Thursday, July 19, 2012

Fee Splitting Draws Proposed Suspension

An Illinois Hearing Board has recommended a one year suspension of an attorney for misconduct found in his dealings with a company ("CCDN") that offered services to people who were experiencing credit card debt issues.

The hearing board described its sanction analysis:  

Some of the dangers inherent in improper fee sharing and improper referral payments can be specifically seen in the facts in this case. The evidence showed [non-lawyer] Lindsey was a persuasive sales person who aggressively marketed and promoted the CCDN program to financially distressed individuals. In doing so, he was undoubtedly motivated by his desire to earn the sizable fee he collected for each referral, rather than by any concern for the welfare of these clients. In an effort to make these sales and earn his fees, Lindsey apparently provided potential clients with false and misleading information regarding what they could expect from the CCDN program. Respondent conceded he eventually terminated this relationship after learning from clients they had been misled by Lindsey.

We also note Respondent's misconduct was not an isolated transaction or a momentary lapse in judgment, but was a program in place for well over a year and constituted an improper arrangement formalized by contract, and involved extensive activity. Respondent admitted Lindsey was a significant source of business during the course of their relationship and referred at least 243 clients to CCDN. The arrangement clearly involved substantial sums of money and resulted in financial gain to both Respondent and Lindsey. Respondent admitted if Lindsey had adhered to the terms of their agreement and paid CCDN $2,800 per client, CCDN would have received over $680,000 for these referrals. Although Lindsey apparently kept a significant portion of CCDN fees, as well as his own, CCDN still received over $210,000 from the arrangement. Thus, there is no doubt Respondent's involvement with Lindsey was motivated by financial gain.

In mitigation, we note Respondent did take some action when he learned of Lindsey's improper conduct. Respondent testified he not only terminated the relationship, he also reported Lindsey to the Texas Attorney General's Office, which then shut Lindsey's business down. Respondent also wrote his clients, informed them of these problems, and encouraged them to contact the
Texas Attorney General.

We also consider in mitigation that Respondent has been practicing law for 23 years and has not been previously disciplined. He also testified regarding his extensive involvement in various community organizations, activities, and charitable causes, and has also been involved in
some pro bono legal and other volunteer work.

The hearing board rejected charges that the attorney's course of conduct involved dishonesty and fraud. (Mike Frisch)

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