Oregon: Stealing From Business Partners No Different Than From Clients

The Oregon Supreme Court has disbarred an attorney for misconduct as a partner in a business venture with two others in which he played the role of general counsel in exchange for a one-third interest in the company

the accused agreed to manage the company’s finances, participate in marketing, and perform functions ordinarily undertaken by a business’s general counsel, such as drafting contracts and sales agreements. The accused had experience in conducting large, complex business transactions between 10 and 20 businesses.

As sometimes occurs, the business prospered but the partners fell out.

The misconduct involved the attorney's efforts to take control of the corporation.

The court found the record messy but concluded

What is clear is that, without consulting his business associates, the accused intermingled his personal and related-business financial affairs with the corporate affairs of Blue Q to the point that an accurate accounting of who owed what to whom would be very difficult to reconstruct. That inadequately explained practice provides context to the trial panel’s determination that the accused improperly diverted corporate assets.

Turns out that cheating a business partner violates attorney ethics rules

On de novo review, we find by clear and convincing evidence that the accused’s diversion of Blue Q assets to EMI and  Carbcert, and his exclusion of his associates from Blue Q’s business affairs, demonstrated dishonesty and a lack of trustworthiness that seriously reflects adversely on his fitness to practice law and violate RPC 8.4(a)(3).

The court also affirmed findings that he made a false statement to the Nevada Secretary of State in corporate dissolution documents.

The fact that the conduct involved business partners rather than client funds did not diminish the sanction

the accused’s conduct, consisting of his exclusion of his associates from the affairs of Blue Q, his diversion of corporate assets to his own use, and his unauthorized dissolution of the corporation, is comparable to theft in terms of its nature and scale of selfish dishonesty.

The attorney is suspended for non-payment of dues (and has been for some time) in both Oregon and Washington State. (Mike Frisch)