New York has disbarred a lawyer who was convicted of conspiracy to commit arson and possession of an unregistered destructive device in violation of 18 USC §§ 371 and 844(i) and 26 USC §§ 5861(d) and 5861(f). The device was used to damage an unoccupied New York police car during the George Floyd protests. Matter of Mattis 2022 NY Slip Op 06438.
On September 16, 2022, the Alabama Supreme Court announced a public reprimand for a former judge.
“Enterprise attorney, Christopher Mark Kaminski was issued a public reprimand with general publication on September 16, 2022, as ordered by the Disciplinary Board of the Alabama State Bar, for violating Rules 8.4(a), (d) and (g) [Misconduct], Alabama Rules of Professional Conduct. In May 2015, Kaminski was appointed as the district court judge for Coffee County and subsequently elected to a full term on November 8, 2015. In September 2018, the Judicial Inquiry Commission began an investigation after receiving a complaint that Kaminski was involved in an extra-marital relationship with attorney Amy Marshall. On July 16, 2019, the Office of General Counsel received a complaint filed by the Judicial Inquiry Commission alleging a number of violations of the Canons of Judicial Ethics. While engaged in the romantic relationship with Marshall, Kaminski routinely appointed Marshall to cases over which Kaminski presided and took judicial action in cases where Marshall was of counsel of record before and after the relationship became public. Kaminski subsequently admitted to violating Canons 1, 2, 2A, 2B, 2C and 3C(1) of the Canons of Judicial Ethics. As a result, Kaminski resigned his position as district court judge and agreed to never seek judicial office again.”
The Supreme Court has accepted a case on the attorney-client privilege.
The ARDC Hearing Board has recommended a four-month suspension for a lawyer who, it found, did not properly communicate with his clients and engaged in a conflict of interest in violation of Rule 1.7(a)(2). The lawyer represented a restaurant and four employees (servers) who were accused of violating a local ordinance. The lawyer attended a hearing and agreed to a resolution of the claims. The employees claimed that the lawyer did not have their consent to resolve the cases on their behalf.
Rule 1.7(a) provides: (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
The ARDC’s Summary stated:
“A local ordinance prohibited persons from exposing their buttocks while acting as a waiter, waitress or entertainer in a business with a liquor license. A restaurant retained Respondent to represent it and four of its servers on charges of violating that ordinance and agreed to pay any fines imposed on the servers if they were found to have violated the ordinance. Without fully informing the servers of their rights and options, Respondent entered pleas admitting that the restaurant and the servers violated the ordinance. Respondent thereby failed to properly consult with his clients concerning the objectives of the representation, failed to properly inform and explain matters to his clients, and improperly represented clients despite a conflict of interest.”
The Opinion continues to describe the testimony of the servers.
“Based on the testimony of Sarah, Briana and Allison, Morales or another manager collected their citations and told the servers they did not have to go to court. Management staff told the servers that Twin Peaks would take care of the situation and the servers would not have to deal with it. None of them ever met with Respondent or expected that anyone would admit to the charge on their behalf. Given the opportunity, Sarah, Briana and Allison each would have sought to present a defense. All three considered any violation the restaurant’s responsibility, not hers, as she was dressed as her employer required. Further, Briana was unaware of the prior police warning. Sarah testified that management told the servers to wear the lingerie despite that warning. While Allison and Briana indicated otherwise, Morales believed that all servers were clad in compliance with the ordinance, and Sarah denied that any portion of her buttocks was exposed. According to Morales, photographs of the servers with their buttocks covered depicted how they were dressed when police arrived on February 11, 2017. (Tr. 59-75, 110, 130-37, 141-43, 151, 176-78, 192, 223-25, 236-39, 317-24, 334-39; Resp. Ex. 6).
Sarah, Briana and Allison first learned that a plea of liable had been entered well after the fact. They were able to obtain information about the disposition of the citations. They were concerned about having any record of this violation and having to disclose the violation when applying for school or jobs in the future. (Tr. 80-93, 146-47, 152, 170, 173, 325-28).
Based on Respondent’s testimony, he met with the servers on March 9, 2017, told them he represented Twin Peaks, and Twin Peaks authorized him to represent them, at no cost to them, if they did not want, or already have, another attorney. Respondent informed the servers of the March 14 court date, that there were citations against them individually and, if they wanted, they should get counsel to represent them. He told the servers they did not have to use him as their attorney. All agreed to have him represent them. (Tr. 279-83, 288-89, 512). Respondent did not inform the servers of the material risks of joint representation or advise them that they should consult with independent counsel. (Ans. at pars. 16, 17). Respondent did not believe there was any conflict of interest between Twin Peaks and the servers. He did not consider whether the servers might have a cause of action against the restaurant. (Tr. 283-86, 297, 509).
Respondent testified that, during the March 9 meeting, he told the servers that he would see if the village would dismiss the cases against them, but that would require an agreement from the village prosecutor. He recognized that was the servers’ first choice. Respondent believed that no one had any viable defense or was apt to succeed if the case went to hearing, as the police report indicated that these servers all were dressed in a way that violated the ordinance and all covered their buttocks after police issued the citations. Respondent understood that the photographs were taken after the citations were issued, not before. Respondent explained that to the servers. Respondent did not believe the servers had a defense to the citations based on lack of notice to them. While recognizing its potential as mitigation, Respondent was not certain whether the fact that the restaurant dictated the servers’ attire might have been a legal defense to the citations against the servers.
Respondent informed the servers that, if a plea had to be entered, Twin Peaks would pay any fine against them. Respondent saw that as the only real option, absent an agreement from the village prosecutor to dismiss the citations against the servers. Respondent noted that the servers were not familiar with the legal system. From his perspective, all the servers preferred to not spend money for an attorney and to avoid having to go to court or see him on an ongoing basis. Respondent thought he had the servers’ authority to enter a plea on their behalf. (Tr. 280-88, 295- 96, 510-11, 531-33, 542-43, 546-49).
Respondent did not communicate directly with any of the four servers after March 9, 2017. He relied on local managers, particularly Morales and Tony Gutierrez, to communicate with them. (Tr. 279, 288, 522-23). Respondent did not inform the servers of the status of the administrative hearings, Huguelet’s refusal to dismiss the citations against them or his negotiations with Huguelet. (Ans. at par. 20; Tr. 297). Respondent did not inform the servers that he had pled them liable to the ordinance violation, what that plea meant or the time within which to appeal. Respondent sent copies of the disposition to Gessner, but not to anyone at Twin Peaks Orland Park. (Ans. at par. 27;Tr. 292-93, 530).”
Comments: The Panel found a violation of Rule 1.7(a)(2) Conflict of Interest and recommended a four-month suspension. In other words, it was impossible for the attorney to represent both the servers and the restaurant. The restaurant’s goal was to have a speedy resolution of the municipal dispute which the lawyer obtained. The servers’ goal would have been to resist any acceptance of responsibility because it might impact their ability to obtain work in the future. The panel found that the lawyer’s representation of the servers was limited by his representation of the restaurant. The lesson here is to think carefully about conflicts of interest and to retain separate counsel for each party to the municipal proceeding.
The American Bar Association has an advisory opinion, No. 496, and an article on how to respond to negative reviews.
I tell lawyers not to respond to negative reviews. However, I believe that it is long past time for the rules to change. Under the current system, clients have free rein to disparage lawyers and lawyers can do little about it without incurring discipline.
Here is how I would like to see the rules change.
First, a client who writes a negative review of the lawyer should be on notice that the lawyer may respond to that review. The lawyer should be able to say “The review is false” or “The review is misleading.” The lawyer should be able to say “We did not represent this person.” or “We declined this person’s case” without any fear of a disciplinary proceeding.
Second, if the lawyer is falsely accused of a wrongful act, the lawyer should be able to respond to that accusation without fear of discipline, including explaining the facts necessary to rebut the false accusation.
Third, unless the client reveals her name and discloses confidential information, the lawyer should not reveal the client’s identity or any confidential information.
Note that the rules now do not allow the types of responses I have outlined above. The system is not fair to lawyers and it should be changed.
The Respondent was a well-known attorney and a chairman of a large law firm. Unfortunately, he became involved with Rick Singer and paid Singer to enable his child to get preferential treatment on a college entrance examination. He was indicted, pleaded guilty and served one month in prison and did 250 hours of community service. The New York Appellate Division suspended him for two years. The lawyer obtained a terrific result from the Appellate Division. Disbarment was certainly a possibility. His decision to plead guilty and accept responsibility was undoubtedly helpful to his cause.
The explanation is as follows:
Respondent cooperated with the AGC and has no disciplinary history. He testified how he disgraced his family and his firm, how he betrayed his former partners, colleagues and his [*4]profession, and he acknowledged that he had several chances to reconsider the wrongness of what he was doing. When asked how he reconciled his statement to Singer that he was not concerned about the moral issue of what he was doing with the person who he thought he was, respondent stated —
“it’s an anathema to me . It’s an enormous disappointment to me that that’s where my head was at .It doesn’t matter how I got there. It doesn’t matter what I was thinking . It was just abhorrent. I always thought I’d be the guy who would hang up on something like this . But when I was tested in this instance, I went for it.
* * *
“This was hubris. It was arrogant. It was about me, not about my child. That took a lot of self-realization. It was deep insecurity, I think. I frankly think a lot of people in my former profession have this notion of having to
prove yourself all the time. It overwhelmed me and it destroyed my life. I destroyed my life.”
The Referee noted that the record itself showed that respondent’s criminal actions were “out of character with his professional life and his desire to make amends.” Respondent presented his pre-sentencing memorandum with some 70 letters of support from, among others, family, friends, former colleagues and Greenwich policemen, all of which showed “the breadth and depth of Respondent’s extensive pro bono activities, his help to others in need, his millions of dollars in financial contributions and hours of personal service to Fordham Law School and Cornell University and his numerous acts of generosity and kindness throughout his career.” Respondent became well known in the legal community, writing articles and presenting at conferences; he was named “Dealmaker of the Year” by American Lawyer in 2018; and he became more involved with Fordham Law School, providing contributions and becoming a member of the Dean’s Advisory Planning Council, for which he was recognized in 2016 with a public service award.
At the hearing, the former Chairman of the law firm where he worked testified that, inter alia, he had worked with respondent for nearly 20 years and knew him quite well due to their management positions, and there was “universal respect and affection” for him. He explained that anybody who knows respondent saw his misconduct as “a real aberration, understood by everyone to be an act of zealousness and protectiveness for his daughter. But it doesn’t change anybody’s views who know him as to his reputation.” The founder of Publicolor testified to respondent’s extensive financial and hands on involvement with the organization assisting struggling schools and their students in poorer neighborhoods in New York City with advancing their education. This included serving as a Board member for 10 years (5 years as Chairman), until he was charged with the subject crime, painting with the kids, and being a mentor to many of the high school students. Even after he resigned from the Board, respondent continued to mentor students.
Recalling [*5]his one-month incarceration respondent testified that it was “deeply, humbling, extraordinarily eye-opening” “horrific on many levels” and it “changed my life forever. I don’t know for better or for worse, but it’s definitely changed the way I view life.” During his incarceration he conducted continuing education seminars for other inmates on their lives after prison and how to start and run a business and met with them individually to make sure they understood the materials. In prison respondent “was a kind, caring, and humble man deeply contrite about his actions and earnestly seeking forgiveness and redemption” who “never minimized his conduct or attempted to shift the blame to someone else” and “desire[d] to atone by helping others at Loretto [prison]”, with several inmates commenting that “his seminar transformed their own post-release plans.”
Prior to his misconduct most of his charitable work was “ironically enough” with education; however, following his experience in prison, respondent wanted to work with an organization that helps inmates and their families and so his community service work was with the Aleph Institute based in Los Angeles which provides “social and religious services focused around the needs of prisoners and their families.”
Since his immediate suspension and release from prison, respondent has been getting his “own house in order” and has been working on business issues related to companies regarding negotiations and investing or strategy around transactions.
In considering a proper sanction, the Referee noted that, as respondent admitted before the sentencing judge, “[t]his was not a victimless crime. The real victims are the kids and the parents who played by the rules in the college admissions process.”
The Referee also considered the importance of “[t]he attorney’s attitude toward the obligations and duties implicit in taking the oath of office” and “notice to the profession that certain conduct will not be tolerated” (Matter of Nearing, 16 AD2d 516, 518 [1st Dept 1962]). The Referee found respondent’s “deep and genuine” remorse “expressed over and again” —
“from his allocution at his sentencing in Federal court, his [EUO] before the Committee and the hearing, and from observing his forthright demeanor at the hearing, it is clear that Caplan has learned his lesson — painfully and traumatically. It is difficult, if not impossible, to imagine Caplan ever again deliberately crossing the line and acting criminally or unethically.”
However, the Referee suggested that the mitigation could not obscure the purpose of the proceedings, “the protection of the public” and imposing a sanction —
“Respondent was at the very top [of] the legal profession in June 2018 when he had his first conversation with Rick Singer. He was co-chair of one of the country’s leading law firms, he had a large and extremely remunerative law practice, he was highly respected by all. Despite all that, when faced with a clear ethical choice, he failed [*6]badly. He knew in that first conversation that Singer was proposing “cheating” the college admissions process. But rather than hanging up the phone, Caplan said yes, signing onto an illegal, criminal scheme that brought shame to himself and to his family.
“In making that choice, Caplan completely disregarded his professional and civic duties. Rather, he used his skills as a lawyer and the rewards of his successful law practice to circumvent the rules, not to honor them, to try to protect himself against the consequences of his clearly ethical and criminal conduct, rather than to choose to avoid any such behavior.
“In these circumstances, the balancing test this proceeding requires weighs against a shorter suspension, but not so heavily, given the weight and consequences of the lessons Caplan has learned, as to require disbarment. I recommend that Caplan be suspended for a period of two years, retroactive to the date of the Appellate Division suspension order of November 7, 2019.”
The AGC now moves for an order confirming the findings of fact, conclusions of law and recommendation of the Referee to impose a two-year suspension, nunc pro tunc to November 7, 2019 (date of his interim suspension) in this “serious crime” proceeding. Although he urged a one-year suspension before the Referee, respondent has submitted a separate Memorandum of Law in support of the Committee’s request for a two-year suspension and provides a detailed presentation of the evidence in mitigation and case precedent. In view of all of the foregoing, and that the purpose of this proceeding is to protect the public as opposed to punishment (Matter of Samuel, 103 AD3d 134, 137 [1st Dept 2013]), the Referee’s report including the sanction recommendation is confirmed.
Within weeks of his arrest, respondent pleaded guilty to conspiracy to commit mail fraud and honest services mail fraud (18 USC § 1349 [see 18 USC §§ 1341 and 1346]), a federal felony, for his participation in a scheme which involved two trips to California and extended for eight months until he was arrested. Almost immediately respondent accepted full responsibility for his criminal and unethical wrongdoing and expressed sincere remorse, not only in court and in public, but to essentially anyone he came into contact with. His honesty about his failings, his shame and the devastating consequences his criminal behavior has had on his personal and professional lives was palpable in his testimony before the sentencing judge, before the AGC (in his EUO) and before the Referee. Respondent’s years of mentoring people from all walks of life and participation in charitable and pro bono activities was not done for appearances but involved a substantial commitment of his time and effort, not just financial. Indeed, the numerous letters submitted on his behalf describe the positive impact respondent has had on people’s lives spanning decades, and not just with family and friends but with acquaintances and even strangers. [*7]Even the Committee acknowledges that his character evidence is “impressive” and that “there is little reason to believe that he will engage in similar criminal conduct.”
Nonetheless, it is clear that respondent’s focus at the time was not on the immorality and illegality of his actions but on not getting caught, and he continued with the scheme despite numerous opportunities to walk away. Although no case is directly on point, this Court has faced somewhat similar matters where attorneys have engaged in deceptive conduct and/or bribery resulting in discipline ranging from suspension to disbarment (Matter of Davis, 109 AD3d 154 [1st Dept 2013]; Matter of Bertel, 268 AD2d 112 [1st Dept 2000]; Matter of Holtz, 239 AD2d 24 [1st Dept 1998]; Matter of Stone, 230 AD2d 481 [1st Dept 1997]; Matter of Goldberg, 190 AD2d 269 [1st Dept 1993]; Matter of Lefkowitz, 105 AD2d 161 [1st Dept 1984]).
Additionally, in the 1990’s there were several misdemeanor commercial bribery/scheme to defraud cases involving attorneys who participated in the “ten percenter” bribery scheme in which they paid insurance adjusters to influence the handling of insurance claims, resulting in sanctions ranging from censure to disbarment (see e.g. Matter of Kreitzer, 281 AD2d 35 [1st Dept 2001], lv denied 97 NY2d 609 ; Matter of Fields, 280 AD2d 104 [1st Dept 2001]; Matter of Rotter, 241 AD2d 81 [1st Dept 1998]; Matter of Ingber, 239 AD2d 58 [1st Dept 1998]).
A two-year suspension retroactive to his 2019 suspension properly balances respondent’s criminal conduct with the substantial evidence in mitigation, the protection of the public, maintaining the honor and integrity of the profession and as a deterrence to others from committing similar misconduct (22 NYCRR 1240.8 [b]).
Accordingly, we grant the AGC’s motion to confirm the Referee’s findings of fact, conclusions of law and recommendation, and respondent is suspended from the practice of law in the State of New York for a period of two years, nunc pro tunc to November 7, 2019, and until further order of the Court.
For years I have advised lawyers to ignore negative online reviews and comments on sites such as Avvo.com, Yelp or Google Business. Lawyers have been disciplined for angry responses to online reviews. This blog post involves a lawyer who went much further than an angry response and had to plead guilty to federal charges as a result.
An Oklahoma lawyer was suspended for two years and one day after he pleaded guilty to a federal crime. After his old firm dissolved, the lawyer was involved in contentious litigation with his brother and former partner. The lawyer hired a consultant to “manage his online” reputation and build a new website. What happened after that is the subject of a federal indictment and guilty plea:
“¶1 Respondent Bradley Alan Pistotnik was admitted to the practice of law in the State of Oklahoma in 1981 and in the State of Kansas in 1982. Respondent attended the University of Kansas School of Law, and he currently lives in Wichita, Kansas. He maintains clients in both states with the majority of his practice being in Kansas. Respondent’s federal criminal conviction in Kansas arose from his conduct in 2014, after he hired a web developer, David Dorsett, to build a website for his newly formed law firm. Respondent opened this new law office following a contentious dissolution of his old firm and partnership with his brother. The winding up of that business led to competing lawsuits between the brothers, including an action for receivership to retain control over clients, and a court order from a Kansas judge directing them to disable the old website, http://www.pistotniklaw.com, and create their own independent sites. Hr’g Tr., 120-21.
¶2 On September 15, 2014, after receiving an email advertisement from David Dorsett, Respondent reached out, and the two met at Respondent’s law office. During this initial meeting, Respondent hired Dorsett to: 1) build the new website, 2) serve as an information technology expert in the dissolution proceeding, and 3) provide assistance with online reputation management. Respondent was concerned that after the fallout at the firm, his brother may be publishing negative information about him online. At the conclusion of the meeting, Respondent wrote Dorsett a check for $5,000, and gave him full access to his office computers and passwords. Id. at 124.1
¶3 Four days later, on September 19, 2014, Respondent met with Dorsett a second time. Dorsett instructed Respondent to search for his name online to see what results appeared. Respondent did so the following day and located an article on RipoffReport.com describing him as a criminal. Respondent immediately emailed Dorsett the following: “Dave look at this new page from yesterday and tell me how we get rid of it[;] states created yesterday[.]” Complainant’s Ex., 2. Dorsett informed Respondent he had a friend who could “de-index” negative articles and build new positive pages to make the unwanted content appear further down in the search results. Hr’g Tr., 127. Respondent testified that he agreed only to this legal de-indexing service. Id. at 128-29. On September 22, 2014, Respondent also emailed Dorsett: “Dave, can you find the IP address for this site and particular claim number to establish the location of the sender?” Complainant’s Ex., 3. Respondent titled both of these emails: “Ripoff Report” and “Ripoff page,” respectively.
¶4 Six days later, on September 25, 2014, Dorsett sent extortionate threats and initiated a flood of emails to the servers of Ripoff Report2, Leagle3, and the Arizona law firm that represented Ripoff Report, in effort to frustrate the recipients and cause them to remove all information pertaining to Respondent. Resp’s Ex., 4, 2. These emails impaired the servers of Ripoff Report, Leagle, and the Arizona law firm, rendering their communications and data inaccessible. Along with the emails, Dorsett sent the following threat separately to all three victims, each reflecting the particular site’s name:
Remove this page and we stop [link of subject article removed] . . . [I]f you don’t remove it we will begin targeting your advertisers and explain that this will stop happening to them once they pull their ads from leagle.com or leagle.com kills this page . . . [link removed] You have 4 hours before we start hitting your advertisers.
¶5 Later this day, as the communications were still inundating the businesses, two attorneys from the firm representing Ripoff Report contacted Respondent at his law office. The attorneys advised Respondent they were recording the phone call. This recording is included in the record before this Court. Complainant’s Ex., 7. The lawyers told Respondent that based on the threats regarding negative content about him, Respondent was their only link for determining who was responsible. Respondent denied having any knowledge or involvement and falsely stated that he had never asked or hired anyone to help him with reputation management. The lawyers asked Respondent repeatedly if he knew any information that could help them in any way, emphasizing that their servers were on the brink of crashing unless they identified the attacker. The lawyers informed Respondent they were turning the matter over to the FBI. Respondent then began shifting the blame to his brother, stating how he was involved in contentious litigation with him so he would most likely be the culprit. Respondent said he would “call around” to see if he could find out anything but reemphasized falsely that he had “not hired anybody,” so whoever was responsible was “doing it on their own.”4
¶6 Immediately after hanging up, Respondent called Dorsett, who confirmed the attacks. According to Respondent, he “chewed him out” and “screamed at him,” asking “what the hell was wrong with him.” Hr’g Tr., 156. Ripoff Report ultimately acquiesced in the ransom and removed the negative review the same day. Dorsett also sent Respondent an email detailing his methods and confirming the successful removal. Four days later, on September 29, 2014, Dorsett emailed Respondent again, this time attaching an invoice listing the reputation services related to the attacks and noting: “I’m pretty sure nobody has ever gotten a full removal from either of those sites, and no reputation companies will even attempt it for under $2,500 per page.” Complainant’s Ex., 4. Respondent paid the invoice by check the same day.5
¶7 Even if Respondent was initially unknowing of Dorsett’s plan, after the attacks he chose to persist in the lie, not contact the lawyers, and then pay for the completed scheme. It was not until months later that Respondent learned Dorsett had actually caused the publication of the negative articles in a larger ploy to also extort Respondent in addition to the other three victims. At this point, Respondent went to the FBI and reported Dorsett. Doing so, he described the events as if he was completely innocent in the scheme. In fact, Respondent was initially listed as a victim in the FBI’s investigation initiated against Dorsett alone. Hr’g Tr., 188. The FBI agent who investigated the criminal case testified at the PRT hearing that it was not until later in the investigation against Dorsett that their office discovered Respondent had excluded two incriminating emails from evidence when reporting Dorsett for extorting him. Id. at 195. At this point, the FBI learned the full extent of Respondent’s business relationship with Dorsett. Id. In summary, Respondent accepted and helped conceal the fraud when he believed it was carried out to his benefit and then reported it only after learning the larger scheme was against him as well. Respondent’s dishonesty regarding the true nature of his and Dorsett’s involvement in the attacks led to his criminal conviction.
¶8 On July 17, 2018, after much investigation and several delays in the prosecutions of both men, the United States Attorney’s Office (“USAO”) for the District of Kansas filed a ten-count Indictment against Respondent in United States v. Pistotnik, Case No. 18-CR-10099-01.6 Following plea negotiations, Respondent agreed to plead guilty to three counts of Accessory After the Fact, in violation of 18 U.S.C. § 3.7 The USAO filed the three-count Information on October 15, 2019. The following day, the United States District Court for the District of Kansas accepted the plea, adjudicated Respondent guilty, and sentenced him to payment of a $375,000 fine, restitution of $55,200, and a special assessment of $300, all due immediately in a lump sum of $430,500. Respondent paid this amount in full on the day of his plea and sentencing.”
The Supreme Court of Oklahoma ordered a suspension of two years and one day for the wrongful conduct. The Supreme Court reasoned that the guilty plea removed any ability of the respondent lawyer to deny involvement in the online harassment of the websites.
State ex rel Oklahoma Bar Association v. Pistotnik, 2020 OK 93 (November 24, 2020).
The Truman Show was a successful movie starring Jim Carrey in which he played the role of Truman Burbank who lives an ordinary life. What Truman does not know is that the entire world around him is composed of actors. Truman is the star of a television show in which he is the only “real” person. There are many lessons to be learned from this sad case.
Yesterday the Illinois Supreme Court entered an order disbarring Vincent Porter, an attorney who the Court believes engaged misconduct serious enough for disbarment. Porter is an attorney and also acts as a sports agent. He did not realize it, but he came to star in his own version of The Truman Show, which ultimately led to his disbarment.
Vincent Porter came to star in his own version of The Truman Show. The transaction he was involved with was a sting operation set up by the FBI. The main witness against him was Marc Pennebaker, an FBI agent who set up the entire scam and recorded hours of conversations with Porter and others discussing a litany of fraudulent actions he was planning to perform, but never did. There were no investors. There was no deal. There were no victims. There was no financing. All that resulted from the FBI operation was the disbarment of Vincent Porter, whose greatest sin was, in my opinion, that he was duped by the FBI and failed to take measures to protect himself. His disbarment is a direct result of his failure to document precisely who he was representing and what his duties were as a lawyer. He was also fooled by a confidential informant who knew what to say, how to say it, when to say it and to record it.
This is how the Hearing Board described the charges:
The Administrator brought a two-count complaint against Respondent charging him with misconduct arising out of his participation in a purported deal to purchase Burger King franchises and related property. The deal, in reality, was part of an FBI sting, which culminated in Respondent’s arrest and eventual entry into a deferred prosecution agreement. Because of his role in the purported deal, Respondent was charged with assisting a client in conduct the lawyer knows is fraudulent, in violation of Rule 1.2(d); making statements of material fact or law to a third person which the lawyer knows are false, in violation of Rule 4.1(a); failing to disclose a material fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client, in violation of Rule 4.1(b); committing a criminal act that reflects adversely on his honesty, trustworthiness, or fitness as a lawyer, in violation of Rule 8.4(b); and engaging in dishonesty, in violation of Rule 8.4(c). Hearing Board Opinion January 18, 2019 at 2.
According to the ARDC and the Hearing Board, “Respondent was a participant in, and counsel to, a group of individuals that planned to defraud investors in a real estate transaction.” Further, Porter was accused of making false statements and withholding information about the transaction.
Porter became involved with Joseph Vaccaro who was being investigated by the FBI. Billy Crafton, a confidential information, contacted Vaccaro Vaccaro then introduced Porter to Crafton, who held meeting and made recordings. Crafton, Vaccaro and Porter discussed a scheme under which they would create an entity to purchase 13 Burger King Restaurants and sell those restaurants to a group of professional athletes at an inflated price. Porter met with Crafton and Vaccaro and later met with Pennebaker.
There is an old saying that if you meet with a group of investors and you have not clarified who you represent, it will later turn out that you represented all of them. It apparently never occurred to Porter to prepare an engagement letter which would have identified his client or clients. Had he taken this small step, it is possible that this entire fiasco could have been avoided. Because he did not protect himself or think about the attorney-client relationship, the ARDC alleged and the Hearing Board found that Porter represented a group of investors including himself, a confidential informant (Crafton) and another target of the investigation (Vaccaro).
Back to the Facts:
Respondent testified he also discussed the Burger King deal with Crafton at a restaurant in Chicago. An audio recording of a meeting between Respondent and Crafton on July 22, 2014 reflects the following statements:
Respondent indicated he was conducting due diligence and would be handling the legal side and structuring the LLCs;
Respondent and Crafton agreed that the real purchase price for the restaurants was $16 million, but Crafton would tell investors that the entire $20 million was going toward the deal;
Respondent confirmed that Crafton should not disclose to potential investors that Respondent, Crafton and Vaccaro would be taking $4 million off the top; Crafton should state that the other 50% stake in the Burger Kings would be owned by a group of New York investors whose identity he did not know; Crafton should not reveal that, in actuality, Vaccaro and Respondent would own the remaining 50% of the Burger Kings; and Crafton should deny any ownership interest or receipt of kickbacks;
Respondent indicated he would create multiple LLCs to make it appear that another group of investors would own 50% of the Burger Kings; When Crafton asked for confirmation that he should not disclose the actual structure of the deal, Respondent replied “Yeah, we’d all be committing suicide . . . you know, career suicide;”
Respondent and Crafton referred to a “home run deal” that the investors would not know about, and a “single” deal. The two deals were also characterized as an “A” deal and a “B” deal; and Respondent indicated he has the experience to do more deals in the future.
Hearing Board Opinion at pages 6-7.
Porter then prepared an Operating Agreement an LLC which was to be owned by the investors brought to the deal by Crofton. Hearing Board at 8. (Here again, the engagement letter would have greatly assisted Porter. Had he created an engagement letter he would have had to figure out who his client was. He might have chosen to represent Crofton or he might have chosen to represent the “investors.” Either choice would have been better than no choice at all because he could have then sorted out what his professional duties were.).
The October 1, 2014 Meeting
Porter agreed to meet with Pennebaker (posing as a financial advisor), Vaccaro and Crafton at Crafton’s office in San Diego. Another FBI agent played the role of “potential investor.” The meeting was, of course, recorded and Porter was arrested after the meeting was over. The Hearing Board explained:
On October 1, 2014 Pennebaker, again posing as a financial advisor, met with Respondent, Vaccaro and Crafton at Crafton’s office in San Diego. Pennebaker brought along another undercover FBI agent who posed as a potential investor. Both video and audio recordings were made of the meeting. (Tr. 78-79, 116, 125-26, 139, 150).
Pennebaker testified the purpose of the meeting was to gather more information and evidence relating to the Burger King investment. During the meeting Respondent stated the final details of the transaction had not been negotiated, but funds would be received from a New York investment group which would have a 50% ownership stake. When Pennebaker asked about the $37 million purchase price, Respondent again indicated the price had started higher and had been negotiated down. Respondent indicated he would be handling the legal end of arranging the deal, although the closing would be handled by Virginia attorneys, and he explained he was not taking any stake in the deal because as a lawyer doing the legal work, he did not want to create a conflict of interest for himself. (Tr. 84, 139, 141, 150; Adm. Ex. 11, Oct. 1, 2014, Track 5, 6, 7).
Respondent testified the information he presented at the meeting was given to him by Vaccaro and Crafton. He acknowledged that the pitch they made was based on a valuation of $40 million for the Burger King restaurants, with Crafton’s group of ten investors contributing a total of $20 million for 50% ownership of the Burger Kings and Vicar’s group owning the other 50%. Respondent recalled the purchase price was represented to be non-final at all times, and he advised Pennebaker that all the details would be disclosed once the deal was made. (Tr. 79-82, 207-08).
Respondent testified that no documents were signed at the October meeting and no papers changed hands. He denied knowingly making any misrepresentations to anyone or misrepresenting anything to the point of putting it on paper. (Tr. 81, 209, 214).
The Hearing Board
Porter attempted to defend himself on the ground that he did not represent any of the parties involved. The ARDC alleged that Porter represented a group of investors including himself and Vaccaro. The Hearing Board disagreed and concluded in Delphic fashion “We find that an attorney-client relationship was established.” Hearing Board at 12. (Note the problem – since Porter did not prepare and make everyone sign an engagement letter he lost the opportunity to decide who he would represent.)
We find that an attorney-client relationship was established. Although we did not hear testimony from Vaccaro or Crafton, we reviewed numerous statements made by Respondent during meetings and telephone conversations, which statements demonstrate he was acting as the attorney for the business group proposing the investment. In July 2014, he indicated to Crafton that his role was to handle the legal side of the transaction, conduct due diligence, and structure LLCs. He also drafted a preliminary version of an LLC operating agreement and provided that document to Crafton. When speaking to Pennebaker in September, Respondent stated his role was to handle the legal work for the deal; he was involved in due diligence and negotiations with Burger King; and funds from the investors would be deposited into his attorney IOLTA account. At the October in-person meeting, Respondent again stated that his role was to handle the legal end of the transaction.
While Respondent consistently disavowed that he would handle the actual closing, as that work had to be done by Virginia attorneys, the closing was only a portion of the legal work necessary for completion of the deal. By Respondent’s own representations, he held himself out as being responsible for the legal side of the transaction and took actions in accordance with his role as attorney. We find, therefore, that the predicate relationship for Rules 1.2 and 4.1 has been established.
Rule 1.2(d) – assisting client in conduct the lawyer knows to be fraudulent
The Administrator charged Respondent with violating Rule 1.2(d) by conduct including:
participating in discussions with Vaccaro and the informant about offering an investment deal to their professional athlete clients which concealed the true terms of the purchase of the Burger King franchises (including the ownership and purchase price of the franchises) from their clients;
agreeing to do the legal work to effectuate the scheme;
telling the informant to misrepresent the purchase price and ownership of the franchises to investors;
telling Pennebaker that the purchase price of the franchises was $37 million, and Respondent did not have an interest in the deal; and telling Pennebaker and the other FBI agent that another investor group would own the remaining 50% of the franchises.
We find Respondent engaged in each of the foregoing acts and by doing so, assisted clients Vaccaro and Crafton in furthering a fraudulent scheme. Fraud encompasses a broad range of human behavior, including “anything calculated to deceive . . . whether it be by direct falsehood or by innuendo, by speech or by silence, by word of mouth or by look or gesture.” In re Armentrout, 99 Ill. 2d 242, 251, 457 N.E.2d 1262 (1983).
Pennebaker’s testimony, as well as the recordings that were presented to us, showed that the three individuals plotted, as a group, to present a financial transaction in a way that would conceal the benefit they would personally realize from the transaction. That benefit was twofold. First, they intended to collect $20 million for the purchase of a group of properties that cost only $16 million, and then divide the remaining $4 million between themselves. Second, they planned to take a 50% ownership stake in the properties without making any financial investment whatsoever. Their financial benefit and interest in the transaction would not be disclosed to the investors. As we saw from Respondent’s September 19th telephone call with Pennebaker, Respondent represented that the purchase price was $37 million, which was more than twice the price he had discussed with Vaccaro and Crafton. Further, he falsely stated that a New York group was investing funds for the other one-half ownership, and he would have no ownership interest in the properties. In reality, the second group would be Respondent, Vaccaro and Porter, but their identities would be concealed by layers of LLCs. Respondent’s representations to Pennebaker were contrary to the facts set forth in Respondent’s discussions with Vaccaro and Crafton.
We recognize the investors were not misinformed as to their rate of return, and because the deal was never consummated, no one suffered a financial loss. The absence of an actual loss, however, does not erase the misconduct that occurred. By participating in crafting a deal with secret terms, presenting the deal to a potential investor without disclosing those terms, advising Crafton to misrepresent information, and making affirmative false statements regarding the investment, Respondent assisted in perpetrating a fraud.
We reject Respondent’s claim that he did not knowingly commit any misconduct. Pennebaker’s testimony, as well as the recordings, show that Respondent knew the actual terms of the proposed transaction and yet misrepresented those terms and advised Crafton to do the same. Further, Respondent’s claim that he was merely repeating information given to him by Vaccaro carries little weight in light of his role as the attorney structuring the deal. If the valuations for the properties were constantly changing, as he maintained, he had an obligation to ferret out the truth before passing information to potential investors. Further, we view Respondent’s lack of recall of key conversations, his vague testimony, and his portrayal of himself as a victim as nothing more than attempts to disguise his own involvement in the scheme. All in all, we did not find him to be a credible witness. By contrast, we regarded Mark Pennebaker as a reliable and objective witness who testified with precision and clarity.
Respondent had many opportunities to disagree with proposals made by Vaccaro and Crafton, to advise them to take a different course, or at least withdraw from representation and from the deal, but he did not do so. Instead, he became an active participant and took actions in furtherance of the scheme. Therefore we find that he engaged in misconduct in violation of Rule 1.2(d). Hearing Board Pages 13-15.
The Hearing Board also found that Porter violated Rule 4.1(a) knowingly making false statements of fact material fact to a third person and 8.4(c) dishonesty, fraud, deceit or misrepresentation and 8.4(b) a criminal act.
Rule 4.1(a) Violation
The Administrator charged Respondent with violating Rule 4.1(a) by:
falsely telling Pennebaker on September 19, 2014 that the purchase price of the franchises was $37 million; Respondent had no interest in the deal; and another investors group would own the remaining 50% of the franchises (in return for a $17 investment); and
by falsely telling Pennebaker and another undercover agent on October 1, 2014 that other investors would be investing money and those investors would receive the other 50% ownership interest in the franchises.
We have addressed the foregoing misrepresentations in the prior section and determined that Respondent made those statements and he knew they were false. We further find that the $37 million purchase price and the identity of other owners in an investment, including whether or not Respondent had an ownership interest in the deal, would be material to the investors’ decision in proceeding with the transaction. Therefore, we find a violation of Rule 4.1(a).
Rule 4.1(b) – knowingly failing to disclose material facts when disclosure is necessary to avoid assisting a criminal or fraudulent act by client
While the previous charge involved the providing of false information, Rule 4.1(b) involves the failure to disclose material information. The Administrator charged Respondent with violating Rule 4.1(b) by not disclosing to the undercover agent and Pennebaker that:
the true purchase price of the franchises was $16 million; and
Respondent, Vaccaro and Crafton would have an interest in ownership and would receive $4 million dollars out of the investors’ money.
We find this charge was proved. Respondent did not disclose the true nature of the Burger King transaction during his September 19, 2014 telephone call with Pennebaker, or during the October 1, 2014 meeting with Pennebaker and the second undercover FBI agent. As stated previously, the true purchase price and ownership interest was material information that should have been provided to prospective investors, as was the fact that $4 million of the purchase money would be going directly to Respondent, Vaccaro and Crafton. Respondent’s failure to disclose assisted his clients’ criminal or fraudulent conduct in violation of Rule 4.1(b).
Rule 8.4(c) Violation
The Hearing Board found:
Rule 8.4(c) – dishonesty, fraud, deceit or misrepresentation
In In re Edmonds, 2014 IL 117696, par. 62 the Court stated “there is essentially no way to define every act or form of conduct that would be considered a violation” of Rule 8.4(c) as “[e]ach case is unique and the circumstances surrounding the respondent’s conduct must be taken into consideration.” Rule 8.4(c) “is broadly construed to include anything calculated to deceive, including the suppression of truth and the suggestion of falsity.” Id. at 53. Motive and intent are rarely proved by direct evidence and must be inferred from conduct and circumstances. See In re Stern, 124 Ill. 2d 310, 529 N.E.2d 562, 565 (1988)
The Administrator charged Respondent with violating Rule 8.4(c) by engaging in the exact same conduct that was set forth in the Rule 1.2(d) charge. We found with respect to that charge that Respondent assisted in conduct that was fraudulent by making statements that were false, performing legal work to further the scheme, directing Crafton to misrepresent facts, and failing to disclose information that was material to the transaction. Further, his actions were taken with knowledge of the fraudulent nature of the transaction.
Our prior discussions amply support a finding that Respondent violated Rule 8.4(c). His motive and intent to deceive investors was further demonstrated by his agreement that Crafton should not disclose the actual deal to investors; and by his indication that disclosure would be “career suicide.” In addition, the video of the October 1, 2014 meeting demonstrated to us that Respondent had no trouble providing misleading and inaccurate information to the undercover agents. Indeed, we found his cavalier attitude in misrepresenting facts to be deeply disturbing. For the reasons stated, we find Respondent engaged in dishonesty, fraud deceit and misrepresentation.
The Panel also found a violation of Rule 8.4(c) criminal conduct. The Review Board essentially affirmed all the factual findings of the Hearing Board but recommended a suspension of three years. The criminal case against Porter was resolved by a deferred prosecution agreement. The Illinois Supreme Court disbarred Porter on September 21, 2020.
This case is a teaching tool for every lawyer who is in the transactional practice. Porter was unlucky because his mistakes were on tape and on video. He was promised, but never received, a hidden interest in the deal. (That should have been disclaimed in the engagement letter. Porter could have been charged with entering into a contract with a client without advising the client to get his own lawyer, but the ARDC did not bother with that.)
The case worries me. In my career clients have, at times, said all sorts of things to me about what they intended to do. I have tried my best to correct them and stop them from engaging in illegal conduct. Porter did not speak up when the FBI agent and the confidential informant read their lines with Shakespearian skill. He sat mute or agreed or went along with the scheme. He was a dupe or chump. The joke was on him. If you wish to keep your license, you cannot be duped in this fashion. You must speak up when the client proposes something unlawful or inappropriate or just plain deceptive.
Porter did not write an engagement letter or even bother to write emails to the participants so that he could summarize the meetings they held. He had nothing to defend himself with. Because he never did the hard work of figuring out who he represented he never understood his duties to that “client.” Had he done so there is a chance that this fiasco could have been avoided. He should have asked other questions such as “Who represents the investors?” “Has anyone recommended that they engage counsel?” I would have been uneasy at the prospect of doing a deal of that size with no counsel on the other side to protect the imaginary athletes who were investing. That Porter never asked these questions saddens me. He never showed any sign, in my opinion, of trying to protect anyone, client or non-client.
He could also have asked the promoters to get a valuation of the deal by a reputable real estate appraiser. He could have requested audited financials of the “franchises.” Better yet, he should have requested tax returns. That too would have protected him and the investors. The promotors would have made excuses, but Porter could have used that to get out of the deal. (They could never have gotten an appraisal because the Burger King franchises did not exist and no one would sign an appraisal valuing nonexistent franchises. There were no tax returns either because the franchises did not exist.) Corporate lawyers ask questions, lots of questions. It does not appear that Porter asked any questions.
Long ago an experienced lawyer told me “if it looks to good to be true, it probably is.” This is a disbarment that did not need to happen. An engagement letter and a few minutes of careful thought could have avoided all of this.
The most troubling aspect of this case is that Porter never made a dime on the deal and no one lost any money. The deal papers were nowhere near completion and Porter, it appears, was waiting for further information from the “clients.” That is probably why the federal government entered into a deferred prosecution agreement with him. Why is this troubling? There is a chance that Porter is just as much a victim as the supposed investors were. Many lawyers in Illinois have done far worse conduct and not received a disbarment. But for the FBI, this “deal” would never have happened.
In the end of The Truman Show, Truman figures out that he is in a show that his life is onstage that his wife and friends are not real and he leaves the set. “In case I don’t see you, Good Morning, Good Afternoon and Goodnight.” To be a corporate lawyer in our world, you have to be at least as smart as Truman Burbank and know when to walk away.
If you are in the practice of law and you are concerned about something, call an ethics lawyer now. Don’t wait until the “deal” goes bad. Speak up. Ask questions. Ask the questions you would want to know the answers to if you were investing in the venture. Ask for the name of the lawyer or the accountant. If those people don’t exist, you can assume it is a scam of some sort. Warn your clients and protect your license.
Ed Clinton, Jr.