who managed the property for the trust, the respondent explained the court’s decision to require an auction. The respondent pointed out that the reorganization plan would not work unless Smith and Jones successfully bid in at the auction. Although they were reluctant to put more money into the building, the respondent advised them that a $5,000 bid, plus the fresh capital contribution of $17,000, would permit them to retain equity ownership. The FDIC’s appeal, meanwhile, would afford them time to raise the funds needed to make the bid. The owners agreed to bid $5,000 at the auction. The respondent explained that Smith and Jones would have to fund the bidding out of their own pockets, not from trust assets.
On this last point there was a clash of testimony at the disciplinary hearing. According to Smith and Black,3 the beneficiaries told the respondent they did not have funds to bid in. In response, they testified, the respondent advised them to divert extra funds available after paying the trust’s on-going expenses and to deposit the gleanings into a separate fund to use for bidding. The respondent denied this. The committee credited the respondent.
At any rate, it is uncontested that, shortly after the February 20 meeting, Smith began diverting trust income to a separate account known as the Prod account. The diverted income was not recorded in the Quicken accounts Black maintained in managing the building’s finances or on the periodic cash flow reports that the trust, as debtor-in-possession, was required to file with the US Trustee.
In June 1992 the FDIC withdrew its interlocutory appeal and made efforts to settle the matter. The next month, after reviewing the trust’s cash flow reports, the respondent became concerned that there appeared to be insufficient income to pay its operating costs. Increased vacancies in 1992 lowered income to such an extent that it imperiled the Chapter 11 plan, and in December 1992 the FDIC filed a motion for relief from the stay so it could foreclose. The motion was scheduled for hearing on February 18, 1993.
In a letter dated December 24, 1992, Black urged the respondent to resist foreclosure and reiterated that she and Smith understood that under the plan the trust would need to generate income of at least $5,000 a month to make the building pay. Black’s letter accompanied a Quicken report of the trust’s finances, from which the respondent concluded the plan would likely fail. Black also stated in her letter, “There is another $8,000 in another account.” The reference was to the Prod account, about which, Smith and Black testified, the respondent had continually questioned them throughout 1992. The respondent, who professed ignorance of the account at all relevant times, testified that he believed Black was referring to personal funds saved by the beneficiaries for bidding at the auction. The hearing committee credited the respondent’s testimony.
On February 8, 1993, the apartment building was destroyed by fire. Without the building, the trust had no business to reorganize in bankruptcy. There then remained only three issues for resolution: the disposition of the building’s insurance proceeds, Smith’s personal exposure under the guarantee (Jones was dead), and the respondent’s outstanding fees. Counsel for the FDIC agreed with the respondent to continue the hearing on its pending motion for relief from the stay.
On March 1, 1993, the respondent sent to Smith and Black a letter in which he advised that the FDIC was entitled to the fire insurance proceeds and that he hoped to negotiate a waiver of its claim against Smith as guarantor. To that end, he urged Smith to fill out certain forms, previously given him, to satisfy the FDIC as to Smith’s financial condition. At the bottom of Black’s letter, but not Smith’s, the respondent had his secretary type a postscript demanding payment of his outstanding fees. At the disciplinary hearing Bar Counsel produced the letter purportedly received by Black. It bore the following version of the postscript:
***Mary: I expect my fees, which are now over $9,000.00, to be
paid from the “slush” fund.
(Ex. 35). The respondent, whose file copy of the letter did not contain a postscript, admitted adding a postscript demanding payment, but he denied having referred to a slush fund. The committee credited the respondent’s testimony and concluded, in effect, that Black herself had added the reference to a slush fund.
The day after receiving the respondent’s March 1 letter, Smith withdrew $8,000 from the Prod account in the form of a cashier’s check payable to himself. He hid the check in his garage for approximately six months. Although he disclosed the existence of the Prod account on the financial forms he filled out to convince the FDIC to waive its rights under the guarantee, he did not disclose that he had withdrawn and concealed $8,000.
The matter finally settled at the end of September 1993. The FDIC received all of the fire insurance proceeds, Smith was released from liability under the guarantee, and the respondent’s fees were paid out of the proceeds of the building’s lost rents insurance. Out of the latter insurance Smith paid other expenses and recovered about $1,500. Smith was upset that he received so little from the settlement, and he later brought a civil action against the respondent. That matter was still pending at the time of the disciplinary hearing.
The hearing committee found that the respondent did not advise his clients to divert trust income to the Prod account and that he was not aware that the trust’s cash flow reports, filed with the US Trustee, contained misrepresentations as to the trust’s income. Accordingly, the committee concluded that Bar Counsel had failed to prove violations of the Disciplinary Rules charged, and it recommended that the petition for discipline be dismissed.
Bar Counsel’s Appeal
This case was a swearing contest. After listening to the testimony of Smith, Black, and the respondent, the hearing committee decided to credit the respondent’s and to discredit that of Smith and Black. The Board’s authority to set aside a committee’s credibility determinations is very narrow. See SJC Rule 4:01, § 8(3) (Board may revise findings “paying due respect to the role of the hearing committee . . . as the sole judge of the credibility of the testimony presented at the hearing”) (emphasis added); Matter of Hachey, 11 Mass. Att’y Disc. R. 102, 103 (1995) (credibility findings may not be disturbed unless “wholly inconsistent” with other findings); Matter of Provanzano, 5 Mass. Att’y Disc. R. 300, 304 (1987) (credibility determinations not to be disturbed “absent some clear error”); Matter of McCabe, 13 Mass. Att’y Disc. R. 501, 507 (1997) (credibility determinations based on permissible choices among conflicting testimony must be upheld unless wholly inconsistent with other findings). Not surprisingly, the Massachusetts Attorney Discipline Reports contain only a single instance in which the Board rejected a committee’s credibility finding, and in that case the Court determined the Board had erred in doing so. See Matter of Hachey, supra.
Bar Counsel faces, therefore, a very heavy burden here. Instead of taking up that burden, Bar Counsel seeks to avoid it by denying, in effect, that the committee’s determinations were really ones of credibility after all. Instead, she argues, the committee “purported” to base its findings on credibility but actually relied on other evidence that does not support its findings. Bar Counsel’s Brief on Appeal at 24. At oral argument, Bar Counsel refined this position somewhat by maintaining that, because the committee had “intertwined” its credibility findings with others based on nontestamentary evidence, the committee is not entitled to the deference normally afforded credibility determinations. If the nontestamentary findings fall, the credibility findings should fall with them. Bar Counsel conceded she was aware of no authority for this proposition.
The principal difficulty with the argument is that the committee did not bottom its credibility determinations on nontestamentary evidence. The committee plainly stated that it had made determinations based on the witnesses’ credibility, and it referred to classic criteria, like the witnesses’ demeanor, for making such determinations. See Hearing Committee Report 17. Having made those judgments, the committee then went on to recount that other evidence supported its credibility determinations. See id. 17, 31. Thus, the committee pointed out that it based its findings “on [its] evaluation of the witnesses’ demeanor, general credibility, and the evidence presented . . . .” Id. 17 (emphasis added).
We are also loath to accept the full import of Bar Counsel’s suggestion that we may disregard the standard of review whenever a committee also adverts to nontestamentary evidence to buttress its credibility findings. Aside from affording an end run around the strictures of Rule 4:01, Bar Counsel’s approach invites hearing officers to rely exclusively on their credibility findings while ignoring supporting documentary evidence lest an error in analyzing the latter expose the former to attack on appeal. We believe the interests of the disciplinary system are better served by construing the rules to encourage the finders of fact to analyze and weigh all the evidence before them. As we have previously observed, Matter of McCabe, 13 Mass. Att’y Disc. R. 501, 506-07 (1997), the deference we owe here is more like that owed a jury’s credibility finding, not that owed hearing officers for administrative tribunals like the boards of registration, which must supply reasoned analysis of the choices made between conflicting testimony. Cp. Herridge v. Board of Registration in Medicine, 420 Mass. 154, 164 (1995) (board may not pick and choose among testimony without explaining how issues of credibility were resolved) with Matter of Hachey, supra at 103 (analogizing review of hearing committee’s credibility findings to appellate court’s review of jury’s finding and concluding they must be accepted unless it can “be said with certainty that the hearing committee’s finding . . . was wholly inconsistent with another implicit finding”).
Bar Counsel’s efforts to impugn the committee’s credibility determinations are not persuasive. Both Smith and Black had motives for wishing harm on the respondent—the former because of the pending litigation, the latter because of a grudge she admitted harboring for his role in getting her fired from a job. By contrast, the respondent had little if anything to gain by proposing and abetting a scheme of bankruptcy fraud on their behalf. Under these circumstances, we are especially hesitant to second guess the resolution of conflicting testimony regarding what was said at the February 20, 1992 meeting, at which Smith and Black said the respondent proposed the diversion. There was, moreover, nothing on the face of the cash flow filings or the Quicken statements the respondent received which would have alerted him to the diversion.
To buttress Smith’s and Black’s version, Bar Counsel relied most heavily on the disputed postscript to the respondent’s March 1, 1993 letter. The respondent acknowledged having added a postscript, but one which demanded he be paid “from the insurance proceeds,” not a slush fund. The committee credited his testimony. It would have been an act of stunning stupidity for him to have memorialized an unambiguous reference to an illegal slush fund, especially after his relations with the clients had begun to sour. (See Ex. 58). The committee also found it was his practice, when writing letters to more than one addressee, always to send originals to all addressees. The disputed version Black produced was a copy, not an original—a fact that strengthens the inference it was not the document the respondent sent her.4
Bar Counsel objects that the committee credited the respondent’s testimony despite his having given “prior inconsistent statements” regarding the postscript. At first he claimed he had demanded the fees be paid without designating a source of payment; later he said he had demanded payment “from the fire insurance proceeds.” The committee justified disregarding these inconsistencies because the respondent, whose file copy contained no postscript, did not have a record of its precise wording and because as its author he “knew” the one produced by Black had been doctored. Bar Counsel objects that this bootstraps the issue to be resolved, i.e., whether the letter had been doctored. The objection misses the point. The committee was not seeking to prove the truth of his testimony by such reasoning; it was merely explaining why these inconsistencies might have arisen. It would be understandable for the respondent to be less than certain about the postscript’s precise wording if he had no file copy, and if he had not authored the postscript championed by Black, then he would indeed “know” that the letter had been doctored.
Bar Counsel sought to shore up the postscript’s authenticity by introducing evidence that on March 2, the day Smith said he saw the postscript, he withdrew $8,000 from the Prod account in order to put them out of the respondent’s reach. Smith hid the funds, in the form of a cashier’s check, in his garage for six months. The committee did not believe Smith. The committee decided Smith had withdrawn the funds for another purpose—to hide them from the FDIC. In the body of the March 1 letter, the respondent had urged Smith to prepare a long-awaited financial statement for use in convincing the FDIC to waive its rights under Smith’s personal guarantee. By letter dated March 8, the respondent forwarded Smith’s completed statement to the FDIC. On it Smith listed the Prod account as having a balance of about $400. The committee inferred, therefore, that Smith’s real reason for withdrawing the $8,000 was to hide the funds from the FDIC. The committee’s inference is at least as strong as the one pressed by Bar Counsel, particularly since the respondent (under Smith’s version of the story) knew about the funds in the Prod account and thus would likely notice the shortfall on the financial statement.
Bar Counsel assails the committee’s inference as “illogical.” On March 2, she observes, Smith also deposited a $6,000 check into his personal account and, although he disclosed the existence of both the Prod and personal accounts on the statement, the balances he supplied for them reflected neither the $6,000 deposit nor the $8,000 withdrawal. If he had cleaned out the Prod account so he wouldn’t have to disclose the $8,000 on the statement, Bar Counsel argues, it is “unlikely that at the same time he would have put $6,000 into his personal account and not list it on the financial statement.”
The record indicates another reason why Smith might have felt it less risky to leave the $6,000 deposit in the personal account than the $8,000 in the Prod account when he set about understating his assets on the financial statement. Smith drew the $6,000 check on a credit card account, and he listed the issuer of the credit card as a creditor on the financial statement. As a consequence, he had a ready explanation for failing to disclose the deposit should the FDIC discover it: the two items were a wash, a $6,000 asset offset by a $6,000 liability. (See Tr. 1:134-36, 2:28-30; Ex. 18, at 2, 3). Obviously, the same would not be true if the FDIC discovered $8,000 sitting in the Prod account. Smith thus had a motive to treat it differently from the $6,000 deposit. Under these circumstances, we cannot fault the hearing committee for rejecting Smith’s claim that he withdrew the Prod funds in order to keep the respondent from applying them toward his legal fees. The inference Bar Counsel urges is not compelled by the documentary evidence, which supports either inference. And there is, of course, nothing in these machinations that fosters a heartening opinion of Smith’s honesty and credibility.
The only remaining evidence that the respondent was aware of the diversion of trust income was Black’s December 24, 1992 letter, in which she sought to convince the respondent that the trust could meet its obligations under the plan notwithstanding the building’s increased vacancies. “There is another $8,000 in another account,” she wrote. (Ex. 33). Black testified that this was a reference to the Prod account; the respondent claimed he believed she was referring to personal money saved by the beneficiaries to bid in at the auction. The committee believed the respondent, not Black. Bar Counsel insists the respondent must have realized Black was describing trust income, not the owners’ personal savings for bidding.
Read in context with the rest of the letter, Black’s statement is more naturally construed as referring to trust income, not owners’ savings, but the construction would be less natural to a reader who was otherwise unburdened by guilty knowledge of the diversion, as the respondent claimed to be. The thrust of the letter was to convince the respondent to resist foreclosure by defending the viability of the Chapter 11 plan, one feature of which was to be the owners’ bidding in at the auction. Without the benefit of Bar Counsel’s hindsight, the respondent could understandably have read the statement as a reference to the owners’ personal funds saved for that purpose. Again, the inference drawn by the committee is at least as strong as the one urged by Bar Counsel.
As we noted at the outset, the hearing was a swearing contest that Bar Counsel lost. Nothing in her arguments on appeal or in our independent review of the record convinces us that there are adequate grounds to invade the hearing committee’s exclusive province as the judge of witness credibility.
The Respondent’s Appeal
After recommending dismissal, the hearing committee proceeded, at Bar Counsel’s suggestion, to detail findings it would have made in aggravation if it had sustained the allegations in the petition for discipline. These provisory findings included:
• Failing to take remedial measures upon learning that the trust was improperly making post-petition payments on a pre-petition loan to one of the owners.
• Attempting to collect legal fees not approved by the Bankruptcy Court.
• Engaging in a conflict of interest by giving legal assistance to a third party in filing a civil action against Smith while simultaneously representing Smith and the trust.
• Improperly using, in connection with his demand for payment of his fees, information he received from Black that Smith had made personal use of money taken from the trust.
• Filing, in an attempt to harass and intimidate Smith and Black immediately before they were scheduled to testify at the disciplinary hearing, a proof of claim in another witness’s bankruptcy proceeding alleging a criminal conspiracy on the part of Smith, Black, and the other witness.
The committee acknowledged that it would have been improper to find violations of the Disciplinary Rules for conduct not charged in the petition for discipline. See In re Ruffalo, 390 U.S. 544 (1968); Matter of Brower, 1 Mass. Att’y Disc. R. 45, 47 (1979). Nonetheless, the committee stated, “we would be remiss not to state our concerns regarding the respondent’s conduct which was disclosed during the hearing . . . .” Hearing Committee Report at 20. We strike these provisory findings for two reasons.
First, they are superfluous, given our acceptance of the committee’s recommendation to dismiss the petition for discipline. It may be true, as Bar Counsel points out, that the provisory findings do not violate due process because, if no discipline is imposed, they cause the respondent no cognizable injury. But this makes the findings no less unfair. While the record of a dismissed proceeding is sealed, see SJC Rule 4:01, § 20(3)(d), a copy of the hearing committee’s report has been made available to the complainant, Smith, who has pending litigation against the respondent. Cotton Mather once epitomized the Puritan world view by proclaiming, “All that is not useful is vicious.” The same may be said for disparaging findings made after dismissal of a petition for discipline.
Second, we believe it is inappropriate to find misconduct in the guise of making findings in aggravation where the respondent has not had adequate notice of the claimed misconduct and lacks incentive to defend fully against the claims. There is some authority for the proposition that uncharged conduct may be weighed in aggravation of other misconduct, see, e.g., Matter of Eisenhauer, 426 Mass. 448, 454 (1998), but not, we conclude, under the circumstances presented here.
This is not a case where Bar Counsel applied a new theory for sustaining the original charges, as in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 654 (1984), or in Matter of Saab, 406 Mass. 315, 323-24, 6 Mass. Att’y Disc. R. 278, 287 (1989). In neither of those cases would notice have assisted the lawyer in disputing the new theory, which was impressed upon subsidiary findings necessary to sustain the allegations in the petition for discipline. See Bar Counsel v. Doe (Fordham), 11 Mass. Att’y Disc. R. 501, 506-07 (1995), rev’d on other grounds, Matter of Fordham, 423 Mass. 481, 12 Mass. Att’y Disc. R. 162 (1996). Nothing in the petition for discipline here put the respondent on notice that he would be called upon to defend or dispute the conduct described in the committee’s provisory findings. As a consequence, we cannot be confident that the factual record for these findings was generated with adequate prior notice.
The lack of notice also distinguishes Matter of Orfanello, 411 Mass. 551, 7 Mass. Att’y Disc. R. 220 (1991), on which Bar Counsel relies. There the Court inferred from an agreed statement of facts that Orfanello engaged in conduct which would have violated a rule not charged in the petition. While not adjudicating a violation, the Court did weigh underlying conduct in aggravation. 411 Mass. at 555-57, 7 Mass. Att’y Disc. R. at 226. Here the facts on which the committee made its findings in aggravation were not agreed upon. They were, rather, an unforeseeable byproduct of a trial on other issues.
Of course, a committee may weigh as an aggravating circumstance the failure of a respondent to be candid in testimony before it. See Matter of Eisenhauer, supra at 454 (1998), citing Matter of Friedman, 7 Mass. Att’y Disc. R. 100, 101 (1991), and PR-93-21, 9 Mass. Att’y Disc. R. 391 (1993). But this is not the case of a committee reacting to the dissembling of a lawyer appearing before it. The committee made its findings based on factual predicates the petition did not allege, and the respondent was not afforded adequate notice that he needed to defend himself against them. As a consequence, he lacked both the opportunity to prepare a defense and the incentive to do so fully. Under these circumstances, it would be unfair to allow the provisory findings to stand.
Conclusion
For all of the foregoing reasons, we deny Bar Counsel’s appeal and allow the respondent’s. We strike the provisory findings from the hearing committee report
and adopt the report as amended. The petition for discipline is dismissed.
Respectfully submitted,
THE BOARD OF BAR OVERSEERS
By: ___________________________
Mitchell H. Kaplan
Secretary
Approved: July 12, 1999
FOOTNOTES
1 Pseudonyms. Because we dismiss the petition for discipline, the record of proceedings is sealed. See SJC Rule 4:01, § 20(3)(d). To preserve the respondent’s anonymity in this memorandum, which will be published, we have used pseudonyms throughout.
2 See note 1, supra.
3 Jones died in January 1993.
4 Bar Counsel rejoins that Black could not have worked from Smith’s original because there is no way she could have copied it without retaining evidence of the respondent’s signature, which slops over the closing on Smith’s original but leaves no trace on disputed version. Black could have worked, however, from her own missing original or from the respondent’s file copy, as there was testimony she had frequent access to the respondent’s office.
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