SJC-07893 (1999)
In the Matter of Alan H. Segal
Suffolk. September 14, 1999. - November 16, 1999.
Present: Marshall, C.J., Abrams, Lynch, & Greaney, JJ.
Attorney at Law, Disciplinary proceeding, Suspension. Collateral
Estoppel. Administrative Law, Substantial evidence, Proceedings before
agency. Evidence, Administrative proceeding.
Information filed in the Supreme Judicial Court for the county
of Suffolk on August 28, 1998.
The case was heard by Ireland, J.
Stephen R. Delinsky for the respondent.
Nancy E. Kaufman, Assistant Bar Counsel.
LYNCH, J.
This is an appeal from a decision of a single justice on an information filed
in the county court by the Board of Bar Overseers (board) recommending that
the respondent be suspended from the practice of law for two years. On February
25, 1994, a judge in the United States District Court for the District of Massachusetts
entered an order for a judgment of acquittal terminating the prosecution of
Alan H. Segal (respondent) for making false statements to a federally insured
bank in violation of 18 U.S.C. Sect. 1014 (1994). On September 30, 1996,
bar counsel filed a formal petition before the board alleging ethical violations
arising out of conduct which was the subject of the Federal prosecution. The
board found ethical violations and recommended a two-year suspension.[1]
After a hearing, a single justice of this court imposed a two-year suspension
commencing on December 10, 1998.
[1]
The board concluded that the respondent violated S.J.C. Rule 3:07, Canon
1, DR 1-102 (A) (4) and (6), as appearing in 382 Mass. 769 (1981); S.J.C. Rule
3:07, Canon 2, DR 2-110 (B) (2), as appearing in 382 Mass. 774 (1981); and S.J.C.
Rule 3:07, Canon 7, DR 7-102 (A) (3), (5), (7) and (B) (1), as appearing in
382 Mass. 785 (1981).
The respondent asserts that the board's proceeding was barred by preclusion
principles, the board's findings were not supported by substantial evidence,
and the length of the suspension was disproportionately long. We reject each
of the respondent's contentions and conclude that a two-year suspension is appropriate.
1. Facts. We summarize the facts found by a hearing committee of the
board. The respondent was admitted to the Massachusetts bar in 1974. Since his
admission, the respondent has engaged in a general legal practice with an emphasis
on real estate matters. In the spring of 1987, the respondent was hired by the
Dime Savings Bank of New York (Dime) as a closing attorney. On behalf of Dime,
the respondent conducted all of the closings on the condominium units at Hawthorne
Village in North Attleborough.
In order to facilitate the sale of the condominium units, the owner offered
incentives to buyers, which included second mortgage financing, a decorating
allowance, and cash credits. These incentives obviated the need for a buyer
to make a down payment to purchase a condominium unit.
Charles McCormick became the lead condominium unit purchaser. He located and
organized a syndicate of investors to buy condominium units. Attorney Thomas
Behenna represented McCormick in the condominium unit sales and coordinated
financing with the parties including second mortgages.[2]
[2]
Behenna also purchased several of the condominium units for himself.
The closings on the condominium units began in September, 1987. Dime acted
as the mortgage lender to the McCormick group and the respondent conducted the
closings on behalf of Dime. Dime had a policy, of which the respondent was aware,
against buyers financing their loans through second mortgages. The loan documents
which Dime sent to the respondent expressly forbade the use of secondary financing.
Furthermore, before becoming Dime's closing attorney, the respondent was told
by Dime's executive vice-president to report any irregularities in the loan
documents.
The respondent presided over closings on September 16, 1987, October 28, 1987,
November 4, 1987, and December 1, 1987, where secondary loan financing was discussed.
On September 16, the participants engaged in an argument, in front of the respondent,
over who was to pay for preparing the second mortgages. [3] On October
28, one of the parties mentioned having "signed seconds a few minutes before"
to which the respondent responded, "I can't hear that." On November 4, one of
the parties noted that the purchase of the condominium unit was a "no-money-down
deal" to which the respondent said, "I am not supposed to know that." Finally,
on December 1, one of the parties told Behenna that he did not have a down payment
for the condominium unit and was using a second mortgage. In front of the respondent,
Behenna explained, "This is nothing to worry about; it's just a formality; this
is the way we are doing all of them. It's okay to sign, go ahead and sign."
Based on these transactions, the board determined that the respondent recognized
that the condominium units were being purchased in conjunction with second mortgages,
and by remaining silent, violated his affirmative obligation to inform Dime.
[3]
Behenna testified before the hearing committee that the respondent had a "look
of disgust on his face" during the discussion of secondary financing.
Included among the closing documents were regulatory forms, which the respondent
had an obligation to see were complete and accurate, but which failed to disclose
the existence of any secondary financing. Thus, the board concluded that, because
the respondent knew of the second mortgages, he falsely submitted the documents
and did not notify Dime about concerns he had regarding the forms' false information.
The respondent was charged in the Federal District Court with making false
statements to a federally insured bank under 18 U.S.C. Sect. 1014. At the
close of the evidence, the judge allowed the respondent's motion for an acquittal
because the government failed to prove that the respondent made the statements
for the purpose of influencing a federally insured bank.[4]
[4]
In allowing the motion for acquittal the judge wrote:
"This Court hereby finds
that there is insufficient evidence to warrant a jury to find, beyond a reasonable
doubt, that any false statements contained in the HUD-1s [forms] were made 'for
the purpose of influencing' the actions of the Dime Savings Bank of New York,
FSB on loans. Rather the evidence establishes that the HUD-1s were made to Dime
Real Estate Services of Massachusetts, which in turn issued the mortgage money
directly from its bank account with the Union Bank of Lowell, Mass."
2. Preclusion. The respondent first contends on appeal that, because
he was acquitted in United States District Court, the board is prohibited from
bringing a subsequent disciplinary action against him arising from the same
conduct. He relies on S.J.C. Rule 4:01, Sect. 11, as appearing in 425 Mass.
1313 (1997), to support his position. The rule provides in part:
"The acquittal of the respondent lawyer on criminal charges, or a verdict,
judgment, or ruling in the lawyer's favor in civil, administrative, or bar
disciplinary proceedings shall not require abatement of a disciplinary investigation
predicated upon the same or substantially similar material allegations."
The respondent asserts that the interpretation of rule 4:01 is governed by
the maxim, the expression of one thing is an implied exclusion of things omitted.
See Harborview Residents' Comm., Inc. v. Quincy Hous. Auth., 368
Mass. 425, 432 (1975), and cases cited. The respondent argues that, by expressly
permitting the board to conduct further investigations after an acquittal, the
rule impliedly denies the board the power to proceed with a bar disciplinary
proceeding after an acquittal. The maxim on which the respondent relies "is
not to be followed where to do so would frustrate the general beneficial purposes
of the legislation." Brady v. Brady, 380 Mass. 480, 484 (1980),
quoting Harborview Residents' Comm., Inc. v. Quincy Hous. Auth.,
supra. Furthermore, each portion of a rule must be read in relation to
the entire scheme to understand the relation of one part of a rule to the rule
as a whole. Cf. Saccone v. State Ethics Comm'n, 395 Mass. 326,
334 (1985) ("We look . . . to the entire statutory scheme to determine the sense
of the amendment in relation to the statute as a whole").
We conclude that S.J.C. Rule 4:01, Sect. 11, does not prevent the board from
conducting a bar disciplinary proceeding after an attorney has been acquitted
in a substantially similar criminal matter.[5] The thrust of the rule
is to permit the board to go forward with its business without regard to other
criminal and civil proceedings.
[5]
The text of S.J.C. Rule 4:01, Sect. 11, as appearing in 425 Mass. 1313
(1997), provides: "The investigation or prosecution of grievances or complaints
involving material allegations which are substantially similar to the material
allegations of pending criminal, civil, administrative, or bar disciplinary
proceedings in this or another jurisdiction shall not be deferred unless the
Board or a single member designated by the chair, in its discretion, or the
court, for good cause shown, shall authorize such deferment, as to which either
the court or the Board may impose conditions. The acquittal of the respondent-lawyer
on criminal charges, or a verdict, judgment, or ruling in the lawyer's favor
in civil, administrative, or bar disciplinary proceedings shall not require
abatement of a disciplinary investigation predicated upon the same or substantially
similar material allegations."
In the absence of any specific provisions in the rule, general rules of collateral
estoppel govern. It is well established that an acquittal in a criminal trial
does not prevent civil proceedings addressing the same facts because civil sanctions
require a different standard of proof than a criminal conviction. See Krochta
v. Commonwealth, 429 Mass. 711, 718 (1999); Doherty v. Retirement
Bd. of Medford, 425 Mass. 130, 140 (1997); Commissioners of Civil Serv.
v. Municipal Court of the Brighton Dist., 369 Mass. 166, 173-174 (1975),
cert. denied sub nom. Patuto v. Commissioners of Civil Serv.,
429 U.S. 845 (1976); Chief of the Fire Dep't of Boston v. Sutherland
Apartments, Inc., 346 Mass. 685, 690 (1964); Matter of Dolan, 10
Mass. Att'y Discipline Rep. 59, 62 (1994). The omission of the term "prosecution"
from the last sentence of the rule is not an implied deviation from this long-standing
principle. Cf. Cousineau v. Laramee, 388 Mass. 859, 862 (1983),
quoting Dexter v. Commissioner of Corps. & Taxation, 316 Mass.
31, 38 (1944) ("A statute should not be interpreted to 'require a radical change
. . . in the existing law [if] the act does not manifest any intent
that such a change should be effected'").
Our decision in Matter of Concemi, 422 Mass. 326 (1996), is not to the
contrary. There we held that "the certificate of conviction is conclusive as
to the conduct alleged therein," id. at 329, and noted that "the issue
of guilt or innocence is not to be relitigated in a bar discipline proceeding."
Id. The respondent contends that the Concemi case prevents the
initiation of any bar discipline proceeding once the attorney has been acquitted
of a related criminal charge. Rather, it stands for the limited proposition
that respect for the criminal justice system precludes relitigation during a
bar disciplinary prosecution of facts conclusively decided in a criminal trial.
The judge in the United States District Court did not conclusively find facts
that would require that the bar discipline proceedings be decided in the respondent's
favor. In the Federal court he was charged with making false statements to a
federally insured bank. He was acquitted because there was no proof that the
respondent made the statements to a federally insured bank. Thus, the fraudulent
nature of the respondent's statements was not conclusively determined by the
judgment of acquittal. Therefore, bar counsel could properly litigate the respondent's
knowledge and intent before the board.
3. Substantial evidence. We review the determination of the board only
to determine whether it is supported by substantial evidence in the record.
See G. L. c. 30A, Sect. 14 (7) (e). "'Substantial evidence'
means such evidence as a reasonable mind might accept as adequate to support
a conclusion." G. L. c. 30A, Sect. 1 (6). The scope of our inquiry
is limited. While we review the entire record and consider whatever detracts
from the weight of the board's conclusion, as long as there is substantial evidence,
we do not disturb the board's finding, even if we would have come to a different
conclusion if considering the matter de novo. See Arthurs v. Board
of Registration in Medicine, 383 Mass. 299, 304 (1981). The thrust of our
inquiry is to determine by what process and by what evidence the board reached
its ultimate conclusion.
The hearing committee heard live testimony and considered documentary evidence
and substantial portions of transcripts from the respondent's criminal trial.[6]
[6]
The hearing committee conducted five days of hearings on March 20, 21, 25; April
23; and May 5, 1997.
It was not improper for the committee to rely on transcripts from the criminal
trial in reaching its conclusion. The admissibility of evidence in board proceedings
is governed by the State Administrative Procedure Act.[7] G. L.
c. 30A, Sect. 11 (2). See Matter of Tobin, 417 Mass. 92, 102
(1994); Board of Bar Overseers Rules Sect. 3.39 (1999). Massachusetts appellate
decisions have repeatedly permitted administrative agencies to consider transcripts
of other proceedings in reaching determinations. See Doherty v. Retirement
Bd. of Medford, 425 Mass. 130, 138 & n.6 (1997); Embers of Salisbury,
Inc. v. Alcoholic Beverages Control Comm'n, 401 Mass. 526, 528-530
(1988); Vaspourakan, Ltd. v. Alcoholic Beverages Control Comm'n,
401 Mass. 347, 354 (1987); Civil Serv. Comm'n v. Boston Mun. Court
Dep't, 27 Mass. App. Ct. 343, 349 (1989); Dolphino Corp. v. Alcoholic
Beverages Control Comm'n, 29 Mass. App. Ct. 954, 955 (1990). The question
we address is not whether the criminal transcript is hearsay in the technical
sense but whether it contains sufficient indicia of reliability that it has
probative value. See Embers of Salisbury, Inc. v. Alcoholic Beverages
Control Comm'n, supra at 530.
[7]
General Laws c. 30A, Sect. 11 (2), provides: "Unless
otherwise provided by any law, agencies need not observe the rules of evidence
observed by courts . . . . Evidence may be admitted and given probative effect
only if it is the kind of evidence on which reasonable persons are accustomed
to rely in the conduct of serious affairs. . . ."
Here, the declarants were testifying under oath on a contested issue in the
criminal trial and were subject to a vigorous cross-examination by the respondent's
attorney. There was sufficient indicia of reliability for the hearing committee
to rely on the transcript.
The respondent contends that the trial testimony contains internal contradictions
and the board cannot choose which version of facts to believe. [8] We
agree that an administrative agency cannot choose to believe one version of
testimony without a reasonable basis for its choice. Cf. Merisme v. Board
of Appeals on Motor Vehicle Liab. Policies & Bonds, 27 Mass. App. Ct.
470 (1989) (agency decision was not supported by substantial evidence where
agency relied solely on contested police accident report).
[8]
For example, Charles McCormick testified that, during one of the closings he
said, "what [he] liked about this property, [was] with the second that it was
a no-money-down deal." And the respondent answered, "I am not supposed to know
that."
Brendan Greene, a condominium
unit purchaser, testified that Attorney Thomas Behenna was present at his December
1 closing and that, when second mortgages were mentioned, the respondent deferred
to Behenna. The respondent's paralegal testified that the respondent was playing
racquetball and was not present at the Greene closing.
In this case, however, there is ample support for the board's reliance on the
transcript. [9] The board identified corroborating testimony of witnesses
at the trial. The board observed that each witness had or heard a conversation
regarding secondary financing while the respondent was present. Several witnesses
also testified that they were present when the respondent stated that he could
not "hear" about secondary financing. The respondent also chose not to utilize
his right to subpoena any of the witnesses before the committee. His failure
to challenge the transcript during the hearing gives added credibility to the
transcripts because it suggests that the respondent believed there was no basis
to challenge the assertions in the trial record. See School Comm. of Brockton
v. Massachusetts Comm'n Against Discrimination, 423 Mass. 7, 15-16 (1996)
(school committee's failure to subpoena and to cross-examine physicians whose
letters were admitted at administrative proceeding was indication of reliability
of evidence); Embers of Salisbury v. Alcoholic Beverages Control Comm'n,
supra at 531 (party who failed to call witness whose criminal transcript
was introduced in evidence "cannot be heard to complain of the consequences").
[9]
The board is not precluded from considering the transcript of the criminal
trial even though the respondent was not convicted of the charges. See Doherty
v. Retirement Bd. of Medford, 425 Mass. 130, 133, 143 (1997) (board consideration
of transcript in which defendant acquitted proper).
The board also relied on live testimony before the hearing committee. Behenna's
testimony before the hearing committee supports the board's version of facts
over conflicting versions which appear in the criminal transcript. There is
conflicting testimony in the transcript whether the respondent was present at
Greene's closing on December 1. See note 8, supra. Behenna testified
that the respondent was present at the closing and that second mortgaging was
discussed. [10] The committee also heard testimony from the respondent
and determined that his denial of having knowledge of the secondary financing
scheme was not credible. [11] Based on the hearing committee's extensive
consideration of the transcript testimony and the supporting live testimony,
we conclude that the board's decision was supported by substantial evidence.
[10]
The respondent argues that Behenna's testimony cannot be credited because he
is a convicted felon and may have been influenced by bias. This argument was
foreclosed by our decision in Doherty v. Retirement Bd. of Medford,
supra at 141. In Doherty, the agency relied on the trial transcript
testimony of Joseph Bangs, a police officer and prosecution witness. In response
to an argument that Bangs's testimony could not be credited, we noted, "Although
Bangs may have been a man of unsavory character, and his cross-examination testimony
reveals strong indication of bias, the board was entitled to find his account . .
. credible. While Bangs may have had an incentive to fabricate his testimony,
'[t]his contention . . . goes to the credibility of and the weight to be given
such testimony . . . and we cannot say, as matter of law, that [Bangs's] testimony
was insufficient to support the [board's] finding.'" Id. at 141, quoting
Embers of Salisbury v. Alcoholic Beverages Control Comm'n, 401
Mass. 526, 530 (1988). Similarly, the fact that Behenna was convicted of a felony
in relation to the condominium deal and may have had a desire to offer certain
testimony to protect his sister who was also involved in the scandal are matters
for the board to weigh in making determinations but do not, as matter of law,
preclude the board from relying on his testimony. We note that, unlike Bangs,
Behenna testified in person and thus the hearing committee was able to view
his testimony to determine whether it was credible.
[11]
The respondent contends that, even if the board ould conclude that he was present
and heard the secondary financing conversations, there is no evidence that he
knew the context of the conversations. Rule 9.1 (f) of the Massachusetts Rules
of Professional Conduct, 426 Mass. 1432 (1998), provides that "[a] person's
knowledge may be inferred from circumstances." The evidence in this case was
more than sufficient for the board to infer that the respondent had knowledge
of the improper secondary financing.
4. Disposition. We review the sanction imposed by the single justice
to determine, "whether the judgment is markedly disparate from those ordinarily
entered by the various single justices in similar cases." Matter of Kerlinsky,
428 Mass. 656, 664 (1999), quoting Matter of Clooney, 403 Mass. 654,
658 (1988). The respondent was suspended for two years for making false statements
and material omissions. The respondent was not disbarred because he was not
convicted of a crime. See Matter of Concemi, 422 Mass. 326, 329 (1996)
("disbarment or indefinite suspension is the usual sanction imposed for a felony
conviction"). However, cases involving the making of false statements are dealt
with seriously because of "the effect upon, and perception of, the public and
the bar." Matter of McInerney, 389 Mass. 528, 535 (1983), quoting Matter
of Alter, 389 Mass. 53, 56 (1983).
The facts of this case are closely related to Matter of Eastwood, 10
Mass. Att'y Discipline Rep. 70 (1994). Eastwood closed two mortgage loans in
which secondary financing was not recorded on the closing documents. He did
not know until the closings that the buyers were giving a second mortgage to
the seller. Id. at 72-73. The single justice imposed a one-year suspension.
[12] Id. at 75. In this case, there were numerous improper loans
and the respondent had knowledge of the secondary financing scheme well before
most of the closings occurred. Like Eastwood, the respondent had substantial
experience as a real estate attorney. Cf. Matter of Franchitto, 12 Mass.
Att'y Discipline Rep. 180 (1996) (nine-month suspension for inexperienced attorney
who signed closing documents that did not disclose second mortgages). We conclude
that a more severe sanction than imposed in Matter of Eastwood, supra,
is warranted. Thus, we conclude that a two-year suspension is appropriate. Accordingly,
we affirm the order of the single justice.
[12]
The single justice noted that he would have favored a two-year suspension.
Matter of Eastwood, 10 Mass. Att'y Discipline Rep. 70, 75 (1994).
So ordered.
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