Opinion
Docket No. DRB 16-181
12-13-2016
IN THE MATTER OF VINCENT L. VERDIRAMO AN ATTORNEY AT LAW
Hillary K. Horton appeared on behalf of the Office of Attorney Ethics. Robert J. DeGroot appeared on behalf of respondent.
Disciplinary Review Board
District Docket No. XIV-2012-0341E Decision Hillary K. Horton appeared on behalf of the Office of Attorney Ethics. Robert J. DeGroot appeared on behalf of respondent.
To the Honorable Chief Justice and Associate Justices of the Supreme Court of New Jersey.
This matter was before us on a motion for reciprocal discipline, pursuant to R. 1:20-14, filed by the Office of Attorney Ethics (OAE), following the entry of an order, in a public administrative proceeding instituted by the United States Securities and Exchange Commission (SEC), pursuant to Rule 102(e)(3) of the SEC's Rules of Practice, temporarily suspending respondent from "appearing or practicing before the [SEC] as an attorney," Under Rule 102(e)(3)(ii), that suspension became permanent, thirty days later, because respondent did not file a petition to lift the temporary suspension.
According to the OAE, the SEC's order is a final adjudication, conclusively establishing the facts on which it rests, thereby permitting us to discipline respondent as a matter of reciprocal discipline. The OAE recommends the imposition of "no less than a prospective three-year suspension from the practice of law." Respondent, on the other hand, filed a motion, asking us to deny the OAE's motion for reciprocal discipline on the ground that the SEC's order of suspension was not based on a finding that respondent had engaged in unethical conduct. Rather, respondent argues, the facts underlying the SEC's order were based on findings that were made in a civil action, also instituted by the SEC against respondent and other defendants, in which the preponderance of the evidence standard governs, rather than the clear and convincing standard applicable to disciplinary proceedings.
Respondent requested that we bifurcate the matter and decide the jurisdictional issue without regard to the merits of the OAE's motion. He further argued that, if we choose to exercise jurisdiction, we should not impose any discipline on him because, to do so, would be "cruel and unnecessary," given the "greatest of consequences" that respondent already has suffered as a result of his "mistake."
For the reasons set forth below, we determine that the matter is not properly before us, on a motion for reciprocal discipline, and, consequently, deny the OAE's motion.
Respondent was admitted to the New Jersey bar in 1965. At the relevant times, he maintained an office for the practice of law in Jersey City.
On May 31, 1984, the Court imposed on respondent what amounted to a seven-and-a-half-year (time-served) suspension as a result of his September 28, 1976 guilty plea to the charge of influencing a witness, a violation of 18 U.S.C. § 1503. In re Verdiramo, 96 N.J. 183, 188 (1984) (Verdiramo II). Specifically, in 1975, respondent was serving as both an administrative aide to U.S. Congressman Henry Helstoski and a member of Helstoski's defense team. Id. at 184. At the time, Helstoski was involved in a grand jury proceeding arising out of his alleged failure to report certain income to the Internal Revenue Service. Ibid. During the course of that proceeding, respondent met with a prospective witness and knowingly asked him to lie to the grand jury. Ibid. Respondent was charged with obstruction of justice, a violation of 18 U.S.C. § 371, and influencing a witness. Ibid.
Effective January 1, 1977, respondent was temporarily suspended from the practice of law. In re Verdiramo, 71 N.J. 607 (1976) (Verdiramo I). On September 1, 1977, he was sentenced to five years in jail, which, with the exception of sixty days, was suspended. Verdiramo II, supra, 96 N.J. at 184. He served forty-five days, followed by a four-year, ten-month probationary term, which ended on October 11, 1982. Id. at 185.
* * *
On March 10, 2010, the SEC filed a civil action against respondent, his son Richard, and two others. Although the complaint charged respondent with violations of Section 5a of the Securities Act (offering to sell and selling unregistered shares of stock through use of the mails) and Sections 10b and 10b5 (aiding and abetting Richard's violations of those sections), the SEC sought partial summary judgment against respondent solely for the alleged Section 5a violation.
On September 9, 2011, the Honorable Richard M. Berman, United States District Court for the Southern District of New York, granted partial summary judgment in favor of the SEC and against respondent. According to Judge Berman, respondent violated Section 5 of the Securities Act, 15 U.S.C. § 77e(a), "by selling 109,000 RECOV shares in nineteen unregistered transactions between July 15, 2005 and February 7, 2006."
The SEC also sought summary judgment against Richard and defendant Victoria Chen.
"RECOV" refers to RECOV Energy Corporation, which was founded by respondent, who was succeeded by Richard.
Judge Berman's decision was based on twenty undisputed material facts. We summarize the pertinent facts below.
In March 1994, respondent founded RECOV. At all relevant times, RECOV was a "reporting company" under Section 12 of the Exchange Act, 15 U.S.C. § 781.4. As such, RECOV was required to file with the SEC reports disclosing the "acquisition or disposition of shares equal to or greater than one percent of . . . total outstanding stock" and "changes in [the beneficial] ownership" of the company.
Respondent served as RECOV's chairman, chief executive officer, and president until March 1, 2000, when he retired, and his son Richard assumed those positions. Richard also became RECOV's chief financial officer. Upon his retirement from RECOV, respondent served as RECOV's counsel "on numerous matters."
In addition to respondent's role as counsel, in December 2004 and January 2005, he had "discussions" with Edward Meyer, Jr. (Meyer), a principal of Xcel Associates, who agreed to purchase control of RECOV for $825,000. As of March 31, 2005, respondent held $255,935 in RECOV debt, representing sixty-four percent of RECOV's total outstanding notes and forty-two percent of RECOV's outstanding liabilities. Between 1999 and 2005, respondent also repaid $140,000 of RECOV's corporate debt out of his own assets.
Between 2000 and 2006, respondent's son, Richard, served as the Chairman, Chief Executive Officer, President, and Chief Financial Officer of RECOV. Prior to April 7, 2005, Richard "owned, directly or indirectly, greater than five percent of outstanding RECOV common stock." On April 7, 2005, in his capacity as President, Richard signed a resolution on behalf of the RECOV Board of Directors (April 7 resolution), authorizing RECOV's transfer agent, Jersey Transfer and Trust (Transfer Agent), to issue "2,032,290 free trading shares of RECOV common stock to [certain] individuals." The April 7 resolution also authorized the Transfer Agent to issue 6,100,000 shares of RECOV restricted common stock to Richard for services rendered as its President.
RECOV retained attorney Irving Rothstein to provide an opinion on the April 7 resolution. On that same date, Rothstein wrote a letter to the Transfer Agent, concluding that "[t]he proposed issuance [of certain RECOV shares in the April 7, 2005 Resolution] . . . appears to meet the requirements of Rule 144 for tacking."
Also on April 7, 2015, respondent wrote to the Transfer Agent, as "counsel to RECOV," and opined that the April 7 resolution's proposed issuance of 6.1 million shares to Richard was "allowable" under federal securities law.
On April 8, 2005, pursuant to the April 7 resolution, the Transfer Agent issued 1,756,000 free trading shares of RECOV common stock to multiple individuals and entities, including two that were controlled by respondent and Richard, and one that was controlled by individuals with whom respondent and Richard had previously worked. On that same date, the Transfer Agent issued to Richard 6.1 million shares of restricted common stock. Richard did not report to the SEC his acquisition of the 6.1 million shares of RECOV stock. He did not timely report to the SEC the change in his beneficial ownership of RECOV.
On May 26, July 19, and July 22, 2005, respectively, and pursuant to three more resolutions signed by Richard, the Transfer Agent issued 1,491,495 free trading shares of RECOV common stock to four separate entities and three individuals.
At all relevant times, Richard faxed all written instructions to the Transfer Agent, who "used the mails to distribute the share certificates to the intended recipients."
Between July 20 and September 13, 2005, Chen sold 158,333 RECOV shares (which she had received through the April 7 resolution) "in [fifteen] unregistered transactions through her interstate brokerage account." Between July 15, 2005 and February 6, 2006, respondent sold 109,000 RECOV shares (which he, too, had received through the April 7, 2005 Resolution) in nineteen unregistered transactions through his company Illuminate Corp., through his interstate brokerage account. No registration statement was on file, or in effect, with the SEC for Chen's fifteen transactions and respondent's nineteen. Moreover, neither Chen nor respondent filed a notice of proposed sale (Form 144) for the period during which the sales of the securities occurred, i.e., between January 1 and December 31, 2005.
Based on the above undisputed facts, Judge Berman concluded that respondent had "sold, by interstate means through [his] brokerage account," 109,000 RECOV shares of stock, between July 15, 2005 and February 6, 2006, a violation of Section 5. The judge also permanently enjoined respondent from future violations of Section 5.
Judge Berman's decision to enjoin respondent from future violations of Section 5 was based on the following findings: (1) respondent's "multiple sales over a seven-month period were not isolated and 'indicate a likelihood of future violations;'" (2) despite "compelling evidence to the contrary," respondent insisted that his conduct was legal and "provided no assurances against future violations;" (3) respondent had attempted to shift the blame for his illegal actions to the provider of a legal opinion on the subject; and (4) "as an attorney practicing in the area of securities regulation," respondent was "engaged in an occupation which present[ed] future opportunities for violations of the securities laws."
In addition to injunctive relief, Judge Berman concluded that respondent was "obligated to disgorge profits from the unregistered sale." In this regard, the matter was referred to United States Magistrate Judge Andrew J. Peck to determine the amount to be disgorged.
On November 10, 2011, Magistrate Judge Peck determined that respondent should disgorge $42,938 and pay $15,827 in prejudgment interest. On January 17, 2012, Judge Berman accepted Magistrate Judge Peck's recommendation and entered judgment against respondent in those amounts. Ultimately, on April 26, 2013, respondent consented to disgorgement of $462,000, plus $197,444 in prejudgment interest.
On November 10, 2011, the SEC entered an order instituting public administrative proceedings against respondent and imposing a temporary suspension on him, pursuant to Rule 102(e)(3)(i) of the SEC's Rules of Practice. The Rule permits the SEC, "without preliminary hearing," to
temporarily suspend from appearing or practicing before it any attorney . . . who has been . . . [p]ermanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.
[OAEb,Ex.F1,n.1.]
"OAEb" refers to the May 13, 2016 brief in support of the motion for reciprocal discipline.
In respondent's case, the SEC found that
a court of competent jurisdiction has permanently enjoined Verdiramo, an attorney, from violating the Federal securities laws within the meaning of Rule 102(e)(3)(i)(A) of the Commission's Rules of Practice. The Commission also finds that a court of competent jurisdiction has found that Verdiramo violated the federal securities laws within the meaning of Rule 102(e)(3)(i)(B) of the Commission's Rules of Practice. In view of these findings, the Commission deems it appropriate and in the public interest that Verdiramo be temporarily suspended from appearing or practicing before the Commission.
[OAEb,Ex.F§III.]
Respondent was given thirty days within which to petition the SEC to lift the temporary suspension. He did not and, therefore, the temporary suspension became permanent, without the benefit of a hearing.
On April 26, 2013, respondent consented to the entry of judgment in the civil action. The actual judgment, entered three days later, permanently barred respondent from acting as an officer or director of any issuer that has a class of registered securities or that is required to file reports, and from participating in an offering of penny stock, and ordered him liable for the disgorgement of $462,000, plus the payment of $197,444 in interest and a $100,000 civil penalty.
* * *
Respondent's arguments regarding the jurisdictional issue are compelling. The OAE did not brief the issue.
Respondent argues that we lack jurisdiction to impose reciprocal discipline because the SEC is not a disciplinary authority for the purpose of R. 1:20-14(a)(4); its order arose out of a civil action that did not involve a finding that respondent had engaged in unethical conduct; and the standard upon which the SEC made its findings in that civil action was a preponderance of the evidence, rather than the clear and convincing evidence required in a New Jersey disciplinary proceeding.
No New Jersey case addresses whether this state's disciplinary authorities have jurisdiction to impose reciprocal discipline on a member of the bar, based on an order entered by the SEC in a Rule 102(e)(3) administrative proceeding temporarily suspending that attorney "from appearing or practicing before the [SEC] as an attorney," as the result of a final judgment permanently enjoining him from future violations of Section 5 of the Act. Thus, this is a matter of first impression, requiring a thorough analysis of the issue.
Reciprocal discipline proceedings in New Jersey are governed by R. 1:20-14. Section (a)(1) of the Rule requires a New Jersey attorney to "promptly inform" the OAE
on imposition of discipline as an attorney or otherwise in connection with the practice of law in another jurisdiction, including any federal court of the United States or the District of Columbia, a state or federal administrative agency or other tribunal, a court of any state, territory, commonwealth or possession of the United States.
The United States Securities and Exchange Commission is a federal agency. www.usa.gov/federal-agencies/securities-and-exchange-commission. Thus, a motion for reciprocal discipline would be appropriate if the SEC's suspension amounted to the "imposition of discipline" on respondent "as an attorney or otherwise in connection with the practice of law" before the SEC. R. 1:20-14(a)(1) and (a)(2).
Further, "a final adjudication in another court, agency or tribunal, that an attorney admitted to practice in this state . . . is guilty of unethical conduct in another jurisdiction . . . shall establish conclusively the facts on which it rests for purposes of a disciplinary proceeding in this state." R. 1:20-14(a)(5), Thus, with respect to motions for reciprocal discipline, "[t]he sole issue to be determined . . . shall be the extent of final discipline to be imposed." R. 1:20-14(b)(3).
With some exceptions, not applicable here, upon review of a motion for reciprocal discipline, we are required to "recommend the imposition of the identical action or discipline." R. 1:20-14(a)(4).
When considered together, R. 1:20-14(a)(1) and (a)(5) authorize us to impose reciprocal discipline on an attorney who has been disciplined as an attorney, for unethical conduct, in connection with the practice of law in another jurisdiction. Here, respondent's SEC suspension does not amount to the imposition of (1) discipline (2) as an attorney (3) for unethical conduct (4) in connection with the practice of law.
Proceedings before the SEC are governed by the agency's Rules of Practice. 17 C.F.R. §201.100. An SEC proceeding under Section 201.102(e) of the SEC Rules of Practice is considered a disciplinary proceeding. 17 C.F.R. §201.101(a)(3).
The Rules of Practice, however, do not apply exclusively to attorneys because attorneys are not the only persons who are permitted to appear before the SEC 17 C.F.R. §201.102. An individual may appear pro se or be represented by an attorney. 17 C.F.R. §201.102(a) and (b). A member of a partnership may represent the partnership. 17 C.F.R. §201.102(b). A bona fide officer of a corporation may represent the corporation. Ibid.
When an attorney wishes to appear before the SEC, he or she is not required to seek admission to do so. All that is required is that the attorney be admitted to practice before the United States Supreme Court or the highest court of any state and that the attorney file with the SEC, and keep current, a written notice identifying the name of the proceeding, the attorney's name, business address, and telephone number, and the name and address of the person represented by the attorney. 17 C.F.R. §201.102(d)(2).
Unlike the United States Patent and Trademark Office (USPTO), and perhaps because non-attorneys may appear before the SEC, the SEC does not have a bar, a bar examination, or comprehensive rules of professional conduct governing attorneys who appear before it. See, e.g., Disciplinary Counsel v. Lapine, 128 Ohio St.3d 87 ¶13 (Oh. 2010) (observing that applicants for admission to practice before the USPTO must pass a registration exam, are subject to the disciplinary jurisdiction of the USPTO, and may be disciplined for violations of the Mandatory Disciplinary Rules of the USPTO).
17 C.F.R. §205.1 does, however, set forth "minimum standards of professional conduct for attorneys appearing and practicing before the [SEC]," but only in the context of representing an issuer. The standards do not apply to the activities of attorneys "other than in the context of providing legal services to an issuer with whom the attorney has an attorney-client relationship." 17 C.F.R. §205.2(a)(2)(i).
An SEC disciplinary proceeding involving a person who appears or practices before it, excluding accountants, may result in the imposition of a censure or a suspension if that person is found
(i) Not to possess the requisite qualifications to represent others; or
(ii) To be lacking in character or integrity or to have engaged in unethical or improper professional conduct; or
(iii) To have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.
[17 C.F.R. §201.102(e)(1)(i)-(iii).]
Further, a temporary suspension will be imposed on one who is (1) permanently enjoined, "by reason of his or her misconduct in an action brought by the [SEC], from violating or aiding and abetting the violation of any provision of the Federal securities laws or the rules and regulations thereunder," or (2) found to have violated or aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder. 17 C.F.R. §201.102(e)(3)(i)(A) and (B).
In this case, the SEC instituted the public administrative proceeding against respondent pursuant to 17 C.F.R. §201.102(e)(3)(i). Thus, he was temporarily suspended based solely on Judge Berman's conclusion that he had violated Section 5 of the Securities Act, by selling unregistered shared of RECOV stock, and, subsequently, permanently enjoined from committing future violations of Section 5. He was not suspended, under 17 C.F.R. §201.102(e)(1)(l), for lacking in character or integrity or for having engaged in unethical or improper professional conduct.
The SEC is not a disciplinary authority for the purposes of R. 1:20-14. With one non-applicable exception, it does not have or enforce rules of professional conduct pertaining to attorneys. Moreover, as stated above, the SEC did not suspend respondent as an attorney who had "engaged in unethical or improper professional conduct," in connection with the practice of law before the SEC. Rather, respondent was suspended simply as a consequence of a judgment entered against him in a civil action based on his violation of a civil law. Thus, we are without jurisdiction to impose reciprocal discipline in this case.
Two opinions from other jurisdictions support our conclusion. In The Florida Bar v. Tepps, 601 So.2d 1174 (F1. 1992), the Supreme Court of Florida held that an SEC order of suspension does not constitute "a final adjudication of discipline by a foreign jurisdiction," for the purpose of Florida's equivalent to R. 1:20-14(a)(4). Like respondent, Tepps consented to the entry of a final judgment and order of permanent injunction, barring him from violating or aiding and abetting any violation of the federal securities laws. Ibid. Specifically, Tepps had participated in an ongoing securities fraud, from at least January 1986 to 1988, by preparing fraudulent SEC registration form statements, containing untrue statements of material fact and omitting material facts, and filing the statements and amendments without authorized signatures. Id. at 1175.
Thereafter, the SEC suspended Tepps from practicing before it for a five-year period. Ibid. According to the Florida Supreme Court, "[b]ecause Tepps consented to the entry of a permanent injunction in the civil action, it was presumed that he had been enjoined by reason of the misconduct alleged in the SEC's complaint." Ibid.
Although the Florida disciplinary action proceeded by way of complaint, the hearing was limited to the issue of discipline. Id. at 1174-75. The special referee adopted both the final judgment of permanent injunction and the order suspending Tepps and recommended his disbarment. Id. at 1175. The Florida Supreme Court reversed, accepting Tepps' argument that he was entitled to "a full evidentiary hearing on the issue of guilt." Ibid. The Court reasoned:
The SEC is not "a court or other authorized disciplinary agency of another jurisdiction" within the meaning of rule 3-4.6. It is a federal administrative agency empowered by the United States Congress to regulate all aspects of securities transactions. As part of its regulatory function, the SEC may deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to any person who is found by the Commission . . . (i) not to possess the requisite qualifications to represent others, or (ii) to be lacking in character or integrity or to have engaged in unethical or improper professional conduct, or (iii) to have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws [citations
omitted], or the rules and regulations thereunder.
[Ibid.]
The Florida court observed that, although the SEC "is similar to that of a court or agency authorized to discipline lawyers, the primary purpose for its exercise is not to ensure qualification, supervision or regulation of lawyers." Ibid. Accordingly, the Florida Supreme Court rejected the special referee's findings and recommendations, and remanded the matter for a full evidentiary hearing. Ibid.
In The Florida Bar v. Calvo, 601 So.2d 1194 (1194) (1992), the Florida high court rejected another special referee's decision to limit a similar proceeding to the issue of discipline. Citing Tepps, the court remanded the matter "for a full evidentiary hearing." Id. at 1195.
In 2010, the Supreme Court of Ohio, citing Tepps, reached the same result. Disciplinary Counsel v. Lapine, 128 Ohio St. 3d 87 (Oh. 2010). In Lapine, the Court phrased the issue as whether
a suspension order entered by the . . . [SEC], in which an attorney licensed in Ohio has voluntarily agreed not to practice before the SEC for five years and which reflects neither an admission of wrongdoing by the attorney nor an affirmative finding of professional misconduct by the SEC, is a disciplinary order by another jurisdiction that requires this court to impose reciprocal discipline . . . .
[Id. at ¶1.]
In Lapine, the SEC suspended the attorney from appearing or practicing before it as an attorney for a five-year period. Id. at ¶2. The suspension was imposed after a federal district court had entered a final judgment by consent, which among other things, permanently enjoined the attorney from violating or aiding and abetting the violation of federal securities laws. Id. at ¶3. The Ohio Supreme Court noted, however, that, although the attorney had consented to entry of final judgment, the federal district court did not obtain his "admission to wrongdoing or make any findings of misconduct." Id. at ¶4.
The Ohio Supreme Court ordered Lapine to show cause why the court should not impose "identical or comparable discipline" on him and ordered the parties to brief the issue. Id. at ¶10. As part of its determination, the court considered whether the SEC was a "jurisdiction" for the purpose of imposing reciprocal discipline and, further, whether Lapine had even been "disciplined by the SEC as a reciprocal authority such that [the] court should impose reciprocal discipline under Ohio law. Ibid. The court answered in the negative to both. Id. at ¶26.
In reaching its conclusion, the court first observed that, in Ohio (like New Jersey), a federal agency may be considered a jurisdiction for purposes of imposing reciprocal discipline. Id. at ¶11. Next, the court noted that it had imposed reciprocal discipline on members of the Ohio bar who had been suspended from practicing before the USPTO. Id. at ¶12. The court then proceeded to note the differences between the USPTO and the SEC as concerned the practice of law.
First, the USPTO permitted "only those practitioners who [were] registered with the USPTO Office of Enrollment and Discipline or who [were] given limited recognition pursuant to agency regulations" to represent others before it. Id. at ¶13. Second, unless a waiver applied, applicants for admission to practice before the USPTO were required to pass a registration examination, administered by the Office of Enrollment and Discipline. Ibid. Third, all practitioners were "subject to the disciplinary jurisdiction of the USPTO," and, thus, could be disciplined for violations of the "Mandatory Disciplinary Rules of the USPTO." Ibid. Fourth, the Office of Enrollment and Discipline had authority to investigate misconduct and to initiate disciplinary proceedings against a practitioner, in which any violation of the USPTO's disciplinary rules had to be established by clear and convincing evidence. Ibid.
In contrast, the SEC did not have its own bar. Id. ¶14. Moreover, appearances before the SEC were not limited to attorneys, but also included partners representing partnerships, officers representing corporations, trusts, or associations, and officers or employees representing state commissions, departments, or political subdivisions. Ibid. The Ohio Supreme Court concluded:
Thus, rather than imposing admission requirements, the SEC affords the privilege of appearing in a representative capacity to broad categories of individuals, with that privilege subject to subsequent suspension on the SEC's finding of a lack of qualification to represent others, a lack of character or integrity, unprofessional conduct, or a violation of federal securities law. [Citation omitted.] Notably, the SEC Rules of Practice do not set forth or incorporate by reference any rules of professional conduct or provide for disciplinary hearings in which misconduct must be proven by clear and convincing evidence.
[Id. at ¶15.]
Further, the Ohio court noted, the SEC Rules of Practice defined "practice" to include transacting business with the SEC and the preparation of "any statement, opinion or other paper by any attorney, accountant, engineer or other professional expert, filed with the [SEC] in any registration statement, notification, application, report or other document with the consent of such attorney, accountant, engineer or other professional or expert." Id. at ¶16-¶18.
Finally, the high court cited the Florida Supreme Court's conclusion, in Tepps, that an SEC suspension order "is not a final adjudication in a disciplinary proceeding by a court or other authorized disciplinary agency of another jurisdiction within the meaning of Florida's reciprocal-discipline provisions." Id. at ¶19.
Thus, the Lapine court concluded, the SEC "should not be considered a jurisdiction for purposes of imposing reciprocal discipline on an attorney admitted to practice law in Ohio" because it "does not admit or supervise attorneys or specifically regulate the practice of law." Id. at ¶20. Moreover, even if the SEC were considered such a jurisdiction, "the SEC suspension order is not the result of a disciplinary proceeding and is therefore not a 'disciplinary order'" for the purpose of imposing reciprocal discipline on Ohio's attorneys. Id. at ¶21.
On another note, the Supreme Court of Ohio pointed out that, because Lapine had entered into a settlement agreement with the SEC, without admitting a violation of any law or commission of any professional misconduct, the SEC "did not make a finding of misconduct based on clear and convincing evidence." Id. at ¶25. Thus, Lapine was not disciplined for professional misconduct as an attorney but rather had "voluntarily agreed not to practice before the SEC in order to settle a dispute with that agency." Ibid.
Based on the above, the Supreme Court of Ohio dismissed the matter. Id. at ¶26.
In our view, the reasoning of the Supreme Courts of Florida and Ohio is sound and, thus, we have concluded that we are without jurisdiction to impose reciprocal discipline on respondent based on the SEC's order of suspension. First, no SEC bar or rules of professional conduct exist that apply to lawyers who practice before it. Second, even though the SEC may discipline anyone for unethical or improper professional conduct, respondent was not suspended on this ground. Thus, the SEC order permanently suspending respondent from appearing before it cannot be considered a disciplinary order within the meaning of R. 1:20-4(e)(4). Accordingly, we lack jurisdiction to consider the motion for reciprocal discipline.
Although the OAE declined to submit a brief on the issue of jurisdiction, at oral argument, deputy ethics counsel argued that In re Hyderally, 162 N.J. 95 (1999), stands for the proposition that we have jurisdiction to impose reciprocal discipline on respondent. In our view, however, Hyderally does not support the OAE's position. To the contrary, that decision is further reason to deny the motion.
Briefly, the Hyderally matter was before us on a motion for reciprocal discipline, based on the decision of the Judge Advocate General (JAG) of the United States Navy (Navy) to suspend the attorney's certification to practice law before the Navy courts or boards for two years. In the Matter of Ty Hyderally, DRB 98-147 (June 9, 1999) (slip op. at 1-2). The suspension was based on Hyderally's violation of JAG Rule of Professional Conduct 8.4(a)(2). We determined, however, that his conduct violated our RPC 8.4(d). Id. at 13.
Hyderally supports our determination, in this case, for several reasons. First, Hyderally was a lawyer who was certified to practice law before Navy courts and boards. Id. at 1-2. Second, he was subject to a non-judicial punishment (NJP) proceeding based on conduct committed during the course of his legal representation of a client. Id. at 2-3. Third, the Navy conducted an ethics investigation of Hyderally as a result of the findings in the NJP. Id. at 5.
The NJP hearing was in lieu of a court martial. Id. at 4. --------
Although we have concluded that we do not have jurisdiction to impose reciprocal discipline on respondent, the OAE is not left without recourse. The OAE may file a complaint, conduct an investigation, and proceed to a hearing. If respondent is amenable, the OAE also is free to enter into a disciplinary stipulation with respondent or to file a motion for discipline by consent.
Member Gallipoli recused himself.
Disciplinary Review Board
Bonnie C. Frost, Chair
By:/s/_________
Ellen A. Brodsky
Chief Counsel
VOTING RECORD
Argued: October 20, 2016 Decided: December 13, 2016 Disposition: Deny Motion for Reciprocal Discipline
| Members | Deny | Recused | Did notparticipate |
|---|---|---|---|
| Frost | X | ||
| Baugh | X | ||
| Boyer | X | ||
| Clark | X | ||
| Gallipoli | X | ||
| Hoberman | X | ||
| Rivera | X | ||
| Singer | X | ||
| Zmirich | X | ||
| Total: | 8 | 1 |
/s/_________
Ellen A. Brodsky
Chief Counsel