Justia.com Opinion Summary: The Attorney Registration and Disciplinary Commission filed a complaint against an attorney, claiming that he converted third-party funds; failed to hold property of a third person separate from his own; failed to promptly deliver to the third person funds to which the person was entitled; engaged in conduct involving dishonesty, deceit, fraud, or misrepresentation; engaged in conduct prejudicial to administration of justice; and engaged in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute. The Hearing Board found that he had converted funds and violated three rules, but found that the Administrator did not prove conduct involving dishonesty, deceit, fraud, or misrepresentation, and recommended suspension for three months and mandatory attendance at a seminar on professionalism and office management. The Review Board affirmed, but recommended a six-month suspension. The Illinois Supreme Court affirmed the decision of the Hearing Board. The attorney, apparently unaware of proper procedures for handling funds, admitted wrongdoing, expressed remorse, and cooperated. He had not been previously disciplined and offered several witnesses who testified to his excellent reputation for honesty. He spends large amounts of time providing pro bono services and made full restitution.
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2011 IL 111378
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 111378)
In re MARK GERARD MULROE, Attorney-Respondent.
Opinion filed September 22, 2011.
JUSTICE GARMAN delivered the judgment of the court, with
opinion.
Chief Justice Kilbride and Justices Freeman, Thomas, Karmeier,
Burke, and Theis concurred in the judgment and opinion.
OPINION
¶1
On June 20, 2007, the Administrator of the Attorney Registration
and Disciplinary Commission filed a one-count complaint against
respondent, Mark Gerard Mulroe. The complaint alleged that
respondent converted third-party funds; failed to hold property of a
third person that was in his possession in connection with a
representation separate from his own property, in violation of Rule
1.15(a) of the Illinois Rules of Professional Conduct; failed to
promptly deliver to the third person the funds that person was entitled
to receive, in violation of Rule 1.15(b) of the Illinois Rules of
Professional Conduct; engaged in conduct involving dishonesty,
deceit, fraud, or misrepresentation, in violation of Rule 8.4(a)(4) of
the Illinois Rules of Professional Conduct; engaged in conduct that is
prejudicial to the administration of justice, in violation of Rule
8.4(a)(5) of the Illinois Rules of Professional Conduct; and engaged
in conduct which tends to defeat the administration of justice or to
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bring the courts or the legal profession into disrepute, in violation of
Supreme Court Rule 770.1
The Hearing Board found that respondent had converted funds
and violated Rules 1.15(a), 1.15(b), and 8.4(a)(5). The Board
concluded, however, that the Administrator did not prove by clear and
convincing evidence that respondent violated Rule 8.4(a)(4). The
Board recommended that respondent be suspended from the practice
of law for three months and be ordered to attend a seminar on
professionalism and office management prior to the conclusion of his
suspension. The Administrator timely filed exceptions to the report
and recommendation of the Review Board. Ill. S. Ct. R. 753(d)(2)
(eff. Sept. 1, 2006). The Review Board affirmed the Hearing Board’s
factual findings and findings of misconduct, but recommended a sixmonth suspension.
We allowed the Administrator’s petition for leave to file
exceptions. Ill. S. Ct. R. 753(e).
I. BACKGROUND
Respondent was admitted to practice law in Illinois in 1989. He
began his own legal practice doing transactional work in 1992.
Respondent bought into a friend’s business, which helps recovering
addicts, and other ventures. Helping these businesses became a
significant function of his law practice. At the time of the hearing,
respondent estimated that he spent less than 20% of his time on his
law practice.
Even though he did not usually handle client funds, respondent
asked his paralegal, Denise Wagner, to open an IOLTA client trust
account on his behalf for his law practice based on the Commission
registration form he was sent one year. This account was in addition
to the practice’s operating account. Respondent used the IOLTA
account as a “pass through” account to park money that he used for
business purposes. He delegated financial responsibilities including
billing and the payment of the law practice’s expenses to Wagner,
who testified that “[m]ost of the money that *** came in went
1
We note that Rule 8.4 of the Illinois Rules of Professional Conduct
was amended, effective January 1, 2010, and no longer follows the same
structure. We have applied the previous version of the rule to respondent’s
case.
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directly to the IOLTA account.” However, no checks had been
ordered for the IOLTA account, so the money was routinely moved
into the operating account before being used to make payments.
Eventually, Roy Gibson, respondent’s banker, began to transfer
money between accounts to pay expenses without consulting
respondent. Respondent admitted that he did not regularly balance his
accounts, but left much of that responsibility to Gibson and Wagner.
In 2002, Julie Fishman filed a petition for dissolution of marriage
against her husband, Adam Fishman. Adam was a friend of
respondent. In July 2003, the Fishman marital home was sold and the
proceeds, $141,506.14, were held in an escrow account by Julie’s
attorney, Jonathan Sherwell. Respondent agreed to represent Adam
and, when Julie discharged Sherwell in October 2005, respondent
agreed to take possession of the Fishman funds until the allocation
was determined by the court. On November 3, 2005, Sherwell
transferred $113,397.65 to respondent’s IOLTA account, which
represented the total amount of the funds after all court-approved
disbursements had been made. In December 2005, the dissolution was
finalized and the trial court awarded Julie $127,783 to be paid from
the escrow. Both Julie and Adam filed motions to reconsider after the
judgment was entered. Respondent agreed to represent Adam free of
charge in the postdissolution matters. At that point, Julie was
representing herself.
Between November 3, 2005, and February 28, 2006, respondent
made transfers from the IOLTA account to his business account to
make payments for his personal and business expenses. As of
February 28, 2006, the IOLTA account had been drawn down to
$174.81. Respondent never received authorization from the court or
from Julie or Adam Fishman to use the funds to pay his business and
personal expenses.
On August 16, 2006, the trial court entered an order directing
respondent to release the funds to Julie. Both Julie and Adam told
respondent that they intended to appeal the order. Adam asked
respondent to represent him on appeal. Respondent declined, but filed
a notice of appeal on Adam’s behalf. Respondent subsequently
received letters from Julie, dated September 15 and September 26,
2006, demanding that he transfer the funds to her and make a full
accounting. Before the Hearing Board, respondent testified that he
had a conversation with Julie shortly after he received the September
26 letter in which he told her the amounts she referenced in her letter
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were not accurate. Julie told him she was planning to appeal the
order. Respondent did not transfer the funds or provide an accounting,
but he testified that if he had written a check on his operating account
at that time, it would have cleared and that his net worth at the time
was approximately $2 million to $3 million.
On November 3, 2006, the trial court heard Julie’s “Verified
Petition for Rule to Show Cause Why Respondent Should not be
Held in Indirect Contempt of Court (Disbursement of Escrow).” The
court directed respondent to transfer the Fishman funds to Julie by
November 13, 2006, to avoid being held in contempt. On November
3, 2006, respondent did not hold the Fishman funds in his IOLTA
account. Between November 3 and November 8, 2006, he made three
deposits to his business account, totaling $151,000. On November 6,
respondent drafted a check on his business account to Julie for
$115,606.49, the amount of the Fishman funds plus interest. The
check was dated November 8, 2006. He testified before the Hearing
Board that he postdated the check so that there would be time to
verify the correct amount owed. On November 7, 2006, respondent
wire transferred the escrow funds into Julie’s account. He testified
that Julie never returned his check. On November 8, 2006, Julie sent
a complaint to the ARDC regarding respondent’s conduct.
Before the Hearing Board, respondent presented several character
witnesses, who attested to respondent’s engagement in the
community, his pro bono work, and his excellent reputation for
honesty and integrity. Brian Rowland testified that, at all relevant
times, respondent had access to $115,000 from their business
enterprises and that respondent could have accessed this money
without Rowland’s permission. Respondent also testified on his own
behalf, stating that he never intended to deprive Julie of her money,
admitting wrongdoing, and expressing remorse. Respondent has had
no prior discipline.
The Hearing Board found that respondent converted Julie
Fishman’s funds in the amount of $115,606.49. The Board further
found that he failed to hold the escrow funds separate from his own
property, that he failed to promptly deliver the funds to Julie, and that
his misconduct is prejudicial the administration of justice and brings
the legal profession into disrepute, violating Rules 1.15(a), 1.15(b),
and 8.4(a)(5) of the Illinois Rules of Professional Conduct. The Board
concluded, however, that the Administrator did not prove by clear and
convincing evidence that respondent engaged in conduct involving
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dishonesty, deceit, fraud, or misrepresentation. It found respondent’s
testimony to be credible and did not believe that he intended to
deprive Julie of the escrow funds. Further, the Board found that
respondent had the financial means to deliver the funds at all relevant
times and that he honestly believed he was not to distribute the funds
to Julie until the issues on appeal were resolved or dismissed. It
concluded that the conversion was a technical one, not motivated by
an intention to deprive Julie of her funds. The Board, therefore,
recommended that the allegation that respondent violated Rule
8.4(a)(4) of the Illinois Rules of Professional Conduct (eff. July 6,
2001) be dismissed. The Hearing Board recommended that
respondent be suspended from the practice of law for three months
and be ordered to attend a seminar on professionalism and office
management prior to the conclusion of his suspension.
The Review Board agreed with the Hearing Board’s conclusion
that respondent’s actions did not violate Rule 8.4(a)(4), but
recommended a six-month suspension.
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II. ANALYSIS
The Administrator challenges the findings of the Hearing and
Review Boards that respondent did not violate Rule of Professional
Conduct 8.4(a)(4). The Administrator also argues to this court that the
proper sanction in this case is to suspend respondent from the practice
of law for three years.
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A. Rule 8.4(a)(4)
The Administrator argues that, when respondent agreed to hold
client funds and “refus[ed] to follow basic financial protocol to
protect those funds,” respondent engaged in dishonest conversion,
such that his actions violated Rule 8.4(a)(4) of the Illinois Rules of
Professional Conduct. Rule 8.4(a)(4) directs: “A lawyer shall not ***
engage in conduct involving dishonesty, fraud, deceit or
misrepresentation.”
The findings of fact made by the Hearing Board will generally not
be disturbed unless they are against the manifest weight of the
evidence. In re Cutright, 233 Ill. 2d 474, 488 (2009). “A decision is
against the manifest weight of the evidence only if the opposite
conclusion is clearly evident.” Id. This deferential standard of review
recognizes that the Hearing Board is in a better position to observe
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the demeanor of witnesses, judge credibility, and resolve conflicting
testimony. Id.
The Hearing Board concluded that the Administrator did not
prove by clear and convincing evidence that respondent engaged in
conduct involving dishonesty, deceit, fraud, or misrepresentation. It
credited respondent’s testimony and found that he did not intend to
deprive Julie of the escrow funds. The Board found that respondent
had the financial means to deliver the funds at all relevant times and
that he had an honest belief that he was not to distribute the funds
until the issues on appeal were resolved or dismissed. The
Administrator argues before this court that the undisputed facts in this
case establish that respondent acted recklessly with respect to the
protection of the funds, in violation of his fiduciary duty to hold and
protect the funds, and that this recklessness is sufficient to satisfy the
scienter requirement of Rule 8.4(a)(4).
We agree with the Administrator that the responsibility of holding
client funds is a serious fiduciary duty and should not be treated
lightly. We have, on more than one occasion, emphasized the
importance of this responsibility, deeming “explanations [for
conversion] such as ‘poor bookkeeping,’ ‘failure to fully understand
the duty’ and ‘no dishonest motive’ completely unacceptable.” In re
Timpone, 157 Ill. 2d 178, 194-95 (1993) (quoting In re Grant, 89 Ill.
2d 247, 253 (1982)). However, the question at hand is not whether
respondent committed conversion, but whether the conversion
constituted “conduct involving dishonesty, fraud, deceit, or
misrepresentation” such that respondent violated Rule 8.4(a)(4).
In In re Cutright, 233 Ill. 2d 474, 488 (2009), we addressed the
Administrator’s argument that an attorney violates Rule 8.4(a)(4)
when he recklessly disregards a legal obligation. In that case, the
Hearing Board found that Cutright gave the judge before whom he
was appearing free legal services by reviewing his tax forms,
violating several rules of professional conduct. Id. at 482. It also
found that when Cutright failed to inform opposing counsel of these
gifts, he was merely unaware of his ethical obligations and did not
intend to deceive anyone. Id. at 482-83. The Board therefore
concluded that the Administrator did not prove a violation of Rule
8.4(a)(4). Id. at 483. In our review, we noted that “where this court
has concluded that the respondent violated Rule 8.4(a)(4), there was
some act or circumstances that showed the respondent’s conduct was
purposeful.” Id. at 489 (citing In re Rinella, 175 Ill. 2d 504 (1997)
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(respondent provided testimony he knew to be false during a hearing
before the Hearing Board), and In re Winthrop, 219 Ill. 2d 526 (2006)
(respondent relayed information he knew to be false to benefit one
client at the detriment of another)). We also noted that, where this
court found no violation of Rule 8.4(a)(4), the court “came to that
conclusion after determining there was no evidence the misconduct
in that case was intentional.” Cutright, 233 Ill. 2d at 489 (citing In re
Witt, 145 Ill. 2d 380 (1991) (the court was not persuaded that the
respondent’s silence was intended to perpetrate a fraud)).
In the case at hand, the Hearing Board similarly found that
respondent was unaware of his ethical responsibilities with respect to
the proper procedures for handling client money and that he did not
intend to deprive Julie of her funds. We cannot say that this
conclusion was against the manifest weight of the evidence, as the
Hearing Board was in a superior position to judge the credibility of
witnesses and there was no evidence that responded gained any
advantage through his sloppy bookkeeping practices. There is nothing
in the record to indicate any deceptive or dishonest intent. As we
stated in Cutright, “[e]ach case is unique and the circumstances
surrounding the respondent’s conduct must be taken into
consideration.” Cutright, 233 Ill. 2d at 490. While a pattern of
recklessness with respect to handling client funds may, in some cases,
indicate a dishonest intent, we cannot say that, in this case,
respondent’s careless bookkeeping practices were clear evidence of
dishonesty.
The Administrator urges us to conclude, however, that failing to
follow proper procedures for safeguarding client funds is inherently
dishonest and that recklessness with respect to client funds creates a
presumption of dishonesty. This court has previously addressed a
similar argument and has found that, while facts indicating poor
bookkeeping practices or a failure to fully understand the attorney’s
duty “do not excuse or negate the conversion of client funds, they are
evidence that the conversions were not due to dishonest motive, but
instead due to the careless practices respondent employed.” In re
Timpone, 157 Ill. 2d 178, 195 (1993). Because the circumstances
surrounding conversion cases vary greatly, we decline to craft a bright
line rule that reckless conversion creates a presumption of dishonesty
in violation of Rule 8.4(a)(4) in every case. See Cutright, 233 Ill. 2d
at 490.
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B. Sanction
The Administrator has also challenged the recommended sanction
for respondent’s conduct, arguing that respondent’s misconduct
warrants a three-year suspension from the practice of law.
Respondent urges us to adopt the Hearing Board’s recommended
sanctions. The Hearing Board recommended a three-month
suspension and attendance of a seminar on professionalism and office
management and the Review Board recommended a six-month
suspension. These recommendations are merely advisory, however,
and we retain the ultimate responsibility for imposing discipline on
attorneys. Cutright, 233 Ill. 2d at 490-91. While each case must be
decided on its unique facts, we “strive for consistency and
predictability in the imposition of sanctions.” Id. at 491. In
determining the proper sanction, we consider evidence in mitigation
and aggravation. Id.
As this court has emphasized before, ignorance of the
responsibilities imposed upon attorneys by the Code of Professional
Responsibility does not excuse respondent’s misconduct. In re
Cheronis, 114 Ill. 2d 527, 535 (1986). “It is a paramount obligation
of each member of the bar to study the Code of Professional
Responsibility and abide by its terms and principles. This court has
stated repeatedly that commingling or conversion of clients’ funds
will not be countenanced.” Id. (collecting cases). However, our
primary goal in imposing sanctions is not to punish the attorney, but
to protect the public and maintain the integrity of the legal profession.
Cutright, 233 Ill. 2d at 491.
In arriving at its recommendation, the Hearing Board compared
respondent’s case to the situation in In re Cheronis. In that case, the
attorney had never had a separate escrow account for client funds,
commingled client funds with his own, and did not immediately
tender all of the funds to the client when they were requested, but
repaid the client in installments over a period of months. Cheronis,
114 Ill. 2d at 536. The Hearing and Review Boards found no
dishonest motive behind the conversions, and Cheronis cooperated
fully with the Administrator and the Hearing Board, expressed
remorse, and took corrective measures by opening a client trust
account. Id. at 537. Other mitigating factors included the fact that
Cheronis made full restitution to the client, had performed substantial
pro bono legal work, and had a good reputation in the community. Id.
This court found that these mitigating factors, combined with the
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aggravating factor of Cheronis’s near-bankruptcy and the resulting
risk to his clients, warranted a three-month suspension from the
practice of law. Id. at 536–37.
The Hearing Board in this case noted that respondent admitted
wrongdoing, expressed remorse, and cooperated throughout the
proceedings. He had not been previously disciplined and he offered
several character witnesses who testified to his excellent reputation
for honesty. Respondent spends large amounts of time providing pro
bono services to members of his community and he had made full
restitution to Julie. The Hearing Board also considered the large sum
that respondent converted and Julie’s testimony regarding the
financial hardship she suffered while waiting for the disbursement of
the funds. Drawing close parallels with Cheronis, the Hearing Board
recommended a three-month suspension and attendance of a seminar
on professionalism and office management as an appropriate sanction
for respondent’s conduct.
The Review Board compared the facts in respondent’s case to two
different cases where discipline was imposed on consent, and
concluded that, in line with those cases, a six-month suspension was
warranted. The Board also found that probation was not a useful tool
in this case, as respondent had already corrected the problems in his
banking practices.
In In re Young, the respondent deposited $3,209.04 in escrow
funds into an account that he used for personal business and was
found to have converted those funds. In re Young, 111 Ill. 2d 98, 101
(1986). The clients contacted Young several times over an eightmonth period concerning the money and respondent refused to return
the escrow funds from their former residence until the title company
waived the title exception, per the escrow agreement. Id. Five days
after the title company waived the title exception, Young tendered a
cashier’s check to the clients for the full sum of the amount held in
escrow, including interest and attorney fees. Id. at 102. The Hearing
Board in that case concluded that Young did not have a dishonest
motive, there was a bona fide title problem which justified his
retention of the clients’ money, and that Young had sufficient assets
to repay the money to the clients. Id. at 104-05. Young was
cooperative with the Hearing Board and repentant for the conversion,
had no prior discipline, had a good reputation in the community, and
engaged in community activities and pro bono work. Id. at 105.
Further, Young no longer actively maintained a legal practice, only
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conducting a small amount of legal work in connection with his other
business dealings. Id. Given these considerations, this court found
that censure was the appropriate sanction. Id.
We find that the current case closely parallels Young and
Cheronis. Though respondent maintained an IOLTA account, he used
the account as he would any other business account, commingling
client funds with his operating funds and resulting in conversion. This
practice violated respondent’s professional duty to maintain a client
funds in a separate account and put client funds at risk. These
practices will not be countenanced. However, as in Young and
Cheronis, the Hearing Board in this case found that there was no
dishonest intent behind the conversion and we have concluded that
this finding was not against the manifest weight of the evidence.
Respondent made full restitution to Julie, admitted wrongdoing,
expressed remorse, and otherwise cooperated fully with the Hearing
Board. The Board also accepted respondent’s testimony that the delay
in delivering Julie’s funds to her resulted from respondent’s genuine
belief that the funds were not due until after all appeals had been
resolved. Respondent performs substantial pro bono work,
participates in other charitable activities, and has never before been
disciplined in more than 20 years of legal practice. Multiple witnesses
testified to respondent’s excellent reputation for honesty and
trustworthiness. In aggravation, we note that respondent converted a
large sum, more than $100,000, and his lack of care with respect to
his banking practices put the money at risk. Though Julie testified to
financial hardship she suffered due to the delay in receiving her
funds, we note that this hardship was not caused by respondent’s
conversion, but by his misunderstanding that the funds were not to be
disbursed until appellate proceedings were completed. We therefore
do not consider this an aggravating factor.
For the foregoing reasons, we conclude that the Hearing Board
recommended an appropriate discipline. Accordingly, respondent is
suspended from the practice of law for three months and ordered to
attend a seminar on professionalism and office management prior to
the conclusion of his suspension.
Respondent suspended.
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