425 Mass. 708 (1997)
In the Matter of David G. Stern
Suffolk. April 8, 1997. - August 14, 1997.
Present: Wilkins, C.J., Abrams, Lynch, & O'Connor , JJ.
Attorney at Law, Disciplinary proceeding, Attorney-client relationship,
Disbarment. Evidence, Credibility of witness.
In a disciplinary proceeding, the conclusion of the Board of
Bar Overseers that an attorney was acting as an attorney with respect to
the mishandling of certain trust assets of his clients, and was thus subject
to discipline by the board, was supported by the evidence. [ ]
Disciplinary proceedings against an attorney were commenced
in a timely manner and no prejudice was demonstrated from any delay. [
]
In a disciplinary proceeding, the Board of Bar Overseers properly
resolved issues of credibility of the witnesses [ ], and the board's findings
were supported by the evidence [ ].
Evidence at an attorney disciplinary proceeding supported the
findings of the Board of Bar Overseers that the attorney used clients'
trust funds to pay interest on his personal loans, that the attorney had,
without the clients' knowledge or consent, invested the clients' trust
funds, and that the clients never received anything of value in return.
[ ]
Disbarment was the appropriate sanction for an attorney's intentional
misuse of client funds, and the sanction was not "markedly disparate" from
those in similar cases. [ ]
Information filed in the Supreme Judicial Court for the county of
Suffolk on December 18, 1996.
The case was reported by Greaney, J.
J. Owen Todd (Juliet Davidson with him) for David G. Stern.
Terence McBride Troyer, Assistant Bar Counsel.
ABRAMS, J. Based on an information and
a record of proceedings filed in the county court, a single justice of
this court has reserved and reported this disciplinary proceeding. A hearing
committee (committee) determined that the respondent, David G. Stern, as
a trustee, improperly transferred more than $3.5 million from a revocable
trust belonging to Bertram and Dianne Parker. The committee issued its
decision and recommended that the respondent be disbarred. The Board of
Bar Overseers (board) adopted the committee's findings of fact, and agreed
with the committee that the appropriate sanction was disbarment.1
The board voted to file an information in the county court recommending
disbarment.
1 Because the board adopted the committee's findings
of fact, we refer to the findings as the board's.
On appeal, the respondent asserts
that he should not be subject to discipline because the transactions at issue
did not involve an attorney-client relationship with the Parkers, see Fanaras
Enters., Inc. v. Doane, 423 Mass. 121 (1996), and that the disciplinary
proceedings should be dismissed due to "unconscionable delay." In addition,
the respondent claims error in the board's evidentiary rulings. Finally, the
respondent argues that the board's recommendation of disbarment is "markedly
disparate" from sanctions imposed in similar cases. For the reasons stated in
this opinion, we conclude that there were no legal or procedural errors, no
reversible evidentiary rulings, and that disbarment is the appropriate sanction.
We summarize the facts in this disciplinary action as
they were submitted to us in this proceeding. Matter of Hurley, 418 Mass.
649, 650 (1994). The respondent was admitted to the Massachusetts bar in 1971.
He has been employed as an associate and partner at three respected Boston firms.
Since August of 1989, he has been a sole practitioner.
Shortly before his admission to the bar, the respondent
met Bertram and Dianne Parker. He became very friendly with them and occupied
a position of trust and confidence with them. Their legal business followed
the respondent to the various firms at which he was employed. The board found
"that an attorney client relationship existed between the [r]espondent and Bertram
and Dianne Parker at all relevant times from the date of [r]espondent's admission
to the bar until August, 1989."
In 1972, attorneys at the firm where the respondent
was then employed created a revocable trust in which the Parkers could hold
their substantial assets.2 The Parkers were named as the original
trustees. In 1978, on the advice of the respondent, the trust was amended to
name the respondent as a cotrustee, "to enable [him] to carry out the Parkers'
wishes because of his familiarity with their affairs."
2 At one point, the value of the trust assets exceeded
$10 million.
Between April 14, 1986, and July 28, 1989, approximately
$7 million was transferred at the respondent's direction from the Parkers' trust
for the benefit of two movie production businesses in which the respondent had
an interest. A number of the transfers, though not all, were made without the
Parkers' authorization, and some were made using documents that contained the
forged signature of Bertram Parker. The board concluded that "[neither] the
Parker trust [n]or the Parkers individually ever received anything of value
in return for these transfers."
The board also made specific findings that: (1) in every
instance where Bertram Parker testified that a signature on a document was not
his signature or authorized by him, the signature was in fact forged; (2) there
was no credible evidence that the respondent ever held a general written power
of attorney (as he had claimed) that would have permitted him to sign the Parkers'
names, dispose of their assets, transfer their assets, or otherwise commit them
to any legal liability; (3) the respondent, without the Parkers' authorization,
used funds from the Parker trust to pay interest on a personal loan of his;
(4) the respondent had sufficient control of the forged documents and knowledge
of Bertram Parker's signature to have known that the signatures on the documents
were not Parker's; (5) that the Parkers essentially were ignorant of the affairs
of the respondent's movie production business, the respondent having failed
to keep them advised of the extent of their involvement and exposure; and (6)
the respondent was the sole person who communicated in behalf of the trust with
the bank that managed the trust's funds.
The board determined that (1) the respondent "entered
into a business relationship and business transactions with a client and failed
to advise the client to obtain independent legal advice and counsel"; (2) the
respondent "breached his fiduciary duties as trustee of the Parker trust and
his interests constituted a conflict of interest"; (3) the respondent's "actions
in borrowing money in the name of the trust without the knowledge or consent
of the Parkers and his use of trust assets to pay interest on the loans were
fraudulent, deceitful, dishonest and constituted misrepresentation . . . and
further were actions prejudicial to and damaging to a client"; and (4) the "failure
to insure that the client received independent advice and counsel and his failure
to fully inform the client of the true state of his affairs, thereby leaving
the client in ignorance and misunderstanding of his affairs while the [r]espondent
continued to manage those affairs for his own benefit were fraudulent, deceitful,
dishonest and constituted misrepresentation."3
3 The board concluded that the actions of the respondent
violated S.J.C. Rule 3:07, Canon 1, DR 1-102 (A) (4)-(6), as appearing in 382
Mass. 769 (1981); S.J.C. Rule 3:07, Canon 5, DR 5-101 (A), as appearing in 382
Mass. 779 (1981); S.J.C. Rule 3:07 Canon 5, DR 5-104 (A), as appearing in 382
Mass. 779 (1981); and S.J.C Rule 3:07, Canon 7, DR 7-101 (A) (3), as appearing
in 382 Mass. 784 (1981).
The board also concluded that the respondent's testimony
in explanation of these transactions "was not credible" based on (1) the inconsistency
in his testimony as to whether he had discussed these transactions with the
New York attorney who represented the Parkers; (2) misrepresentations that the
respondent had made to his prospective partners in one of his law firms concerning
the Parkers; (3) his "wholly unconvincing testimony" of his claim that he was
operating under a power of attorney executed by the Parkers, coupled with the
fact that he could not produce the document when asked to do so; (4) his denial
of the existence of an attorney-client relationship with the Parkers; (5) the
"disingenuous manner" in which he claimed that the Parkers were informed of
the transactions;4 and (6) his denial of the existence of, or inability
to produce, other documentation of his various allegations. The report stated
that "[t]he long and short of a very long-running matter is that upon consideration
of the entire record, and the matters particularized above especially, the [board]
simply does not believe the [r]espondent."5
4 The board found the statements to be "confusing and
difficult to analyze, even though in possession of all the ex post facto information
elicited at the hearing."
5 Other facts are included where relevant.
I. Dismissal of disciplinary proceedings.
A. Attorney client relationship. Relying on Fanaras,
supra, the respondent asserts that he cannot be disciplined because he
was not acting as an attorney with respect to the transactions at issue. The
respondent's reliance is misplaced. The board determined that, while serving
as the Parkers' attorney, the respondent recommended that he be added as a trustee
to the Parker family trust in 1978 to "enable [him] to carry out the Parkers'
wishes." His role as trustee and financial advisor was inextricably linked to
his role as their attorney and thus any action taken by the respondent with
respect to the trust should have included considerations with respect to his
role as their attorney.6
6 In a memorandum dated March 20, 1989, from the respondent
to a partner in Casner, Edwards & Roseman, the respondent himself admitted
that Bertram was a client of his and that he received additional fees for acting
as a trustee of the Parker family trust.
The compensation received by the respondent in exchange
for his efforts and expertise as a trustee created a fiduciary relationship,
which he compromised when he made withdrawals from the trust, without the consent
of the Parkers, for the benefit of a movie production company in which he had
an interest. The board determined that the respondent's actions were pursuant
to an attorney-client relationship and thus violated S.J.C. Rule 3:07, Canon
5, DR 5-101A, DR 5-104A, as appearing in 382 Mass. 779 (1981), and S.J.C. Rule
3:07, Canon 7, DR 7-101 (A) (3), as appearing in 382 Mass. 784 (1981).7
See Matter of Clooney, 403 Mass. 654, 657 (1988); Matter of Romano,
9 Mass. Att'y Discipline Rep. 274 (1993).
7 An attorney-client relationship generally is a matter
for the trier of fact to determine and "'can be implied from the conduct of
the parties' and need not be expressed." Robertson v. Gaston Snow
& Ely Bartlett, 404 Mass. 515, 522, cert. denied, 493 U.S. 894 (1989),
quoting Page v. Frazier, 388 Mass. 55, 61 (1983); D.J. Meiselman,
Attorney Malpractice: Law and Procedure §§ 1:1-1:5 (1980).
Further, Fanaras is distinguishable. In that
case, a loan by the plaintiff to the defendant was made without any collateral
to secure the loan. The attorney had previously received a retainer from the
plaintiff. The plaintiff's contention was that the attorney, by virtue of the
retainer agreement, should have advised it to seek the advice of another attorney
or to have sought security for the loan. We concluded that a retainer paid to
an attorney for a right to prompt legal advice on request did not establish,
absent other factors, an attorney-client relationship with respect to an unrelated
loan made by the plaintiff to that attorney. Id. at 125. In Fanaras,
we concluded that the attorney was not acting as an attorney, but rather participating
in an arm's-length transaction unrelated to the fact that the defendant was
an attorney and unrelated to any work being performed by the attorney on behalf
of the client.
Here, the board specifically determined that the respondent's
role as trustee was that of a legal advisor. The respondent was paid fees both
to act as a professional trustee and to act as the Parkers' attorney. The board
also noted that "[t]he Parkers devoted their time and attention to the non-
financial aspects of their lives and left the details of business, investment
and practical affairs to the [r]espondent." The board's conclusion that an attorney-client
relationship existed and that the respondent is subject to discipline under
DR 5-101 (A), DR 5-104 (A), and DR 7-101(A)(3) is supported by the evidence.8
8 Additional facts support the conclusion that the respondent
violated the disciplinary rules mentioned: In April, 1986, the respondent asked
the Parkers to invest in his movie production companies. The Parkers declined.
Despite that response, the respondent, as a trustee, authorized transfers from
the Parkers' trust to a movie company in which he had an interest.
On more than one occasion, the respondent encouraged the
Parkers to consent to providing collateral for loans made to the movie company
in which he had an interest. Regarding a $1 million loan made from the Parker
trust in August of 1988, the board made explicit findings that the respondent
did not give the Parkers "advice, counsel or explanation regarding the import,
meaning and effect of the documents . . . [or] cause or arrange for such advice,
counsel or explanation to be given by independent counsel."
B. Delay. The respondent also asserts that the
disciplinary proceedings should have been dismissed because of "unconscionable
delay." We do not agree. Bar counsel opened the respondent's file on June 29,
1990, less than one year after the last act alleged in the petition for discipline.
On the date that the file was opened, notice was sent to and received by the
respondent in accordance with S.J.C. Rule 4:01, § 7 (2), as amended, 394
Mass. 1106 (1985), and Rule 2.6 of the Rules of the Board of Bar Overseers (West
1997). On August 31, 1994, a copy of the petition for discipline and of the
Bar Counsel's disposition memorandum were served on the respondent. In sum,
the petition for discipline was commenced within six years after the last act
of alleged wrongdoing.
There is no evidence to suggest that bar counsel was
lethargic in his pursuit of this matter. As the board recognized, "[t]hese were
not simple charges to investigate, especially taking into account the respondent's
failure to maintain contemporaneous records of his putative instructions on
the handling of the trust's assets." Absent prejudice for the delay, there is
no basis for dismissing the claim. See Matter of Kerlinsky, 406 Mass.
67, 75 (1989).
II. Evidentiary rulings. Relying on Kerlinsky,
supra, the respondent argues that all issues of credibility should be
resolved in his favor due to delay. We do not agree. In Kerlinsky, there
was a specific finding of prejudice and corroborating evidence to support Kerlinsky's
claim that favorable evidence was lost due to laches. As a result, the board
chose to resolve certain credibility issues in his favor. Id. at 75-76.
By contrast here, there was no corroborating evidence lost as a result of delay
by bar counsel or the board. Generally, we adhere to the principle that the
board is "the sole judge of the credibility of the testimony presented at the
hearing." S.J.C. Rule 4:01, § 8 (3), as amended, 415 Mass. 1304 (1993);
Matter of Saab, 406 Mass. 315, 328 (1989).9 There is no reason
to depart from that rule here.
9 The board made explicit findings that the testimony
of the respondent was not credible. These findings were based on specific inconsistencies
in the respondent's testimony and on incidents in the past that called into
question the respondent's credibility. See supra at .
A. Sufficiency of proof. The respondent also
asserts that the board impermissibly relied on the disbelief of his testimony
as affirmative proof of the charges and that the board never found Bertram Parker
to be credible.10 We do not agree.
10 The respondent correctly acknowledges that the board's
disbelief of the respondent's testimony is not open to challenge. See Matter
of Saab, 406 Mass. 315, 328 (1989).
The board recognized that "[t]he primary and indeed
almost exclusive task of the [board] was to ascertain the credibility of the
witnesses, and in particular of the [r]espondent." The fact that the findings
correspond to the events as testified to by Bertram Parker indicates that the
board found him credible. In its findings, the board repeatedly found facts
which were supported by Bertram Parker's testimony. For example, in his testimony,
Bertram Parker stated that he did not sign numerous documents that bore his
signature. One of the board's findings specifically stated that "[a]ll of the
documents bearing the purported signature of Bertram B. Parker, where Mr. Parker
has disavowed the signature, were not signed by him, or by his authorization
and such signatures are forgeries."
The physical evidence referenced by the board also corresponds
with Bertram Parker's testimony. Despite the Parkers' decision not to invest
in the movie company in 1986, there is evidence of a transfer of $125,000 of
trust assets between April and September, 1986. In February, 1988, the respondent
transferred over $1 million from the trust to cover gaps in financing that had
arisen in his movie production company. The board was free to accept Bertram
Parker's testimony that he was unaware of the transactions. This testimony refuted
the respondent's claim that the Parkers knew of and approved of the transactions.
Thus, the board's findings are supported by evidence, and not just disbelief
of the respondent.
B. Trust activities. The respondent challenges
the rulings that the Parkers were ignorant as to the activities of the trust,
that the respondent used trust funds to pay interest on personal loans, and
that the Parkers did not have a substantial equity interest in the movie production
company.
In challenging the determination that the Parkers did
not understand the activities of their trust, the respondent points to the quarterly
statements which he alleges the Parkers received, despite the fact that these
reports were sent to their address but with an incorrect zip code, were lengthy,
and, in some instances, were missing sections. For a period of time, these reports
came to the Parkers through the respondent, and were missing the section that
delineated the trust transactions.
The board determined that it was the respondent who
received the reports and that he did nothing to ensure that the Parkers understood
the trust activities. As the board observed, "without [detailed, meaningful,
and informative] analysis, the Parkers alone would be most unlikely to understand
the statements or learn from them the true extent of their involvement with
[the movie production company]."
With respect to the claim that the respondent used funds
from the Bertram Parker account to pay interest on personal loans, there was
evidence that, on July 17, 1989, the respondent made a withdrawal by debit memorandum
from a demand account in the name of Bertram Parker, care of David Stern, in
the amount of $22,359.70. According to an official at Shawmut Bank, the bank
issued three consecutively numbered credit memoranda on July 17, 1989, totaling
$22,359.70. One of the memoranda showed an interest payment of $1,679.17 on
the respondent's personal loan. From that evidence, the board could conclude
that the respondent used Bertram Parker's money for an interest payment on his
personal loan.11
11 The other two credit memoranda paid interest on loans
held by the Parkers and by the movie production company.
The respondent's further allegation that the board's
finding that the Parkers did not have a substantial equity interest in the movie
production company is countered by Bertram Parker's testimony that his only
knowledge of ownership in the movie production company was a purchase of shares
for $2,450.12 Whether to believe Bertram Parker's testimony was for
the board. See Saab, supra.
12 Bertram Parker also stated that he never acted knowledgeably
as an officer of the company as alleged by the respondent.
Physical evidence supported Bertram Parker's testimony.
The documentation regarding the extent of the Parkers' ownership was a "stock
summary" in evidence which showed that the Parkers owned the 2,450 shares that
he testified to owning, which amounted to a 14.7% interest in the movie production
company.13
13 We note that the board determined that the $2,450
that the Parkers had invested in equity in the movie production company does
not constitute a significant investment in light of the vast size of their trust.
The documents referenced by the respondent do not indicate
knowledge of a large ownership stake in the movie production company. The only
document that addressed stock ownership with Bertram Parker's signature authorized
the transfer of shares in his name to the joint name of Bertram and Dianne Parker.
In this document, there is no indication of the number of shares owned by the
Parkers. In short, from the evidence, the board could conclude that the Parkers
did not have any substantial equity interest in the movie production company
in which the respondent had an interest.
III. Sanction. Finally, we do not agree with
the respondent's argument that the board's recommended sanction of disbarment
is disparate with other cases. The board highlighted the following violations
in proposing disbarment as the appropriate sanction: entering into a business
relationship and business transactions with a client without advising the client
to obtain independent legal advice and counsel in violation of DR 5-104 (A);
breaching his fiduciary duty as a trustee of the Parker trust while his interests
constituted a conflict of interest in violation of S.J.C. Rule 3:07, Canon 1,
DR 1-102 (A) (5), DR 1-102 (A) (6), as appearing in 382 Mass. 769 (1981), and
S.J.C. Rule 3:07, Canon 5, DR 5-101(A), as appearing in 382 Mass. 779 (1981);
borrowing money in the name of the trust without the knowledge or consent of
the Parkers and by using trust assets to pay interest on his personal loans
in violation of DR 1-102 (A) (4), DR 1-102 (A) (6), and DR 7-101 (A) (3); failing
to ensure that the client received independent advice and counsel, leaving the
client in ignorance and misunderstanding of his affairs while the respondent
continued to manage those affairs for his own benefit in violation of DR 1-102
(A) (4) and DR 1-102 (A) (6).
Disbarment in these circumstances is not "markedly disparate"
from those orders ordinarily entered in similar cases. See, e.g., Clooney,
supra at 658; Matter of Bryan, 411 Mass. 288, 291-292 (1991);
Matter of the Discipline of an Attorney, 390 Mass. 827, 836 (1984) ("Intentional
use [of client funds] with intent to deprive or with actual deprivation, should
be disciplined by disbarment or indefinite suspension"). The matter is remanded
to the county court where a judgment of disbarment shall enter.
So ordered.
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