Coppock v. State Bar

Opinion

We review the recommendation of the Review Department of the State Bar Court that petitioner be ordered suspended from the practice of law for two years, that execution of suspension be stayed, and that petitioner be placed on two years’ probation on specified conditions including ninety days actual suspension and payment of restitution. The review department found that petitioner allowed a client to use his client trust account in a scheme to defraud the client’s creditors. We adopt the review department’s recommendation as to discipline.

I. Facts

Petitioner was admitted to practice law in April 1978. He has no prior record of State Bar discipline.

Meanwhile petitioner “had become very close to Pollock,” and he asserts that for this reason the Pollocks, although “of course dismayed to learn that I had mishandled their appeal,” chose not to take action against him for his admittedly “clear mishandling of their matter.” Instead, Pollock sought petitioner’s assistance in setting up a trust account to conceal money from the Pollocks’ judgment creditors and enable Pollock to manage his business affairs unhampered by attempts to attach his funds. Petitioner states he agreed to set up the account because he was “beleaguered by a sense of guilt” about Sandra Pollock’s default judgment, and was trying “to redress [this] wrong.”

In July 1981, petitioner opened a bank account designated “Wally Cop-pock, Attorney at Law, Clients Trust Account.” He states he established the account so that “Pollock could be shielded from any attempts to execute on that account,” and notes he intended the account to contain only Pollock’s funds. He gave total control of the account to Pollock, and for a period of approximately two years supplied him with signed checks and deposit slips to facilitate his use of the account. Petitioner initially reviewed the monthly trust account statements, but admits that by the second year he became “lax,” and “paid less attention” to supervising the account. Pollock, acting without interference or supervision from petitioner, eventually used the trust account to commit fraud against third parties.

About one year after the account was opened, Pollock became involved in an investment venture with James and Marie DeMers to organize an offshore bank. In connection with this venture, Pollock retained an attorney in Panama, Charles Novo-Gradac. In May 1983, at Pollock’s request, the DeMerses sent Pollock a check for $10,000, to purchase a bond for capitalization of the offshore bank. They made the check out to the “Novo-Gradac

Withdrawal of factual stipulations is generally not permitted. In disciplinary matters, we have held, “Ordinarily . . . the stipulated facts may not be contradicted; otherwise the stipulation procedure would serve little or no purpose, requiring a remand for further evidentiary hearings whenever the attorney deems it advisable to challenge the factual recitals.” (Inniss v. State Bar (1978) 20 Cal.3d 552 , 555 [ 143 Cal.Rptr. 408 , 573 P.2d 852 ].)

In this case, however, petitioner argues that because he was not aware of certain evidence which he claims the examiner withheld from him at the time he made the stipulation, he was denied a fair hearing. He complains that the examiner withheld the DeMerses’ application for client security fund reimbursement and did not introduce it into evidence until late in the hearing, and that therefore petitioner “was not afforded a reasonable opportunity to utilize the newly discovered information containéd therein.” The new information to which petitioner refers is a statement in the application that Novo-Gradac “had endorsed [the $10,000 check] over to [petitioner].”

Petitioner’s argument fails for several reasons. First, it is not clear that the examiner did in fact “withhold” evidence from petitioner. Petitioner had been aware of the DeMerses’ application since at least April 1986, when he received notice of an order consolidating the disciplinary and client security fund matters, and there is no indication in the record that petitioner sought discovery of the application or any other documents or records. Petitioner states he did ask to see the application, and the examiner “refused me access to the application.” We see no evidence in the record, other than petitioner’s own unsupported statement in his brief, either that he requested to see the document or that the examiner improperly refused him access to it.

Second, at the hearing petitioner expressly stated that he did not object to the admission of the application. He simply pointed out to the panel a paragraph of the application stating that he had “never admitted obligation” to the DeMerses. Further, he failed to state at the hearing that he had not previously seen the application, and did not request a continuance to review it. In Walter v. State Bar (1970) 2 Cal.3d 880 , 890 [ 87 Cal.Rptr. 833 , 471 P.2d 481 ], we held that an attorney who claimed he had no opportunity to examine documentary exhibits before the panel hearing failed to show a due process violation because “[t]he record discloses that petitioner did not request a continuance of the proceedings in order to examine the exhibits, nor did he raise before the disciplinary board the point that he had not been allowed to examine them.”

Petitioner also argues that the examiner engaged in “prejudicial misconduct” by suppressing a letter from Marie DeMers addressed to petitioner in care of the examiner, in which she requested restitution from petitioner. The record reveals that, at worst, the examiner inadvertently neglected to forward the letter to petitioner. Although we disapprove of suppression of information by the State Bar, in this case it does not appear that petitioner was prejudiced if indeed the letter was improperly withheld from him. The DeMerses contacted petitioner directly numerous times in an attempt to recover their money, and although petitioner stated he was willing to make restitution, he paid them nothing. Further, petitioner informed the panel at the hearing that he had received the letter from the examiner only a week before, and the panel made a finding that he was unsure of his restitution obligations.

Finally, petitioner implies that because of the “quasi-criminal” nature of disciplinary proceedings, he is entitled to heightened procedural protections. The rules of criminal procedure, however, do not apply in State Bar disciplinary proceedings, and petitioner’s “only due process entitlement is a ‘fair hearing.’ ” (Rosenthal (J.B.) v. State Bar (1987) 43 Cal.3d 612 , 634 [ 238 Cal.Rptr. 377 , 738 P.2d 723 ].) We conclude petitioner’s right to a fair hearing was not violated here.

B. Sufficiency of the Evidence

Petitioner claims the review department’s findings are not supported by sufficient evidence. He objects particularly to its findings that his trust

The State Bar’s factual findings, whether made by the hearing panel or the review department, are not binding on this court. (Franklin v. State Bar (1986) 41 Cal.3d 700 , 708 [ 224 Cal.Rptr. 738 , 715 P.2d 699 ].) ‘“This court must independently examine the record, reweigh the evidence, and pass on its sufficiency in State Bar disciplinary matters.’ [Citations.]” (Ibid.) We resolve all reasonable doubts in favor of the attorney. (Galardi v. State Bar (1987) 43 Cal.3d 683 , 689 [ 238 Cal.Rptr. 774 , 739 P.2d 134 ].) Generally, however, the findings of the State Bar Court are entitled to great weight, and are presumed to be supported by the record; petitioner bears the burden of demonstrating “‘that the charges of unprofessional conduct are not sustained by convincing proof and to a reasonable certainty. . . .’ [Citations.]” (Ibid.)

In this case, the hearing panel and the review department differed in some of their factual and legal conclusions. The panel found the petitioner had engaged in “no dishonest act.” The review department deleted this finding, and in contrast found that petitioner had opened the client trust account for Pollock for the purpose of defrauding Pollock’s creditors, and allowed him to use the account in furtherance of that fraud. In light of this disagreement, we must carefully review the record to make our own factual determinations. (See Franklin, supra, 41 Cal.3d at p. 706.)

Petitioner argues that we should give greater weight to the hearing panel’s findings than the review department’s because the panel had the opportunity to see him testify and observe his demeanor. Certainly when the hearing panel findings “ ‘ “rest primarily on testimonial evidence, we are reluctant to reverse the decision of the [hearing panel], which was in a better position to evaluate conflicting statements after observing the demeanor of the witnesses and the character of their testimony.” ’ [Citations.]” (Alberton v. State Bar (1984) 37 Cal.3d 1 , 12 [ 206 Cal.Rptr. 373 , 686 P.2d 1177 ].) In this case, however, the findings do not rest on a resolution of conflicting testimony. Petitioner was the only witness to testify at the two-hour long hearing. And although petitioner’s demeanor may be relevant to an evaluation of his honesty, the record shows that petitioner also appeared before the review department, and answered questions there, thus giving the department as well as the panel an opportunity to observe his demeanor and evaluate his credibility. In addition, the State Bar’s case rests largely on documentary evidence, including petitioner’s own written

In the earlier case of Hallinan v. State Bar (1948) 33 Cal.2d 246 [ 200 P.2d 787 ], we approved a three-month actual suspension for an attorney who simulated the signature of his client on a settlement release. The attorney had broad power of attorney from the client, and the client had no complaint about the attorney signing his name and settling the case. However, because the lawyer signed the release with the intent that opposing counsel would believe the client himself had signed it, we found it “evident that petitioner practiced a deception upon [opposing counsel], that is, by leading [opposing counsel] to believe that [the client] had personally signed the settlement papers .... Although he may have been legally authorized to simulate [the client's] signature under his power of attorney, . . . yet he should not have led [opposing counsel] to believe that [the client] had personally signed, knowing that [opposing counsel] expected and thought he was getting [the client’s] signature. Such conduct should not be condoned.” (Id., at p. 249, italics added.) In short, an attorney is not permitted to engage in deceptive acts even when he believes his action is legally justified. (See also Tomlinson v. State Bar (1975) 13 Cal.3d 567 , 577 [ 119 Cal.Rptr. 335 , 531 P.2d 1119 ] [attorney’s issuance of numerous checks returned for insufficient funds “manifests an abiding disregard of ‘ “the fundamental rule of ethics—that of common honesty—without which the

Petitioner contends his conduct was at worst negligent. As we have often pointed out, “[e]ven if petitioner’s conduct were not wilful and dishonest, gross carelessness and negligence constitute a violation of an attorney’s oath faithfully to discharge his duties and involve moral turpitude.” (Jackson v. State Bar (1979) 23 Cal.3d 509 , 513 [ 153 Cal.Rptr. 24 , 591 P.2d 47 ].) We find petitioner’s conduct clearly amounted to “gross carelessness and negligence,” given the pattern of neglect of his professional responsibilities in the face of circumstances that should have led him to be vigilant. In Palomo v. State Bar (1984) 36 Cal.3d 785 , 796 [ 205 Cal.Rptr. 834 , 685 P.2d 1185 ], the attorney gave control of his client trust account to his office manager, and then failed to examine her records or the bank statements. We stated that the attorney’s failure to supervise the management of the account, or to check the records, “permitted the fact that a substantial client check endorsed by him had been misdeposited, commingled and misappropriated to escape his notice for four months.. . . Any procedure so lax as to produce that result was grossly negligent.” (Id., at p. 796, fn. 8.) Thus we held the attorney’s conduct was sufficiently “wilful” to merit discipline. (Id., at p. 796.) Similarly, petitioner’s conduct merits discipline, even without a showing that he was fully aware of Pollock’s fraud against the DeMerses.

Petitioner has admitted the essential facts of his wrongdoing. He argues, however, that his admissions and stipulations resulted from the examiner’s concealment of information from him, so that “he had no information to counter the examiner’s charges.” He asserts that the examiner’s failure to give him the DeMerses’ reimbursement application (containing the reference to Novo-Gradac’s indorsement of their check) caused him to make admissions that he otherwise might not have made: “This information was crucial to Petitioner since Petitioner had already formed the opinion that Pollock had betrayed him. Since the act of forgery is closely akin to fraud Petitioner fell prey to the examiner’s charges that Pollock was indeed a ‘fraud.’ ”

This line of reasoning is utterly unpersuasive. A subsequent lack of access to evidence cannot affect the knowledge and intent petitioner had when he opened the trust account and continued to allow Pollock to use it unsupervised. And, in fact, petitioner’s factual assertions in his arguments before the review department and this court (after he gained access to the DeMerses’ application) are no different from those he made before the panel.

In sum, we find there is sufficient evidence on the record to sustain a finding that petitioner allowed Pollock to use his trust account in a scheme

In Rosenthal (M.B.), supra, 43 Cal.3d 658 , we discussed evidence similar to the letter submitted by petitioner, which also was not included in the record below, and was offered by the attorney to support his contention that the recommended discipline was too severe. There, the attorney asked us to consider psychiatric evaluations and letters which he said demonstrated his efforts at rehabilitation. We stated, “In general, this court does not consider evidence which was not presented to the State Bar during its review process.” (Id., at p. 663.) Following Possino, supra, 37 Cal.3d 163 , we concluded, “Petitioner’s documents are inherently unreliable .... The letters and reports merely reflect personal beliefs in petitioner’s continued recovery, and are based exclusively upon conversations or interviews with him.” ( 43 Cal.3d 658 , 663.) In Rosenthal, as in Possino, we also noted that in any event the new evidence would not compel a lesser discipline. (Ibid.)

Thus, we generally do not consider evidence outside the record when determining the appropriate discipline, especially if the extrinsic evidence consists of statements of opinions about the petitioner’s mental attitude. Following Rosenthal (M.B.), supra, 43 Cal.3d 658 , and Possino, supra, 37 Cal.3d 163 , we will not consider petitioner’s letter here. Even if we were to consider it, however, it would not significantly affect our evaluation of the appropriate discipline.

2. Terms of Recommended Discipline

Petitioner’s conduct, although it did not harm his clients, nonetheless warrants discipline. (See 1 Witkin, Cal. Procedure (3d ed. 1985) Attorneys, § 408, pp. 459-460, and cases cited.) It is clearly established that participation in a scheme to defraud a client’s creditors is a crime and subjects an attorney to discipline. (Allen v. State Bar (1977) 20 Cal.3d 172 ,

Petitioner urges, however, that the terms of the recommended discipline in his case are not justified because he did not intend to defraud the DeMerses, nor did he foresee any harm to them. It may be true that petitioner did not specifically intend to defraud the DeMerses, but it does not follow that the recommended discipline is too severe. As we have often repeated, in imposing discipline, we do not simply impose retribution and punishment, but seek to protect the public, to preserve public confidence in the legal profession, and to maintain and enforce the highest possible professional standards for members of the bar. (Jackson v. State Bar, supra, 23 Cal.3d at p. 514.) When an attorney violates his professional duties, disciplinary measures may be appropriate even absent any intentional dishonesty. (E.g., Doyle, supra, 15 Cal.3d at p. 978.) As reviewed above, there is ample evidence to support the finding that petitioner’s actions were both unprofessional and unethical. The recommended discipline is not excessive.

a. Restitution

Petitioner argues he should not be required to pay restitution because the examiner failed to prove that Pollock did not perform any services for the DeMerses that might entitle Pollock to keep part of the $10,000. This claim ignores the uncontradicted statement in James DeMers’s declaration that Pollock had performed no services for the DeMerses. Petitioner submits no evidence to dispute the finding that Pollock did not earn any of the $10,000, and hence we reject this contention.

Petitioner also argues restitution is inappropriate because he did not profit from his wrongful conduct. Restitution is routinely required, usually without discussion, in cases of misappropriation of client funds. (E.g., Mepham v. State Bar (1986) 42 Cal.3d 943 [ 232 Cal.Rptr. 152 , 728 P.2d 222 ]; Waysman v. State Bar (1986) 41 Cal.3d 452 [ 224 Cal.Rptr. 101 , 714 P.2d 1239 ]; Chasteen v. State Bar (1985) 40 Cal.3d 586 [ 220 Cal.Rptr. 842 , 709

Although part of the rationale for requiring restitution may be to prevent an attorney from profiting from his wrongdoing, restitution is also intended to compensate the victim of the wrongdoing, and to discourage dishonest and unprofessional conduct. As we noted in Alberton, supra, “this court should have the power to impose discipline which encourages attorneys to act honestly and with integrity.” (37 Cal.3d at p. 7, fn. 4.) (See also Galardi, supra, 43 Cal.3d at pp. 694-695 [requiring $186,000 in restitution to attorney’s coventurers, notwithstanding lack of any attorney-client relationship.]) In Bate v. State Bar (1983) 34 Cal.3d 920 , 924 [ 196 Cal.Rptr. 209 , 671 P.2d 360 ], where the attorney had misappropriated $2,221 of client funds, we held that the recommended discipline was “inadequate because it does not require restitution.” Citing our concern for the protection of the public and the maintenance of high standards of professional conduct, we added the requirement of restitution to the attorney’s discipline. (Id., at pp. 924-925.) Similarly, we believe that a requirement of restitution in this case will not only protect the public, but also serve to further the integrity of the profession and encourage high professional standards of conduct. We agree with the review department recommendation and find that restitution is an appropriate condition of probation.

b. Actual suspension

Petitioner argues he should not be actually suspended from practice for any period of time. He contends, without elaboration, that his conduct was “less serious” than that of attorneys in prior cases in which we did not order actual suspension. (E.g., Palomo, supra, 36 Cal.3d 785 .) We are not convinced. As detailed above, petitioner participated in a client’s scheme to defraud. In Palomo, by contrast, the attorney received a check payable to a client, indorsed the client’s name without his consent, and failed to notify the client of his receipt of the check. The check was deposited in his firm’s payroll account. When the client inquired about the money, the attorney forwarded him the funds plus interest within three weeks. We cautioned in Palomo that the recommended discipline of one year probation, with no actual suspension, was “lenient,” and that the attorney’s “conduct warrants at least” the discipline recommended. (36 Cal.3d at p. 797, italics added.) We adopted the recommendation, in part because of

Although the facts of the present case are unusual, we find that a 90-day term of actual suspension is not excessive, nor is it disproportionate compared with the discipline imposed in previous cases. (See, e.g., Brody v. State Bar (1974) 11 Cal.3d 347 , 350 [ 113 Cal.Rptr. 371 , 521 P.2d 107 ] [single incident of failure to maintain client trust account properly, commingling and misappropriation, with failure to make restitution despite inquiries from client; we ordered one year actual suspension]; Walter, supra, 2 Cal.3d at p. 891 [attorney who misappropriated client funds made voluntary restitution of the entire amount in question, but we nevertheless ordered two years probation with six months actual suspension]; Hallinan, supra, 33 Cal.2d 246 [approving three months actual suspension for attorney who had simulated client’s signature, despite the fact that client did not object and no money was lost].)

3. Mitigating Factors

Petitioner argues the mitigating factors, as listed by the hearing panel, compel less severe discipline than that recommended. We discuss each of the asserted mitigating factors in turn.

The panel found petitioner had no prior record of discipline. This may constitute a mitigating factor in an appropriate case. If an attorney has practiced law only a short time, however, lack of a prior record is “not a strong mitigating factor.” (Smith v. State Bar (1985) 38 Cal.3d 525 , 540 [ 213 Cal.Rptr. 236 , 698 P.2d 139 ].) In Smith, lack of prior discipline did not greatly influence our review, because “petitioner had been in practice only six years at the time of the misconduct.” (Ibid.; see also Rosenthal, supra, 43 Cal.3d at p. 664.) In the present case, petitioner opened the trust account at issue only three years and three months after he was admitted to the bar. His lack of prior discipline therefore is not entitled to great weight.

The hearing panel also found petitioner’s “emotional difficulties” to be a factor in mitigation. Yet emotional or “psychological disability, while it may ameliorate the moral culpability of an attorney’s misconduct, does not immunize him from disciplinary measures necessary to protect the public.” (Palomo, supra, 36 Cal.3d at p. 797.) We have held, “Psychoneurotic problems are not a mitigating factor in bar disciplinary

The panel listed lack of harm to petitioner’s clients as a mitigating factor, but as we have noted, an attorney has an ethical responsibility to the public, including his clients’ creditors, as well as to his clients. In light of our goals of protecting the public, and promoting the integrity of the profession, we cannot attach great weight to this factor.

Petitioner’s “good faith” is asserted as a factor in mitigation, but because he admittedly knew Pollock intended to use the trust account to conceal funds from creditors, and knowingly relinquished total control of the account to Pollock, we find this factor unpersuasive. Similarly, considering the avowed purpose of the account, we do not give great weight to the panel’s finding of petitioner’s “good character,” especially in light of the lack of any references attesting to said good character or any other supporting evidence in the record. Finally, petitioner’s cooperation with the State Bar, and his stated remorse, are both factors in mitigation here, but in light of all the circumstances of this case, we find that the recommended discipline is not excessive. Indeed, three review department referees deemed the recommended degree of discipline “insufficient.” We conclude the mitigating factors do not warrant reducing the discipline to less than that recommended by the review department.

We adopt the recommended discipline of the review department, and order that: (1) petitioner be suspended from the practice of law for two years; (2) execution of the suspension be stayed; and (3) petitioner be placed on probation for said two years on condition that he be actually suspended for the first ninety days of said probation, and that he comply with all other conditions of probation recommended by the review department, as set out in its decision filed April 16, 1987. The further conditions specified by the State Bar include: payment of restitution in the amount of $10,000 plus interest to the DeMerses within the first year; filing of quarterly reports with the State Bar regarding his compliance with the terms of his probation and the status of his client trust accounts; and obtaining psychiatric or psychological help. In addition, we order that petitioner comply with the provisions of California Rules of Court, rule 955, and that he perform the acts specified in subdivisions (a) and (c) of the rule within 30 and 40 days, respectively, after the effective date of this order. We further order that

Petitioner’s application for a rehearing was denied April 20, 1988,