Petrus Van De Goor, Complainant vs. Stephen N. Schaffer, Respondent
Grievance Complaint #02-0637
Pursuant to Practice Book ß2-35, the undersigned, duly-appointed reviewing committee of the Statewide Grievance Committee, conducted a hearing at the Superior Court, 235 Church Street, New Haven, Connecticut on May 7, 2003. The hearing addressed the record of the complaint filed on January 2, 2003, and the probable cause determination filed by the Stamford/Norwalk Judicial District Grievance Panel on March 13, 2003, finding that there existed probable cause that the Respondent violated Rules 1.5(a), 1.8(a), 1.15(a) and (b), 1.16 and 8.4(1) and (3) of the Rules of Professional Conduct, as well as Practice Book ß2-27(b).
Notice of the hearing was mailed to the Complainant and to the Respondent on March 25, 2003. Both the Complainant and the Respondent appeared at the hearing and gave testimony. Four exhibits were admitted into evidence.
This reviewing committee finds the following facts by clear and convincing evidence:
The Respondent represented the Complainant in the formation of a company known as Export Autos, LLC in December of 2000. By agreement with the Complainant, the Respondent allowed the Complainantís customers to wire transfer funds in his clientsí funds account for the purchase of automobiles. Thereafter, the Respondent followed the Complainantís instructions regarding the distribution of the funds received. The Respondentís representation of the Complainant continued until approximately June of 2002.
The Respondent received fees from the Complainant for allowing the Complainantís customers to wire transfer funds in his clientsí funds account and for disbursing those funds pursuant to the Complainantís instruction. Each payment of attorneyís fees to the Respondent was approved by the Complainant, and was taken from the funds received in the Respondentís clientsí funds account from the Complainantís customers. The Respondent did not provide the Complainant with any invoices for the work performed, although the Complainant requested invoices on several occasions. The Respondent indicated that he would provide invoices to the Complainant, but never did.
The Complainant loaned the Respondent $20,000. A first loan of $10,000 occurred sometime in late 2001, and a second loan of $10,000 occurred sometime in 2002. The Respondent did not provide the Complainant with promissory notes. The Respondent also did not advise the Complainant in writing that he should seek the advice of counsel before agreeing to loan the money, although he knew that the Rules of Professional Conduct required such a writing. The Respondent did not repay the loan despite demands for repayment by the Complainant and despite the Complainantís explanation that he needed the funds for his criminal defense. Additionally, the Complainantís counsel for another purpose, Attorney William T. Gerace, sent the Respondent a letter dated March 14, 2003 in which he demanded payment on the Complainantís behalf. The Respondent did not respond to Attorney Geraceís letter.
Finally, the Respondent failed to respond to the Complainantís telephone calls and letters after July of 2002. The Respondent also did not send the Complainant a letter confirming termination of the representation.
This reviewing committee also considered the following:
The Complainant denied that the Respondent advised him orally to seek the advice of counsel before loaning the money to the Respondent. Moreover, he testified that the Respondent was desperate when he requested the loans from the Complainant. The Complainant also maintained that he lost approximately $500,000 because of the Respondentís failure to follow through on several business deals on the Complainantís behalf. The Complainant testified that, in relation to several deals, the Respondent indicated to him that he would take care of the matter, but never did. Finally, the Complainant testified that he paid the Respondent $50,000 in attorneyís fees over the course of the representation.
The Complainant admitted serving eight (8) months in a halfway house in Holland, although the testimony was contradictory as to the origin of the Complainantís sentence and there was no evidence as to when this occurred. Additionally, the Complainant admitted lying to his wife, her family and the Respondent regarding a trip to Europe in 2002. The Complainant, however, denied threatening the Respondent at the conclusion of their attorney-client relationship.
The Respondent testified that he orally advised the Complainant to consult with another attorney regarding the loans. Although he admitted knowing that the Rules of Professional Conduct require such advice to be in writing, the Respondent testified that he felt pressure to obtain the loans, which were for personal matters. He also maintained that his intention is to repay the Complainant when he can. Additionally, the Respondent maintained that he did not have responsibility to complete any business transactions and that he was not directly involved with the Complainantís business dealings or customers.
The Respondent indicated in his written response to the grievance complaint that he did not believe that the fees he collected from the Complainant were in the neighborhood of $50,000. However, the Respondent was unable to provide any information as to the timing or amount of his collection of fees from the Complainant. According to the Respondent, his file was seized by the State Police and, therefore, he was unable to provide concrete evidence as to when he received fees and in what amounts. The Respondent also testified that the Complainant never requested invoices for work performed and fees collected.
Finally, the Respondent maintained that the Complainant lied to him and was untruthful in their dealings. The Respondent also maintained that he did not respond to the Complainantís letters or telephone calls after July of 2002 because of threatening remarks by the Complainant.
This reviewing committee finds the following violations of the Rules of Professional Conduct and the Practice Book by clear and convincing evidence. We note that, in rendering each finding, we considered the credibility of both the Complainant and the Respondent.
The Respondent violated Rule 1.15(b) of the Rules of Professional Conduct by failing promptly to render a full accounting to the Complainant of the fees that were taken out of the funds received by the Respondent on behalf of the Complainant. The Respondent received funds in his clientsí funds account on behalf of the Complainant. As such, the Complainant had an interest in those funds. The Complainant approved the release of a portion of those funds to the Respondent as payment of his fee. Thereafter, the Complainant requested that the Respondent provide him with an invoice or accounting for the funds taken as his fee; however, the Respondent never provided the Complainant with any invoices or an accounting. We find that the Respondentís conduct in this regard also constituted a violation of Practice Book ß2-27(b).
By entering into prohibited business transactions with the Complainant, the Respondent violated Rule 1.8(a) of the Rules of Professional Conduct. When the Respondent approached the Complainant for the two loans, he failed to reduce the transactions and terms to writing. Moreover, the Respondent failed to advise the Complainant in writing that he should consider seeking the advice of independent counsel. Finally, the Respondent failed to obtain the Complainantís consent in writing.
The Respondent also violated Rule 1.16(d) of the Rules of Professional Conduct by failing to confirm the termination of the representation with the Complainant in writing before or within a reasonable time after the representation was terminated. Even if we find that the Complainant made threatening remarks to the Respondent and that such remarks excused the Respondentís failure to respond to the Complainantís letters and telephone calls, this in no way excuses the Respondentís failure to comply with his ethical obligation to send the Complainant a letter confirming termination of the representation.
By engaging in conduct involving dishonesty and misrepresentation, the Respondent violated Rule 8.4(3) of the Rules of Professional Conduct. As discussed above, the Respondent did not provide the Complainant a written document setting forth the terms of the transactions when he approached the Complainant for the two loans. The Respondent also failed to advise the Complainant in writing to seek the advice of independent counsel, and failed to obtain the Complainantís consent in writing. Moreover, the Respondent knew that he was required to provide the Complainant with such a writing and to obtain the Complainantís consent. However, the Respondent chose to go forward with the loans based on personal pressure that he felt at the time and, as such, chose to disregard the requirements set forth in Rule 1.8(a) of the Rules of Professional Conduct. Additionally, the Respondent has yet to repay the loans to the Complainant, although the Complainant indicated that he needed the funds for his criminal defense. Despite the Respondentís representation that his intention is repay the loans, the loans remain unpaid and the Respondent has repeatedly failed to respond to the Complainantís requests for repayment. We find that the Respondentís conduct in this regard also constituted a violation of Rule 8.4(1) of the Rules of Professional Conduct.
Finally, we find that the record lacks clear and convincing evidence that the Respondent violated Rules 1.5(a) and 1.15(a) of the Rules of Professional Conduct. The evidence was contradictory as to the amount of the fees collected by the Respondent. Additionally, it was undisputed that the Respondentís files relating to his representation of the Complainant were seized by the State Police. As such, the Respondent claimed that he was unable to show when he received fees and in what amounts. Therefore, we find that the record before us in this particular matter is insufficient to find a violation of either Rule 1.5(a) or 1.15(a) of the Rules of Professional Conduct by clear and convincing evidence.
Accordingly, since this reviewing committee concludes that the Respondent violated Rules 1.8(a), 1.15 (b), 1.16(d) and 8.4(1) and (3) of the Rules of Professional Conduct and Practice Book ß2-27(b), we order that the Respondent be presented to the Superior Court for the imposition of whatever discipline the Court may deem appropriate.
Attorney Noble F. Allen
Attorney Tracie Molinaro
Professor Paul Hawkshaw