Friday, October 15, 2021

The Second Time Around

The Iowa Supreme Court has ordered a 30 day suspension

Attorneys who engage in business dealings with their clients create an inherent conflict of interest under our rules of professional conduct. Such conflicts are not prohibited—as long as the attorney first meets strict disclosure requirements and provides adequate information so their clients can make an informed consent to the conflict. Attorney Bruce A. Willey appears before us for the second time for engaging in similar conduct for which we previously disciplined him but with different clients and in deals that predate the conduct giving rise to Willey’s previous discipline. The Iowa Supreme Court Grievance Commission (commission) recommends we suspend Willey’s license for thirty  days on the theory that had we known about this conduct we would have suspended his license for a longer period the first time. Upon our de novo review of the record, we suspend Willey’s license for thirty days.

The court rejected the claim that the attorney-client privilege impaired his ability to defend himself

We first address, and reject, Willey’s suggestion he could not defend himself related to Midwest because Midwest was not a complaining party and therefore had not waived its attorney–client privilege.

...The plain language of our disciplinary rules reveals that Willey could disclose attorney–client confidences in defending himself regardless of Midwest’s consent to the disclosure.

As to informed consent

Here, the Midwest waiver violated rule 32:1.8(a) in a number of ways. First, it misrepresented Willey’s interest in Catalyst as an “anticipate[d]” and “future” interest rather than identifying his actual 50% ownership interest through Orion’s Pride in violation of subparagraph (3) requiring written disclosure of the attorney’s “role in the transaction.” Iowa R. Prof’l Conduct 32:1.8(a)(3); see also Iowa Sup. Ct. Att’y Disciplinary Bd. v. Wright, 840 N.W.2d 295, 301–02 (Iowa 2013) (holding attorney “failed to obtain the clients’ written informed consent to the proposition that he held a contingent fee interest in Madison’s inheritance claim”). Willey also failed to disclose that Wild had significant financial liabilities, was judgment proof, and had failed to enter any successful ventures in the time they worked together, information that made his personal guaranty likely worthless. The purpose for the loan—to fund Catalyst’s investment in a risky and unsecured foreign trading platform—was important information about the nature of the proposed loan. Each of these pieces of information were omitted in violation of rule 32:1.8(a)(1), requiring the transaction and terms on which the attorney obtained his interest in the company to be “fair and reasonable to the client” and “fully disclosed and transmitted in writing.”

The court found dishonesty as well.

Sanction

Willey suggests an attorney cannot receive an enhanced sanction for conduct occurring prior to a previous disciplinary action. There is no such blanket rule. In past cases, we have refrained from enhancing the sanction due to the specific facts, such as where enhancement of the sanctions would not have deterred conduct and protected the public or the attorney had already been sufficiently sanctioned.

...Notwithstanding the mitigating factors, we must consider the aggravating factors involved in the Catalyst-Midwest transaction. We consider the experience of an attorney to be an aggravating factor. Bartley, 860 N.W.2d at 339. Willey was an experienced attorney and CPA, who specialized in tax and business law and who had been practicing for many years. Willey I, 889 N.W.2d at 658. Similar to Willey I, here, the structure of the investment was “questionable from the beginning with an outrageous promise of a return on the investment.” Id. In Willey I we stated that no one could “reasonably counsel a client that [the transaction] was a sound investment opportunity.” Id. The same applies here. During the hearing, neither Willey nor Wild could satisfactorily explain how the transaction with Ramis would work. That Willey has engaged multiple clients in dubious investment schemes is troubling.

(Mike Frisch)

 

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