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Commonwealth of Massachusetts

N0. BD-2001-025


SJC Order (one year and one day suspension) entered by Justice Cordy on May 11, 2001. 1


From August 1987 to April 1989, the respondent was employed as in-house counsel for Rhodes Financial Services, Inc. ("Rhodes") in Framingham, Massachusetts. Rhodes was a mortgage lender, making consumer loans secured by mortgages. These loans were then sold to investors, to whom the mortgage was assigned. Rhodes was run by Randolph L. White ("White") and his son and daughter.

On December 15, 1987, the respondent represented Rhodes as settlement agent at a closing for a $30,000 loan secured by a second mortgage on a condominium unit in East Boston owned by the borrowers ("the loan"). A bank held the first mortgage on the unit. The borrowers signed a promissory note to Rhodes at 14% interest, which called for payment of 35 monthly installments of $399.53 and a final balloon payment of $28,199.70 on December 15, 1990.

In about July 1988, a potential investor was referred to White to discuss purchasing loans from Rhodes as an investment. White assured the investor that his purchase of a loan from Rhodes was safe because Rhodes fully guaranteed payment even if the borrowers defaulted. The investor asked White for a written guarantee from Rhodesís attorney that the investment was risk-free. Outside the respondentís presence, White agreed that the respondent would give the investor a written guarantee.

On August 4, 1988, the investor purchased the loan by paying $30,000 to Rhodes, and Rhodes gave the investor a loan assignment prepared by the respondent. At about the same time, Whiteís son asked the respondent to commit a guarantee of the loan to writing. The respondent refused. However, on September 21, 1988, the respondent wrote and signed a letter to the investor on her law office stationery stating that payments on the loan were guaranteed every month "whether or not we receive payment from the Mortgagor," and that the investor was "at absolutely no risk whatsoever." The respondent was aware that the no-risk statement in the letter misrepresented a material fact.

On May 22, 1990, the borrowers filed bankruptcy, which triggered a default under the terms of both the assigned loan and the first mortgage loan on the condominium unit. In January 1991, the bank holding the first mortgage filed a foreclosure action in the Land Court. On June 13, 1991, the bank sold the unit at a foreclosure auction.

The investor had no knowledge of the default, the foreclosure or the sale. Rhodes continued to send the investor a monthly check in the amount of $399.53 through December 1992.

In January 1993, Rhodes informed the investor that Rhodes could not afford to continue monthly payments on the assigned loan but hoped to resume payments in the future. Rhodes never resumed payments and filed for bankruptcy in April 1994. In December 1994, the investor discovered that the bank had foreclosed in 1991. The investor lost $9,090.42 of his original $30,000 investment.

On April 4, 1997, the investor filed a request for investigation with Bar Counsel alleging that he was induced to purchase the loan by the promise of the respondentís written guarantee and that the respondent had personally guaranteed in her September 21, 1988, letter that his loan was risk-free.

The respondent falsely denied to Bar Counsel that she had signed or sent the September 21, 1988 guarantee letter to the investor or ever guaranteed that he would receive all his payments. The respondent asked to have the September 21, 1988 letter examined by a handwriting expert. Bar Counsel submitted the letter to a handwriting expert, who opined that the signature was the respondentís. The respondent acknowledged her signature on the letter after Bar Counsel conveyed the result of the handwriting analysis.

The respondentís intentional misrepresentation to the investor that his funds would be safe and his investment risk-free violated Canon One, DR 1-102(A) (4) and (6), and Canon Seven, DR 7-102(A)(5) and (7). The respondentís false denials to Bar Counsel that she signed or sent the guarantee letter violated Canon One, DR 1-102(A) (4), (5) and (6), and S.J.C. Rule 4:01, ß 3.

In mitigation, the respondent was inexperienced in the practice of law and had been pressured by her client to write the letter. The respondent has not practiced law since 1998. The respondent also reimbursed Bar Counsel the cost of the handwriting analysis.

The petition for discipline was filed with the Board of Bar Overseers on January 18, 2001, together with the respondentís answer and the stipulation of the parties that the respondent be suspended from the practice of law for a year and a day. On April 9, 2001, the Board of Bar Overseers voted to recommend to the Court that the respondent be suspended for a year and a day. On May 11, 2001, the Court entered an order suspending the respondent for a year and a day, effective June 11, 2001.

1 The complete Order of the Court is available by contacting the Clerk of the Supreme Judicial Court for Suffolk County.

2 Compiled by the Board of Bar Overseers based on the record before the Court.

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