstatement.
We do not ignore either the serious nature of Mumina's transgressions or the steep hill he must climb before he may be considered for reinstatement. All that is required of a first-time applicant is that the individual show that he or she has "good moral character, due respect for the law, and fitness to practice law" without any demand of proof of the same.When viewed in its entirety, the evidence goes well beyond those requirements and is clear and convincing in support of the attorney's present moral fitness to return to the practice of law in Oklahoma.
Justice Taylor dissented:
I dissent to the reinstatement of the Respondent. He is a thief. He stole over $50,000.00 from his law firm and actively attempted to conceal the theft. He was a court-appointed trustee and stole over $100,000.00 from a bankruptcy estate. He is a convicted felon. He made restitution and apology only after being discovered and confronted.
The Respondent does not meet, by clear and convincing evidence, the very strict test set out in Rule 11.4 RGDP which requires that "An applicant seeking such reinstatement will be required to present stronger proof of qualifications than one seeking admission for the first time." (emphasis added) If today, with his record, he was seeking admission to the Bar for the first time he would certainly, absolutely and rightfully be denied.
This Court has a primary obligation to safeguard the interests of the public and to protect the integrity of the legal profession. If Rule 11.4 RGDP is to have any meaningful enforcement at all, this Respondent's application for reinstatement must be denied. His qualifications are not stronger than anyone seeking admission for the first time. No first-time applicant with the Respondent's record would be admitted to the Oklahoma Bar Association. That is the standard required by the RGDP and it has not been followed in this case.
Justice Winchester joined the dissent.
The New York Appellate Division for the Third Judicial Department has denied the admission application of a person who passed the bar exam in 2005. According to the court, the applicant had "engaged in a pattern of inappropriate and offensive behavior at work and in law school [not described in the opinion] extending from 1990 until recently." The applicant also exhibited a lack of candor in the New Jersey admissions process, where admission was withheld for a year pending evidence of "personal reform and current good character."
The court here allowed renewal of the character and fitness inquiry after a year. Unfortunately, the absence of any description of the conduct at issue gives little guidance to future applicants. (Mike Frisch)
Also from the California Bar Journal:
[An attorney] was suspended for two years, stayed, placed on five years of probation with a one-year actual suspension and he was ordered to take the MPRE within one year. Credit will be given for a period of interim suspension that began Jan. 24, 2008. The order took effect Feb. 25, 2009.
A former Fresno County deputy district attorney, [he] was treasurer of the Fresno County Prosecutors Association (FCPA) for two years. During that time, he stole $2,800 from the group by writing checks to “cash” and to himself. When a new treasurer was elected, [he] provided two check registers and one checkbook, but delayed in providing receipts, logs or expenditure justification. All carbon duplicates were removed from the checkbooks.
He repaid the funds, plus interest, and admitted he had a gambling problem.
[He] quit his job and pleaded no contest to misdemeanor theft.
In mitigation, he cooperated with the bar’s investigation, provided references attesting to his good character and underwent treatment for substance abuse and gambling addiction.
The California Bar Journal reports:
WILLIAM S. LERACH [#68581], 63, of San Diego was summarily disbarred March 12, 2009, and was ordered to comply with rule 9.20.
Lerach pleaded guilty in 2007 to one count of conspiracy to obstruct justice and make material false declarations under oath. The conviction met the requirements for summary disbarment: it is a felony involving moral turpitude. Lerach has been on interim suspension since Nov. 21, 2007.
The one-time class action king admitted in federal court to playing a part in a scheme to pay kickbacks in order to gain an advantage in lucrative class action lawsuits. He was sentenced to two years in prison and was ordered to forfeit $7.75 million. (See June 2009 California Bar Journal.)
An interesting case involving both reciprocal discipline was decided by the District of Columbia Court of Appeals. The attorney was a partner of Coudert Brothers in charge of the representation of an accused international drug trafficker and money launderer. The lawyer handled matters relative to forfeiture of assets. The client's criminal lawyer was F. Lee Bailey. The misconduct involved the transfer of more than $1.5 million from the client's bank account in Austria to the attorney's Swiss account. Later some portions were transferred to the lawyer's personal accounts in Hong Kong and Thailand.
The attorney was convicted of tax offenses and suspended for five years in New York. The court here rejected D.C. Bar Counsel's call for disbarment (which in fact is a five-year suspension) and imposed discipline identical to New York. The court concluded that the facts established in New York did not amount to intentional or reckless misappropriation of client funds However, the court was not finished--it remanded the criminal conviction for a hearing on moral turpitude. If moral turpitude is found, disbarment must be imposed.
The representation of this same client led to F. Lee Bailey's disbarment in Florida and Massachusetts. (Mike Frisch)
Wednesday, September 30, 2009
Two subjects that, Miss Manners said, should never be the talk at a formal dinner. Anyway, Jeff's SSRN piece analyzing Leiter's conception of religion has become "recommended reading" by Larry Solum on the Legal Theory Blog, and is number one with a bullet on the First Amendment Law Prof Blog.
It has also caused some consternation on the Prawfsblawg blog because Brian Leiter does not like what Jeff says very much. Although blogger Rick Garnett cut out the most strident comments by various people (none by Jeff, who is polite, in my opinion), it is still fun to read Professor Leiter's apparent position that Jeff is wrong with a capital F. When he refers to Jeff as Professor Lipshaw (as in "Professor Lipshaw's incompetent caricature of my arguments in the SSRN essay"), you immediately think of Marshall McLuhan coming out from behind a theatre billboard telling Jeff, "You know nothing of my work. How you got to be a professor in anything is beyond me." [And read a real attempt to engage Jeff intellectually here by blogger Michael Young.] Keep it up, Jeff. At least he spelled your name right. If law school were a situation comedy, you and Brian Leiter would be in-laws.
Posted by Alan Childress
I assume that most lawyers, like me, find Deal Or No Deal unwatchable. One of the many reasons is that contestants use a decisionmaking process akin to clients, rather than "thinking like lawyers." Lawyers would never "keep going" the way most contestants do. How do you turn down a sure $270,000 for a two-thirds chance to win $600,000 with a one-third chance to win $450? When I found myself hoping they would win $450, I realized this was unhealthy for me, and possibly immoral, and certainly pathetic (beyond the fact of watching itself), and I quit watching, forever.
Then a journalist, yesterday, told me that lawyers on both sides of the FEMA trailer lawsuits -- these trailers reek of formaldahyde, plaintiffs say, while defendants tout the biology preservation uses of the substance like those shiny frogs [not really] -- told HER that they plan to wait until five "bellweather" trials are done before talking global settlement. I told her I doubted that, and recounted my theory that the legal profession plays Deal Or No Deal very differently from the rest of the world. I think they will have enough information before then (especially since the plaintiff lost the first big one, last week in Louisiana) and are risk averse enough to see a way out fairly soon. (In truth, both the journalist and the law professor had to ask around to recall the name of the stupid game show with the suitcases, but both of us could remember Let's Make a Deal, showing our age.) Anyway, she had called me, I suspect, not because I have legal profession qua game show insight, but because I got myself duly quoted last week on the Chinese drywall cases (these walls smell like rotten eggs, instead of formaldahyde, but both show how unlucky we local Louisianans are). And media citations beget more media citations, you know, so fwiw here is the story on the trailer cases, from Marilyn Odendahl of The Elkhart Truth, near the Indiana factory of defendant Gulf Stream. (Turns out Ms. Odendahl graduated from Ball State, where my mom [happy birthday!] and David Letterman did too.)
Clearly my memory is not what it used to be if I cannot name Deal Or No Deal, given that there was a period of time when it was the only show on television. Further proof of the memory thing is the fact that a student emailed me today to ask whether we have Evidence tomorrow, because there is no October 1 on the syllabus. (Damn those law profs who come out with new editions so often, what with their new pagination and all!) My students must think I am celebrating Oktoberfest Eve or something. (I do recall that last year, Macy's in Plano, Texas put up its Christmas ornaments on October 1, so maybe that is why I skipped the date.) Yes, Virginia, there is an October 1, and if you happen to be an Evidence student of mine reading this, please show up tomorrow.
Unrelated, I heard somewhere that the state color of West Virginia is primer.
The New York Appellate Division for the First Judicial Department affirmed the dismissal of a number of related claims of legal malpractice but disagreed with the trial court's determination that the claims against firms and individual attorneys were time-barred:
Although we affirm Supreme Court's order, we do not do so on the ground that plaintiffs' legal malpractice claim against Pillsbury is time-barred. A legal malpractice action must be commenced within three years of accrual (CPLR 214, 203[a]). Accrual occurs when the malpractice is committed (Shumsky v Eisenstein, 96 NY2d 164, 166 ). In this case, plaintiffs' malpractice claim against Pillsbury accrued nearly six years before this action was commenced. Under the doctrine of continuous representation, however, the statute of limitations is tolled while representation on the same matter in which the malpractice is alleged is ongoing (see Glamm v Allen, 57 NY2d 87 ). The doctrine is rooted in recognition that a client cannot be expected to jeopardize a pending case or relationship with an attorney during the period that the attorney continues to handle the case (see id. at 94). In rendering its decision, Supreme Court ruled that the statute of limitations was not tolled as to Pillsbury because it ceased representing plaintiff in January 2002 when Caruso left the firm and took plaintiffs' case with him. In HNH Intl., Ltd. v Pryor Cashman Sherman & Flynn LLP (63 AD3d 534 ), this Court has since held that the statute was tolled as to a malpractice claim against a law firm because the attorneys who handled the case continued to represent the plaintiffs in the same matter, albeit at different law firms. Guided by this precedent, we now hold that the statute of limitations was tolled by the doctrine of continuous representation during the time that Caruso represented plaintiffs in the underlying matter while he was a partner at Chadbourne and Bracewell.
Sound policy considerations also support the tolling of the statute of limitations with respect to the legal malpractice claim against Pillsbury. Any suit brought by plaintiffs against Pillsbury would have been based upon Caruso's acts of malpractice. Caruso would have thereby been exposed to Pillsbury's potential claims for contribution or indemnification. As noted by the Court of Appeals in Glamm, a person cannot be expected to jeopardize a relationship with the attorney handling his or her case during the period that the attorney continues to represent him (57 NY2d at 94). An attorney-client relationship would certainly be jeopardized by a client's allegation that his or her attorney committed malpractice while representing the client. Beal Bank, SSB v Arter & Hadden, LLP (42 Cal 4th 503, 167 P3d 666 ), a case defendants cite, is distinguishable because it involves the interpretation of a California statute that codifies the continuous representation doctrine. New York does not have a similar statute.
The Oklahoma Supreme Court has imposed a one-year suspension of an attorney in connection with his misuse of funds in a spendthrift trust that the attorney set up. The key legal conclusion:
Vis-a-vis the Kulp Trust respondent acted in a dual capacity. He performed legal services by advising the settlor and drafting the trust document in which he was named a co-trustee. He also served in a fiduciary capacity qua co-trustee of the Kulp Trust. A lawyer who commingles the role of a lawyer with that of a fiduciary is not immune to and cannot escape disciplinary action for a breach of fiduciary duty occurring dehors the practice of law. He or she will be held both to the ethical standards for lawyers as well as to those governing fiduciaries.
The court rejected a proposed six-month suspension. (Mike Frisch)
An Illinois Hearing Board has recommended that an attorney be disbarred for conduct described in these findings:
The evidence, along with the admitted allegations, established that during the period from May 2003 through July 2005, Respondent was the principal and managing member of Tsunami Capital, LLC ("Tsunami Capital"), which was registered with the CFTC as a commodity pool operator and commodity trading advisor. In a commodity pool, many individuals combine their money and trade futures contracts as a single entity. From October 2002 to September 2006 Respondent, through Tsunami Capital, opened and maintained various commodity futures accounts, two of which were structured as Tsunami Lakeshore Integrated Fund ("Tsunami Lakeshore").
In June 2003, Respondent opened one of the Tsunami Lakeshore accounts and began trading with $287,000, which had been pooled and deposited into that account. Respondent, through Tsunami Capital, was the commodity pool operator for the Tsunami Lakeshore account, and the sole authorized signatory on this account. All of the account statements for the Tsunami Lakeshore account were sent to Respondent's office at 455 N. Cityfront Plaza, in Chicago.
After June 2003 Respondent managed trades made in the Tsunami Lakeshore account. In 2004 the account had a deficit of $4,425 in its trading and in January 2005, the account was closed. Respondent knew or should have known the financial condition of the Tsunami Lakeshore account during the period from June 2003 through January 2005, as he was the sole authorized signatory on the account and the account statements for Tsunami Lakeshore were sent to him.
Sometime after June 2003, Respondent created, or directed the creation of, a document titled "Confidential Private Placement Memorandum Tsunami Lakeshore Integrated Fund, LLC" ("Memorandum"), which identified Tsunami Capital as Tsunami Lakeshore's managing member and commodity pool operator and Respondent as the principal of Tsunami Capital. Respondent created, or caused the Memorandum to be created, to either solicit potential investors and/or to provide information to investors interested in Tsunami Lakeshore.
Sometime after June 2003, Respondent created, or directed the creation of, a profit and loss spreadsheet ("profitability spreadsheet") on Tsunami Capital letterhead for the Tsunami Lakeshore account, which purported to show that Tsunami Lakeshore's trading had been profitable in all but two months in 2003 and 2004, with rates of return as high as 26.85% in April 2003 and 22.21% in May 2003. The purported statements were false because the Tsunami Lakeshore account was not active in April or May 2003, and it had a deficit of $4,425 in its trading in 2004. Respondent created or caused the profitability spreadsheet to be created, to either solicit potential investors and/or to provide information to investors interested in Tsunami Lakeshore.
During the period between December 2004 and January 2005, Respondent engaged in discussions with a potential investor, Brett Simons, regarding investment in Tsunami Lakeshore.
Respondent told Simons that Tsunami Lakeshore was a commodity pool trading futures with $6 million invested, with a minimum investment of $50,000. Respondent provided Simons with a copy of the Memorandum and the profitability spreadsheet. When Respondent told Simons that $6 million had been invested in Tsunami Lakeshore, Respondent knew or should have known that that statement was false, because in 2004 Tsunami Lakeshore had a deficit of $4,425. Respondent knew or should have known that the profitability spreadsheet falsely represented the activity and profitability of Tsunami Lakeshore in April and May 2003, because the Tsunami Lakeshore account was not active in April or May 2003.
In January 2005 Simons invested $50,000 with Tsunami Capital for the purpose of trading in the Tsunami Lakeshore account. In March 2005 Respondent told Simons that his $50,000 investment was profitable and, based on those representations, Simons invested an additional $100,000 with Tsunami Capital for the purposes of trading in the Tsunami Lakeshore account. Respondent's representations to Simons that his $50,000 investment was profitable was false and known by Respondent to be false because the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.
Sometime after March 2005, Respondent created, or directed the creation of, an account statement for Tsunami Lakeshore, on Tsunami Capital letterhead, which purported to show a 17% profit in the Tsunami Lakeshore account. The purported statement was false because the Tsunami Lakeshore account had been closed since January 2005. In April 2005, Respondent gave Simons a copy of the account statement. Respondent knew the statement he tendered to Simons in April 2005 showing a 17% profit in the Tsunami Lakeshore account was a false statement, because the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.
In April 2005, Respondent made oral representations to potential investors Jay Deutsch and Mike Budicak to the effect that Tsunami Lakeshore had been profitable. As a result of Respondent's representations, Deutsch invested $50,000 in April 2005, and Budicak invested $100,000 in early 2005. Respondent knew that his representations to Deutsch and to Budicak were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.
Sometime after April 2005, Respondent created, or caused to be created, account statements for Tsunami Lakeshore which purported to show that Budicak had profited $11,366 by the end of June 2005. Respondent knew or should have known that the account statements he sent to Budicak were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.
In or about December 2005, Respondent made oral representations to potential investor Frank Carbonara to the effect that Tsunami Lakeshore had been profitable. As a result of Respondent's representations, Carbonara invested approximately $92,000 from his Individual Retirement Account. Respondent knew that his representations to Carbonara were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.
Sometime after December 2005, Respondent created, or caused to be created, account statements for Tsunami Lakeshore which purported to show that Carbonara had profited $58,000 by the end of March 2007. Respondent knew or should have known that all of the account statements he sent to Carbonara were false since the Tsunami Lakeshore account had a deficit of $4,425 in 2004, and the account had been closed since January 2005.
In late 2005, Respondent made oral representations to potential investor Peter Tamuzian that Tsunami Lakeshore had been profitable. In or about February 2006, as a result of Respondent's representations, Tamuzian invested $60,000 from his employee retirement savings account. Respondent knew that his representations to Tamuzian were false since the Tsunami Lakeshore account had been closed since January 2005. (Adm. Ex. 4).
Sometime after February 2006, Respondent created, or caused to be created, account statements for Tsunami Lakeshore which purported to show that Tamuzian's investment had earned 7.83% for March 2006. Respondent knew or should have known that the account statements he provided to Tamuzian were false since the Tsunami Lakeshore account had been closed since January 2005. In May 2006, based on the false statements provided to him by Respondent, Tamuzian invested an additional $40,000 to Respondent to invest in the Tsunami Lakeshore account.
From at least April 2002 to at least April 2007, Respondent, by making false oral representations about the profitability of Tsunami Lakeshore and by creating false account statements that reflected profitable track records, solicited and accepted $16,312,100 from 108 individuals for the purpose of trading financial futures, and used those funds for his own personal purposes. (Adm. Ex. 3).
The attorney had sought a last-minute continuance that the hearing board denied. He also claimed a Fifth Amendment privilege and did not testify at the hearing. (Mike Frisch)
Tuesday, September 29, 2009
Posted by Jeff Lipshaw
Somebody had ripped my gym's Time, the one with Glenn Beck on the cover, to shreds, so I was reduced to reading the October 2009 edition of Money or this month's edition of Club Management. I went with the Money, and read an article (pp. 25-27) that made me wonder what kind of financial planners and economists they are hiring over there. Also, since I've been giving financial advice in the blogosphere anyway, why stop now?
The article says that lending to relatives could be a sweet deal. Son can only get a 9% interest on a $100,000 home equity loan (for you finance rookies, that's one secured by a second mortgage on your house). Dad has some money just sitting there earning 1% or 2% in a money market account or savings account. So he lends $100,000 to Son at 6% and everybody is happy.
Wait a minute. Now, in fairness, the author lists several cautions, but misses the most important ones. I often criticize welfare economics consequentialism that goes to one extreme in assuming that every perception or value or duty held by an individual is ultimately a matter of utility (read some of the early Posner on rational actor sex and love), even if the measure is somewhat difficult. That is, in that view, people don't engage in charity out of altruism; they do it because they get some kind of material, psychic, or other benefit from it. This odd financial advice from Money (of all people!) goes to the other extreme, and fails to put ANY cost into the equation for the effect of love, harmony, conflict avoidance, divorce, mental anguish, public embarrassment, or the like when you lend a lot of money to a relative, and it's not getting paid back.
For example, nowhere does it discuss getting security for the loan. The bank was willing to lend at 9% AND TOSS SONNY OUT OF HIS HOUSE IF HE DIDN'T REPAY! Dad is lending at 6% on an unsecured basis? Or even if he takes a second mortgage, is he really going to foreclose and evict his grandkids? And we haven't done anything yet to put a cost on the tension you can cut with a ham carving knife (unless it's Honey Baked Spiral Sliced) at Christmas or the matzoh kugel ladle at Passover when Son and the spouse and kids went to Disneyworld the week before and said, "oh, we'll pay you at the end of the summer."
The point is that there are costs that are hard to measure, and so Dad's real cost here isn't $100,000 and his real return isn't 6%. It's something a lot more than $100,000, and that reduces his effective yield on the money substantially. It's NOT a sweet economic deal for Dad unless none of that peace, love, and family harmony stuff means anything to him. I say this as a child who borrowed from parents, and as a parent who stands prepared to help out his children: if you think of that loan as anything other than a contingent gift, you are smoking the drapes.
You know what? I don't think the truth about whether those intangible can be reduced to money lies at either extreme - it's probably somewhere in the middle. Aristotle* would be proud of me, I think.
From the online edition of the Detroit News:
A Michigan Supreme Court justice may be called as a defense witness on behalf of a retired Wayne County judge accused along with an assistant prosecutor and two police officers of allowing lies during a drug trial.
Justice Maura Corrigan's agreement to act as a character witness on behalf of former Wayne County Circuit Judge Mary Waterstone was revealed after Corrigan abstained from issuing an opinion in the drug case at the heart of felony charges against Waterstone; Karen Plants, the former head of the Wayne County prosecutor's drug unit; and Inkster Police Sgt. Scott Rechtzigel and Officer Robert McArthur.
Because of Corrigan's abstention, the High Court deadlocked in a rare 3-3 split announced Friday that rejected an appeal by Alexander Aceval. The Inkster bar owner was imprisoned in 2006 after two trials in which the conduct of local legal authorities has been described in a state Court of Appeals review as "reprehensible."
aterstone was charged in March with felony misconduct stemming from Aceval's 2005 trial. It's alleged Waterstone let the jury hear false testimony. The charge carries a possible five-year sentence.
Waterstone declared a hung jury in the first trial, and she testified as a witness at Aceval's second trial, overseen by a different judge. Waterstone has claimed she allowed lies to cover the identity of a police informant because she feared for the man's life. The informant led police to arrest Aceval in possession of a large shipment of high quality cocaine.
Plants, Rechtzigel and McArthur have been charged with obstruction of justice for allegedly misstating facts and allowing the informant to lie. Their charges are punishable by up to life in prison.
Plants retired after being charged. The officers remain on duty. Investigations of Plants and Wayne County Prosecutor Kym Worthy's involvement in the incident are pending before the state's Attorney Grievance Commission.
Corrigan's connection with the case was explained in a single sentence attached to Friday's opinion: "I am not participating because I may be called as a witness in a related case."
Contacted at her home by The News on Sunday, Corrigan said, "I was asked to be a character witness, and I agreed."
Michigan Attorney General Mike Cox is handling the case because Worthy stepped aside, saying she is too close to the defendants. Cox spokesman John Sellek said Sunday his office was unaware of Corrigan's status as a possible witness.
Aceval's lawyer, David L. Moffitt, complained the deadlock means the conviction and what he described as a "conspiracy" won't be reviewed by the state's highest court.
"These people are still reaching out to hold on to their power and have now enmeshed a Supreme Court justice," Moffitt said.
Waterstone has appealed Cox's authority to prosecute her, alleging a conflict because lawyers from the Attorney General's Office defended her against a complaint based on the same incident to the state's Judicial Tenure Commission.
The attorney general contends there isn't a conflict because the lawyers assigned to Waterstone's criminal prosecution work in a separate office from those who were involved in her professional misconduct complaint.
Wayne County Circuit Judge Daniel Hathaway planned to issue an opinion today on whether Cox should be barred from prosecuting her. If Hathaway rules against Cox, a special prosecutor will be appointed.
The issues must be resolved before a 36th District Court judge can hold a preliminary examination to determine if there is enough evidence to order the defendants to stand trial.