Opinion
D.D. No. 85-46
Decided June 25, 1986.
Attorneys at law — Misconduct — One-year suspension — Investment transactions with clients — No prejudice shown from failure to complete investigation within sixty days — Gov. Bar R. V(4) — DR 1-102(A)(6) not unconstitutionally vague.
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and Discipline of the Bar.
Relator, Dayton Bar Association, filed this disciplinary action against respondent, John S. Zarka, following three separate complaints lodged with the relator by persons who were former clients of respondent.
The record shows that the first complainant, Mrs. Birdie Hunt, consulted with respondent for investment advice following the death of her husband regarding a substantial insurance settlement. Respondent recommended that she invest in Tyman Industries, Inc. ("Tyman"), a California corporation that processed cottonseed oil. Mrs. Hunt testified that respondent told her she would receive a sixteen percent return on her investment. Mrs. Hunt gave respondent a check for $25,000 for her investment on December 19, 1981. She received a handwritten receipt from respondent which included a statement indicating it would be replaced with a proper receipt. She testified that respondent told her he was a shareholder in the corporation. Evidence revealed that he was a one-third shareholder, and an officer and director of the corporation. Moreover, evidence disclosed that Tyman's charter had been cancelled on December 1, 1981 for failure to pay California franchise taxes.
The original receipt given to Mrs. Hunt concerning the Tyman investment indicated that it was for a term of twenty-three months, thereby making it payable in November 1983. Although Mrs. Hunt made several inquiries she did not obtain her money in November 1983.
During the early part of 1984, Mrs. Hunt received a call from respondent's secretary stating that respondent had left an envelope for her. The envelope contained a document labelled a "Certificate of Indebtedness Debenture." This was supposed to evidence the $25,000 investment in Tyman. It did not include her name, however, nor did it reflect the correct interest rate or term of the agreement. Mrs. Hunt refused to accept this document.
Mrs. Hunt made another investment with respondent on April 14, 1982. She testified that respondent told her of a "joint venture" involving the purchase and renovation of apartment buildings in the Dayton area. Respondent was also an investor in the project. She gave respondent a check for $10,000 for the investment and received a handwritten receipt, but no additional documentation.
Respondent claimed he never discussed any investment with Mrs. Hunt regarding a real estate project in the Dayton area. He testified that he gave the $10,000 along with $15,000 of his own money to a David Rafael in New York to invest. This money was allegedly reinvested as a loan to Rafael Discounts, Inc., of Bronx, New York, but there was no credible documentation of such investment. Mrs. Hunt testified that respondent did not mention to her an investment with Rafael Discounts, Inc.
Mrs. Hunt contacted respondent by letter in August 1984. She requested the return on her $35,000 plus interest within thirty days. Respondent asked for an additional thirty days to return the money. Nevertheless, Mrs. Hunt did not receive her money until January 21, 1985 after she retained a lawyer who negotiated with respondent.
The second complaint involved respondent's relationship with Joseph Dukic, following the death of Mr. Dukic's wife. She had kept a substantial amount of cash in a safe deposit box which was discovered during an inventory following her death. Respondent, with Mr. Dukic's knowledge, took $9,800 of the cash, and told Mr. Dukic he would use $5,800 to make him a partner in a silver project. (The balance of the cash was used for estate expenses.) Respondent gave Mr. Dukic a receipt for the cash. Mr. Dukic did not receive any other indication of an investment made on his behalf by respondent. The evidence at the hearing showed that respondent paid $10,000 to become a partner in a partnership known as the Silver Investment Partnership. The partnership was formed to invest in the silver futures market.
Respondent produced a document entitled "Joint Venture Agreement." The agreement provided that respondent and Mr. Dukic would purchase one unit in the Silver Investment Partnership for $10,000 and they would be equal partners. The agreement also provided that respondent would indemnify Mr. Dukic for any loss over $2,500. Respondent testified that Mr. Dukic refused to sign the agreement. The document presented by respondent was unsigned and undated.
In May 1984, Mr. Dukic asked respondent to return his money. Respondent responded to Mr. Dukic's request by letter, and stated that the investment was registered with the Securities and Exchange Commission and a request to withdraw would have to be in writing. The document respondent produced did not include this requirement. The evidence submitted at the hearing showed that the investment was not registered. Mr. Dukic requested the return of his investment in writing, but at the time of the hearing before the board it had not been returned.
The third complaint related to an $11,000 investment by respondent for Mrs. Jeanne Harowski. She testified that respondent suggested she invest part of an inheritance in a "silver investment." She agreed and respondent executed a promissory note, representing the receipt of $11,000 on August 1, 1981, for a term of thirty-two months payable with interest at an annual rate of seventeen percent.
Respondent testified that he did not discuss a silver investment with Mrs. Harowski but that the money was to be a loan to Myrtle Automotive Center, Inc., of Brooklyn, New York, to be used to purchase a building. Mrs. Harowski testified that she had never heard of Myrtle Automotive Center, Inc. Respondent, however, produced evidence showing that Mrs. Harowski received periodic interest payments from him by check drawn on personal checking accounts, a general account of his law firm and respondent's trust account.
Mrs. Harowski wrote a letter to respondent asking for the return of her money on August 10, 1984. She reminded respondent that the note had matured. Respondent did not return the money. After Mrs. Harowski retained an attorney and a lawsuit was filed against respondent, a settlement was reached wherein respondent agreed to satisfy Mrs. Harowski's claim.
Following these complaints, which were filed in July and August 1984, relator conducted an investigation which included an interview with respondent on September 15, 1984. A final report of the investigation was submitted to relator on October 31, 1984. Respondent was apprised that the investigation was completed but apparently was not informed of the results until the complaint was filed with the board on May 9, 1985.
Relator filed the three-count complaint with the board alleging misconduct by respondent in violation of DR 1-102(A)(4), 1-102(A)(6), 5-104(A) and 6-101(A)(3). A hearing was held on relator's complaint before a panel of the board on September 30, 1985. Respondent moved to dismiss the complaint for relator's failure to adhere to the time limit set forth in Gov. Bar R. V(4) of sixty days. After the hearing, the panel overruled respondent's motion to dismiss and found that respondent had violated DR 1-102(A)(4), 1-102(A)(6) and 5-104(A).
The panel recommended that the respondent be indefinitely suspended from the practice of law in the state of Ohio. The board adopted the panel's findings, conclusions, and recommendation in its certified report to this court.
Respondent has filed objections to the board's report and recommendation.
Coolidge, Wall, Womsley Lombard Co., L.P.A., Roger J. Makley and Kevin J. O'Brien, for relator.
Horace W. Baggott, Sr., for respondent.
Respondent first objects to the overruling of his motion to dismiss for failure to complete the investigation within sixty days as required by Gov. Bar. R. V(4). Respondent has not demonstrated any prejudice resulting from the delay. Ohio State Bar Assn. v. Sacher (1983), 8 Ohio St.3d 49.
In the second objection to the findings of the board's report, respondent contends that the findings of fact were not supported by a preponderance of the evidence and are contrary to the manifest weight of the evidence. This court has examined the record presented before the board. We concur in the board's findings that respondent violated DR 1-102(A)(4), 1-102(A)(6) and 5-104(A) of the Code of Professional Responsibility.
Respondent further objects to the board's recommendation to permanently disbar the respondent from the practice of law as unduly harsh. Actually, as indicated above, the recommendation was an indefinite suspension. The record reveals that respondent has never been involved in any proceeding of this kind, although he has been practicing law for over forty years, and the evidence shows that he has a good reputation for truth and honesty. Although this does not lessen the gravity of respondent's professional misconduct, we believe that an indefinite suspension under the circumstances is somewhat excessive. Therefore, it is the judgment of this court that respondent be suspended from the practice of law for a period of one year.
Finally, respondent contends that DR 1-102(A)(6) is unconstitutionally vague and violates the Fifth Amendment to the United States Constitution. The court finds no basis for such a contention and accordingly overrules the final objection.
Therefore, upon a careful review of the entire record, we concur with the findings of the board except for the above indicated modification in the recommendation that relator be indefinitely suspended.
For the foregoing reasons, it is the judgment of this court that respondent be suspended from the practice of law for a period of one year.
Judgment accordingly.
CELEBREZZE, C.J., SWEENEY, REILLY and C. BROWN, JJ., concur.
HOLMES, DOUGLAS and WRIGHT, JJ., dissent.
REILLY, J., of the Tenth Appellate District, sitting for LOCHER, J.
From the record in this case it is clear that the respondent engaged in a systematic and calculated program of misrepresentation, fraud and deceit to take advantage of three very vulnerable clients. Upon the facts of this case, the board concluded that respondent was guilty of misconduct in that he violated DR 1-102(A)(4), 1-102(A)(6) and 5-104(A). The board also found that the respondent made false and misleading statements under oath during the course of the disciplinary proceeding.
While it is true that Mrs. Hunt had her original $35,000 plus $5,000 interest returned to her, this was only accomplished after she retained a lawyer and then not until January 1985 did she receive her money. Mrs. Hunt was required to pay her attorney $526 to effect recovery from respondent.
With regard to Mr. Dukic, as of the date of hearing, respondent had not returned the $5,800 or paid Mr. Dukic any interest on the "investment." There is nothing before us which would indicate that Mr. Dukic would ever be able to recover his money.
As to Mrs. Harowski's "investment," respondent refused to return her money even though Mrs. Harowski made a specific request in writing and the note given to her by respondent had matured. Mrs. Harowski was required to retain another attorney who eventually had to file a lawsuit for her in an attempt to recover her money. After the complaint was filed, respondent did make a payment of $2,000 to Mrs. Harowski's attorney and apparently some settlement had been reached where respondent agreed to satisfy Mrs. Harowski's claim by April 1986. The record, of course, does not contain any information as to whether or not Mrs. Harowski has even yet obtained return of her money.
After considering all of the circumstances, the board has recommended to this court "* * * that Respondent's misconduct in his relationship with Birdie Hunt, Joseph Dukic and Jeanne Harowski, standing alone, would warrant a suspension from the practice of law for one year. The Board is of the opinion, however[,] that the Respondent also made false and misleading statements under oath during the course of this proceeding and, accordingly, should be indefinitely suspended from the practice of law."
In view of the record before us, and the recommendation of the board, I am unable to understand the decision of the majority to impose only a one-year suspension. Accordingly, I would adopt the recommendation of the board, and since the majority does not do so, I must respectfully dissent.
HOLMES and WRIGHT, JJ., concur in the foregoing dissenting opinion.