Monday, May 2, 2016

Associate Who Used Confidential Information Faces Discipline

Also on tap this week at the Ohio Supreme Court

Cincinnati Bar Association v. Christopher D. Wiest, Case no. 2016-0263
Hamilton County

The Board of Professional Conduct has recommended that Kentucky attorney Christopher D. Wiest be suspended for two years, with 18 months stayed under certain conditions. The board found Wiest, who is admitted to practice law in Ohio and Kentucky, used confidential information he received from a company his law firm represented to make stock trades that benefitted him financially and also disclosed the confidential details to federal investigators.

Client Requests Research on Potential Acquisitions
As an associate attorney for Thompson Hine, Wiest provided “environmental due diligence” research for a client, The Stanley Works. The company went through a merger in late 2009 and became Stanley Black & Decker, and Wiest continued doing similar work for the new company.

On Oct. 21, 2010, the firm contacted Wiest to explore whether Stanley should acquire a company called InfoLogix. The confidential analysis was code-named “Project Icon.” According to the professional conduct board’s report, the firm agreed to do the project on Oct. 7.

Also on Oct. 21, InfoLogix publicly disclosed that the stock exchange Nasdaq had decided to remove, or de-list, the company from its service because of non-compliance with a minimum requirement. InfoLogix stock was suspended from trading when the exchange opened that morning. A separate company offered to quote InfoLogix stock through its service beginning the same day.

Lawyer Purchases InfoLogix Stock
Wiest, who had three personal accounts for buying and selling stocks, made several trades of InfoLogix stock between Oct. 28 and Dec. 16, 2010, in his 401(k) account through the law firm. Wiest bought 10,000 shares of InfoLogix stock on Oct. 28. He had acquired 35,000 shares by Nov. 16. Two days later, he sold 13,510 shares of the stock at a loss of about $17,700.

On Dec. 15, 2010, Stanley Black & Decker announced publicly it had acquired InfoLogix. The next day, Wiest contacted an attorney and, based on the attorney’s advice, sold his remaining InfoLogix stock for a profit of $56,291.97 before taxes.

Board Finds Two Rule Violations
The Cincinnati Bar Association investigated and filed a disciplinary complaint against Wiest, alleging four professional conduct rule violations.

The professional conduct board dismissed two of the allegations, but found Wiest violated two other rules. The board’s report stated Wiest acknowledged he provided confidential information to the Securities and Exchange Commission (SEC) and testified to the SEC about that information in response to a subpoena. However, the subpoena in this case didn’t lift Wiest’s duty of confidentiality to his client, the board explained.

The board determined Wiest took confidential information from the client gained through his employment and provided that information to the SEC without his employer’s consent and for the purpose of trying to limit his exposure in an insider-trading investigation. This was an illegal act, violating R.C. 1333.81, that reflected adversely on his honesty and trustworthiness, the board concluded in describing Wiest’s first rule violation.

Wiest told the board his InfoLogix stock purchases weren’t made because of confidential information, but instead because of the stock’s de-listing and volatility. He also maintained he had reason to think the Stanley acquisition of InfoLogix wasn’t going forward.

However, the board reasoned that Wiest bought the stock based on the confidential information he had received and that he knew or should’ve known the deal’s uncertainty prohibited him from purchasing the stock. Wiest’s dishonest and deceitful actions for his own financial benefit amount to professional misconduct, the board concluded.

Noting concern for the public’s trust in the legal profession and that “a fully stayed suspension would send the wrong message” to the legal profession and the public, the board recommended a two-year suspension with the final 18 months stayed if Wiest doesn’t commit any more misconduct.

Briefs Filed Under Seal
Wiest has objected to the board’s findings and recommended sanctions, and the Cincinnati Bar Association has responded. However, at the request of the parties, the Court sealed the briefs.

- Kathleen Maloney

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Contacts
Representing the Cincinnati Bar Association: Ann Lugbill, 513.784.1280

Representing Christopher D. Wiest: George Jonson, 513.241.4722.

Cincinnatti.com reported on the allegations.

The legal troubles continue to mount for Kenton County attorney Chris Wiest, the former mayor of Fort Mitchell accused of insider trading by the Securities and Exchange Commission.

He settled the case with the SEC in May 2014 but now faces possible disciplinary action by the Ohio Supreme Court.

The Cincinnati Bar Association has asked the state's highest court to discipline him for "misconduct (which) has brought disrepute to the legal profession."

The case will be argued on May 4. (Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2016/05/associate-who-used-confidential-information-faces-discipline.html

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