Case

Archive for the ‘Holland & Knight’ Category

HK – Inside Story

In HK on December 27, 2008 at 10:39 pm

A law firm's sexual harassment case: An inside story

By SCOTT BARANCIK and KRIS HUNDLEY
Published April 24, 2005

It was supposed to be a networking breakfast for young, female lawyers at the Tampa office of Holland & Knight.

But when an organizer of the December 2003 get-together said she thought the law firm offered excellent opportunities for women, there was dead silence. Then a number of junior lawyers began sharing stories of alleged harassment and intimidation as far back as 1999 by Tampa partner Douglas A. Wright.

An inquiry followed, first by an outside law firm, then by an internal committee. Every participant was sworn to secrecy. By May, most of Holland's investigating committee found the complaints against Wright, 44, credible. Punishments were recommended. Case closed.

But it wasn't.

Four of the young accusers raised their voices, dissatisfied with the outcome. Wright had been reprimanded, but not to the extent suggested. In a memo, they expressed anger at the managing partner of the 1,250-lawyer firm, Howell Melton Jr. He held his ground.

Six months later, Melton announced to the firm that he was promoting Wright to third in command. Then someone leaked the internal committee's report to local newspapers. Wright surrendered his promotion but remains a partner in the firm.

And what was once securely private offers a rare glimpse into the secret world of sexual harassment claims.

Selected excerpts from those documents follow.

Statement of female accuser #1

Within my first week as a summer associate in 2002, Doug Wright started coming into my office daily or every other day … He told me to "Stand up. Turn around in a circle. You look like the hostess in a Chinese restaurant." He then walked out. I was very upset by his behavior and cried …

… Right before I was set to join the firm as an associate, my rooming plans fell through … I called (a male associate at the firm) … to see if he could help me find a roommate. He offered me a room in his 3-bedroom, 2-bathroom house … Doug Wright became merciless in teasing me about it. He would ask or say things like: "Did you know (he) has a camera in your shower? Did you know (he) lays in your bed? Did you know (he) puts your panties on his head? … What does (he) look like in boxers? …

On at least one occasion I overheard Doug Wright say something like, "I wonder if (the roommate) is banging (her) yet" … I decided to move out in the fall of 2003 … … In early fall of 2003, I got fed up and talked to several people about Doug Wright's power and pervasive influence … I am upset that no one at the firm stood up for me to stop Doug Wright's harassment.

Statement of female accuser #2

Doug Wright asked me to "feel (his) guns" or to "feel (his) pipe" on countless occasions. As a young associate, you feel as if you cannot say no. … He also asked you to "feel (his) pipes" in front of other attorneys …

… I was walking down the hall and Doug Wright asked me to feel his thigh. I initially said no, but he persisted that I should feel his thigh. Finally, I felt his thigh … As he walked away, he patted his bottom and told me that it was much harder …

… I quickly learned that the best way to deal with Doug Wright was to simply avoid him. If I heard his voice in the hall, I would pretend I was on a phone call so he would not come into my office. If I saw him in the hall, I would change the way I was walking … I would avoid monthly socials or other office social events if he was there…

… The worst part of the situation, however, is that there is a feeling in this office that everyone knows about his behavior and that it is accepted … that Doug Wright is very powerful and untouchable. …

Statement of female accuser #3

… My negative experience with Doug Wright began as soon as I started and continued daily until I was able to move off of his floor (in the company's office building) … I was just out of law school and this was my first job as a lawyer …

… At first, he would just stop by and we would have harmless conversations. It very quickly escalated from there. Within a short time, Doug Wright was spending between 30 and 45 minutes in my office, three to four times per week. We did not have normal "conversations." I was simply barraged with questions and ridiculed until Doug got bored and left my office.

Doug Wright would constantly ask me questions about my boyfriend … When (my boyfriend) went out of town … Doug would always insist that (he) was having an affair or visiting strip clubs …

I would have been able to deal with this sort of conversation in and of itself, except that it happened EVERY DAY for weeks and weeks …

… My worst experience with Doug came one day when I refused to come to his office … An hour or so later, Doug came into my office and said, "Did you get the message that I wanted to see you?" I responded, "Yes, I got the message," and looked back down at my work. This sent Doug into a rage. He turned bright red and I have never seen him so mad since. He asked me if I wanted to be fired. He told me that he knew everybody in town and that the only place I would be able to get a job would be the public defender's office.

… Ever since that incident, the topic of me getting "fired" has been a favorite of Doug's.

… Doug Wright probably asked me to feel his "guns" about 4 or 5 times. Recently … Doug Wright ordered me to fix his tie in front of (another male lawyer). … … By July of 2002, I became desperate to move (my office) … eventually I was moved to a different floor and the daily harassment stopped …

Statement of female accuser #4

…My first encounter with Doug Wright was at cocktail happy hour at the firm. He came up to me and said, "What is your name? Who do you work with?"

Doug Wright proceeded to ask me to "feel his pipes" in front of an entire room of attorneys. I felt extremely offended and humiliated … I said, "Are you kidding?" and I walked away. … My next encounter with Doug Wright was in the fall of 2003, at a recruiting cocktail reception in Gainesville, Florida. Doug Wright … asked me what I was doing at the recruiting event. … (He told) me that I was completely ineffective and that my days were numbered at Holland & Knight. I was mortified. There was not a hint of sarcasm in his voice…

… Doug Wright has poisoned the working environment in the Tampa office. When I hear his voice in the hallway I either pretend I am on the phone or just hold my breath and hope to God that he does not come into my office …

Statement of Douglas A. Wright

… I have been at Holland & Knight my entire career, and it's an important place for me.

Regarding Female Accuser #2, I do not recall asking her to "feel my pipes" … but I may have done so because I've done it to others … I do not recall asking her to feel my thigh. I do not recall telling her that my butt was harder than my thigh, but it's possible that I did that …

… Regarding Female Accuser #1, I recall that she had an outfit that reminded me of a hostess in a Chinese restaurant, but I cannot recall an incident in which I told her so … I do not recall being in her office and telling her to stand up and turn around. I have lots of work to do, and I can't spend 20 minutes in her office.

I deny that I made any inappropriate comments to her about (renting a room from a male associate) … I may have jokingly asked her what (her roommate) looks like in the morning … I never asked (the roommate), "Are you banging (her) yet?" I do not use the term "bang."

I may have asked him if he was sleeping with her, but I don't really recall asking anything of the sort … Perhaps I was standing in a group when a statement was made and she assumed it was me. For example, (another male associate) is more likely to use the term "banging" than I am …

… It is possible that I touched her suit skirt in the Fall of 2003, but it would not have been sexual touching. I sometimes touch men's clothing. I recall criticizing people's clothing a lot a couple of years ago because the firm had gone to year-round business casual, and I thought people began dressing too casually and not like we work at a premier law firm.

… I do, however, ask people to feel my pipes. I do not have a typical physique, and a client once introduced me by telling someone to feel my pipes. I adopted it as sort of an icebreaker with new people. … If a person declined to do so, sometimes I'd back off and sometimes I would ask again … …Regarding Female Accuser #3 …I probably dropped by about three days out of the week. … She was a litigator sitting on a corporate floor and I was concerned that she would be ignored. I would have talked to her about her boyfriend, but not any sexual questions …

…I recall teasing her when (her boyfriend) was away about whether he called her to check in and then went back out. I probably said that he was out but not that he was cheating. I probably implied that he was out at bars with women. … I recall jokingly threatening to fire her. I have threatened hundreds of people with firing and they all know that it is a joke. I even joke about myself ending up at the public defender's office. … I thought I was being her friend. I was trying to get to know her and to help her get integrated into the office. I guess I did an ineffective job of communicating with her …

… I do not target women. I joke and tease with everyone. I suppose some might think that makes me an indiscriminate jerk. …

Investigating committee's findings, May 25, 2004

… The majority of the members found the allegations to be generally credible, and found it difficult to find the allegations less credible simply because of a series of general denials of recollection by several witnesses, including (Wright).

… In regard to (Doug Wright's) admitted habit of asking people to feel his pipes/guns/muscles, the majority of the committee found it baffling that (he) could believe that such a statement was an "icebreaker" …

After a thorough investigation and careful consideration … a majority of the Committee believed that…(Wright's) actions were of a sexual nature … these actions of a sexual nature, combined with other taunting behavior by (Wright), constitute a violation of the (firm's sexual harassment) policy. A majority … further found that the violation was exacerbated by the position of power acquired by (Wright), and his extremely close ties to others in the office who hold positions of power …

In light of the (committee's) confirmation of violation of the policy, it is recommended that the Managing Partner consider the following courses of action:

Issue to (Wright) a private and personal reprimand …

… Direct Wright to refrain from asking and/or requiring Firm attorneys, staff or others in the offices of the Firm to feel his muscles, guns, and/or pipes

… refrain from asking questions of or making comments to associates and summer associates concerning their sexual lives

… refrain from participating, for an extended period, in summer associate hiring

… refrain from serving, for an extended period, on any associate hiring or evaluation committees

… refrain from taking upon himself the task of monitoring the attire of Firm attorneys and staff…

… Require Wright to engage a professional counselor and/or trainer for sexual harassment awareness training and management training …

… Wright has been entrusted with leadership positions within the Firm, and he has made questionable use of the power inherent to those positions …

Memo from Holland & Knight managing partner Howell Melton Jr. to Investigating Committee (July 27, 2004)

… I am not persuaded by all of the findings articulated in the Report, but I am persuaded that, when viewed as a whole, (Wright's) actions were inappropriate and unacceptable. I find the reported conduct particularly objectionable in view of (his) position of leadership within the firm.

Therefore, I accept and will implement each of the (committee's) recommended sanctions as set forth in the Report, except the two that would bar (Wright) from participation in summer associate and associate hiring …

Memo from four female accusers to Melton (August 2, 2004)

…We are very disappointed at your failure to adopt the recommendations set forth by the FEPC committee with regard to Doug Wright.

This is not a case of 4 lone females making isolated complaints. When this situation first developed, there were between ten and fifteen female attorneys, including at least one female partner, who met with (an outside) law firm to discuss the complaint against Doug Wright…

… The message that you have sent us by your memorandum is that cruel behavior is tolerated, so long as the perpetrator is in a position of power. Despite the "hell" that we have all been through, we have received no apology, no words of sympathy, only repeated orders of "keep quiet," "don't talk about this with anyone" and "this process is confidential." … The system protects Doug, not us.

Memo from Melton to four female accusers (August 16, 2004)

… As the FEPC's report makes clear, the findings and, presumably, the recommendations of that committee were not unanimous.

Contrary to the concerns you expressed about my relationship with Doug Wright, he and I are not social friends. I assure you I was in no way biased in his favor … I continue to believe that the sanctions I imposed in this case are both reasonable and appropriate under the circumstances. … … It is my earnest desire that our Tampa office will be a supportive environment for you to work and grow professionally.

Times editorial assistant Barbara Moch contributed to this report. Scott Barancik can be reached at 727 893-8751 or barancik@sptimes.com Kris Hundley can be reached at (727) 892-2996 or hundley@sptimes.com

[Last modified April 24, 2005, 01:02:20]

Posted via email from Case Investigation

HK – Matthew Farmer

In HK on December 27, 2008 at 10:35 pm
Lawyer's charge opens window on bill padding
Wednesday, August 30, 2006
By Nathan Koppel, The Wall Street Journal

The career of Matthew Farmer, a junior partner in the Chicago law offices of Holland & Knight LLP, was on the upswing in December 2004. He had just won a monthlong trial for Pinnacle Corp., a Midwestern home builder accused of copyright infringement, and gotten kudos from many of his partners.

But weeks later, after reviewing billing records in the Pinnacle matter, he decided to leave the 1,200-lawyer firm. Mr. Farmer, 42 years old, believed his own hours on the case had been inflated by the partner in charge of billing, 62-year-old Edward Ryan. Fearing he would violate state ethics rules if he kept quiet, Mr. Farmer blew the whistle to Holland & Knight lawyers.

The firm, which has 24 offices in the U.S. and abroad, took no action and denies Mr. Ryan or the firm did anything wrong. "The amount billed by Holland & Knight in the litigation was reasonable and appropriate," says L. Kinder Cannon III, the firm's general counsel. Mr. Ryan declines to comment.

Last October, Mr. Farmer took a 7 percent pay cut to join Cohn Baughman & Martin, a 12-lawyer firm. He says he moved of his own accord because he was upset that Holland & Knight wasn't acting against Mr. Ryan.

While the facts of the case are still in dispute, Mr. Farmer's billing allegations offer a rare window into the tricky and emotional issue of inflated billing by law firms. It's difficult to know how widespread billing fraud is, but Stephen Gillers, an ethics professor at New York University School of Law, says "there is a general consensus that billing fraud has increased" as law firms seek to increase profits and attract top lawyers.

"Bill-padding is the perfect crime," adds William Ross, a professor at Samford University's Cumberland School of Law in Birmingham, Ala. It is seldom detected because it is almost impossible for clients to know whether "an attorney really spent three hours doing research instead of five hours," he says. He says that in a billing survey he conducted in 1996, two-thirds of the attorneys (and three-fourths of the clients) reported knowledge of bill padding. Earlier this year, a partner at Willkie Farr & Gallagher LLP left the firm and was suspended from practicing law due to bill fraud.

Meanwhile, Mr. Farmer is still pressing his claims against Holland & Knight. In February, he sent a letter detailing his charges to a Minnesota state court judge, Janet Poston, accompanied by internal Holland & Knight billing records. Mr. Farmer's letter led Pinnacle's insurer, Connecticut Specialty Insurance Co., to file claims against Holland in May, stating that "Ryan and Holland & Knight inflated and falsified legal bills." Last month, the insurer reached a confidential settlement with Holland & Knight, withdrawing the fraud claims. But Connecticut Specialty's outside counsel, Robert Haugen, believes the original motion was credible. "I have a standard to live up to in (Minnesota) when I file pleadings," he says.

Mr. Farmer, who joined Holland & Knight in 2000, became involved in the Pinnacle case in the summer of 2002. A competitor had filed suit in Minneapolis federal court, claiming Pinnacle built homes that infringed on copyrighted designs and seeking more than $30 million in damages. (The jury's finding in favor of the defendant was later reversed due to an evidentiary ruling at trial; the case may be retried in the future by someone other than Mr. Farmer.)

After the trial, Mr. Farmer reviewed the firm's bills. The first invoice struck him as odd, he says. It claimed he worked 6.5 hours on Aug. 7, 2002, the day he learned of the suit. Mr. Farmer says he distinctly recalls hearing about the case late that day and spending only 15 minutes on it.

Over the next two days, Mr. Farmer says, he checked further to see if the first entry was an aberration. He finally quit probing, he says, after discovering some 60 instances of bill padding. Mr. Farmer believes that from August 2002 through September 2003, Mr. Ryan inflated his time — and that of three other lawyers in the case — by more than 450 hours, an overcharge that Mr. Farmer says exceeded $100,000. Mr. Farmer believes his discovery may have been the tip of the iceberg, for he says he analyzed only a "sampling" of the more than $3.5 million of Pinnacle bills.

In one instance, Mr. Farmer says, Mr. Ryan sent a bill to Pinnacle claiming that partner Scott Petersen had worked 89.8 hours over a 17-day period in March 2003. Mr. Farmer says internal firm records show the lawyer didn't work on the case at all during that time. Mr. Farmer also accuses Mr. Ryan of creating "fictitious" narratives using such phrases as "review key documents" and "analyze defense strategy" to describe work that Mr. Petersen never performed. Mr. Peterson didn't return calls seeking comment. The two other lawyers on the case declined to comment.

Mr. Farmer reported his findings in early 2005 to Colin Smith, a firm partner charged with ethics oversight, suggesting that Holland & Knight file a report with the state's attorney-ethics commission. "Don't go there," he says Mr. Smith warned him. "Why would you want to do this to Ed Ryan?" Mr. Smith declines to comment.

Colleagues describe the tall, white-haired Mr. Ryan as a genteel litigator. "I always found Ed to be an excellent lawyer and a gentleman of the highest character," says Michael Kanute, a former Holland & Knight partner. Another former partner, Julie Shelton, says she "can't imagine that he would do anything unethical." At Chicago office functions, another former partner recalls, Mr. Ryan liked to offer positive messages to lawyers. "He would use the sort of catch words that were expected by headquarters, like, 'We are so glad to gather together as the Holland & Knight family.'"

Soon after the meeting with Mr. Smith, Mr. Farmer says he had a "very awkward" 10-minute meeting with Mr. Ryan. He says Mr. Ryan told him that he himself had billed time internally to Pinnacle for which he hadn't charged the client and that he therefore inflated other lawyers' hours on the case to compensate for his uncharged time. In the final tally, Mr. Farmer says Mr. Ryan told him, Pinnacle's total bill reflected the actual time the firm worked on the case.

But Mr. Farmer says he found the explanation "unpersuasive." He says Mr. Ryan occasionally offered strategic advice and edited briefs for the case but never performed routine tasks. "He never stepped foot in a courtroom, never drafted any legal papers, never deposed a witness," says Mr. Farmer, who worked full-time on the matter from the start.

"The amount billed was consistent with the value of the time worked," Mr. Cannon, Holland & Knight's general counsel, said in response to questions about Mr. Farmer's allegations.

Early last year, Pinnacle was acquired by home-builder Hovnanian Enterprises Inc. "These issues occurred well before we were associated with" Pinnacle, a Hovnanian spokesman said. "We have no independent knowledge of the facts."

After his meeting with Mr. Ryan, Mr. Farmer waited for an investigation into his allegations. "I figured at some point, someone would register disbelief or disgust," he says. When that didn't happen, Mr. Farmer moved to the less prestigious Cohn Baughman. "If you look at Matt's resume, you realize this was not a lateral move," says William Elward, a former classmate of Mr. Farmer's at Loyola University Chicago School of Law.

Late last year, still convinced it was his ethical responsibility, Mr. Farmer reported his bill-padding claims to the Illinois Attorney Registration & Disciplinary Commission. (The commission's chief counsel, James Grogan, won't comment on the pending investigation.) Then, Mr. Farmer sent the seven-page letter and billing records to Judge Poston. "Edward F. Ryan … frequently inflated far beyond the hours that the timekeeping attorneys had actually recorded," he wrote the judge, who was then presiding over a lawsuit brought by Connecticut Specialty against Pinnacle regarding the legal bills.

Though Mr. Farmer says he is happy in his new job, he concedes he is dazed by the turn his life has taken. Before that, "if you told me I would be out of my firm in a handful of months, I'd never have believed it," he says.

First published on August 30, 2006 at 12:00 am

Download now or preview on posterous

farmer.pdf (311 KB)

Posted via email from Case Investigation

IARDC – In re George Clive Hook – Commission No. 98 CH 50

In HK on December 27, 2008 at 10:31 pm

 

Filed July 26, 2005

In re George Clive Hook
Commission No. 98 CH 50

Synopsis of Hearing Board Report and Recommendation

NATURE OF THE CASE: committing criminal acts that reflect adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects; conduct involving dishonesty, fraud, deceit or misrepresentation; and conduct that is prejudicial to the administration of justice, or which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute

RULES DISCUSSED: 8.4(a)(3) of the Illinois Rules of Professional Conduct (1990); 8.4(a)(4); 8.4(a)(5) and Supreme Court 771

SANCTION: Disbarment

DATE OF OPINION: July 26, 2005

HEARING PANEL: Joseph A. Barthlomew, William E. Hornsby, Jr. and Albert C. Baldermann

ADMINISTRATOR'S COUNSEL: Athena T. Taite

RESPONDENT'S COUNSEL: Pro se

BEFORE THE HEARING BOARD
OF THE
ILLINOIS ATTORNEY REGISTRATION
AND
DISCIPLINARY COMMISSION

In the Matter of:

GEORGE CLIVE HOOK,

Attorney-Respondent,

No. 1256432.

Commission No. 98 CH 50

REPORT AND RECOMMENDATION OF THE HEARING BOARD

The hearing in this matter and was held on February 2-3, March 16 and April 19, 2005 at the offices of the Attorney Registration and Disciplinary Commission, Chicago, Illinois, before a Panel of the Hearing Board consisting of Joseph A. Bartholomew, Chair, William E. Hornsby, Jr. and Albert C. Baldermann. Athena T. Taite appeared on behalf of the Administrator and Respondent, George Clive Hook, appeared pro se.

PLEADINGS AND PRE-HEARING RECORD

In a one-count Complaint filed pursuant to Supreme Court Rule 761(d) on June 11, 1998, the Administrator alleges that due to Respondent's May 29, 1997 conviction in the U.S. District Court, Central Division of Illinois in United States of America v. George C. Hook, No. 1L95CR10010-002, Respondent has engaged in the following misconduct: committing criminal acts that reflect adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects; conduct involving dishonesty, fraud, deceit or misrepresentation; and conduct that is prejudicial to the administration of justice, or which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute. (See Adm. Compl. at para. 1-7; Adm. Ex. 1)

PAGE 2:

On November 19, 1999 the Illinois Supreme Court, pursuant to the rule to show cause under Supreme Court Rule 761 that issued to Respondent on June 17, 1998 and continued until August 11, 1998, ordered Respondent suspended from the practice of law effective immediately and until further order of Court. On September 5, 2000 Respondent filed his Answer to the Administrator's Complaint. On March 30, 2001 the Administrator's Motion to Strike Respondent's Answers and Exhibits was granted and Respondent was allowed to file an Amended Answer to the Administrator's Complaint in compliance with Commission Rule 233 on or before April 16, 2001. On April 20, 2001 Respondent filed his Answer and Verified Third Party Complaints. On April 26, 2001 the Administrator filed a Motion to Strike Respondent's Third Party Complaints. On May 15, 2001 Respondent filed a Response to the Administrator's Motion to Strike his Third Party Complaints. On June 4, 2001 the Chair granted the Administrator's Motion to Strike Respondent's Third Party Complaints and ordered that pages 26-40 of Respondent's April 20, 2001 Amended Answer be stricken. Respondent's Answer denies virtually all of the allegations of the Administrator's Complaint.

On May 17, 2002 Respondent filed a Motion in Limine to preclude use of his federal conviction. On May 29, 2002 the Administrator filed a response to Respondent's Motion in Limine. On June 18, 2002 the Administrator filed a Motion in Limine to preclude argument and evidence contradicting Court rulings regarding PBGC v. Wittek and its relationship to U.S. v. Hook, a Motion in Limine to preclude argument and evidence concerning whether Respondent received a full and fair hearing, and a Motion to Strike certain affirmative defenses. On July 31, 2002 Respondent filed his response to both of the Administrator's Motions in Limine, a response to the Administrator's Motion to Strike and a reply in support of his Motion in Limine to preclude use of his federal conviction. On September 10, 2002 the Chair denied Respondent's

PAGE 3:

Motion in Limine to preclude use of his federal conviction and granted the Administrator's Motion in Limine to preclude argument and evidence contracting court rulings regarding PBGC v. Wittek and its relationship to U.S. v. Hook as well as the Administrator's Motion in Limine to preclude argument and evidence concerning whether Respondent received a full and fair hearing. The Chair further deemed the Administrator's Motion to Strike certain affirmative defenses moot based on the ruling on other motions.

Based on the reassignment of this matter to another Hearing Board Chair, on March 20, 2003, Respondent filed a Motion to Reconsider preclusion of his federal conviction and a Motion to Reinstate Third Party Complaints. Four days later, the Administrator filed responses to Respondent's Motion to Reinstate Third Party Complaints and the Motion to Reconsider. On March 25, 2003 Respondent filed a Motion to Reconsider Motion to Compel pursuant to Supreme Court Rule 219. On April 3, 2003 the Administrator filed her response to Respondent's Motion to Reconsider Motion to Compel and her responses to Respondent's Motion to Reconsider preclusion of argument and evidence regarding PBGC v. Wittek and Motion to Reconsider permitting argument and evidence that U.S. v. Hook was not a full and fair hearing. On April 15, 2003, Respondent filed a reply in support of the Motion to Reconsider preclusion of federal conviction.

Additionally, On May 19, 2003 the Chair ordered that a hearing in this matter was tentatively scheduled for July 29 and 30, 2003. The tentative hearing was to be held, pending confirmation, at the Metropolitan Correctional Center where Respondent was incarcerated. On July 16, 2003 Respondent filed an In Chambers Motion to Place Motions Under Seal and a Motion to Postpone Proceedings. On July 22, 2003 the Chair ordered, with no objection by the

PAGE 4:

Administrator, that Respondent's Motion to Postpone Proceedings be granted and thereby vacated the previously scheduled July 29 and 30, 2003 hearing dates.

On August 17, 2004 the Chair denied Respondent's Motion to Reinstate Third Party Complaints and his Motion to Reconsider Preclusion of Federal Conviction. On August 23, 2004 Respondent sent the Chair, a letter requesting reconsideration of the August 17, 2004 order which denied his Motion to Reinstate Third Party Complaints. On September 1, 2004 the Chair denied Respondent's Motion to Reconsider the Denial of his Motion to Reinstate Third Party Complaints and the Motion to Reconsider Denial of his Motion to Reconsider Preclusion of Federal Conviction.

On September 30, 2004 the Chair scheduled the hearing for December 2 and 3, 2004 at the Chicago offices of the ARDC. On November 11, 2004 the Chair ordered that the Administrator and Respondent file any motions in limine or motions to bar or exclude testimony on or before November 12, 2004. The Chair further ordered that the Administrator and Respondent shall respond to any motions in limine or motions to bar or exclude testimony on or before November 23, 2004 and that the hearing remain scheduled for December 2 and 3, 2004.

On November 12, 2004 the Administrator filed a Motion to Limit Character Witnesses and Motion in Limine to Bar Witness Testimony. On November 23, 2004 Respondent filed responses to the Administrator's Motions. On November 30, 2004 the Administrator's Motion in Limine to Bar Witness Testimony was granted, but the Administrator's Motion to Limit Character Witnesses was denied.

EVIDENCE

The Administrator presented the testimony of Robert Schnitz, Drake Boutwell and Exhibits 1-3 which are, respectively, the certified judgment and opinion in United States of

PAGE 5:

America v. George C. Hook, No. 1L95CR10010-002, and the July 13, 1992 letter from Drake Boutwell to Carmen Viana. Respondent presented his own testimony along with the testimony of Richard Baran, Robert Neil Rudman, Theodore W. Grippo, Joseph Pankus, Carol Petersen, Glen Canwitt, Michael C. Osajda, Albert L. Grasso, Nicolas C. Hindman and Exhibits 4, 17, 21, 22, 24, 24-B, 25, 26-7-A, 26-9-A, 26-B, 27, 28, 28-A, 29, 32, 34, 37, 40, 45, 46, 46-A, 53, 55, 56-A, 56, 57, 58, 59, 59-A, 59-B, 59-C, 59-D, 60, 61, 61-A, 63, 63-B, 64, 66, and 67. The testimony of the witnesses and the Exhibits established the following facts:

On September 13, 1996, a federal grand jury returned a seven-count indictment alleging that beginning in June of 1992 and continuing to, at least September of 1992, Respondent conspired with Carmen Viana ("Viana") to commit wire fraud, money laundering and theft. The indictment alleged that Viana was the sole owner, Chairman and CEO of Wittek Industries, Inc. ("Wittek"). Wittek was the employer and plan sponsor for an employee benefit plan ("Plan"). The Plan was an employee benefit plan subject to the provisions of Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA). Certain provisions of ERISA prohibited the lending or transfer of Plan funds to or for the benefit or a party in interest, such as an employer (Wittek). The assets and funds of the Plan were held and managed by Manufacturer's Bank in Detroit, Michigan. The indictment further alleged that Respondent conspired with Viana to form a "shell" corporation to serve as a conduit for money to flow from the Plan to Wittek. The purpose of the conspiracy was to obtain funds to provide additional operating capital to Wittek. Between July 17, 1992 and August 7, 1992, Respondent conspired with Viana to transmit and receive by wire transfer, approximately $989,000 belonging to the Plan, and that Respondent placed those funds in a "shell" corporation account and a client trust account for the purpose of concealing the source of these funds. The indictment also alleged that between August 6, 1992,

PAGE 6:

and September 18, 1992, Respondent laundered $660,000 belonging to the Plan with the intent of concealing the nature, location, source, ownership and control of the funds. Respondent was also charged with willfully converting $36,800 of the funds from the Plan. (See Adm. Compl. para. 1-5; Adm. Ex. 2 at pp. 3-6)).

On May 29, 1997 Respondent was found guilty of each charge set forth in the indictment, (three counts of wire fraud, 18 U.S.C. § 1343, one count of theft from an employee benefit plan, 18 U.S.C. § 664, and three counts of money laundering, 18 U.S.C. § 1956) and on May 27, 1998 Respondent was sentenced to eighty-four months imprisonment and ordered to pay restitution in the amount of $735,566.00. (See Adm. Compl. para. 6-7; Adm. Ex. 1; Adm. Ex. 2 at pp. 7-8).

Testimony of Respondent

Respondent testified that Viana described to him a very simple transaction involving Wittek's Plan which involved Wittek's three properties and how she wanted to sell one of those properties to the Plan. Respondent advised Viana that he did not regard himself as an expert in pension law, but knew such a transaction required an ERISA lawyer because it might be a prohibited transaction. Respondent knew enough about pension law to know an ERISA expert was required, but that was the extent of his knowledge. In a meeting between Viana and Boutwell, Viana described the transaction she wanted Boutwell to complete. Boutwell informed Viana that such a transaction was prohibited, but he thought the transaction could be structured in a way to accomplish Viana's goals which was to cure the under-funding of the Plan which was approximately $800,000.00. The transaction, if accomplished, would also provide working capital to Wittek. (Tr. 290-300).

Boutwell testified against Respondent in his criminal trial. Respondent does not know if Boutwell received immunity from the prosecution for his testimony. Boutwell's testimony in the

PAGE 7:

criminal proceeding was that it was untrue that the Pineville Real Estate Operation Corporation assets were not Plan assets. (Tr. 301)

Respondent testified that the money (a little less than $700,000.00) went to Wittek in the form of a loan from Pineville Real Estate Operation Corporation. Those funds were used to operate Wittek. Viana was not taking her full salary during this time period. (Tr. 341).

According to Respondent, Viana did not flee the country after her indictment; instead she tried to resuscitate the company until the middle of 1994 when she realized she could not do that. Viana put herself and Wittek into bankruptcy and then she went to Brazil expecting to come back for the federal hearings. Viana had periodic medical problems. Viana was indicted in February of 1995 and was Respondent's co-defendant. The government attempted to extradite her from Brazil and trick her to come back, but that did not work. The government was also planning on indicting Viana for tax evasion dating back to a period of time long before Respondent ever knew her. Viana was a New York resident and citizen of Brazil. (Tr. 341-344).

Respondent testified that he was not counsel for the Plan although the plan's money went from Manufacturer's Bank to his firm's trust account even though the Plan was not his client, since his clients were Pineville and Wittek. Respondent never expected those funds to go to his firm's trust account. According to Respondent the firm's trust account was used an an accommodation account. Respondent agreed he wired the funds to Wittek which used the funds for operating expenses. (Tr. 370-371).

Respondent did not wire the funds back to the bank and wait to get another account in a few days and have the funds sent to the appropriate bank. Respondent viewed his responsibility to Viana, not to the bank which had no further relationship with the Plan, even though Respondent agreed he did not represent Viana. Respondent thought he did not have the authority

PAGE 8:

to direct the funds unless he asked the trustee of the Plan what to do and Viana told him to send the funds to Wittek's COBRA account. Respondent initially thought he was sending the funds to a trust account Wittek's comptroller, Mr. Lumen, had established. Respondent admitted that sending of the funds to Wittek's COBRA account without documentation can be interpreted as giving the appearance of impropriety. Respondent again stated he did not feel comfortable with doing anything with the funds without conferring with the trustee, Viana. Respondent believes what he did was proper, and he does not view it as a mistake. (Tr. 373-379, 382).

Respondent further testified that Viana was upset that annuities were purchased with money from the Plan without her authorization because she was the one who was ultimately responsible for the pension and profit sharing plans. (Tr. 485-521).

Respondent stated that the prosecution's theory in his criminal case was that he assisted Viana to steal money from Wittek's pension funds. Respondent testified that his main objective was to secure the Plan from these unauthorized activities. Respondent thought it was important to get the funds out of the hands of Manufacturer's Bank. Respondent wanted to avoid litigation with Manufacturer's Bank and he was happy when the attorney, Mr. Buschmann, became involved because Respondent thought Buschmann would establish the requirements Manufacturer's Bank needed in order to transfer funds. Respondent thought Wittek would be able to satisfy those requirements and therefore the Plan would not end up in litigation. During this time period there were already numerous law suits going on involving Wittek. (Tr. 523, 535-536).

Respondent stated that around June 9 or 10, 1992 Viana and Boutwell discussed the transaction that Viana wanted to implement in which Wittek would sell one of three pieces of property to the Plan. Boutwell indicated that would be a prohibited transaction and he proposed

PAGE 9:

an alternate structure to accomplish Viana's goal of curing the under funding of the Plan which would also provide working capital for Wittek. The premise of Boutwell's structure was Department of Labor/IRS Regulation 2510.3-101. Boutwell stated that as long as the Plan did not have more than a 51% interest in the underlying company (Wittek), the assets of that company would not be Plan assets and the underlying assets would not be subject to ERISA regulations. Boutwell's structure was the whole premise of the transaction which would provide working capital to Wittek. Under the transaction, 51% of Pineville's shares would be owned by the Plan and 49% would be owned by Viana. Respondent prepared the subscription agreements which were executed by Viana as trustee of the Plan and by Viana individually; however, the stock was never issued. Boutwell acceded to Bushmann's concerns and recommended that the Plan own 100%, which Respondent thought was contrary to the regulations and would have meant that Wittek could not have transferred the property to Pineville Real Estate Operation Corporation because it could not transfer it to an entity which was 100% owned by the Plan. (Resp. Exs. 4, 24; Tr. 539-542, 551-553).

Respondent believed the structured transaction would cure the under funding of the Plan and provide working capital for Wittek. According to Respondent, the whole question was how could this be done, legally. Respondent did not know the answer to this question and consulted an ERISA expert since Respondent could not make that determination. (Tr. 554, 569-570, 727).

Respondent also testified that he caused the incorporation of the Pineville Real Estate Operation Corporation in North Carolina. Respondent prepared the documentation which he had Boutwell review and comment on. Boutwell advised that a deed in trust to reflect the security interest between Wittek and Pineville not be filed in order to assure that the Plan would not be subject to any subordination of a purchase money mortgage. Boutwell's advice was reflected in

PAGE 10:

the documents. When Respondent was terminated as Wittek's counsel in 1994 the documents he had involving Wittek and Pineville were taken by Viana from him and all of the documents presented at this hearing are documents the federal government obtained in its criminal discovery process. (Tr. 698).

Respondent further testified that the Plan was not his client, but Pineville Real Estate Operating Corporation and Wittek were his clients, and it was appropriate for him to confer with Viana and receive direction from her. Even if these entities were not his clients Respondent would have sought the advice of the person whose funds they were and that is exactly what he did. (Tr. 701).

Respondent stated that Viana would have benefited from the Pineville transaction since she would have been a 49% shareholder in Pineville. If the Pineville property had been sold Viana would have received 49% of the proceeds and Wittek would have received the loan from the Plan as well as $1.5 million in payments. The transaction was intended to be a good deal for everyone. (Tr. 732, 738-739). Respondent also stated that Viana could have cured the under funding of the Plan with the proceeds from the sale of the LaGrange property or the Pineville Property. Respondent testified that, various adjustments had been made by the actuary, there actually would have been no under-funding of the Plan. (Resp. Ex. 64; Tr. 743-744, 748).

Respondent further testified that the structuring of the equity in Pineville was done because the pension plan could not have all of the equity interest and if Viana had more than a 50% interest under the interested/disqualified person provision, would be regarded as receiving those plan assets, and that would adversely affect Boutwell's structuring therefore, a 51%/49% arrangement was necessary to comply with the law. According to Respondent, Boutwell acknowledged in his July 13th letter that Viana was a fiduciary under the Pineville structuring,

PAGE 11:

but was not personally receiving anything from the Plan that would have made it a prohibited transaction. The only source of revenue that she would receive from Pineville was as a shareholder which, according to Respondent, was not a prohibited transaction since there was no transfer of Plan assets from the pension plan to Wittek. (Adm. Ex. 3; Tr. 786-787, 790-791).

On cross-examination Respondent admitted that in 1992 Wittek was strapped for cash and therefore he tried to obtain financing for Wittek, but could only obtain financing from the Pineville Real Estate Operation transaction and from one of John Darrah's companies. Part of the financing for Wittek was with respect to the Pineville transactions. (Tr. 806).

Respondent agreed on cross-examination that Boutwell consistently gave advice that Wittek could not receive Plan assets. Respondent agreed that the language in Respondent's Exhibit 59 specifically discusses the loan proceeds. Respondent stated that they were to use the Plan's money as working capital which was a very broad term. (Resp. Ex. 59; Tr. 807-810).

Respondent agreed he was convicted of money laundering and stated he was also convicted of unlawful conversion of pension plan assets to the use of another and wire fraud for misrepresentations occurring in the July 15, 1992 and July 30, 1992 communications to the Bank of Detroit. Respondent stated he was ordered to pay restitution in the amount of $735,000. Respondent is unable to pay the full amount of restitution and is currently paying $200 per month which is the maximum amount that he can afford to pay in his present circumstances. (Tr. 811-813).

Testimony of Drake Boutwell

Drake Boutwell ("Boutwell") is an attorney licensed to practice in Illinois since approximately 1975 or 1976. Boutwell graduated from the University of Alabama Law School

PAGE 12:

and he received his master's in tax from New York University. Boutwell also has a background in accounting. (Tr. 586-587).

Boutwell testified that in 1992 he practiced law and his concentration was in the ERISA. Boutwell preformed legal services for Wittek and he knew Respondent and Viana at that time. Boutwell testified that Administrator's Exhibit 3 is the advisory letter regarding a proposed transaction he sent to Viana on or about July 13, 1992 which was also copied to Respondent. Boutwell agreed that the letter indicated that Pineville was to use Plan assets to develop the real estate. Under this letter, it states that only Pineville could use Plan assets, therefore, Plan assets could not be used for Wittek's working capital or operating expenses. Boutwell also testified that the letter was done only with respect to the legality of the transaction and it was not advice regarding the prudence or advisability of a particular investment. The advice in the letter was regarding whether this would, or would not be a prohibited transaction. (Adm. Ex. 3; Tr. 588-590, 594-595).

Boutwell further testified that around the time of the July 13, 1992 letter, he had conversations with Respondent indicating that Plan assets could not be used as operating expenses, working capital, or by Wittek in any fashion. (Adm. Ex. 3; Tr. 591-592).

On cross-examination Boutwell indicated he regards himself experienced in ERISA at this time, but it is a very broad area and as far as the statute in the letter, he hasn't looked at statutes like that for 10 years. Therefore, Boutwell does not regard himself as an ERISA expert in the same way he did in 1992. (Adm. Ex. 3; Tr. 599).

Boutwell recalled that the July 13, 1992 letter had an error in it. Boutwell could not recall the specific error in the letter, only that in his own mind he misread a complicated regulation. Boutwell recalled making an error regarding the reading of some language in the

PAGE 13:

regulation. Boutwell further testified that he consistently told Respondent and Viana that the Plan's money could not go to Wittek. Boutwell testified in Respondent's criminal case but was not granted immunity. (Adm. Ex. 3; Tr. 633-635, Tr. 641, Tr. 644).

Boutwell stated that he was the only one out of Respondent, Viana and himself who knew anything about real estate operating corporations and the Department of Labor's pension regulations. (Tr. 645).

EVIDENCE OFFERED IN MITIGATION

Testimony of Richard Baran

Richard Baran ("Baran") testified that he recently retired from being a teacher and a coach for the last forty years. Baran graduated from the Missouri Military Academy ("the Academy") and he has bachelor's and master's degrees in business from Loyola University, Chicago. Baran also has a master's of science degree in counseling from Chicago State and a doctorate in education from Vanderbilt University. Besides being a teacher, Baran also worked as a business consultant in the area of stress management in the aviation industry. Currently, Baran is working on six different novels. (Tr. 109-111).

Baran has known Respondent since September of 1952 when they were both freshmen at the Academy. Baran and Respondent would socialize a couple of times each year through their association with the Academy's alumni association and at homecomings. (Tr. 111-112).

Baran testified that he aware of Respondent's reputation regarding his character and when he heard what happened he was, "to put it bluntly—totally floored by all of this" since he has known Respondent so long. Baran stated that Respondent is upright and "honest as the day is long". Baran also testified that he could not ever see Respondent doing the things that he was accused of doing. Baran stated he was aware of the charges that were brought against

PAGE 14:

Respondent and that he was found guilty of those charges by a jury and that Respondent was sentenced to seven years in prison. (Tr. 112-117).

Testimony of Robert Neil Rudman

Robert Neil Rudman ("Rudman") testified that he graduated from the Academy in 1956 and four years later graduated from Westminster College in Fulton, Missouri. After graduating from Westminster College Rudman went into his family businesses which consisted of several enterprises. Rudman met Respondent when they were freshmen at the Academy and he has known Respondent since that time. Rudman and Respondent were roommates during their junior and senior years at the Academy. After graduating from the Academy, Rudman and Respondent kept in touch. Rudman also testified that Respondent was a trustee of the Academy. Respondent attended Rudman's daughter's wedding and his 60th birthday party. Rudman and Respondent got together whenever they could. (Tr. 119-124).

Rudman further testified that the consensus about Respondent's character amongst his peers is that it would be inconceivable that Respondent would be guilty of whatever he was sentenced for because that is not Respondent's nature. Rudman stated he "had no reason not to say you were guilty or innocent to me because it made no difference, really in our friendship. And it's my belief that you aren't guilty." Rudman also stated he has the highest regard for Respondent and that hasn't changed because of his misfortunes. If Rudman had to characterize Respondent in one word it would be "integrity". (Tr. 125-127).

Rudman was aware of the federal charges against Respondent, that he was found guilty of those charges and that he was sentenced to seven years in prison. Rudman's opinion of Respondent has not changed because of Respondent's indictment, conviction or incarceration.

PAGE 15:

Rudman testified that he wrote letters to President Bush and to Attorney General Ashcroft on behalf of Respondent. (Tr. 124-125). (Tr. 127-128).

Testimony of Theodore W. Grippo

Theodore W. Grippo ("Grippo") testified that he is a partner with the law firm Grippo & Elden located in Chicago. Grippo received a bachelor in science from Georgetown University and his law degree from Northwestern University. Grippo also received an LLM degree in taxation from DePaul University. Grippo was the Securities Commissioner for the State of Illinois in 1959 and he practiced law with the law firm Keck, Mahin & Kate, Rubin & Proctor which merged into the law firm Isham, Lincoln & Beale. This firm eventually dissolved. Grippo then formed the law firm of Grippo & Elden. Grippo has known Respondent since approximately 1975 when they both lived at 2650 Lakeview in Chicago. (Tr. 131-135, 141).

Grippo testified that in 1992 he was involved with Wittek. Grippo's involvement with Wittek began because Sidley & Austin was representing Wittek and they had experienced some sort of conflict which caused that firm to withdraw from its representation of Wittek. Upon Sidley & Austin's withdrawal, Wittek retained Grippo & Elden as legal counsel. Grippo handled the Wittek matter since it was more of a corporate matter than a litigation matter even though it involved litigation. It appeared that there was an attempt to take over Wittek by a group of internal officers. The president of the company, Viana, had acquired this company while Sidley & Austin was representing Wittek. Viana moved Wittek from the Chicago area to Galesburg, Illinois. Grippo went to court to seek a temporary restraining order ("TRO") so that the internal employees of Wittek could not take over the company. The Circuit Court issued the TRO. The opponents filed a motion for sanctions against Grippo & Elden alleging that the complaint was not justified. Eventually, over a two year period, the opponent's motion for sanctions was

PAGE 16:

dismissed. Because of the motion of sanctions being filed against Grippo & Elden, Grippo & Elden could no longer represent Wittek and Respondent became Wittek's counsel. (Tr. 136-140).

Grippo testified that due to his association with Respondent he has formed an opinion as to Respondent's character. Grippo stated at the time of the Wittek matter, he felt Respondent had the highest quality of character. He thought Respondent was a fine lawyer and fine man. Grippo testified he is generally aware of the federal charges against Respondent, that Respondent was found guilty of those charges and that he was sentenced to seven years in prison. Grippo wrote Respondent letters while he was in prison. Grippo also wrote a letter to President Clinton asking for Respondent's pardon and he visited Respondent while he was in prison. Grippo also stated that Respondent would be fit to practice law today since he believes Respondent would never make that mistake again. (Tr. 142-145).

Testimony of Joseph Pankus

Joseph Pankus ("Pankus") testified that he graduated with Respondent from Knox College located in Galesburg, Illinois. Pankus was in the advertising business and eventually started his own company called Holiday Publishing. Pankus sold this company and went on to a variety of other jobs and most recently retired as President of Wurlitzer where he spent the last 12 years. Pankus then joined a company called Morris Anderson. (Tr. 153-154).

Pankus has known Respondent for almost fifty years and has periodically kept in touch with Respondent since their graduation from Knox College. Respondent contacted Pankus in 1992 to help revise a poorly structured marketing and sales program at Wittek. Pankus thought Respondent was the attorney for the company at that time. Pankus left Wittek after about four

PAGE 17:

months since it was evident to him that, without major changes, Wittek was not going to make it. (Tr. 154-156).

Pankus stated Respondent asked him to deal with Wittek's marketing and sales strategies which Pankus agreed to do. Pankus discovered that prior to his involvement some Wittek employees tried to sabotage the company with an attempted takeover, and in reviewing the growth of the company, Pankus noticed that the labor cost ratios kept getting higher and higher than the previous labor cost ratios had been at Wittek. According to Pankus, there were too many variables at Wittek that kept increasing from the cost standpoint. Pankus informed Viana and Jim Baughman ("Baughman"), the head of Wittek's quality control, that if they continued selling the products at the same prices they would run out of money within 12 to 18 months. Pankus also showed Viana and Baughman informal data that he collected indicating that at that time Wittek's labor costs were going right through the roof. Viana and Baughman did not respond to Pankus' information. Pankus also testified that he informed Viana and Baughman that they either had to get new equipment or make the company unique, but Wittek could not continue the same way without raising prices. (Resp. Ex. 63; Tr. 158-167).

Pankus testified that he is aware of Respondent's character and that he has never had anybody question Respondent's integrity, honesty or moral fiber. Pankus is aware of the federal charges against Respondent, that Respondent was convicted of those charges and that he was sentenced to seven years in prison. Pankus stated Respondent's criminal conviction has not changed his opinion about Respondent. (Tr. 172-175).

Testimony of Carol Petersen

Carol Petersen ("Petersen") testified that she graduated from the University of Illinois, she received her master's and juris doctor degrees from Stanford and she received a master's in

PAGE 18:

tax from IIT Kent. In 1966 Petersen joined the law firm Schiff, Hardin Waite, Dorshell & Britton as an associate and became a partner in 1973. Petersen left that firm in 1979 and went to Hubachek, Kelly, Brown & Kirby. In 1990 Petersen went to the First National Bank of Chicago as a trust advisor for their client services area. (Tr. 177-178).

Petersen first met Respondent when he interviewed for an associate position with Schiff, Hardin, Waite, Dorshell & Britton. In October of 1966, Respondent became an associate at this firm upon his return from the service. Petersen and Respondent started dating each other when they were both associates at Schiff, Hardin, Waite, Dorshell & Britton and were married in 1968. Petersen and Respondent have two children together and they were divorced in 1992. Respondent is currently staying at Petersen's home since he was released from prison in the spring of 2004. (Tr. 178-179).

Petersen testified that as a result of their association she is aware of Respondent's character. According to Petersen Respondent is, "scrupulously honest. … and that you try to do the very best under the circumstances." Petersen is aware of the federal charges for which Respondent was found guilty and that he was sentenced to seven years in prison. She visited Respondent while he was incarcerated. Her knowledge of Respondent's conviction has not altered her opinion of Respondent. (Tr. 180-181).

Petersen stated that during the time frame when Respondent was trying to get Harris Bank to be the Plan's trustee, Respondent did not seek Petersen's counsel about how he should handle the trustee issue. Petersen further testified Respondent did not speak with her about any of the Wittek matters. Petersen testified that the Wittek situation really not did have anything to do with her divorce from Respondent. (Tr. 213-215).

PAGE 19:

Petersen further testified that Respondent was involved in a very, very difficult situation when he was representing Wittek and she was shocked and surprised that Respondent was criminally prosecuted. Petersen further testified that she did not believe Respondent lacked objectivity regarding his client in this matter, but that Respondent tends to zealously represent his clients and, "that can get people's hackles up on the other side." Petersen thinks Respondent got caught up in becoming very close to the client and felt that he zealously had to do things to straighten out the situation at the company. Petersen thinks Respondent became close to the situation in trying to resolve all of the problems of the client in a relatively short period of time while Respondent received his own client's version of things which sometimes can affect objectivity. (Tr. 216-227).

Testimony of Glen Canwitt

Glen Canwitt ("Canwitt") testified that he is an attorney who graduated from Swarthmore College in 1965 and from Columbia Law School in 1968. Upon graduation from law school he joined the law firm of Hopkins & Sutter where he was an associate for six years before becoming partner. Canwitt was a partner with Hopkins & Sutter until it merged with Foley & Lardner in 2001 where Canwitt remains a partner. Canwitt has known Respondent for almost thirty years. Canwit met Respondent through his wife who was friends with Respondent's wife. Canwitt and Respondent also had a case they worked on together in the 1970s. (Tr. 237-239).

Respondent asked Canwitt, who had some experience in tax litigation, advice about what Wittek should do in relation to a seizure controversy involving the Internal Revenue Service and Wittek. Canwitt was basically an expert consultant relating to Wittek's issue with the IRS and he functioned as co-counsel with Respondent in the Wittek takeover case. According to Canwitt, Respondent's representation of Wittek's Board of Directors was effective and honest and he

PAGE 20:

thought Respondent displayed a high amount of integrity. Canwitt thought Respondent gave the Board of Directors a very high degree of professional, independent representation. (Tr. 240-241).

Canwitt testified that as a result of his association with Respondent he is aware of Respondent's character reputation. According to Canwitt, Respondent is a reputable person with a high reputation. Canwitt further stated that this does not mean that Respondent has not made a mistake, but nobody is perfect. Canwitt stated if people's mistakes are an isolated instance that, to him, doesn't affect their integrity. Canwitt is familiar with the federal charges that were brought against Respondent, that Respondent was found guilty of those charges and was aware that Respondent was sentenced to time in prison. This information has not changed Canwitt's opinion of Respondent. (Tr. 242-244).

Testimony of Michael C. Osajda

Michael C. Osajda ("Osajda") testified that he is a commercial attorney and business ethics champion at Motorola. Osajda received a degree in foreign service and a master's of law in taxation from Georgetown University and he received his law degree from Northwestern University. Osajda spent eleven years in active duty in the United States Marine Corp. and remained in the Reserves for thirty years and retired as a Colonel of the United States Marine Corp. Reserves. Osajda spent four years at Much, Shelist, Freed, Denenberg, Ament & Eiger, P.C. ("Much Shelist") and subsequently he became the Deputy General Counsel of Midway Airlines. Osajda spent a period of time in private practice and in 1979 went to Motorola where he is still employed. (Tr. 246-247).

In 1981 Osajda met Respondent after he was hired as an associate at Much Shelist where Respondent was then a partner. According to Osajda he worked under Respondent's tutelage

PAGE 21:

and assisted Respondent on a number of projects in the securities area where Respondent had an expertise and on projects involving the redomestication of insurance companies. (Tr. 247-249).

Osajda stated Respondent is of extreme high moral character and he conducts himself, both professionally and personally, with extreme rectitude. Osajda is aware of the federal charges brought against Respondent, that he was found guilty of those charges and that Respondent was sentenced to seven years in prison. It was Osajda's understanding that there was no personal benefit in the transactions which led to the charges against Respondent. Osajda's stated Respondent's conviction has not changed his opinon of Respondent. (Tr. 250-253).

Testimony of Albert L. Grasso

Albert L. Grasso ("Grasso") testified that he is an attorney who has a master's degree in tax law and primarily concentrates his practice in tax and employee benefits law. Grasso began practicing law in Washington D.C. where he was employed by a small law firm. He obtained both his law degree and master's in tax law from Georgetown University. Grasso then went to work for the law firm Baker & McKenzie. Grasso then joined Much Shelist and became a partner at that law firm. While at Much Shelist Grasso became well acquainted with Respondent. Grasso then went to form his own law firm in 1987 which is Chuhak & Tecson. Grasso has served in various capacities with the American Institute of Certified Public Accountants, although he is not a CPA himself. He has also taught taxation, estate planning and deferred compensation. (Tr. 257-258, 260-261).

In 1997 Respondent went to Grasso, in conjunction with his indictment, regarding questions Respondent had with respect to certain pension law matters and testified as an expert in Respondent's criminal case. (Tr. 259-260, 264-266).

PAGE 22:

Grasso testified that it was not unreasonable for Respondent to rely on Drake Boutwell's advice since Boutwell was an acknowledged ERISA practitioner. It also would have been reasonable not to have followed Boutwell's advise, subsequent to extensive conferences with Boutwell, regarding real estate operating corporation matters that the pension plan should have a 100% interest in the Pineville Real Estate Operation Corporation since under the Department of Labor regulations, with respect to dealing with the definition of plan assets, it is clear that if you own 100% of an entity you are treated as owning the underlying assets of the entity. As soon as Boutwell's proposed structured is understood you know that you could not follow that advice because it would end up that you would be dealing directly with plan assets because of the 100% real estate holding entity. Grasso further testified that when he looked at the transaction he thought to himself that only someone who is familiar with the ERISA requirements would lay out the structure in this fashion and that person is not Respondent. Grasso also knew that Boutwell was the partner who did ERISA work at the firm Respondent was with at that time and he thought that Respondent had to have consulted with Boutwell. Grasso also thought that there would have been a much simpler way of effecting that transaction. Grasso testified that besides Respondent's conviction, he believes Respondent could well serve the bar. (Tr. 274-275, 279-280, 282). (Tr. 282).

Testimony of Nicholas C. Hindman

Nicholas C. Hindman ("Hindman") is the Senior Vice President and Chief Financial Officer of Westel Technologies. Hindman received an accounting degree from the University of Iowa and is a CPA. Hindman began his career with Arthur Andersen which he left in 1977 to begin a career as a tax and insurance manager which he did until 1980. Since 1980 Hindman has

PAGE 23:

had his own CPA firm. In 1980 he helped start Westel and became its CFO in 1999. Hindman has assisted in turning around troubled companies. (Tr. 395-396).

Hindman has known Respondent since the early 1980s when he met Respondent through a mutual client. Hindman stated Respondent contacted him to finish an audit that was delinquent with respect to Wittek's Plan. Hindman prepared an audit for the 6141 pension plan as of December 30, 1990 and he believed he prepared audits for other years, including 1991. (Tr. 396-403, 410, 419-425).

Hindman stated that due to his association with Respondent he is aware of Respondent's character which is very high. Hindman is aware of the federal charges which were brought against Respondent and of Respondent's conviction and sentencing and that has not changed his opinion of Respondent. (Tr. 439-440).

Testimony of Delores Marie Veninga

Delores Marie Veninga ("Veninga") testified that she graduated from Southern Methodist University School of Law in 1971 and then was a research student at Cambridge University for two years. Subsequently, Veninga headed up her family's real estate business in Dallas. In 1981 she was an associate at the law firm Katten, Muchin Pierce & Galler ("Katten"). After that, Veninga went back to Dallas and was associated with the firm Jones, Day Reavis & Pogue. In 1984 she joined the law firm McBride Baker & Coles ("McBride"). Respondent was a partner at McBride Baker & Coles when Veninga joined the firm. According to Veninga she worked with Respondent the entire time she was with McBride Baker & Coles until she was terminated by that firm in 1991. (Tr. 452-453).

PAGE 24:

According to Veninga, Mr. Schnitz, was instrumental in her termination from the McBride law firm. Veninga also testified that she is aware of the bias Schnitz has against Respondent to cause Sch

Posted via email from Case Investigation

IARDC – In re George Clive Hook – Commission No. 98 CH 50

In HK on December 27, 2008 at 10:31 pm

 

Filed July 26, 2005

In re George Clive Hook
Commission No. 98 CH 50

Synopsis of Hearing Board Report and Recommendation

NATURE OF THE CASE: committing criminal acts that reflect adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects; conduct involving dishonesty, fraud, deceit or misrepresentation; and conduct that is prejudicial to the administration of justice, or which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute

RULES DISCUSSED: 8.4(a)(3) of the Illinois Rules of Professional Conduct (1990); 8.4(a)(4); 8.4(a)(5) and Supreme Court 771

SANCTION: Disbarment

DATE OF OPINION: July 26, 2005

HEARING PANEL: Joseph A. Barthlomew, William E. Hornsby, Jr. and Albert C. Baldermann

ADMINISTRATOR'S COUNSEL: Athena T. Taite

RESPONDENT'S COUNSEL: Pro se

BEFORE THE HEARING BOARD
OF THE
ILLINOIS ATTORNEY REGISTRATION
AND
DISCIPLINARY COMMISSION

In the Matter of:

GEORGE CLIVE HOOK,

Attorney-Respondent,

No. 1256432.

Commission No. 98 CH 50

REPORT AND RECOMMENDATION OF THE HEARING BOARD

The hearing in this matter and was held on February 2-3, March 16 and April 19, 2005 at the offices of the Attorney Registration and Disciplinary Commission, Chicago, Illinois, before a Panel of the Hearing Board consisting of Joseph A. Bartholomew, Chair, William E. Hornsby, Jr. and Albert C. Baldermann. Athena T. Taite appeared on behalf of the Administrator and Respondent, George Clive Hook, appeared pro se.

PLEADINGS AND PRE-HEARING RECORD

In a one-count Complaint filed pursuant to Supreme Court Rule 761(d) on June 11, 1998, the Administrator alleges that due to Respondent's May 29, 1997 conviction in the U.S. District Court, Central Division of Illinois in United States of America v. George C. Hook, No. 1L95CR10010-002, Respondent has engaged in the following misconduct: committing criminal acts that reflect adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects; conduct involving dishonesty, fraud, deceit or misrepresentation; and conduct that is prejudicial to the administration of justice, or which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute. (See Adm. Compl. at para. 1-7; Adm. Ex. 1)

PAGE 2:

On November 19, 1999 the Illinois Supreme Court, pursuant to the rule to show cause under Supreme Court Rule 761 that issued to Respondent on June 17, 1998 and continued until August 11, 1998, ordered Respondent suspended from the practice of law effective immediately and until further order of Court. On September 5, 2000 Respondent filed his Answer to the Administrator's Complaint. On March 30, 2001 the Administrator's Motion to Strike Respondent's Answers and Exhibits was granted and Respondent was allowed to file an Amended Answer to the Administrator's Complaint in compliance with Commission Rule 233 on or before April 16, 2001. On April 20, 2001 Respondent filed his Answer and Verified Third Party Complaints. On April 26, 2001 the Administrator filed a Motion to Strike Respondent's Third Party Complaints. On May 15, 2001 Respondent filed a Response to the Administrator's Motion to Strike his Third Party Complaints. On June 4, 2001 the Chair granted the Administrator's Motion to Strike Respondent's Third Party Complaints and ordered that pages 26-40 of Respondent's April 20, 2001 Amended Answer be stricken. Respondent's Answer denies virtually all of the allegations of the Administrator's Complaint.

On May 17, 2002 Respondent filed a Motion in Limine to preclude use of his federal conviction. On May 29, 2002 the Administrator filed a response to Respondent's Motion in Limine. On June 18, 2002 the Administrator filed a Motion in Limine to preclude argument and evidence contradicting Court rulings regarding PBGC v. Wittek and its relationship to U.S. v. Hook, a Motion in Limine to preclude argument and evidence concerning whether Respondent received a full and fair hearing, and a Motion to Strike certain affirmative defenses. On July 31, 2002 Respondent filed his response to both of the Administrator's Motions in Limine, a response to the Administrator's Motion to Strike and a reply in support of his Motion in Limine to preclude use of his federal conviction. On September 10, 2002 the Chair denied Respondent's

PAGE 3:

Motion in Limine to preclude use of his federal conviction and granted the Administrator's Motion in Limine to preclude argument and evidence contracting court rulings regarding PBGC v. Wittek and its relationship to U.S. v. Hook as well as the Administrator's Motion in Limine to preclude argument and evidence concerning whether Respondent received a full and fair hearing. The Chair further deemed the Administrator's Motion to Strike certain affirmative defenses moot based on the ruling on other motions.

Based on the reassignment of this matter to another Hearing Board Chair, on March 20, 2003, Respondent filed a Motion to Reconsider preclusion of his federal conviction and a Motion to Reinstate Third Party Complaints. Four days later, the Administrator filed responses to Respondent's Motion to Reinstate Third Party Complaints and the Motion to Reconsider. On March 25, 2003 Respondent filed a Motion to Reconsider Motion to Compel pursuant to Supreme Court Rule 219. On April 3, 2003 the Administrator filed her response to Respondent's Motion to Reconsider Motion to Compel and her responses to Respondent's Motion to Reconsider preclusion of argument and evidence regarding PBGC v. Wittek and Motion to Reconsider permitting argument and evidence that U.S. v. Hook was not a full and fair hearing. On April 15, 2003, Respondent filed a reply in support of the Motion to Reconsider preclusion of federal conviction.

Additionally, On May 19, 2003 the Chair ordered that a hearing in this matter was tentatively scheduled for July 29 and 30, 2003. The tentative hearing was to be held, pending confirmation, at the Metropolitan Correctional Center where Respondent was incarcerated. On July 16, 2003 Respondent filed an In Chambers Motion to Place Motions Under Seal and a Motion to Postpone Proceedings. On July 22, 2003 the Chair ordered, with no objection by the

PAGE 4:

Administrator, that Respondent's Motion to Postpone Proceedings be granted and thereby vacated the previously scheduled July 29 and 30, 2003 hearing dates.

On August 17, 2004 the Chair denied Respondent's Motion to Reinstate Third Party Complaints and his Motion to Reconsider Preclusion of Federal Conviction. On August 23, 2004 Respondent sent the Chair, a letter requesting reconsideration of the August 17, 2004 order which denied his Motion to Reinstate Third Party Complaints. On September 1, 2004 the Chair denied Respondent's Motion to Reconsider the Denial of his Motion to Reinstate Third Party Complaints and the Motion to Reconsider Denial of his Motion to Reconsider Preclusion of Federal Conviction.

On September 30, 2004 the Chair scheduled the hearing for December 2 and 3, 2004 at the Chicago offices of the ARDC. On November 11, 2004 the Chair ordered that the Administrator and Respondent file any motions in limine or motions to bar or exclude testimony on or before November 12, 2004. The Chair further ordered that the Administrator and Respondent shall respond to any motions in limine or motions to bar or exclude testimony on or before November 23, 2004 and that the hearing remain scheduled for December 2 and 3, 2004.

On November 12, 2004 the Administrator filed a Motion to Limit Character Witnesses and Motion in Limine to Bar Witness Testimony. On November 23, 2004 Respondent filed responses to the Administrator's Motions. On November 30, 2004 the Administrator's Motion in Limine to Bar Witness Testimony was granted, but the Administrator's Motion to Limit Character Witnesses was denied.

EVIDENCE

The Administrator presented the testimony of Robert Schnitz, Drake Boutwell and Exhibits 1-3 which are, respectively, the certified judgment and opinion in United States of

PAGE 5:

America v. George C. Hook, No. 1L95CR10010-002, and the July 13, 1992 letter from Drake Boutwell to Carmen Viana. Respondent presented his own testimony along with the testimony of Richard Baran, Robert Neil Rudman, Theodore W. Grippo, Joseph Pankus, Carol Petersen, Glen Canwitt, Michael C. Osajda, Albert L. Grasso, Nicolas C. Hindman and Exhibits 4, 17, 21, 22, 24, 24-B, 25, 26-7-A, 26-9-A, 26-B, 27, 28, 28-A, 29, 32, 34, 37, 40, 45, 46, 46-A, 53, 55, 56-A, 56, 57, 58, 59, 59-A, 59-B, 59-C, 59-D, 60, 61, 61-A, 63, 63-B, 64, 66, and 67. The testimony of the witnesses and the Exhibits established the following facts:

On September 13, 1996, a federal grand jury returned a seven-count indictment alleging that beginning in June of 1992 and continuing to, at least September of 1992, Respondent conspired with Carmen Viana ("Viana") to commit wire fraud, money laundering and theft. The indictment alleged that Viana was the sole owner, Chairman and CEO of Wittek Industries, Inc. ("Wittek"). Wittek was the employer and plan sponsor for an employee benefit plan ("Plan"). The Plan was an employee benefit plan subject to the provisions of Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA). Certain provisions of ERISA prohibited the lending or transfer of Plan funds to or for the benefit or a party in interest, such as an employer (Wittek). The assets and funds of the Plan were held and managed by Manufacturer's Bank in Detroit, Michigan. The indictment further alleged that Respondent conspired with Viana to form a "shell" corporation to serve as a conduit for money to flow from the Plan to Wittek. The purpose of the conspiracy was to obtain funds to provide additional operating capital to Wittek. Between July 17, 1992 and August 7, 1992, Respondent conspired with Viana to transmit and receive by wire transfer, approximately $989,000 belonging to the Plan, and that Respondent placed those funds in a "shell" corporation account and a client trust account for the purpose of concealing the source of these funds. The indictment also alleged that between August 6, 1992,

PAGE 6:

and September 18, 1992, Respondent laundered $660,000 belonging to the Plan with the intent of concealing the nature, location, source, ownership and control of the funds. Respondent was also charged with willfully converting $36,800 of the funds from the Plan. (See Adm. Compl. para. 1-5; Adm. Ex. 2 at pp. 3-6)).

On May 29, 1997 Respondent was found guilty of each charge set forth in the indictment, (three counts of wire fraud, 18 U.S.C. § 1343, one count of theft from an employee benefit plan, 18 U.S.C. § 664, and three counts of money laundering, 18 U.S.C. § 1956) and on May 27, 1998 Respondent was sentenced to eighty-four months imprisonment and ordered to pay restitution in the amount of $735,566.00. (See Adm. Compl. para. 6-7; Adm. Ex. 1; Adm. Ex. 2 at pp. 7-8).

Testimony of Respondent

Respondent testified that Viana described to him a very simple transaction involving Wittek's Plan which involved Wittek's three properties and how she wanted to sell one of those properties to the Plan. Respondent advised Viana that he did not regard himself as an expert in pension law, but knew such a transaction required an ERISA lawyer because it might be a prohibited transaction. Respondent knew enough about pension law to know an ERISA expert was required, but that was the extent of his knowledge. In a meeting between Viana and Boutwell, Viana described the transaction she wanted Boutwell to complete. Boutwell informed Viana that such a transaction was prohibited, but he thought the transaction could be structured in a way to accomplish Viana's goals which was to cure the under-funding of the Plan which was approximately $800,000.00. The transaction, if accomplished, would also provide working capital to Wittek. (Tr. 290-300).

Boutwell testified against Respondent in his criminal trial. Respondent does not know if Boutwell received immunity from the prosecution for his testimony. Boutwell's testimony in the

PAGE 7:

criminal proceeding was that it was untrue that the Pineville Real Estate Operation Corporation assets were not Plan assets. (Tr. 301)

Respondent testified that the money (a little less than $700,000.00) went to Wittek in the form of a loan from Pineville Real Estate Operation Corporation. Those funds were used to operate Wittek. Viana was not taking her full salary during this time period. (Tr. 341).

According to Respondent, Viana did not flee the country after her indictment; instead she tried to resuscitate the company until the middle of 1994 when she realized she could not do that. Viana put herself and Wittek into bankruptcy and then she went to Brazil expecting to come back for the federal hearings. Viana had periodic medical problems. Viana was indicted in February of 1995 and was Respondent's co-defendant. The government attempted to extradite her from Brazil and trick her to come back, but that did not work. The government was also planning on indicting Viana for tax evasion dating back to a period of time long before Respondent ever knew her. Viana was a New York resident and citizen of Brazil. (Tr. 341-344).

Respondent testified that he was not counsel for the Plan although the plan's money went from Manufacturer's Bank to his firm's trust account even though the Plan was not his client, since his clients were Pineville and Wittek. Respondent never expected those funds to go to his firm's trust account. According to Respondent the firm's trust account was used an an accommodation account. Respondent agreed he wired the funds to Wittek which used the funds for operating expenses. (Tr. 370-371).

Respondent did not wire the funds back to the bank and wait to get another account in a few days and have the funds sent to the appropriate bank. Respondent viewed his responsibility to Viana, not to the bank which had no further relationship with the Plan, even though Respondent agreed he did not represent Viana. Respondent thought he did not have the authority

PAGE 8:

to direct the funds unless he asked the trustee of the Plan what to do and Viana told him to send the funds to Wittek's COBRA account. Respondent initially thought he was sending the funds to a trust account Wittek's comptroller, Mr. Lumen, had established. Respondent admitted that sending of the funds to Wittek's COBRA account without documentation can be interpreted as giving the appearance of impropriety. Respondent again stated he did not feel comfortable with doing anything with the funds without conferring with the trustee, Viana. Respondent believes what he did was proper, and he does not view it as a mistake. (Tr. 373-379, 382).

Respondent further testified that Viana was upset that annuities were purchased with money from the Plan without her authorization because she was the one who was ultimately responsible for the pension and profit sharing plans. (Tr. 485-521).

Respondent stated that the prosecution's theory in his criminal case was that he assisted Viana to steal money from Wittek's pension funds. Respondent testified that his main objective was to secure the Plan from these unauthorized activities. Respondent thought it was important to get the funds out of the hands of Manufacturer's Bank. Respondent wanted to avoid litigation with Manufacturer's Bank and he was happy when the attorney, Mr. Buschmann, became involved because Respondent thought Buschmann would establish the requirements Manufacturer's Bank needed in order to transfer funds. Respondent thought Wittek would be able to satisfy those requirements and therefore the Plan would not end up in litigation. During this time period there were already numerous law suits going on involving Wittek. (Tr. 523, 535-536).

Respondent stated that around June 9 or 10, 1992 Viana and Boutwell discussed the transaction that Viana wanted to implement in which Wittek would sell one of three pieces of property to the Plan. Boutwell indicated that would be a prohibited transaction and he proposed

PAGE 9:

an alternate structure to accomplish Viana's goal of curing the under funding of the Plan which would also provide working capital for Wittek. The premise of Boutwell's structure was Department of Labor/IRS Regulation 2510.3-101. Boutwell stated that as long as the Plan did not have more than a 51% interest in the underlying company (Wittek), the assets of that company would not be Plan assets and the underlying assets would not be subject to ERISA regulations. Boutwell's structure was the whole premise of the transaction which would provide working capital to Wittek. Under the transaction, 51% of Pineville's shares would be owned by the Plan and 49% would be owned by Viana. Respondent prepared the subscription agreements which were executed by Viana as trustee of the Plan and by Viana individually; however, the stock was never issued. Boutwell acceded to Bushmann's concerns and recommended that the Plan own 100%, which Respondent thought was contrary to the regulations and would have meant that Wittek could not have transferred the property to Pineville Real Estate Operation Corporation because it could not transfer it to an entity which was 100% owned by the Plan. (Resp. Exs. 4, 24; Tr. 539-542, 551-553).

Respondent believed the structured transaction would cure the under funding of the Plan and provide working capital for Wittek. According to Respondent, the whole question was how could this be done, legally. Respondent did not know the answer to this question and consulted an ERISA expert since Respondent could not make that determination. (Tr. 554, 569-570, 727).

Respondent also testified that he caused the incorporation of the Pineville Real Estate Operation Corporation in North Carolina. Respondent prepared the documentation which he had Boutwell review and comment on. Boutwell advised that a deed in trust to reflect the security interest between Wittek and Pineville not be filed in order to assure that the Plan would not be subject to any subordination of a purchase money mortgage. Boutwell's advice was reflected in

PAGE 10:

the documents. When Respondent was terminated as Wittek's counsel in 1994 the documents he had involving Wittek and Pineville were taken by Viana from him and all of the documents presented at this hearing are documents the federal government obtained in its criminal discovery process. (Tr. 698).

Respondent further testified that the Plan was not his client, but Pineville Real Estate Operating Corporation and Wittek were his clients, and it was appropriate for him to confer with Viana and receive direction from her. Even if these entities were not his clients Respondent would have sought the advice of the person whose funds they were and that is exactly what he did. (Tr. 701).

Respondent stated that Viana would have benefited from the Pineville transaction since she would have been a 49% shareholder in Pineville. If the Pineville property had been sold Viana would have received 49% of the proceeds and Wittek would have received the loan from the Plan as well as $1.5 million in payments. The transaction was intended to be a good deal for everyone. (Tr. 732, 738-739). Respondent also stated that Viana could have cured the under funding of the Plan with the proceeds from the sale of the LaGrange property or the Pineville Property. Respondent testified that, various adjustments had been made by the actuary, there actually would have been no under-funding of the Plan. (Resp. Ex. 64; Tr. 743-744, 748).

Respondent further testified that the structuring of the equity in Pineville was done because the pension plan could not have all of the equity interest and if Viana had more than a 50% interest under the interested/disqualified person provision, would be regarded as receiving those plan assets, and that would adversely affect Boutwell's structuring therefore, a 51%/49% arrangement was necessary to comply with the law. According to Respondent, Boutwell acknowledged in his July 13th letter that Viana was a fiduciary under the Pineville structuring,

PAGE 11:

but was not personally receiving anything from the Plan that would have made it a prohibited transaction. The only source of revenue that she would receive from Pineville was as a shareholder which, according to Respondent, was not a prohibited transaction since there was no transfer of Plan assets from the pension plan to Wittek. (Adm. Ex. 3; Tr. 786-787, 790-791).

On cross-examination Respondent admitted that in 1992 Wittek was strapped for cash and therefore he tried to obtain financing for Wittek, but could only obtain financing from the Pineville Real Estate Operation transaction and from one of John Darrah's companies. Part of the financing for Wittek was with respect to the Pineville transactions. (Tr. 806).

Respondent agreed on cross-examination that Boutwell consistently gave advice that Wittek could not receive Plan assets. Respondent agreed that the language in Respondent's Exhibit 59 specifically discusses the loan proceeds. Respondent stated that they were to use the Plan's money as working capital which was a very broad term. (Resp. Ex. 59; Tr. 807-810).

Respondent agreed he was convicted of money laundering and stated he was also convicted of unlawful conversion of pension plan assets to the use of another and wire fraud for misrepresentations occurring in the July 15, 1992 and July 30, 1992 communications to the Bank of Detroit. Respondent stated he was ordered to pay restitution in the amount of $735,000. Respondent is unable to pay the full amount of restitution and is currently paying $200 per month which is the maximum amount that he can afford to pay in his present circumstances. (Tr. 811-813).

Testimony of Drake Boutwell

Drake Boutwell ("Boutwell") is an attorney licensed to practice in Illinois since approximately 1975 or 1976. Boutwell graduated from the University of Alabama Law School

PAGE 12:

and he received his master's in tax from New York University. Boutwell also has a background in accounting. (Tr. 586-587).

Boutwell testified that in 1992 he practiced law and his concentration was in the ERISA. Boutwell preformed legal services for Wittek and he knew Respondent and Viana at that time. Boutwell testified that Administrator's Exhibit 3 is the advisory letter regarding a proposed transaction he sent to Viana on or about July 13, 1992 which was also copied to Respondent. Boutwell agreed that the letter indicated that Pineville was to use Plan assets to develop the real estate. Under this letter, it states that only Pineville could use Plan assets, therefore, Plan assets could not be used for Wittek's working capital or operating expenses. Boutwell also testified that the letter was done only with respect to the legality of the transaction and it was not advice regarding the prudence or advisability of a particular investment. The advice in the letter was regarding whether this would, or would not be a prohibited transaction. (Adm. Ex. 3; Tr. 588-590, 594-595).

Boutwell further testified that around the time of the July 13, 1992 letter, he had conversations with Respondent indicating that Plan assets could not be used as operating expenses, working capital, or by Wittek in any fashion. (Adm. Ex. 3; Tr. 591-592).

On cross-examination Boutwell indicated he regards himself experienced in ERISA at this time, but it is a very broad area and as far as the statute in the letter, he hasn't looked at statutes like that for 10 years. Therefore, Boutwell does not regard himself as an ERISA expert in the same way he did in 1992. (Adm. Ex. 3; Tr. 599).

Boutwell recalled that the July 13, 1992 letter had an error in it. Boutwell could not recall the specific error in the letter, only that in his own mind he misread a complicated regulation. Boutwell recalled making an error regarding the reading of some language in the

PAGE 13:

regulation. Boutwell further testified that he consistently told Respondent and Viana that the Plan's money could not go to Wittek. Boutwell testified in Respondent's criminal case but was not granted immunity. (Adm. Ex. 3; Tr. 633-635, Tr. 641, Tr. 644).

Boutwell stated that he was the only one out of Respondent, Viana and himself who knew anything about real estate operating corporations and the Department of Labor's pension regulations. (Tr. 645).

EVIDENCE OFFERED IN MITIGATION

Testimony of Richard Baran

Richard Baran ("Baran") testified that he recently retired from being a teacher and a coach for the last forty years. Baran graduated from the Missouri Military Academy ("the Academy") and he has bachelor's and master's degrees in business from Loyola University, Chicago. Baran also has a master's of science degree in counseling from Chicago State and a doctorate in education from Vanderbilt University. Besides being a teacher, Baran also worked as a business consultant in the area of stress management in the aviation industry. Currently, Baran is working on six different novels. (Tr. 109-111).

Baran has known Respondent since September of 1952 when they were both freshmen at the Academy. Baran and Respondent would socialize a couple of times each year through their association with the Academy's alumni association and at homecomings. (Tr. 111-112).

Baran testified that he aware of Respondent's reputation regarding his character and when he heard what happened he was, "to put it bluntly—totally floored by all of this" since he has known Respondent so long. Baran stated that Respondent is upright and "honest as the day is long". Baran also testified that he could not ever see Respondent doing the things that he was accused of doing. Baran stated he was aware of the charges that were brought against

PAGE 14:

Respondent and that he was found guilty of those charges by a jury and that Respondent was sentenced to seven years in prison. (Tr. 112-117).

Testimony of Robert Neil Rudman

Robert Neil Rudman ("Rudman") testified that he graduated from the Academy in 1956 and four years later graduated from Westminster College in Fulton, Missouri. After graduating from Westminster College Rudman went into his family businesses which consisted of several enterprises. Rudman met Respondent when they were freshmen at the Academy and he has known Respondent since that time. Rudman and Respondent were roommates during their junior and senior years at the Academy. After graduating from the Academy, Rudman and Respondent kept in touch. Rudman also testified that Respondent was a trustee of the Academy. Respondent attended Rudman's daughter's wedding and his 60th birthday party. Rudman and Respondent got together whenever they could. (Tr. 119-124).

Rudman further testified that the consensus about Respondent's character amongst his peers is that it would be inconceivable that Respondent would be guilty of whatever he was sentenced for because that is not Respondent's nature. Rudman stated he "had no reason not to say you were guilty or innocent to me because it made no difference, really in our friendship. And it's my belief that you aren't guilty." Rudman also stated he has the highest regard for Respondent and that hasn't changed because of his misfortunes. If Rudman had to characterize Respondent in one word it would be "integrity". (Tr. 125-127).

Rudman was aware of the federal charges against Respondent, that he was found guilty of those charges and that he was sentenced to seven years in prison. Rudman's opinion of Respondent has not changed because of Respondent's indictment, conviction or incarceration.

PAGE 15:

Rudman testified that he wrote letters to President Bush and to Attorney General Ashcroft on behalf of Respondent. (Tr. 124-125). (Tr. 127-128).

Testimony of Theodore W. Grippo

Theodore W. Grippo ("Grippo") testified that he is a partner with the law firm Grippo & Elden located in Chicago. Grippo received a bachelor in science from Georgetown University and his law degree from Northwestern University. Grippo also received an LLM degree in taxation from DePaul University. Grippo was the Securities Commissioner for the State of Illinois in 1959 and he practiced law with the law firm Keck, Mahin & Kate, Rubin & Proctor which merged into the law firm Isham, Lincoln & Beale. This firm eventually dissolved. Grippo then formed the law firm of Grippo & Elden. Grippo has known Respondent since approximately 1975 when they both lived at 2650 Lakeview in Chicago. (Tr. 131-135, 141).

Grippo testified that in 1992 he was involved with Wittek. Grippo's involvement with Wittek began because Sidley & Austin was representing Wittek and they had experienced some sort of conflict which caused that firm to withdraw from its representation of Wittek. Upon Sidley & Austin's withdrawal, Wittek retained Grippo & Elden as legal counsel. Grippo handled the Wittek matter since it was more of a corporate matter than a litigation matter even though it involved litigation. It appeared that there was an attempt to take over Wittek by a group of internal officers. The president of the company, Viana, had acquired this company while Sidley & Austin was representing Wittek. Viana moved Wittek from the Chicago area to Galesburg, Illinois. Grippo went to court to seek a temporary restraining order ("TRO") so that the internal employees of Wittek could not take over the company. The Circuit Court issued the TRO. The opponents filed a motion for sanctions against Grippo & Elden alleging that the complaint was not justified. Eventually, over a two year period, the opponent's motion for sanctions was

PAGE 16:

dismissed. Because of the motion of sanctions being filed against Grippo & Elden, Grippo & Elden could no longer represent Wittek and Respondent became Wittek's counsel. (Tr. 136-140).

Grippo testified that due to his association with Respondent he has formed an opinion as to Respondent's character. Grippo stated at the time of the Wittek matter, he felt Respondent had the highest quality of character. He thought Respondent was a fine lawyer and fine man. Grippo testified he is generally aware of the federal charges against Respondent, that Respondent was found guilty of those charges and that he was sentenced to seven years in prison. Grippo wrote Respondent letters while he was in prison. Grippo also wrote a letter to President Clinton asking for Respondent's pardon and he visited Respondent while he was in prison. Grippo also stated that Respondent would be fit to practice law today since he believes Respondent would never make that mistake again. (Tr. 142-145).

Testimony of Joseph Pankus

Joseph Pankus ("Pankus") testified that he graduated with Respondent from Knox College located in Galesburg, Illinois. Pankus was in the advertising business and eventually started his own company called Holiday Publishing. Pankus sold this company and went on to a variety of other jobs and most recently retired as President of Wurlitzer where he spent the last 12 years. Pankus then joined a company called Morris Anderson. (Tr. 153-154).

Pankus has known Respondent for almost fifty years and has periodically kept in touch with Respondent since their graduation from Knox College. Respondent contacted Pankus in 1992 to help revise a poorly structured marketing and sales program at Wittek. Pankus thought Respondent was the attorney for the company at that time. Pankus left Wittek after about four

PAGE 17:

months since it was evident to him that, without major changes, Wittek was not going to make it. (Tr. 154-156).

Pankus stated Respondent asked him to deal with Wittek's marketing and sales strategies which Pankus agreed to do. Pankus discovered that prior to his involvement some Wittek employees tried to sabotage the company with an attempted takeover, and in reviewing the growth of the company, Pankus noticed that the labor cost ratios kept getting higher and higher than the previous labor cost ratios had been at Wittek. According to Pankus, there were too many variables at Wittek that kept increasing from the cost standpoint. Pankus informed Viana and Jim Baughman ("Baughman"), the head of Wittek's quality control, that if they continued selling the products at the same prices they would run out of money within 12 to 18 months. Pankus also showed Viana and Baughman informal data that he collected indicating that at that time Wittek's labor costs were going right through the roof. Viana and Baughman did not respond to Pankus' information. Pankus also testified that he informed Viana and Baughman that they either had to get new equipment or make the company unique, but Wittek could not continue the same way without raising prices. (Resp. Ex. 63; Tr. 158-167).

Pankus testified that he is aware of Respondent's character and that he has never had anybody question Respondent's integrity, honesty or moral fiber. Pankus is aware of the federal charges against Respondent, that Respondent was convicted of those charges and that he was sentenced to seven years in prison. Pankus stated Respondent's criminal conviction has not changed his opinion about Respondent. (Tr. 172-175).

Testimony of Carol Petersen

Carol Petersen ("Petersen") testified that she graduated from the University of Illinois, she received her master's and juris doctor degrees from Stanford and she received a master's in

PAGE 18:

tax from IIT Kent. In 1966 Petersen joined the law firm Schiff, Hardin Waite, Dorshell & Britton as an associate and became a partner in 1973. Petersen left that firm in 1979 and went to Hubachek, Kelly, Brown & Kirby. In 1990 Petersen went to the First National Bank of Chicago as a trust advisor for their client services area. (Tr. 177-178).

Petersen first met Respondent when he interviewed for an associate position with Schiff, Hardin, Waite, Dorshell & Britton. In October of 1966, Respondent became an associate at this firm upon his return from the service. Petersen and Respondent started dating each other when they were both associates at Schiff, Hardin, Waite, Dorshell & Britton and were married in 1968. Petersen and Respondent have two children together and they were divorced in 1992. Respondent is currently staying at Petersen's home since he was released from prison in the spring of 2004. (Tr. 178-179).

Petersen testified that as a result of their association she is aware of Respondent's character. According to Petersen Respondent is, "scrupulously honest. … and that you try to do the very best under the circumstances." Petersen is aware of the federal charges for which Respondent was found guilty and that he was sentenced to seven years in prison. She visited Respondent while he was incarcerated. Her knowledge of Respondent's conviction has not altered her opinion of Respondent. (Tr. 180-181).

Petersen stated that during the time frame when Respondent was trying to get Harris Bank to be the Plan's trustee, Respondent did not seek Petersen's counsel about how he should handle the trustee issue. Petersen further testified Respondent did not speak with her about any of the Wittek matters. Petersen testified that the Wittek situation really not did have anything to do with her divorce from Respondent. (Tr. 213-215).

PAGE 19:

Petersen further testified that Respondent was involved in a very, very difficult situation when he was representing Wittek and she was shocked and surprised that Respondent was criminally prosecuted. Petersen further testified that she did not believe Respondent lacked objectivity regarding his client in this matter, but that Respondent tends to zealously represent his clients and, "that can get people's hackles up on the other side." Petersen thinks Respondent got caught up in becoming very close to the client and felt that he zealously had to do things to straighten out the situation at the company. Petersen thinks Respondent became close to the situation in trying to resolve all of the problems of the client in a relatively short period of time while Respondent received his own client's version of things which sometimes can affect objectivity. (Tr. 216-227).

Testimony of Glen Canwitt

Glen Canwitt ("Canwitt") testified that he is an attorney who graduated from Swarthmore College in 1965 and from Columbia Law School in 1968. Upon graduation from law school he joined the law firm of Hopkins & Sutter where he was an associate for six years before becoming partner. Canwitt was a partner with Hopkins & Sutter until it merged with Foley & Lardner in 2001 where Canwitt remains a partner. Canwitt has known Respondent for almost thirty years. Canwit met Respondent through his wife who was friends with Respondent's wife. Canwitt and Respondent also had a case they worked on together in the 1970s. (Tr. 237-239).

Respondent asked Canwitt, who had some experience in tax litigation, advice about what Wittek should do in relation to a seizure controversy involving the Internal Revenue Service and Wittek. Canwitt was basically an expert consultant relating to Wittek's issue with the IRS and he functioned as co-counsel with Respondent in the Wittek takeover case. According to Canwitt, Respondent's representation of Wittek's Board of Directors was effective and honest and he

PAGE 20:

thought Respondent displayed a high amount of integrity. Canwitt thought Respondent gave the Board of Directors a very high degree of professional, independent representation. (Tr. 240-241).

Canwitt testified that as a result of his association with Respondent he is aware of Respondent's character reputation. According to Canwitt, Respondent is a reputable person with a high reputation. Canwitt further stated that this does not mean that Respondent has not made a mistake, but nobody is perfect. Canwitt stated if people's mistakes are an isolated instance that, to him, doesn't affect their integrity. Canwitt is familiar with the federal charges that were brought against Respondent, that Respondent was found guilty of those charges and was aware that Respondent was sentenced to time in prison. This information has not changed Canwitt's opinion of Respondent. (Tr. 242-244).

Testimony of Michael C. Osajda

Michael C. Osajda ("Osajda") testified that he is a commercial attorney and business ethics champion at Motorola. Osajda received a degree in foreign service and a master's of law in taxation from Georgetown University and he received his law degree from Northwestern University. Osajda spent eleven years in active duty in the United States Marine Corp. and remained in the Reserves for thirty years and retired as a Colonel of the United States Marine Corp. Reserves. Osajda spent four years at Much, Shelist, Freed, Denenberg, Ament & Eiger, P.C. ("Much Shelist") and subsequently he became the Deputy General Counsel of Midway Airlines. Osajda spent a period of time in private practice and in 1979 went to Motorola where he is still employed. (Tr. 246-247).

In 1981 Osajda met Respondent after he was hired as an associate at Much Shelist where Respondent was then a partner. According to Osajda he worked under Respondent's tutelage

PAGE 21:

and assisted Respondent on a number of projects in the securities area where Respondent had an expertise and on projects involving the redomestication of insurance companies. (Tr. 247-249).

Osajda stated Respondent is of extreme high moral character and he conducts himself, both professionally and personally, with extreme rectitude. Osajda is aware of the federal charges brought against Respondent, that he was found guilty of those charges and that Respondent was sentenced to seven years in prison. It was Osajda's understanding that there was no personal benefit in the transactions which led to the charges against Respondent. Osajda's stated Respondent's conviction has not changed his opinon of Respondent. (Tr. 250-253).

Testimony of Albert L. Grasso

Albert L. Grasso ("Grasso") testified that he is an attorney who has a master's degree in tax law and primarily concentrates his practice in tax and employee benefits law. Grasso began practicing law in Washington D.C. where he was employed by a small law firm. He obtained both his law degree and master's in tax law from Georgetown University. Grasso then went to work for the law firm Baker & McKenzie. Grasso then joined Much Shelist and became a partner at that law firm. While at Much Shelist Grasso became well acquainted with Respondent. Grasso then went to form his own law firm in 1987 which is Chuhak & Tecson. Grasso has served in various capacities with the American Institute of Certified Public Accountants, although he is not a CPA himself. He has also taught taxation, estate planning and deferred compensation. (Tr. 257-258, 260-261).

In 1997 Respondent went to Grasso, in conjunction with his indictment, regarding questions Respondent had with respect to certain pension law matters and testified as an expert in Respondent's criminal case. (Tr. 259-260, 264-266).

PAGE 22:

Grasso testified that it was not unreasonable for Respondent to rely on Drake Boutwell's advice since Boutwell was an acknowledged ERISA practitioner. It also would have been reasonable not to have followed Boutwell's advise, subsequent to extensive conferences with Boutwell, regarding real estate operating corporation matters that the pension plan should have a 100% interest in the Pineville Real Estate Operation Corporation since under the Department of Labor regulations, with respect to dealing with the definition of plan assets, it is clear that if you own 100% of an entity you are treated as owning the underlying assets of the entity. As soon as Boutwell's proposed structured is understood you know that you could not follow that advice because it would end up that you would be dealing directly with plan assets because of the 100% real estate holding entity. Grasso further testified that when he looked at the transaction he thought to himself that only someone who is familiar with the ERISA requirements would lay out the structure in this fashion and that person is not Respondent. Grasso also knew that Boutwell was the partner who did ERISA work at the firm Respondent was with at that time and he thought that Respondent had to have consulted with Boutwell. Grasso also thought that there would have been a much simpler way of effecting that transaction. Grasso testified that besides Respondent's conviction, he believes Respondent could well serve the bar. (Tr. 274-275, 279-280, 282). (Tr. 282).

Testimony of Nicholas C. Hindman

Nicholas C. Hindman ("Hindman") is the Senior Vice President and Chief Financial Officer of Westel Technologies. Hindman received an accounting degree from the University of Iowa and is a CPA. Hindman began his career with Arthur Andersen which he left in 1977 to begin a career as a tax and insurance manager which he did until 1980. Since 1980 Hindman has

PAGE 23:

had his own CPA firm. In 1980 he helped start Westel and became its CFO in 1999. Hindman has assisted in turning around troubled companies. (Tr. 395-396).

Hindman has known Respondent since the early 1980s when he met Respondent through a mutual client. Hindman stated Respondent contacted him to finish an audit that was delinquent with respect to Wittek's Plan. Hindman prepared an audit for the 6141 pension plan as of December 30, 1990 and he believed he prepared audits for other years, including 1991. (Tr. 396-403, 410, 419-425).

Hindman stated that due to his association with Respondent he is aware of Respondent's character which is very high. Hindman is aware of the federal charges which were brought against Respondent and of Respondent's conviction and sentencing and that has not changed his opinion of Respondent. (Tr. 439-440).

Testimony of Delores Marie Veninga

Delores Marie Veninga ("Veninga") testified that she graduated from Southern Methodist University School of Law in 1971 and then was a research student at Cambridge University for two years. Subsequently, Veninga headed up her family's real estate business in Dallas. In 1981 she was an associate at the law firm Katten, Muchin Pierce & Galler ("Katten"). After that, Veninga went back to Dallas and was associated with the firm Jones, Day Reavis & Pogue. In 1984 she joined the law firm McBride Baker & Coles ("McBride"). Respondent was a partner at McBride Baker & Coles when Veninga joined the firm. According to Veninga she worked with Respondent the entire time she was with McBride Baker & Coles until she was terminated by that firm in 1991. (Tr. 452-453).

PAGE 24:

According to Veninga, Mr. Schnitz, was instrumental in her termination from the McBride law firm. Veninga also testified that she is aware of the bias Schnitz has against Respondent to cause Sch

Posted via email from Case Investigation

HK – Engagement Agreements

In HK on December 27, 2008 at 10:19 pm
Download now or preview on posterous

BOSAgendaItem.pdf (177 KB)

Download now or preview on posterous

C200650.pdf (1205 KB)

Posted via email from Case Investigation

HK – Ryan charged with Billing Fraud

In HK on December 27, 2008 at 10:03 pm

Former partner with Holland & Knight charged with billing fraud

Edward Ryan inflated bills for Pinnacle Corp., says Illinois Attorney Registration and Disciplinary Commission

By Ameet Sachdev | Tribune reporter

December 24, 2008

A former high-ranking partner at Holland & Knight's Chicago office faces sanctions that include disbarment after state regulators charged him with inflating his legal bills on a multimillion-dollar lawsuit.

The Illinois Attorney Registration and Disciplinary Commission accuses Edward Ryan, 65, of billing fraud that lasted more than two years during his representation of Pinnacle Corp., a Midwestern home builder, in a copyright-infringement lawsuit. Ryan, who was served with the complaint earlier this month, denies the allegations, his attorney said Tuesday.

"We do not believe that Mr. Ryan violated the Rules of Professional Conduct, and intend vigorously to defend against the claims asserted," said Arthur Friedman.

Legal ethicists call bill padding the "perfect crime" because it is nearly impossible for clients to detect if a lawyer charges for five hours reviewing documents when he really only spent three. While bill padding is believed to be quite common, known cases of billing fraud don't amount to more than a few a year, said Steven Lubet, an ethics professor at Northwestern University School of Law.

What makes the Ryan case more unusual is that a junior lawyer at Holland & Knight blew the whistle on him.

Matthew Farmer reported his ethical concerns about Ryan's billing practices to the disciplinary commission in November 2005, according to court papers he filed in a lawsuit related to the Pinnacle case.

Farmer first raised concerns about his ex-boss with other partners at Holland & Knight in early 2005 but was brushed off, he said in court papers. "I am unaware of any corrective and/or disciplinary measures taken by the firm with respect to these issues," he wrote.

Farmer, who left 1,150-lawyer Holland & Knight in October 2005 for a Chicago firm with about a dozen lawyers, declined to comment Tuesday on the commission's complaint.

The disciplinary commission has not accused Holland & Knight of any wrongdoing. In a statement, the firm said, "We are aware the [commission] has filed a complaint. Mr. Ryan is no longer with the firm. Holland & Knight is not a party to these proceedings, therefore we have no further comment."

The firm, however, supported Ryan in public statements when it was first reported by The Wall Street Journal in 2006. Holland & Knight's general counsel then said the billing was "reasonable and appropriate."

The firm and Ryan's attorney declined to comment on Ryan's departure in October. At one time, Ryan was executive partner of the Chicago office, which Holland & Knight opened in 2000 when it acquired 40-lawyer Burke Weaver & Prell.

One of Ryan's long-time clients is Pinnacle, known as Town & Country Homes in Chicago, according to the commission's complaint. Ryan's brother, William Ryan, founded Town & Country in 1958.

Starting in August 2002, Ryan oversaw a suit filed against Pinnacle in a Minneapolis federal court. Ryan reviewed the hours his team of six lawyers, including Farmer, worked on the case before the firm sent monthly invoices to the client.

The commission found discrepancies between the firm's internal electronic billing records and the bills sent to Pinnacle. For instance, Farmer recorded that he worked 2,978.8 hours on the suit between August 2002 and April 2004. The invoices reflect that he worked 3,334.7 hours. At Farmer's hourly rate of about $250 an hour, the phantom hours resulted in an overcharge of more than $88,000.

The disciplinary commission said the total time billed to the client was inflated by nearly 2,000 hours. The commission said that the other lawyers accurately recorded the time they spent on the case.

Much of the bill padding was for hours Ryan said he performed for the client but reassigned to other attorneys, the commission said.

asachdev@tribune.com

Posted via email from Case Investigation

HK – Bill Padding

In HK on December 27, 2008 at 9:59 pm

Lawyer's Charge Opens
Window on Bill Padding

By NATHAN KOPPEL
August 30, 2006; Page B1
The Wall Street Journal

 

The career of Matthew Farmer, a junior partner in the Chicago law offices of Holland & Knight LLP, was on the upswing in December 2004. He had just won a monthlong trial for Pinnacle Corp., a Midwestern home builder accused of copyright infringement, and gotten kudos from many of his partners.

But weeks later, after reviewing billing records in the Pinnacle matter, he decided to leave the 1,200-lawyer firm. Mr. Farmer, 42 years old, believed his own hours on the case had been inflated by the partner in charge of billing, 62-year-old Edward Ryan. Fearing he would violate state ethics rules if he kept quiet, Mr. Farmer blew the whistle to Holland & Knight lawyers.

The firm, which has 24 offices in the U.S. and abroad, took no action and denies Mr. Ryan or the firm did anything wrong. "The amount billed by Holland & Knight in the litigation was reasonable and appropriate," says L. Kinder Cannon III, the firm's general counsel. Mr. Ryan declines to comment.

Last October, Mr. Farmer took a 7% pay cut to join Cohn Baughman & Martin, a 12-lawyer firm. He says he moved of his own accord because he was upset that Holland & Knight wasn't acting against Mr. Ryan.

While the facts of the case are still in dispute, Mr. Farmer's billing allegations offer a rare window into the tricky and emotional issue of inflated billing by law firms. It's difficult to know how widespread billing fraud is, but Stephen Gillers, an ethics professor at New York University School of Law, says "there is a general consensus that billing fraud has increased" as law firms seek to increase profits and attract top lawyers.

"Bill-padding is the perfect crime," adds William Ross, a professor at Samford University's Cumberland School of Law in Birmingham, Ala. It is seldom detected because it is almost impossible for clients to know whether "an attorney really spent three hours doing research instead of five hours," he says. He says that in a billing survey he conducted in 1996, two-thirds of the attorneys (and three-fourths of the clients) reported knowledge of bill padding. Earlier this year, a partner at Willkie Farr & Gallagher LLP left the firm and was suspended from practicing law due to bill fraud.

Meanwhile, Mr. Farmer is still pressing his claims against Holland & Knight. In February, he sent a letter detailing his charges to a Minnesota state court judge, Janet Poston, accompanied by internal Holland & Knight billing records. Mr. Farmer's letter led Pinnacle's insurer, Connecticut Specialty Insurance Co., to file claims against Holland in May, stating that "Ryan and Holland & Knight inflated and falsified legal bills." Last month, the insurer reached a confidential settlement with Holland & Knight, withdrawing the fraud claims. But Connecticut Specialty's outside counsel, Robert Haugen, believes the original motion was credible. "I have a standard to live up to in [Minnesota] when I file pleadings," he says.

Mr. Farmer, who joined Holland & Knight in 2000, became involved in the Pinnacle case in the summer of 2002. A competitor had filed suit in Minneapolis federal court, claiming Pinnacle built homes that infringed on copyrighted designs and seeking more than $30 million in damages. (The jury's finding in favor of the defendant was later reversed due to an evidentiary ruling at trial; the case may be retried in the future by someone other than Mr. Farmer.)

After the trial, Mr. Farmer reviewed the firm's bills. The first invoice struck him as odd, he says. It claimed he worked 6.5 hours on Aug. 7, 2002, the day he learned of the suit. Mr. Farmer says he distinctly recalls hearing about the case late that day and spending only 15 minutes on it.

Over the next two days, Mr. Farmer says, he checked further to see if the first entry was an aberration. He finally quit probing, he says, after discovering some 60 instances of bill padding. Mr. Farmer believes that from August 2002 through September 2003, Mr. Ryan inflated his time — and that of three other lawyers in the case — by more than 450 hours, an overcharge that Mr. Farmer says exceeded $100,000. Mr. Farmer believes his discovery may have been the tip of the iceberg, for he says he analyzed only a "sampling" of the more than $3.5 million of Pinnacle bills.

In one instance, Mr. Farmer says, Mr. Ryan sent a bill to Pinnacle claiming that partner Scott Petersen had worked 89.8 hours over a 17-day period in March 2003. Mr. Farmer says internal firm records show the lawyer didn't work on the case at all during that time. Mr. Farmer also accuses Mr. Ryan of creating "fictitious" narratives using such phrases as "review key documents" and "analyze defense strategy" to describe work that Mr. Petersen never performed. Mr. Peterson didn't return calls seeking comment. The two other lawyers on the case declined to comment.

Mr. Farmer reported his findings in early 2005 to Colin Smith, a firm partner charged with ethics oversight, suggesting that Holland & Knight file a report with the state's attorney-ethics commission. "Don't go there," he says Mr. Smith warned him. "Why would you want to do this to Ed Ryan?" Mr. Smith declines to comment.

Colleagues describe the tall, white-haired Mr. Ryan as a genteel litigator. "I always found Ed to be an excellent lawyer and a gentleman of the highest character," says Michael Kanute, a former Holland & Knight partner. Another former partner, Julie Shelton, says she "can't imagine that he would do anything unethical." At Chicago office functions, another former partner recalls, Mr. Ryan liked to offer positive messages to lawyers. "He would use the sort of catch words that were expected by headquarters, like, 'We are so glad to gather together as the Holland & Knight family.' "

Soon after the meeting with Mr. Smith, Mr. Farmer says he had a "very awkward" 10-minute meeting with Mr. Ryan. He says Mr. Ryan told him that he himself had billed time internally to Pinnacle for which he hadn't charged the client and that he therefore inflated other lawyers' hours on the case to compensate for his uncharged time. In the final tally, Mr. Farmer says Mr. Ryan told him, Pinnacle's total bill reflected the actual time the firm worked on the case.

But Mr. Farmer says he found the explanation "unpersuasive." He says Mr. Ryan occasionally offered strategic advice and edited briefs for the case but never performed routine tasks. "He never stepped foot in a courtroom, never drafted any legal papers, never deposed a witness," says Mr. Farmer, who worked full-time on the matter from the start.

"The amount billed was consistent with the value of the time worked," Mr. Cannon, Holland & Knight's general counsel, said in response to questions about Mr. Farmer's allegations.

Early last year, Pinnacle was acquired by home-builder Hovnanian Enterprises Inc. "These issues occurred well before we were associated with" Pinnacle, a Hovnanian spokesman said. "We have no independent knowledge of the facts."

After his meeting with Mr. Ryan, Mr. Farmer waited for an investigation into his allegations. "I figured at some point, someone would register disbelief or disgust," he says. When that didn't happen, Mr. Farmer moved to the less prestigious Cohn Baughman. "If you look at Matt's résumé, you realize this was not a lateral move," says William Elward, a former classmate of Mr. Farmer's at Loyola University Chicago School of Law.

Late last year, still convinced it was his ethical responsibility, Mr. Farmer reported his bill-padding claims to the Illinois Attorney Registration & Disciplinary Commission. (The commission's chief counsel, James Grogan, won't comment on the pending investigation.) Then, Mr. Farmer sent the seven-page letter and billing records to Judge Poston. "Edward F. Ryan . . . frequently inflated far beyond the hours that the timekeeping attorneys had actually recorded," he wrote the judge, who was then presiding over a lawsuit brought by Connecticut Specialty against Pinnacle regarding the legal bills.

Though Mr. Farmer says he is happy in his new job, he concedes he is dazed by the turn his life has taken. Before that, "if you told me I would be out of my firm in a handful of months, I'd never have believed it," he says.
 

Posted via email from Case Investigation

HK – Managing Partner Ryan Accused of the Perfect Crime

In HK on December 27, 2008 at 9:58 pm

Former Holland & Knight Partner Accused of the Perfect Crime

Posted by Nathan Koppel

hkSeveral years back, we blogged about a WSJ profile of Matthew Farmer, a former Chicago partner at Holland & Knight who blew the whistle when he believed a fellow partner had inflated bills to a client.

Farmer in 2005 reported to the firm, and then to Illinois bar authorities and to a trial court, that partner Edward Ryan had allegedly inflated by more than 450 hours the hours that he and other firm lawyers (including Farmer) had actually worked on a litigation matter.

Holland & Knight took no action and told WSJ that Ryan and the firm did nothing wrong. “The amount billed by Holland & Knight in the litigation was reasonable and appropriate,” L. Kinder Cannon III, the firm’s general counsel told WSJ.

We now have an update on the matter. Last month, the Illinois Attorney Registration and Disciplinary Commission decided to file charges against Ryan, accusing him of falsifying time on client invoices. Here is a copy of the complaint, in which the disciplinary board requests a hearing on the matter.

Ryan left Holland & Knight earlier this year, and he could not be located for comment.

“We are aware the ARDC has filed a complaint,” Holland & Knight told the Law Blog. “Mr. Ryan is no longer with the firm. Holland & Knight is not a party to these proceedings; therefore we have no further comment.”

After blowing the whistle, Farmer left the firm in 2006 and now works at Chicago’s Cohn Baughman & Martin. “Bill-padding is the perfect crime,” an ethics specialst told WSJ at the time. It is virtually impossible, he said, for clients to know whether “an attorney really spent three hours doing research instead of five hours.”

http://blogs.wsj.com/law/2008/12/22/former-holland-knight-partner-accused-of-the-perfect-crime/

Posted via email from Case Investigation

HK – Ex-Director Edward Ryan Billing Fraud

In HK on December 27, 2008 at 9:54 pm

Absolved by Firm, Ex-Holland & Knight Partner Faces Ethics Case re Timekeeping

Posted Dec 22, 2008, 03:19 pm CST
By
Martha Neil

After Matthew Farmer complained in 2005 that a fellow partner at Holland & Knight's Chicago office had allegedly added hours to a client's bill for work in a litigation matter that Farmer and others didn't actually perform, the law firm said Edward Ryan had done nothing wrong.

But now the Illinois Attorney Registration and Disciplinary Commission has filed a complaint against Ryan that reiterates much of Farmer's accusation, according to the Wall Street Journal Law Blog.

The ARDC complaint contains one count alleging that Ryan falsified time on a matter on which Farmer worked, as well as two counts alleging that Ryan made false representations to a tribunal.

It contends that Ryan, while representing, in a federal copyright infringement case, an affiliate of a real estate development company owned by his brother, initially recorded time he claimed to have billed personally on the litigation matter. But then, during a period from August 2002 to March 2004, Ryan revised firm time records to shift 1,389.10 hours of the 1,670.50 hours he said he personally had worked on the case to other timekeepers, including attorneys, paralegals and support staff.

Only 281.40 hours of the 1,670.50 total Ryan said he worked on the case during this period actually was billed to the client as Ryan's time, and the rest was added to other timekeepers' bills, the complaint contends.

However, it lists a total of about 2,000 hours as the amount of his own claimed time that Ryan allegedly added to other timekeepers records, not 1,389.10 hours. (Perhaps this discrepancy was due to the presumed difference in billable hourly rates for Ryan and the others on the litigation team?) Included in the 2,000-hour total was 355.90 hours of Ryan's time that he allegedly added to Farmer's billing on the matter.

When he shifted his own recorded time to other individuals working on the matter, Ryan knew "that those services had been provided, if at all, by Respondent," the complaint states. It contends that his alleged time-shifting violated legal ethics rules prohibiting conduct involving dishonesty, fraud, deceit or misrepresentation and "conduct which tends to defeat the administration of justice, or to bring the courts or the legal profession into disrepute."

A 2006 Wall Street Journal (sub. req.) article about the H&K billable time dispute says Farmer blew the whistle on Ryan because he feared he himself could be violating legal ethics rules if he kept quiet, since the allegedly inflated hours included some of his own billable time. He also took a 7 percent pay cut to move to a small firm, Cohn Baughman & Martin.

In addition to notifying the firm, Farmer also notified bar authorities and a trial court of his concerns about Ryan's timekeeping, the WSJ article says.

Ryan, who was admitted to practice in 1968, left Holland & Knight earlier this year and could not be located for comment, according to WSJ blog post. (His ARDC listing at H&K apparently has not been updated since he left the firm.)

Because it's difficult or impossible for a client to determine how much time a lawyer actually spent on a particular task, ” bill-padding is the perfect crime,” professor William Ross of Samford University's Cumberland School of Law told the WSJ in 2006.

"He says that in a billing survey he conducted in 1996, two-thirds of the attorneys (and three-fourths of the clients) reported knowledge of bill padding," the article recounts.

An unnamed spokesperson for Holland & Knight noted that the firm is not a party to the ARDC case and that Ryan is no longer with the firm, but otherwise declined to comment, the WSJ blog post states.
 

Posted via email from Case Investigation

HK – Negligence Suit

In HK on December 27, 2008 at 9:47 pm
Negligence Suit
TV station buyers say Holland & Knight botched deal

November 05, 2008 By: Billy Shields

Frances Gail Faigenblat

 
 

he owners of Spanish-language GenTV are suing four Holland & Knight partners, alleging the $48 million purchase price of a Key West television station was millions of dollars too high because of botched legal work.

Web Extra:
Lawsuit

The station buyers allege Holland partners Enrique Gomez-Pinzon and Charles Naftalin in Washington, Eric Fishman in New York and Frances Gail Faigenblat in Miami failed to determine whether WGEN-TV, known as GenTV, had valid must-carry rights when New York-based Wepahe Entertainment bought a 75 percent stake and Caracol Television bought a 25 percent stake in the station in 2005. The buyers say the station’s must-carry rights had been voided years before.

A station with must-carry rights must be part of a cable provider’s offerings in the local station’s market.

“Stations that have must-carry rights always have a minimum right to be carried in the marketplace, which impacts the value of the TV station,” said James Whisenand, a name partner with Whisenand & Turner in Miami, who represents the owners suing in Miami-Dade Circuit Court. “Without must-carry rights [GenTV] is worth substantially less.”

Whisenand would not give an estimate for the difference in value between a must-carry station and one without those rights and declined further comment on the lawsuit.

Caracol, which wanted to bolster the market for its Spanish-language offerings in South Florida, is a 54-year-old Colombian TV network known for its telenovelas, reality shows and news magazines. It relaunched GenTV as a Spanish-language station in September 2006.

“Until at least Aug. 17, 2007, defendants repeatedly advised plaintiffs that the station had legally recognized must-carry rights without adverse claims,” the lawsuit said. Caracol said it invested an additional $25 million in the station after the purchase in the mistaken belief it had must-carry rights.

The station owners allege the Holland & Knight lawyers attempted to cover up their gaffe and tried to get Caracol executives “to provide a general release of defendants in exchange for discounted legal fees and continued legal representation.”

The owners are suing for professional negligence, breach of contract and breach of fiduciary duty. They are seeking the return of about $2 million in legal fees plus other damages.

Holland & Knight plans to vigorously defend this action and are confident that we will prevail,” firm spokeswoman Karen McBride said by e-mail. She did not address the details of the dispute.

GenTV is carried throughout South Florida by Comcast, Advanced Cable, Telemedia and satellite providers without the station paying for carriage, Whisenand said. But without established must-carry rights, it could watch its reach evaporate from the airwaves when its cable and satellite carriage agreements expire.

This is another chapter in a half-century fight that intensified after Congress passed the Cable Television Consumer Protection and Competition Act of 1992, which firmly established must-carry rights.

“It really wasn’t a big deal until Ted Turner and the explosion of the cable channels,” said David Ostroff, chair of the telecommunications department at the University of Florida’s college of journalism.

Turner sued the Federal Communications Commission shortly after passage of the law on the grounds that regulating his cable offerings violated his First Amendment rights. In a 1997 opinion, the U.S. Supreme Court affirmed a trial court ruling against Turner and found must-carry rights were constitutional.

Cable networks are obligated by the FCC to carry local TV stations with a few exceptions: a station may choose to waive its must-carry rights in favor of negotiating a carrying price from the cable provider or a station may lose must-carry status if its signal isn’t powerful enough in a particular market or if a cable provider petitions the FCC for a market modification order that would void must-carry rights, Ostroff said.

The plaintiffs allege the FCC approved market modification orders deleting WGEN’s must-carry rights sometime between 1996 and 2001.

Exhibits attached to the lawsuit include copies of e-mails among the attorneys. In one message, Naftalin wrote Faigenblat to say, “It is my opinion that we (H&K) reasonably should have discovered the FCC market modification orders but did not. … We need to discuss how to communicate our findings.”

A May 23 letter from Gomez-Pinzon to Diego Cordoba Mallarino, president of Caracol parent Valorem, followed a meeting in Bogota, Colombia. Gomez-Pinzon’s letter suggested Caracol should sue former station owner William de la Pena, a Los Angeles ophthalmologist, but warned Cordoba that the network should probably retain other counsel.

Caracol retained Holland & Knight in September 2005, with Gomez-Pinzon as the engagement partner at an hourly rate of $390. Fishman worked on tax regulation matters at a rate of $415 an hour, according to documents filed with the lawsuit. The other partners were brought in later.

The lawsuit filed Oct. 17 has been assigned to Circuit Judge Gill Freeman in the court’s complex business division. The Holland & Knight attorneys have not filed an answer yet.

Billy Shields can be reached at (305) 347-6649.

http://74.125.47.132/search?q=cache:_-q8yRin_ioJ:www.dailybusinessreview.com/news.html%3Fnews_id%3D51518+holland+%26+Knight+sued&hl=en&ct=clnk&cd=19&gl=us

Posted via email from Case Investigation