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Commonwealth of Massachusetts

BBO File No. C2-95-0189

IN RE: WAYNE B. HOLLINGSWORTH

S.J.C. Order of Disbarment entered by Justice Ireland on December 21, 2000.1

BOARD MEMORANDUM

In February 1991, James Kilroe received good news: he was about to receive a cash distribution in the amount of $100,000 from the estate of his deceased aunt. The timing was less propitious, however, as Kilroe and his estranged wife were divorcing. Kilroe did not want her to get the money. To that end he sought advice from the respondent, Wayne B. Hollingsworth, who was representing him in the divorce.

By telephone from Florida, the respondent offered to invest the money on Kilroe's behalf. Aside from assuring him it would be a secure investment earning a reasonable return, the respondent did not reveal any details of the investment lest, he explained, Kilroe be compelled to disclose them in the divorce action. Kilroe agreed and express mailed the funds to the respondent in Florida.

The respondent immediately deposited the funds into a trust account he maintained for Cayman U.S. Developments, Ltd. (Cayman), apparently a longtime client of the respondent. Cayman also happened to own the respondent's Florida residence. The respondent expended all of Kilroe's funds on the residence and on his personal expenses and needs. For example, he immediately used $50,000 of the funds to discharge a mechanic's lien on the residence, and he paid maintenance costs for an airplane owned by a corporation he once owned and had transferred to his future son-in-law. He also used the funds to pay for such personal expenses as cable television, newspapers, and automobile repairs. The entire $100,000 was gone in less than three months.

Starting in January 1992, Kilroe tried to get the funds back from the respondent. For more than two years the respondent parried Kilroe's repeated requests for repayment with vague claims that the funds were "tied up" and illiquid. In April 1994, when Kilroe made written demand for repayment with interest, the respondent asserted for the first time that Kilroe had lent the funds through him to Cayman at an unspecified "fair rate of return" subject to "fluctuating interest rates." Kilroe filed a grievance with the Office of Bar Counsel in August of 1994.3

In November 1994, the respondent filed a Chapter 7 petition for personal bankruptcy; he listed Kilroe as holding a fixed and liquidated claim for $100,000. Kilroe filed, and eventually prevailed in, an adversary proceeding objecting to the discharge of the debt. The bankruptcy trustee later sold the Florida residence and used some of the proceeds to pay Kilroe his $100,000 plus some interest.

In the meantime, while he was still representing Kilroe in the divorce proceeding, the respondent advised him not to disclose receipt of the $100,000 inheritance on his financial statement. Kilroe feared there might be a paper trail, but the respondent told him he would take care of any problems. The respondent had Kilroe sign the false financial statement under oath, listed himself as counsel, and filed it with the court. The respondent advised him to execute an intentionally false statement in part to conceal his misappropriation of Kilroe's funds.

After Kilroe filed his disciplinary grievance, Bar Counsel requested that the respondent execute an authorization to allow the OBC to obtain records from the Florida bank that held the trust account into which the funds had been deposited. The respondent refused Bar Counsel's first request and did not respond to the second one. A subpoena was issued to compel him to appear before Bar Counsel with certain records, including those relating to the trust account. The respondent wrote back, declining to sign the authorization or to produce any records on the ground that Cayman refused to authorize such production; he did not appear in response to the subpoena. Bar Counsel served another subpoena on the respondent. Again he failed to appear or otherwise respond. On January 7, 1996, Bar Counsel filed a petition for temporary suspension. The respondent assented to the suspension. Afterwards, the respondent failed to appear for a scheduled meeting with Bar Counsel.

Bar Counsel filed a petition for discipline in three counts, respectively alleging misappropriation of Kilroe's funds, participation in the filing of an intentionally false financial statement during Kilroe's divorce, and willful failure to cooperate with Bar Counsel's investigation.

The foregoing is a summary of the hearing committee's findings of fact, which we adopt and incorporate by reference for the reasons discussed below. We also adopt the committee's conclusions of law, which are set out in the margin above. Making no findings in mitigation and weighing the respondent's intentional disregard of his ethical duties, his failure to make restitution, and his lack of candor at hearing, the committee recommended disbarment.

The respondent appeals. He attacks the committee's factual determinations as unsupported or against the weight of the evidence. Even if the findings are sustained, he argues, the appropriate sanction should be indefinite suspension, not disbarment. Bar Counsel urges adoption of the committee's report and recommendation. Oral argument having been waived by the parties, see Rules of the Board of Bar Overseers, Section 3.50(b), the Board considered the matter on the papers on September 11 and November 13, 2000. We reject the respondent's appeal.

Objections to Findings of Fact and Conclusions of Law

The respondent objects to the committee's findings of fact and conclusions of law under all three counts. We consider each in turn.

Count I. The heart of the respondent's quarrel with the findings under the first count is his claim that the hearing committee should have credited his testimony over Kilroe's. Our authority to disturb a hearing committee's credibility determinations is exceedingly narrow. The committee, which heard the testimony, is the "sole judge" of the credibility of witnesses appearing before it, S.J.C. Rule 4:01, § 8(3), and we may not encroach on its role absent clear error. Matter of Provanzano, 5 Mass. Att'y Disc. R. 300, 304 (1987) (credibility determinations not to be disturbed "absent some clear error"). See also Matter of Hachey, 11 Mass. Att'y Disc. R. 102, 103 (1995) (credibility findings may not be disturbed unless "wholly inconsistent" with other findings). The respondent has not demonstrated such error here.

Kilroe testified that he was not informed that his funds hand been "loaned" to Cayman until April 1994. The respondent disputes this, but even he acknowledges that Kilroe was not so informed before he sent the funds to the respondent in March of 1991. See Respondent's Brief on Appeal at 6. This leaves open only the question whether Kilroe was later informed of the putative loan and acquiesced in it. Although Kilroe exhibited some uncertainty as to the precise date he learned of Cayman's involvement, he was adamant and consistent in his testimony that the respondent put him off with claims that the funds were tied up despite Kilroe's need for the funds to pay for his children's tuition and for work on his house.

Such documentary evidence as exists comports with Kilroe's version of events, not the respondent's. Attorney Sherman, the lawyer who replaced him as Kilroe's divorce counsel, advised the respondent by letter in January 1993 that Kilroe had to have an accounting of the $100,000 in order to respond to a court order. The respondent admitted receiving the letter and failing to respond to it. Nor did he respond to Kilroe's January 13, 1994 letter demanding return of the funds and "financial closure" within a month. Even more telling, at no time did the respondent produce a note executed by Cayman or other document evidencing an investment of any kind. There was no writing mentioning the loan until the respondent advised Kilroe by letter in April 1994 that Kilroe had "loaned through me $100,000 to [Cayman]."

The personal uses to which the respondent put the funds strengthens the inference that there was no loan and no legitimate investment. The funds were used, for the most part, to secure, furnish, and accouter the respondent's Florida abode. On appeal, the respondent rejoins that these uses, although appearing "at first glance . . . to be of a more personal nature," were needed to help Cayman market the property as a personal residence. This argument amounts, at most, to an alternative inference the committee was permitted if it had not rejected the respondent's testimony in this regard. We cannot indulge the inference without impermissibly disturbing the committee's determination not to believe the respondent.

Finally, the entire claim that the funds were lent to Cayman, with or without Kilroe's knowledge and consent, is exposed as an imposture by the respondent's personal bankruptcy filing. The bankruptcy filing is mentioned nowhere in the respondent's brief on appeal-and for good reason. The respondent scheduled and sought to discharge the $100,000 as a personal debt he owed to Kilroe. Such treatment is wholly inconsistent with, and fatal to, the claim that the transaction was a loan obligation of Cayman's. Given the credibility determinations, the documentary evidence, the absence of a note or other writing memorializing the purported loan, the personal nature of the expenditures, and the attempt to have the debt discharged as a personal obligation, the committee did not err in concluding that the respondent misled Kilroe into entrusting the funds to him and intentionally used them for his own purposes, with intent to deprive Kilroe of the funds and actual deprivation resulting.

Count II. Against the allegation that he deliberately advised Kilroe to file an intentionally false financial statement with the court, the respondent claimed he had acted out of ignorance and in reliance on a "casual conversation" with Attorney Sherman, who allegedly advised him that an inheritance received after separation was not a marital asset. The hearing committee rejected the respondent's testimony in this regard, and he claims on appeal that it was error to do so.

We disagree. Again, the committee faced a clash of conflicting testimony and opted not to credit the respondent. We may not second-guess that credibility determination. The financial statement was filed on July 1, 1991. Sherman testified that it was not until sometime in 1992 that the respondent asked him some questions about the divorce case. Sherman also insisted he would never have advised the respondent not to disclose a vested bequest on a financial statement. In fact, one of the first actions Sherman took after succeeding the respondent as Kilroe's counsel was to file a new financial statement that disclosed the inheritance. This evidence the committee rightly weighed against the respondent's self-serving testimony that he merely acted on erroneous advice.

Further, the respondent's concealment here extended beyond helping a dishonest client to perpetrate a fraud on the court. As we have seen, the committee properly determined that the respondent had deliberately misappropriated the funds in question. The guilty knowledge of this fraudulent conversion gave the respondent a powerful incentive to conceal the "investment" from the court and the wife's lawyer, lest Kilroe discover the dissipation of his inheritance.

There was no error. The committee rightly found that the respondent deliberately advised his client to file an intentionally false financial statement.

Count III. The respondent disputes the hearing committee's conclusion that he failed without good cause to cooperate with Bar Counsel's investigation. His argument is without merit.

The respondent argues, first, that his failure to produce the trust account and other business records sought was permitted-even required by Mass. R. Prof. C. 1.6-because Cayman had not assented to the disclosure of confidential information sought by Bar Counsel. The argument misperceives both the attorney/client privilege and the confidentiality requirements of Rule 1.6. Because bank and business records are not "communications" between a lawyer and client, they are not protected by the attorney/client privilege. See Purcell v. District Attorney for the Suffolk District, 424 Mass. 109, 115 (1997); P.J. Liacos, M.S. Brodin & M. Avery, Handbook of Massachusetts Evidence § 13.4.4, at 781 (1999). And a lawyer may be compelled by subpoena to produce material protected by Rule 1.6 but not falling within the scope of the attorney/client privilege. In any event, the belief that documents need not be produced does not excuse the failure to appear in compliance with a duly issued subpoena. Such a belief might be tested through a motion to quash, but a lawyer may not unilaterally refuse to appear or otherwise ignore the subpoena.

Second, the respondent claims the committee erred in failing to credit his testimony that he never received one of the subpoenas because he was in Alaska at the time. It was for the hearing committee to determine whether to credit this testimony, and the committee had no obligation to accept it just because it was not contested. Matter of Saab, 406 Mass. 315, 328-329, 6 Mass. Att'y Disc. R. 278, 292 (1998). We note further that, in his answer to the petition for discipline, the respondent admitted having received the subpoena, and he defended his failure to appear solely on the ground that Cayman had not authorized disclosure, not that timely service had not been made.

Third, the respondent claims he did not appear for the March 31, 1998 meeting with Bar Counsel because (he claimed he had advised Bar Counsel through his attorney, who did not recall having such a conversation) he feared Kilroe was trying to obtain information to use against him in the then-pending bankruptcy proceeding. Again, this concern might form a basis for asking to postpone the meeting or for moving to defer the proceedings under Board Rule 2.13, but it does not excuse the lawyer from appearing.

The committee properly found that the respondent failed to cooperate with Bar Counsel inquiries, in violation of S.J.C. Rule 4:01, § 3, and Canon One, DR 1-102(A)(5).

The Appropriate Sanction

Having sustained the hearing committee's findings of fact and conclusions of law, we, too, are convinced that disbarment is the only appropriate sanction for the respondent's misconduct. Disbarment or indefinite suspension is the presumptive sanction for an attorney who intentionally misappropriates client funds and either intends or causes the client to be deprived of the funds. Matter of Schoepfer, 426 Mass. 183, 13 Mass. Att'y Disc. R. 679 (1997); Matter of the Discipline of an Attorney (and two companion cases), 392 Mass. 827, 4 Mass. Att'y Disc. R. 155 (1984). In choosing between disbarment and indefinite suspension in such cases, the Court places much emphasis on whether restitution has been made. Matter of Bryan, 411 Mass. 288, 292, 7 Mass. Att'y Disc. R. 24, 29 (1992). Finding none here, the hearing committee recommended disbarment.

After the hearing committee filed its report, the respondent moved to reopen the proceedings to receive evidence that restitution had been made. We allow the motion to reopen but reject the claim that the respondent should receive credit for making restitution.

In April 1994 Kilroe learned for the first time that the respondent claimed he had lent his money to Cayman. Kilroe filed his grievance with the Office of Bar Counsel four months later, in August. In September the respondent submitted his first response to the grievance. Then, in November, the respondent filed a petition in bankruptcy in which he listed the obligation to Kilroe as a dischargable personal debt. When Kilroe objected to discharge, the respondent disputed the objection. Further, the respondent did not list as assets in his bankruptcy estate his interest in the Florida residence, the sale of which produced the funds by which Kilroe was repaid. In other words, Kilroe got his money back through the actions of the trustee in bankruptcy, not because of any steps taken by the respondent. This is not a case in which a remorseful lawyer scuffled to come up with the money to make restitution to his injured client. See, e.g., Matter of Callahan, 10 Mass. Att'y Disc. R. 30, 31 (1994). On the contrary, the respondent sought to obstruct Kilroe's efforts to recover his money. Recovery obtained through court action and despite the respondent's lack of cooperation is not "restitution" for purposes of choosing an appropriate sanction. See Bar Counsel v. Eisenstadt, BBO File No. C1-95-0297, Appeal Panel Report at 4 (report adopted by Board).

The respondent argues that indefinite suspension would be appropriate even if he is not given credit for making restitution. In the cases on which he relies, however, the lawyers either had made restitution or had made a substantial showing in mitigation, or both. See Matter of McIntyre, 426 Mass. 1012, 14 Mass. Att'y Disc. R. 526 (1998) (rescript) (alcoholism); Matter of Collins, 14 Mass. Att'y Disc. R. 152 (1998) (timely restitution made); Matter of Spearing, 14 Mass. Att'y Disc. R. 731 (1998) (lawyer sought treatment for contributing emotional difficulties and acknowledged obligation to repay).

Further, aside from the conversion of client funds, the respondent engaged in other serious misconduct. His participation in the filing of a false financial statement, standing alone, would have warranted suspension. See Matter of McCarthy, 416 Mass. 423, 9 Mass. Att'y Disc. R. 225 (1993); Matter of Neitlich, 413 Mass. 416, 8 Mass. Att'y Disc. R. 167 (1992). The totality of his misconduct has a cumulative force that must be weighed. Matter of Saab, supra, 406 Mass. at 328, 6 Mass. Att'y Disc. R. at 289-290. Like the hearing committee, therefore, we believe disbarment is required.

Conclusion

For all of the foregoing reasons, we allow the motion to reopen the proceedings and adopt the hearing committee's report and recommendation. An Information shall be filed with the Supreme Judicial Court for Suffolk County recommending that the respondent, Wayne B. Hollingsworth, be disbarred, retroactive to February 14, 1996, the effective date of his temporary suspension.

Respectfully submitted,
THE BOARD OF BAR OVERSEERS

By: ___________________________
Mitchell H. Kaplan
Secretary

Approved: November 13, 2000


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.

3 The hearing committee found that the respondent's actions in obtaining and misusing Kilroe's funds, the gravamen of Count I of the petition for discipline, violated Canon One, DR 1-102(A)(4) (dishonesty, fraud, deceit, or misrepresentation), (5) (conduct prejudicial to the administration of justice), and (6) (conduct adversely reflecting on fitness to practice); Canon Seven, DR 7-101(A)(1) (intentional conduct resulting in failure to seek lawful objectives of client), (2) (intentional conduct resulting in failure to carry out contract of employment), and (3) (intentional conduct resulting in prejudice or damage to client); Canon Nine, DR 9-102(A) (client funds shall be deposited in bank accounts maintained in the state in which the law office is situated and no funds belonging to the lawyer shall be deposited therein) and (B) (failure to maintain records and promptly deliver as requested client funds); Canon Five, DR 5-101(A) (refusing employment when the interest of the lawyer may impair his independent judgment), DR 5-104(A) (limiting business relations with a client), DR 5-105(A) (refusing employment if the interests of another client may impair the professional judgment of the lawyer).



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