Tuesday, September 21, 2021

A Mighty Fortress

A majority of the Illinois Review Board has recommended a three-year suspension for false expense charges

Respondent began working at Vedder Price P.C., a large international law firm, as a summer associate in 2005. After being licensed to practice law, he remained at Vedder Price, became a shareholder in 2014, and continued practicing until his termination in October 2019. One of his clients was Fortress Investment Group, which provides finance and leasing services to airlines. Under its contracts with its customers, Fortress could pass its expenses, including legal fees, onto its customers.

Between January 2018 and September 2019, Respondent created and sent nine invoices to Fortress customers, including Azur Havaciliki A.S. (“Azur”) (a company that leased airplanes and had leasing agreements with Fortress), while knowing that those invoices sought payment for services in which Fortress already had paid. Based on those invoices, Fortress customers remitted almost $109,000 to Vedder Price. Those funds, Respondent admitted, belonged to Fortress.

As a part of his scheme, Respondent instructed the Vedder Price accounting department to reactivate a dormant account that had been assigned to his former client, the L. Martinez Construction Company; and he further instructed the accounting department to credit the payments made on the false invoices to the Martinez Construction account, which was done.

Around the same time, Respondent prepared a false invoice in the amount of $7,488 directed to another client, GA Tellesis, using the Martinez Construction account number on the invoice, which caused payment on the false invoice to be credited to that account.

As Respondent was creating and submitting false invoices, he sent requests to Vedder Price’s accounting department seeking payment from the reactivated Martinez Construction account purportedly to reimburse him for expenses. For example, he requested reimbursement of $2,140.18 for fees related to a “client event” and a “race day” event (Adm. Ex. 5); $2,599.99 for the purchase of a crossbow, purportedly as a gift for someone with whom he had gone on a hunting trip (Adm. Ex. 10; R. 52); $13,772.43 for airfare (Adm. Ex. 13); and $16,986.46 for first-class plane tickets to Moscow, which he did not use and for which he received a credit to his personal credit card. (Adm. Ex. 12; R. 60-61.)2 The reimbursement requests were fraudulent.

Based on those false reimbursement requests, Respondent personally received at least $79,790.43 in funds that belonged to Fortress and GA Tellesis.

The Hearing Board had proposed a 20-month suspension which the Review Board found insufficient

In short, we believe that the 20-month suspension recommended by the Hearing Board is clearly insufficient. Respondent’s misconduct, which spanned 18 months, was calculated and deliberate, and resulted in him converting almost $80,000 of his clients’ funds. Conversion is an egregious breach of an attorney’s duties.

...Furthermore, Respondent undertook his fraudulent scheme as a handsomely compensated attorney and shareholder of a large international law firm, with an expertise in aircraft financing, a unique practice.

A dissent would impose 20 months and cites a notable instance of prior leniency in an earlier case of some notoriety

In In re Smolen, 2013PR00060 (Hearing Bd., Jan. 7, 2015), approved and confirmed, M.R. 27199 (March 12, 2015), over a five-year period, the attorney submitted over 800receipts for cab rides he did not take, and received almost $70,000 in reimbursement from his firm for the falsified expenses. In addition, a forensic accounting consultant hired by the firm identified $379,000 of additional reimbursed expenses for which it could not identify a sufficient underlying basis, including restaurant gift cards, country club meals, air fare, and other entertainment expenses. The firm paid the forensic accounting consultant $258,000 to perform its investigation.

The Hearing Board found Respondent’s conduct to be purposeful and intentional, and did not find credible his claim that he did not realize he was doing anything wrong. It also found other aspects of his testimony inconsistent and not credible. In aggravation, it found he engaged in a lengthy, systematic pattern of dishonest conduct from which he profited financially, and harmed his firm. In mitigation, it found he did not charge false expenses to clients, and paid $400,000 in restitution to his firm. It also found he admitted wrongdoing when confronted by his firm, cooperated in his disciplinary proceeding, had no prior discipline, presented positive character testimony, and engaged in volunteer and pro bono work. In observing his demeanor, it stated that he was genuinely remorseful, accepted responsibility for his misconduct, and did not present a risk of repeating his misconduct. He was suspended for one year and until he completed 12 months of psychiatric treatment.

(Mike Frisch)


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