Opinion
2021-SC-0181-KB
09-21-2021
H. Harris PEPPER, Jr., Movant v. KENTUCKY BAR ASSOCIATION, Respondent
OPINION AND ORDER
Pursuant to Supreme Court Rule (SCR) 3.480(2), the negotiated sanction rule, Movant, H. Harris Pepper, Jr., requests this Court to impose upon him, retroactive from February 27, 2020, a suspension for five years or until the time he has satisfied in full the terms and conditions of probation in his federal criminal case for conspiring to launder proceeds of an illegal gambling operation, whichever event occurs first. Pepper states that presently his probation is set to run until July 2025 and that he has been tentatively advised by his probation officer that after two and one-half years or so of successful probation, the probation officer may recommend that Pepper be released from probation. If the proposed suspension were approved by this Court, grounds for revocation of his suspension in this disciplinary action and for seeking his permanent disbarment would include his violation of the terms of probation in his criminal case. Further conditions of the suspension would be Pepper's KYLAP participation on terms and conditions set by KYLAP and payment of the costs of this disciplinary proceeding.
SCR 3.480(2) states:
The Court may consider negotiated sanctions of disciplinary investigations, complaints or charges prior to the commencement of a hearing before a Trial Commissioner under SCR 3.240. Any member who is under investigation pursuant to SCR 3.160(2) or who has a complaint or charge pending in this jurisdiction, and who desires to terminate such investigation or disciplinary proceedings at any stage of it may request Bar Counsel to consider a negotiated sanction. If the member and Bar Counsel agree upon the specifics of the facts, the rules violated, and the appropriate sanction, the member shall file a motion with the Court which states such agreement, and serve a copy upon Bar Counsel, who shall, within 10 days of the Clerk's notice that the motion has been docketed, respond to its merits and confirm its agreement. The Disciplinary Clerk shall submit to the Court within the 10 day period the active disciplinary files to which the motion applies. The Court may approve the sanction agreed to by the parties, or may remand the case for hearing or other proceedings specified in the order of remand.
Kentucky Bar Association (KBA) Member No. 84068; bar roster address: 1317 Burr Oaks Court, Bowling Green, Kentucky, 42103. Pepper was admitted to the practice of law October 17, 1991.
Kentucky Lawyer Assistance Program.
Pepper requests this discipline to resolve a disciplinary case in which the Inquiry Commission charged that by engaging in a criminal conspiracy to commit money laundering, evidenced by Pepper's guilty plea, he violated SCR 3.130 (8.4)(b) and SCR 3.130 (8.4)(c). Pepper admits his conduct violated SCR 3.130 (8.4)(b). He does not admit his conduct violated SCR 3.130 (8.4)(c); other than referencing the Charge, his motion is silent as to the allegation that he violated SCR 3.130 (8.4)(c).
Pepper's statement in his motion is that "The Charge contains one Count alleging [he] violated SCR 3.130 (8.4)(b)." It is unclear if the lack of reference to SCR 3.130 (8.4)(c) is an oversight. Bar Counsel's response, stating that the "parties have agreed to a negotiated sanction in order to resolve this matter" does not add any clarity.
Pepper, pursuant to SCR 3.166, was automatically temporarily suspended from the practice of law in Kentucky on February 27, 2020 when he entered his guilty plea. Bar Counsel has no objection to Pepper's requests. Upon review of applicable authority and in keeping with its guiding principles, we approve the proposed sanction in part. While we approve of a full five-year suspension, we cannot agree with terms that would allow for a suspension of less than five years.
SCR 3.166(1) states:
Any member of the Kentucky Bar Association who pleads guilty to a felony, including a no contest plea or a plea in which the member allows conviction but does not admit the commission of a crime, or is convicted by a judge or jury of a felony, in this State or in any other jurisdiction, shall be automatically suspended from the practice of law in this Commonwealth. "Felony" means an offense for which a sentence to a term of imprisonment of at least one (1) year is authorized by law. The imposition of probation, parole, diversion or any other type of discharge prior to the service of sentence, if one is imposed, shall not affect the automatic suspension. The suspension shall take effect automatically beginning on the day following the plea of guilty or finding of guilt by a judge or jury or upon the entry of judgment whichever occurs first. The suspension under this rule shall remain in effect until dissolved or superseded by order of the Court. Within thirty (30) days of the plea of guilty, or the finding of guilt by a judge or jury, or entry of judgment, whichever occurs first, the suspended attorney may file a motion with the Clerk of the Supreme Court of Kentucky setting forth any grounds which the attorney believes justify dissolution or modification of the suspension.
Per SCR 3.166, since Pepper entered his plea on February 27, 2020, his automatic suspension occurred February 28, 2020, the day following the plea. This Opinion maintains Pepper's reference to February 27, 2020 as his automatic suspension date.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Prior Disciplinary Proceedings
Pepper was automatically suspended from the practice of law in this Commonwealth on February 27, 2020, when he entered his guilty plea in United States v. Pepper , Case Number 1:20-CR-00003-JRW, United States District Court, Western District of Kentucky, Bowling Green Division, to the charge of conspiracy to commit money laundering in violation of Title 18, United States Code, Section 1956(h). In July 2020, he was sentenced for that crime to one year and one day in prison, probated for five years, with conditions. Pepper was also fined $100,000, which was paid promptly. Admitted to the practice of law on October 17, 1991, he has no prior disciplinary history.
Per the plea agreement, the charge carried a maximum term of imprisonment of 20 years, a combined maximum fine of $500,000, and a three-year term of supervised release. At the sentencing hearing, Pepper sought a departure due to the personal needs of his children. The United States, in accordance with the plea agreement, recommended a sentence of twelve months and one-day imprisonment.
Along with participating in a community-based mental health treatment program, special conditions of Pepper's probation include: 1) being "prohibited from engaging, directly or indirectly, in any form of gambling, game of chance; and [he] shall not loiter near or enter any dwelling or enterprise whose principal business purpose is gambling or the offering of games of chance"; and 2) being "prohibited from incurring any new credit charges or opening any additional lines of credit without approval of the Probation Officer unless he is in compliance with the payment schedule."
B. Pepper's Guilty Plea
Pepper's plea agreement with the United States provided the following facts:
From 2008 through 2016, Pepper knowingly conspired with Douglas Booth to conceal the proceeds of Booth's unlawful conduct. During this period, Pepper was aware that Booth was operating an illegal sports-gambling operation out of Bowling Green, Kentucky, and conspired with Booth to launder proceeds of his gambling operation into real estate investments. At all times, Pepper knew the significant portions of the money provided to him by Booth was from this illegal activity. Pepper, a practicing real-estate attorney, took actions to conceal Booth's involvement in a series of real estate investments by concealing Booth's investment and not documenting or recording Booth's ownership of the real estate. More particularly, Pepper and Booth knowingly conspired to conduct
financial transactions affecting interstate and foreign commerce that involved proceeds of an illegal activity, that is transmission of wagering information in violation of 18 U.S.C. § 1084, with the intent to promote the carrying on of the illegal activity and to conceal and disguise the nature, location, source, ownership, and control of the proceeds of the illegal activity. During the course of the conspiracy, Pepper and Booth did the following:
A. In 2008, Booth purchased a percentage ownership of Hard Six, LLC, by providing $125,000 in cash to Pepper. Hard Six owned real estate and buildings that it leased to Dollar General Store, Inc. Both Pepper and Booth knew portions of the proceeds invested by Booth were proceeds of a specified unlawful activity. Pepper did not document or record Booth as an owner in Hard Six [in] order to conceal Booth's involvement in the transaction.
B. In about 2010, Booth attempted to purchase a percentage of ownership of an apartment complex on Louisville Road in Bowling Green, Kentucky, by providing $90,000 in cash to Pepper. Both Pepper and Booth knew portions of the proceeds invested were proceeds of a specified unlawful activity. Pepper did not document or record Booth as an owner in the apartment complex in order to conceal Booth's involvement in the transaction.
C. From in or about 2009 through 2016, Booth purchased and maintained a percentage of ownership of HAAM Investments, LLC, by providing approximately $250,000 in cash to Pepper. HAAM Investments was created and used for purchasing an apartment complex in Russellville, Kentucky. Both Pepper and Booth knew portions of the proceeds invested were proceeds of a specified unlawful activity. Pepper transferred his ownership of HAAM Investments in July of 2009. As part of the conspiracy, but not known to Pepper, on August 19, 2016, Booth sold his ownership interest of HAAM Investments and received a $160,000 check payable to B.B. from HAAM Investments. Pepper did not document or record Booth as an owner in HAAM Investments [in] order to conceal Booth's investment in the transaction.
D. From in or about 2010 through 2016, Booth purchased and maintained an ownership interest in MYP Properties by providing approximately $200,000 in cash and relief from gambling debt to Pepper. MYP Properties were created to own and operate apartment complexes. Both Pepper and Booth knew portions of the proceeds invested were proceeds of a specified unlawful activity. In April of 2016 Pepper wrote a check for $20,000 payable to Kentucky Aviation Partners for the benefit of Booth. Pepper did not document or record Booth as an owner of MYP Properties in order to conceal Booth's involvement in the transaction.
Each of these transactions was financial transaction in that they affected interstate commerce by involving the movement of funds by wire and involved monetary instruments, i.e. United States currency.[ ]
Pepper's name is presented in bold, capital letters in the Plea Agreement. That emphasis is removed here.
C. Violations Charged in KBA File 20-DIS-0046
The Charge in KBA File 20-DIS-0046 alleges Pepper violated two rules, SCR 3.130 (8.4)(b) (Count 1) and SCR 3.130 (8.4)(c) (Count 2), when he engaged in a criminal conspiracy to commit money laundering, evidenced by his guilty plea. Under SCR 3.130 (8.4)(b), "[i]t is professional misconduct for a lawyer to ... commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects." Under SCR 3.130 (8.4)(c), "[i]t is professional misconduct for a lawyer to ... engage in conduct involving dishonesty, fraud, deceit or misrepresentation." Pepper admits violating SCR 3.130 (8.4)(b).
Before the July 15, 2009 amendments, these rules were enumerated SCR 3.130 (8.3)(b) and SCR 3.130 (8.3)(c). In the disciplinary cases discussed below and prosecuted under then SCR 3.130 (8.3)(b) and SCR 3.130 (8.3)(c), this Opinion refers to the current enumerations and indicates that reference with an accompanying asterisk.
D. Mitigating Circumstances
Pepper states in his verified motion that he does not seek to excuse his conduct, but that he seeks mitigation. In the motion, he explains certain circumstances, conditions and events before, during, and after the criminal conduct in mitigation of the resolution of the present disciplinary proceeding. He describes his professional life; his family circumstances, which includes care of two children (now young adults), one on the autism spectrum but functional, and the other autistic, non-verbal, and requiring constant oversight and care; his history with alcohol abuse and gambling; and his conduct which led to the criminal case against him. The mitigation he seeks is in part related to a mental health condition, a condition for which he gained insight upon participating in a community-based mental health treatment program as part of his probation in the federal criminal case.
In his sentencing memorandum provided to the federal court, Pepper describes his alcohol and gambling problem in relation to the diagnosis and care of his children and building his law practice. Pepper stated that the children
were separately diagnosed during the period [he] was exhaustingly building his law practice. With [his wife], [Pepper] managed his work and home lives, but the pressure was great. In attempt to relieve this pressure, [Pepper] drank and watched sports with other young businessmen and professionals in Bowling Green. He gambled with them, too, sometimes driving with them to the casino in New Albany, Indiana.
It was during this time that he met Doug Booth. [Pepper] developed a gambling problem ....
Pepper successfully practiced transactional law, including real estate transactions and business transactions and formations as a member of a Bowling Green law firm. He resigned from the firm following his guilty plea on February 27, 2020 and has not practiced law since. In May 2020, Pepper transferred his part of a title company to his wife. The co-owner of the title company at that time has always been and remains responsible for the day-to-day operations of the company, including the oversight of support staff and overseeing the financial operations of the company. Since May 2020, Pepper has been an employee of the title company, not engaging in the practice of law. The Office of Bar Counsel has been advised of Pepper's activities at the title company since he entered his plea.
Pepper began drinking around age fifteen and has been sober since late 2004. He credits continuing support from a relative, a Certified Alcohol and Drug Counselor, and regular attendance at Alcoholic Anonymous meetings for a three-year period, as contributing to his sobriety. He states his drinking had concluded by the time of the conduct set out in the criminal case, conduct which spanned nine years. Pepper states that while he was able to address his alcohol addiction, his addictive behavior transferred and increased as to gambling. Although the Certified Counselor had warned him in previous years about the adverse consequences of addictive behavior, Pepper failed to heed the concerns and advice regarding gambling. The gambling activity escalated, eventually leading to Pepper betting and losing significant amounts of money; associating with Booth, a bookie; and investing Booth's unlawful gambling business proceeds in real estate and other business opportunities as described above.
Pepper describes his gambling activity before around 2000 as being insignificant. In the early 2000s, he was introduced to an internet gambling website operated by Booth. Pepper gambled primarily on the website until around 2011; he estimates losing around $250,000 on Booth's gambling website. By around 2003, Pepper began having direct dealings with Booth, his gambling ever-increasing. Per his plea, during the course of the conspiracy, from 2008 through 2016, Pepper conspired with Booth to conceal the proceeds of Booth's unlawful conduct. From around 2011 to 2018, he continued gambling but primarily at casinos, Pepper wanting to distance himself from Booth. Pepper estimates that during that time he lost around $100,000 per year. Pepper states that but for his gambling activity, he would not have had the problems and issues which later developed into the criminal case in 2020.
As described in his federal sentencing memorandum, "[Pepper] developed a gambling problem, and, at one time, had $250,000 in gambling losses. It was also generally during this time that [Pepper] and others formed and invested in the enterprises that are the subject of these charges.[ ] As the attorney among his friends, [Pepper] did the paperwork." As he also describes, Pepper sought to distance himself from Booth as early as 2011. According to his plea, the money laundering transactions occurred through 2016. Pepper points out that he thought himself successful enough to manage his gambling losses, but according to his plea agreement, a benefit to Pepper of conspiring to commit money laundering with Booth was relief from gambling debt.
Pepper describes his real estate investments as one way to save for the future care of his children. His sentencing memorandum states:
[Pepper] has spent nearly 30 years saving money, in every way he could, for his children and their care upon his death. This is among the reasons his savings have taken different forms: He cannot simply trust, for instance, an ordinary 401k retirement plan, dependent as it would be upon an unreliable stock market. As a real estate attorney, he used his skills and experience to, among other things, invest in small commercial real estate ventures. While these ventures reflect value on a balance sheet, they are not liquid in the short run and are also subject to the interests of the other investors. [Pepper] also has purchased life insurance policies in the hope that, when needed, their cash value could be used for his children, and, of course, the proceeds for them when he passes.
By March 2017 Pepper knew he was the target of a federal criminal investigation.
In November 2020, the licensed psychologist working with Pepper prepared a letter on Pepper's behalf, knowing it likely would be tendered to the Kentucky Bar Association. The psychologist describes Pepper's trading options in the stock market, which occurred before his drinking became problematic, as unrecognized gambling behavior. He states that Pepper's drinking and gambling problems are patterns and symptoms better explained by a diagnosis of Bipolar Disorder. The psychologist also identifies other prominent symptoms, such as trading automobiles five to ten times a year, that Pepper did not understand were associated with his mood and are better accounted for by this disorder. The psychologist believes that it is likely that Pepper's alcohol addiction was a period when he was self-medicating mood shifts and that the drinking and gambling were and are more likely symptoms of the mood disorder. The psychologist states that Pepper has made progress in the counseling sessions, the stress he has been dealing with in his life for many years is being addressed, and that he has become more aware of the need to have a better baseline of his mood and to moderate his behaviors. The psychologist points out that Pepper has been able to stop behaviors such as alcohol use by recognizing the destruction in his life and taking the responsibility of making significant changes.
Pepper also seeks mitigation based upon this disciplinary action being his first since bar admission in 1991, the federal criminal proceeding being his one and only criminal charge, the United States acknowledging his cooperation and acceptance of responsibility, and the fact that there were no victims of his criminal conduct.
II. ANALYSIS
Pepper admits that he is guilty of violating SCR 3.130 (8.4)(b) and moves this Court to accept his Motion for Suspension. As noted, he asks this Court to enter an order suspending his license to practice law in the Commonwealth of Kentucky for a period of five years, retroactive from February 27, 2020, or until such time as he has satisfied in full the terms and conditions of probation in his criminal case, whichever event first occurs. Bar Counsel has no objection to Pepper's motion, the proposed sanction being negotiated under SCR 3.480(2) to resolve this disciplinary matter.
As mitigating circumstances, Pepper points out that he has accepted responsibility for his improper conduct and has taken serious and significant personal and professional steps to address those issues. As the psychologist notes, Pepper has stopped his alcohol use, has made progress in the counseling sessions, and is taking the responsibility of making significant changes and addressing the stress and serious problems to which he subjected himself and his family. Pepper states that he is committed to remaining compliant with all treatment and his therapist's counseling recommendations to avoid any recurrence of his previous problems, a condition he understands would be part of the resolution of the present disciplinary proceeding, as well as actively participating in KYLAP.
The issue in a consensual discipline case generally is the appropriate discipline to be imposed under the circumstances. Factors relevant to the appropriate level of sanction are taken into consideration, such as the nature and severity of the offense(s), the need for deterring other members of the bar from engaging in similar behavior, the maintenance of the reputation of the bar as a whole, the protection of the public, the attitude of the offender generally, and the offender's present or future fitness to continue in the practice of law. See , e.g. , Kentucky Bar Ass'n v Hill , 476 S.W.3d 874 (Ky. 2015) ; Kentucky Bar Ass'n v. Maze , 397 S.W.3d 891 (Ky. 2013) ; and Grigsby v. Kentucky Bar Ass'n , 181 S.W.3d 40 (Ky. 2005). Each case is evaluated in light of its particular facts and circumstances, including aggravating and mitigating factors, and generally whether the proposed sanction is adequate and comparable to discipline imposed for similar conduct. Pepper offers various mitigating circumstances, including a stressful and personally demanding family life. He stresses that his crime involved no victims and he has learned since being convicted and attending mental health counseling that his problematic behaviors of alcohol use and gambling, along with other behaviors, are indicative of a mood disorder. Although the Office of Bar Counsel primarily offers support for the negotiated sanction by citing suspension cases which involved aspects of mental health and substance abuse, we begin by reviewing cases involving criminal financial misconduct.
When determining appropriate discipline, we may consider the American Bar Association Standards for Imposing Lawyer Sanctions Rule 9 compilation of aggravating and mitigating circumstances. See Hill , 476 S.W.3d at 884 ; Kentucky Bar Ass'n v. Deters , 360 S.W.3d 224, 233 (Ky. 2012) ; Anderson v. Kentucky Bar Ass'n , 262 S.W.3d 636, 638-39 (Ky. 2008). Under Rule 9, aggravating factors include: prior disciplinary offenses; dishonest or selfish motive; a pattern of misconduct; multiple offenses; bad faith obstruction of the disciplinary proceeding by intentionally failing to comply with rules or orders of the disciplinary agency; submission of false evidence, false statements or other deceptive practices during disciplinary process; refusal to acknowledge wrongful nature of conduct; vulnerability of victim; substantial experience in the practice of law; and indifference to making restitution. See note 25 below for mitigating factors.
Existing authority supports an attorney's disbarment when the attorney is convicted of conspiring to commit money laundering. However, prior cases involving this charge have not presented any mitigating circumstances for this Court's consideration. In Kentucky Bar Ass'n v. Rorrer , 222 S.W.3d 223 (Ky. 2007), Rorrer, like Pepper, faced disciplinary action for committing the crime of conspiring to commit money laundering. The Inquiry Commission issued a Charge alleging that Rorrer violated SCR 3.130 (8.4)(b)* and SCR 3.130 (8.4)(c)*. Id. at 226. Rorrer denied violation of the Rules. Id. Following an evidentiary hearing the trial commissioner recommended that Rorrer be found guilty of the counts and disbarred. Id. After hearing appellate arguments by both Rorrer and the Office of Bar Counsel, the Board of Governors adopted the trial commissioner's report and recommendations. Id. at 226-27.
The third count of the October 2004 Charge alleged that Rorrer violated "SCR 3.130 (8.1)(b), which states that a lawyer shall not ‘knowingly fail to respond to a lawful demand for information from an admissions or disciplinary authority[.]’ " This Court decided that disbarment was warranted based on Rorrer's criminal conduct alone. Id. at 228-29.
This Court reviewed the Board's decision and determined that the appropriate penalty for Rorrer's criminal conduct was permanent disbarment. This Court concluded that it was clear that Rorrer violated SCR 3.130 (8.4)(b)* and despite Rorrer's arguments that his conviction was not a crime involving dishonesty, his criminal conduct also violated SCR 3.130 (8.4)(c)*. Id. at 227. "According to the Sixth Circuit, Rorrer instigated the actions leading to the money laundering conspiracy and used his skills as an attorney to draft a fictitious contract to further that conspiracy.[ ] Obviously, Rorrer's criminal conduct inherently involved dishonesty, fraud, and/or deceit." Id. at 227–28.
Note content omitted. The content is incorporated in discussion below.
We then stated: "[O]ur precedent is crystal clear: we treat criminal financial misconduct by attorneys very seriously; and we have previously found that disbarment was appropriate for numerous attorneys who had committed criminal offenses involving dishonesty in financial matters.[ ]" Id. at 229. Rorrer never accepted responsibility for his criminal conduct and was convicted by a jury. Id. at 225. Even after his conviction was affirmed on appeal, id. , Rorrer did not admit that he was guilty of violating SCR 3.130 (8.4)(b)* and SCR 3.130 (8.4)(c)* during the disciplinary process and, apparently in accordance, did not offer any mitigating circumstances for the rather complex drug money laundering scheme he instigated.
See, e.g., Kentucky Bar Ass'n v. Tanner , 152 S.W.3d 875 (Ky. 2005) (permanent disbarment for attorney convicted of embezzlement); Kentucky Bar Ass'n v. Layton , 97 S.W.3d 452 (Ky. 2003) (permanent disbarment for attorney convicted of theft by failure to make required disposition involving wrongful conversion of funds from attorney's Master Commissioner's account); Caudill v. Kentucky Bar Ass'n , 155 S.W.3d 725 (Ky. 2005) (accepting attorney's resignation under terms of permanent disbarment when attorney pleaded guilty to embezzlement and theft by failure to make required disposition); Kentucky Bar Ass'n v. Steiner , 157 S.W.3d 209 (Ky. 2005) (disbarring attorney who misappropriated client funds for his own use, despite attorney's lack of previous disciplinary history and claim of mental illness); Dickey v. Kentucky Bar Ass'n , 98 S.W.3d 864 (Ky. 2003) (approving attorney's motion to withdraw under terms of permanent disbarment when attorney had pleaded guilty to conspiracy to commit securities fraud); Kentucky Bar Ass'n v. Matthews , 131 S.W.3d 744 (Ky. 2004) (permanently disbarring attorney convicted of, inter alia , conspiracy to defraud a financial institution).
Id. at 229 n.18.
Disciplinary cases involving the criminal conviction of money laundering since Rorrer include Kentucky Bar Ass'n v. Ford , 515 S.W.3d 181 (Ky. 2017), Kentucky Bar Ass'n v. Coffman , 494 S.W.3d 493 (Ky. 2016), and Reskin v. Kentucky Bar Ass'n , 320 S.W.3d 698 (Ky. 2010). In these disbarment cases, the attorney was convicted of money laundering and/or its conspiracy and other crimes. The Ford and Coffman cases, involving large amounts of money and numerous victims, proceeded as default cases and in Reskin the attorney moved this Court for permanent disbarment. Consequently, the attorneys were found guilty of violating SCR 3.130 (8.4)(b) and SCR 3.130 (8.4)(c), and this Court entered orders permanently disbarring the attorneys.
In Ford , the Inquiry Commission issued a two-count charge against Ford, alleging violations of SCR 3.130 (8.4)(b) and SCR 3.130 (8.4)(c). 515 S.W.3d at 182. Ford pled guilty in federal court to wire fraud and money laundering. Id. "He acted as the executor of seven estates between 2008 and 2015, from which he took approximately $1.7 million for, as the Board of Governors indicated, ‘his personal expenses and enjoyment, as well as his significant gambling activity.’ " Id. The Board found Ford guilty of the two counts and unanimously recommended this Court permanently disbar Ford. Id. at 181. This Court agreed with the Board's recommendation given the nature of Ford's violations and their gravity. Id. at 182. Quoting Orr v. Kentucky Bar Ass'n , 355 S.W.3d 449, 450 (Ky. 2011), we explained that "[p]ermanent disbarment is a severe sanction [but] this Court has been stern and consistent in matters related to financial misconduct by attorneys." Id.
In Coffman , the Inquiry Commission alleged Coffman violated SCR 3.130 (8.4)*. 494 S.W.3d at 494. Coffman was found guilty by a federal jury of twenty-seven (27) counts of wire fraud, conspiracy to commit money laundering, money laundering and securities fraud involving approximately 600 individuals and a total monetary loss of $36,464,060.86. Id. This Court agreed with the Board's recommendation to permanently disbar Coffman. Id. at 495. In Reskin , Reskin entered a guilty plea in federal court to one count of conspiracy to commit wire fraud, securities fraud and money laundering and one count of obstruction of justice. 320 S.W.3d at 698. He moved this Court to enter an order permanently disbarring him from the practice of law. Id. Concluding that Reskin violated SCR 3.130 (8.4)(b)* and SCR 3.130 (8.4)(c)*, this Court granted his motion. Id. at 698-99.
Beyond Rorrer , and the default- and attorney-requested-disbarment cases dealing with money laundering, a recent review of our cases involving lawyer dishonesty in financial transactions reveals that permanent disbarment is often the proper sanction when the circumstances involve a form of theft. See Kentucky Bar Ass'n v. Goble , 424 S.W.3d 423 (Ky. 2014), and Rorrer , 222 S.W.3d 223 (Ky. 2007). In terms of the four cases reviewed in Goble in which the Board of Governors recommended permanent disbarment and mitigation was offered but was not successful, they involved financial misconduct crimes often described as crimes of moral turpitude, which include crimes harming others, requiring disbarment in order to protect the public and the integrity of the profession. Pepper, however, seeks mitigation based upon the fact that his crime was one with no victims, a fact different from those cases.
In Goble , in contrast to this case, the Office of Bar Counsel sought disbarment of the attorney. Goble, entering an Alford plea, was criminally convicted on two counts of failure to make required disposition of property of over $500 but less than $10,000 and one count of theft of labor over $500 but less than $10,000. Id. at 425. Goble was sentenced to two years in prison on each count, to run concurrently, with the sentence diverted for three years. Id. While the Office of Bar Counsel (referred to as the KBA in Goble ) believed Goble should be disbarred, the Board believed Goble should be suspended for five years. Id. at 426. In support of its argument, the Office of Bar Counsel cited the cases Rorrer relied on and additional cases involving criminal financial misconduct by an attorney that resulted in permanent disbarment (the Court also reviewed two other cases that resulted in permanent disbarment following criminal misconduct), cited three cases involving financial misconduct with no criminal convictions that resulted in permanent disbarment which included Kentucky Bar Ass'n v. Steiner , 157 S.W.3d 209 (Ky. 2005), and cited two cases involving attorneys taking "relatively small" amounts of money but who were nonetheless disbarred. See id. at 426-28.
The twelve cases reviewed involving criminal financial misconduct which resulted in the attorney's permanent disbarment follow: Fitzgerald v. Kentucky Bar Ass'n , 381 S.W.3d 318 (Ky. 2012) (permanent disbarment requested); Kentucky Bar Ass'n v. Carmichael , 244 S.W.3d 111 (Ky. 2008) (Board of Governor's recommended disbarment); Kentucky Bar Ass'n v. Sivalls , 165 S.W.3d 137 (Ky. 2005) (default case); King v. Kentucky Bar Ass'n , 162 S.W.3d 462 (Ky. 2005) (permanent disbarment requested); Caudill v. Kentucky Bar Ass'n , 155 S.W.3d 725 (Ky. 2005) (permanent disbarment requested); Kentucky Bar Ass'n v. Tanner , 152 S.W.3d 875 (Ky. 2005) (default case); Kentucky Bar Ass'n v. Matthews , 131 S.W.3d 744 (Ky. 2004) (default case); Dickey v. Kentucky Bar Ass'n , 98 S.W.3d 864 (Ky. 2003) (permanent disbarment requested); Kentucky Bar Ass'n v. Layton , 97 S.W.3d 452 (Ky. 2003) (With the case proceeding under SCR 3.210 as containing only questions of law, the Board of Governors recommended permanent disbarment; Layton did not advance his mental illness as a mitigator but as a defense to the charge, but either way, Layton did not provide evidence of his mental illness.); Kentucky State Bar Ass'n v. Scott , 409 S.W.2d 293 (Ky. 1966) (Board of Governors recommended permanent disbarment); In re Shumate , 382 S.W.2d 405 (Ky. 1964) (Board of Governors recommended disbarment); and In re Lynch , 238 S.W.2d 118 (Ky. 1951) (Board of Bar Commissioners recommended permanent disbarment).
Rorrer , rendered in 2007, cites Caudill , Tanner , Matthews , Dickey , Layton , and Steiner (In Steiner , the Board of Governors recommended permanent disbarment; although Rorrer describes Steiner otherwise, criminal conviction is not part of the facts.).
In terms of the circumstances encountered in Goble itself, a majority of this Court concluded that Goble's criminal convictions warranted a five-year suspension rather than disbarment, a primary reason being unlike the cases reviewed in which the attorneys were permanently disbarred, Goble's transgressions did not arise out of the practice of law or involve client funds. Goble , 424 S.W.3d at 428 (Minton. C.J. and Hughes, J., dissenting).
As part of its decision making, in addition to the cases referenced in the preceding note, the Court also reviewed three cases in which it had imposed less severe penalties, either a five-year or a two-year suspension, on attorneys who engaged in dishonesty involving financial matters. Those cases were Kentucky Bar Ass'n v. Hawkins , 260 S.W.3d 337 (Ky. 2008) (five-year suspension); Elliott v. Kentucky Bar Ass'n , 341 S.W.3d 119 (Ky. 2011) (two-year suspension); and Kentucky Bar Ass'n v. Hammond , 241 S.W.3d 310 (Ky. 2007) (five-year suspension). Goble , 424 S.W.3d at 428.
At the time In re Lynch was decided, the governing body was the Board of Bar Commissioners.
Kentucky Bar Ass'n v. Layton , 97 S.W.3d 452 (Ky. 2003), does not fall within this category because Layton offered, unsupported, mental illness as a defense to the charges, rather than seeking mitigation. In Layton , with the case proceeding under SCR 3.210 as containing only questions of law, the Board of Governors recommended permanent disbarment. Layton's defense against disbarment or at least disbarment due to intentional conduct was that his conversion of funds for several years from his account as Master Commissioner of Jessamine and Garrard counties was the result of suffering from bipolar disorder and severe obsessive-compulsive personality features. The Court considered the record did not contain any evidence verifying Layton's medical condition and although Layton had been and was currently being treated for a bipolar disorder, he presented no credible defense to the charge supported by either fact or law. Id. at 453. Steiner , decided in 2005, clarified that in the context of disciplinary proceedings, mental illness may be considered as a punishment mitigator, but not a defense to a charge. 157 S.W.3d at 214.
In Kentucky Bar Ass'n v. Carmichael , 244 S.W.3d 111 (Ky. 2008), Carmichael, a Commonwealth's Attorney, was found guilty by a federal jury of attempted extortion. Id. at 112. The mitigating factors—Carmichael's good reputation, his success in re-integrating himself in the community, and his absence of a prior disciplinary record—did not outweigh the aggravating circumstance that Carmichael, in a position of authority and influence, abused his public office for his own selfish gain. Id. at 114-15.
In Kentucky State Bar Ass'n v. Scott , 409 S.W.2d 293 (Ky. 1966), Scott was employed in an executive and managerial capacity as an insurance adjuster. The mitigation that Scott had accepted the responsibility of the adjusters working under his charge and had offered restitution was not enough to overcome Scott's guilty plea to charges of conspiracy to commit grand larceny and grand larceny, larceny being a crime of moral turpitude. Id. at 294.
In re Shumate , 382 S.W.2d 405 (Ky. 1964), involved an attorney found guilty by a jury of embezzling money placed in his charge as Trustee in Bankruptcy and knowingly and fraudulently concealing money from the successor Trustee in Bankruptcy and from the creditors in the bankruptcy proceedings. The mitigation offered that Shumate paid back money taken, that he was ill, and that a former employee misappropriated money was not sufficient to overcome his crimes, moral turpitude being inherent in the felony conviction. Id. at 406.
In re Lynch , 238 S.W.2d 118 (Ky. 1951), involved an attorney who denied the charge that while serving as Alcoholic Beverage Administrator for the City of Louisville in 1945, he misappropriated and embezzled money belonging to the city. The mitigation he offered—his conduct was not connected with his professional duties, and he did not plead guilty to a criminal offense in confessing a fine for misfeasance in office—did not weigh in favor of suspension. Lynch's conduct showed he should be disbarred "to protect the public and also to keep clean and wholesome the legal profession." Id. at 120.
In Kentucky Bar Ass'n v. Vincent , 537 S.W.2d 171 (Ky. 1976), dealing with an attorney who pled guilty to willfully and knowingly failing to make an income tax return, who was sentenced to prison for twelve months, and who then faced disciplinary proceedings for having been convicted of a criminal offense involving moral turpitude, this Court recognized the problem of defining moral turpitude. Id. at 171-72. While noting that Kentucky Bar Ass'n v. McAfee , 301 S.W.2d 899 (Ky. 1957), held that a conviction for failing to file a federal income tax return does not involve moral turpitude, id. at 172, Vincent did not specifically decide the issue of moral turpitude in Vincent's income tax matter, but explained that the disbarment "criterion is and should be whether the attorney is guilty of such unprofessional and unethical conduct which is calculated to bring the bench and bar into disrepute," id. at 173. But Vincent also recognized that "[i]t is beyond cavil that an attorney who is convicted of an offense involving moral turpitude, or who is convicted of an intentional and serious misdemeanor, or who is convicted of a felony, is guilty of such conduct as is calculated to bring the bench and bar into disrepute." Id.
This Court rejected the Board's finding that Vincent committed an infamous crime, but concluded that his conduct constituted unethical and unprofessional conduct and agreed with the Board's recommended six-month suspension. At an evidentiary hearing, Vincent offered mitigation, much like that in Pepper's motion. Vincent testified about his personal and family-related matters which included his devotion to a chronically ill child; his professional conduct; and his cooperation with the Internal Revenue Service, all tax returns being duly filed and all taxes, penalties, and interest being duly paid. Id. at 172. In regard to the issue of moral turpitude, each of Vincent's witnesses expressed that Vincent's conduct did not lower his opinion of lawyers in general or his opinion of Vincent. Id. at 173.
More recently, in McEnroe v. Kentucky Bar Ass'n , 408 S.W.3d 750 (Ky. 2013), the attorney pled guilty in federal court to willfully attempting to evade and defeat payment of income and employment taxes owed for the calendar years 1993 to 2008. Id. at 750-51. At the time of this Court's consideration of the negotiated sanction, McEnroe had begun serving a 24-month prison sentence and had yet to make any payments on the $368,753 restitution owed. Id. at 751. The Court considered McEnroe's admission that he had struggled with alcohol addiction for many years, and while participating in Alcoholics Anonymous in the past, had "fallen off the wagon" in the years leading up to his incarceration. Id. The Court accepted his negotiated sanction and imposed a five-year suspension, subject to the requirement that McEnroe also undergo an evaluation through KYLAP and successfully complete all resulting recommendations. Id.
While Rorrer , like Vincent , did not address whether the crime of laundering money involves moral turpitude, Grigsby v. Kentucky Bar Ass'n , 181 S.W.3d 40 (Ky. 2005), is precedent that even if the crime committed may be considered as involving moral turpitude, suspension may be proper because of mitigating factors. In Grigsby the attorney pled guilty to the reduced charge of possession of a controlled substance, third degree, a Class A misdemeanor. Id. at 41. Grigsby admitted violating SCR 3.130 (8.4)(b)* and sought to be disciplined, with agreement of Bar Counsel, by submission to KYLAP for two years and a 61-day suspension from the practice of law probated for two years. Id. at 42. This Court ordered review pursuant to then SCR 3.370(9). Id.
This Court concluded that the nature of the offense and the fact that Grigsby did not voluntarily enter KYLAP pursuant to SCR 3.950 prior to an arrest were key to Grigsby's proper discipline. Id. The Court recognized that narcotics offenses are ordinarily considered crimes of moral turpitude justifying disbarment, stating that "[b]esides being illegal, the addictive nature of the drugs combined with their effects is known to cause the lawyer to harm others, either the public or clients." Id. at 43. The Court refused to consider the fact that Grigsby, a skilled defense attorney, arrested for promoting contraband in the first degree, a Class D felony, and possession of a controlled substance in the first degree, a Class D felony, was able to plead to a lesser offense as mitigating the underlying concerns for his fitness to practice law. Id. The Court explained that "[l]awyer discipline for violations of the code of professional conduct is not entirely focused on punishing a lawyer for committing a crime, but in maintaining bar membership that has the character and fitness to practice law." Id. at 42.
Fitness to practice law includes maintaining good moral character. It is a long standing principle that for one to be worthy to practice law, the person must have a good moral character upon entering the profession, and must maintain such character all through his or her professional life. Any act by an attorney that brings the profession or the authority of the courts and administration of the law into disrespect or disregard, such as dishonesty, personal misconduct, questionable moral character, or unprofessional conduct is potential grounds for disbarment. Rather, the public is entitled to rely on an attorney's admission to the practice of law as a certification of the attorney's honesty, high ethical standards, and good moral character. Thus, the companion aspect of discipline is to safeguard the public's trust that this Court maintains a bar membership that has the fitness and character to practice law.
Id. at 42-43 (internal citations omitted).
In Grigsby , the Court suspended the attorney for one hundred eighty (180) days with sixty-one (61) days to be served and the remainder probated for the balance of his duties under the KYLAP monitoring contract. Like the mitigating factors being considered here, mitigating factors were Grigsby had no other disciplinary actions against him, he had been cooperating in the disciplinary proceedings, and had agreed to KYLAP assistance. Id. at 43. The Court explained, however, that agreement would have had a greater mitigating effect if Grigsby had self-reported his difficulties with cocaine prior to being charged with crimes related to the drug use or causing other harm. Id.
Lastly, Goble is another more recent case in which, despite involving a crime of moral turpitude, a majority of this Court decided that the appropriate discipline was a five-year suspension. In Goble , the Board of Governors and the Office of Bar Counsel disagreed as to the appropriate discipline. Id. at 426. Goble, entering an Alford plea, was criminally convicted on two counts of failure to make required disposition of property of over $500 but less than $10,000 and one count of theft of labor over $500 but less than $10,000. Id. at 425. Goble was sentenced to two years in prison on each count, to run concurrently, with the sentence diverted for three years. Id. Goble was found guilty of violating both SCR 3.130 (8.4)(b) and SCR 3.130 (8.4)(c). Id. Notably, in Goble , the Board believed Goble should be suspended for five years, and in contrast to this case, the Office of Bar Counsel believed Goble should be disbarred. See id. at 426. The Court, reviewing many financial misconduct cases, agreed with the Board's recommendation, citing three reasons:
See notes 17 and 18 above.
First, unlike the majority of the attorneys noted above who were permanently disbarred, Goble's transgressions did not arise out of the practice of law or involve client funds. Second, although not insubstantial, the amount of money involved in Goble's transgressions was substantially less than the amounts generally involved in the permanent disbarment cases. Third, unlike some of the permanently disbarred attorneys, Goble has not had any prior disciplinary actions; has apparently made restitution; and has apparently taken responsibility for his actions.
Id. at 428.
Pertinently, perhaps only a step away from the mitigation Pepper seeks, the Court considered part of Goble's mitigation to be that Goble did not take client funds.
Although this Court has disbarred other attorneys for crimes committed, particularly Rorrer whose criminal actions, like Pepper's, resulted in a conviction of a single money-laundering charge, the Office of Bar Counsel regards the requested sanction to be appropriate when comparing the facts and the discipline imposed in Wade v. Kentucky Bar Ass'n , 498 S.W.3d 783 (Ky. 2016), and Kentucky Bar Ass'n v. Embry , 152 S.W.3d 869 (Ky. 2005). The Office of Bar Counsel notes that like Pepper, in Wade , the attorney showed his commitment to treating his mental health and addiction issues, and in Embry , the attorney had a substance abuse problem.
Wade involved two Charges against the attorney stemming from criminal prosecution in two counties. 498 S.W.3d at 784. Wade admitted that his pattern of drug and alcohol abuse, as well as his criminal proceedings, subjected him to disciplinary sanction from this Court. Id. at 785.
In File No. 19905, a Charge resulted from Wade's felony drug offenses committed in Bullitt County. The Bullitt County criminal charges against Wade, 11-CR-00238, were resolved with a felony pretrial diversion, Wade entering a guilty plea. The Charge alleged, and Wade admitted, violating SCR 3.130 (8.4)(b). After his criminal conviction, Wade took steps to treat his drug and alcohol addiction, including extensive inpatient treatment, entering a supervision agreement with KYLAP, and regularly attending twelve-step support meetings. Id. at 785.
In KBA File No. 19610, although Wade made efforts to distribute an insurance settlement to his client, the distribution did not occur until a year after receipt. Id. at 784. Part of the delay seemingly was a result of Wade spending five months in an inpatient rehabilitation facility after being convicted in Bullitt County on the drug offenses. See id. This Court noted that Wade suffered from anxiety and depression and an active drug and alcohol addiction years before his representation of the client. Id.
A Jefferson County grand jury indicted Wade in 12-CR-001889 on two criminal charges related to his handling of the insurance settlement. Id. at 784-85. Wade had endorsed his client's name on the check and was charged with second-degree criminal possession of a forged instrument. Id. at 784. He was charged with theft by failure to make required disposition of property for his belated distribution of the settlement funds. Id. at 784-85. Wade entered an Alford plea and received felony pretrial diversion for four years. Id. at 785. The Charge alleged, and Wade admitted, he violated five Supreme Court Rules including SCR 3.130 (8.4)(b) and SCR 3.130 (8.4)(c). Id.
This Court accepted the proposed consensual discipline to resolve the two disciplinary cases. Wade's license to practice law in Kentucky was suspended for a period of four years and six months, retroactive from the date of his automatic suspension, or until such time as he had satisfied the full terms and conditions of pretrial diversion in the Jefferson and Bullitt Circuit Court proceedings, whichever event last occurred. Id.
Embry , 152 S.W.3d 869, involved one Charge against an attorney who pled guilty to second-degree manslaughter and first-degree possession of a controlled substance. After Embry moved in with his mother to help care for her, he began using crack cocaine and became a regular user. Over a course of seven years, Embry's addiction and financial situation worsened; the resources for paying for his mother's caretakers became depleted. Embry's mother was taken to the emergency room, where she was diagnosed with pneumonia, and was emaciated, covered with sores and showed signs of severe neglect. A search of Embry's home revealed deplorable conditions and drug paraphernalia. When Embry's mother died several days later, he was indicted for manslaughter and drug possession. Embry was sentenced to ten years in prison for manslaughter and to a concurrent five-year sentence for possession of a controlled substance. After serving 150 days in jail, Embry received shock probation. 152 S.W.3d at 871.
Upon Embry's guilty plea to the two felonies, the Charge alleged, and Embry admitted, that he violated SCR 3.130 (8.4)(b)*. Id. at 870, 872. The trial commissioner recommended that Embry be suspended from the practice of law for five years with conditions. Id. at 870. A majority of the Board of Governors voted to affirm the recommendation except it concluded the suspension should run from the date of entry of the Supreme Court disciplinary order. Id. This Court adopted the Board's recommendation, the Board noting that Embry had no previous disciplinary charges, his drug use escalated as his duties for caring for his mother increased, he was remorseful and wished to practice law again to help people as he did before, and he stated he would comply with KYLAP assistance. Id. at 870-72.
Within three months of his KBA testimony, Embry failed to comply with the terms of his probation and his probation was revoked for cocaine use. Embry was permanently disbarred in October 2005 in accordance with this Court's January 2005 Order. Kentucky Bar Ass'n v. Embry , 173 S.W.3d 246 (Ky. 2005).
While Wade and Embry are cases involving attorneys who were criminally charged, who had substance abuse problems, and who were suspended from the practice of law, these cases do not provide the guidance required for Pepper's case. Pepper's mitigation defense to his ethical violation(s) includes his mood disorder, its manifestations including gambling and abuse of alcohol, and his commitment to treatment of his mood disorder. Although not cited by the parties here, Hill , 476 S.W.3d at 874, is authority properly considered when dealing with mitigation due to attorney mental health issues. Hill dealing directly with mitigating factors related to mental health, relied upon prior precedent and the American Bar Association (ABA) Standards for Imposing Lawyer Sanctions to clearly pronounce a mental-health-mitigation rule.
Bratcher v. Kentucky Bar Ass'n , 487 S.W.3d 894 (Ky. 2016), is the only other published case dealing with mental health issues and appropriate KBA discipline which cites Hill . Recent cases dealing with mental health issues include Scott v. Kentucky Bar Ass'n , 614 S.W.3d 500 (Ky. 2021) (Major Depressive Disorder and Chronic Post Traumatic Stress Disorder ); Grinnell v. Kentucky Bar Ass'n , 602 S.W.3d 784 (Ky. 2020) (anxiety and depression); Hall v. Kentucky Bar Ass'n , 599 S.W.3d 877 (Ky. 2020) (In accordance with Hill we noted, id. at 881 n.1, that Hall did not provide any medical proof of his alleged anxiety and depression to the KBA or to this Court.); and Kentucky Bar Ass'n v. Howell , 568 S.W.3d 857 (Ky. 2019) (anxiety, depression and alcohol addiction ).
In Hill , we found Hill's depression to be a mitigating factor and suspended Hill for eighteen months after being found guilty of twelve ethical violations based on a pervasive pattern of lying to three clients about the status of their cases, ignoring their repeated requests for information, and charging them for work not performed. 476 S.W.3d at 881, 885.
Hill's violations occurred in 2010, 2011, and 2012. Id. at 877-89. Hill presented evidence that as early as 2009 he began suffering from untreated depression and resulting anxiety, and he aggravated the suffering by self-medicating with alcohol. Id. at 882. At others’ insistence, Hill sought help through KYLAP, which in turn put him in touch with a licensed clinical social worker for help with his substance abuse problems. Id. He was prescribed medication for his depression and attended individual and group counseling between March 2009 and September 2010. Id. Hill's ethical violations began to accrue after he stopped the counseling. Id.
Hill began seeing a psychiatrist in 2013. Id. The psychiatrist testified that the 2009-2010 treatment and counseling were inadequate to address his actual problems. Id. In January 2013, Hill entered into a KYLAP Supervision Agreement and as agreed, began and continued attending Alcoholics Anonymous meetings. Id. The psychiatrist testified to a causal connection between Hill's untreated mental health condition and his conduct in the disciplinary cases and was of the opinion that Hill was on the path to recovery if he continued his same program and treatment. Id. One of Hill's clients also testified that there were improvements in Hill's demeanor, appearance, and attitude toward his work between 2010-2012 and after he started his therapeutic regimen in 2013. Id. at 883.
The Board of Governors reviewed Hill's case after the trial commissioner found Hill guilty of twelve of fifteen violations and recommended that Hill be suspended from the practice of law for five years, a term of suspension which Bar Counsel advocated for when this Court undertook its review of the Board's decision under SCR 3.370(7). Id. at 875. The Board unanimously agreed with the trial commissioner's guilt findings, but recommended a 181-day suspension along with other conditions, those being that Hill obtain the approval of the KBA's Character and Fitness Committee prior to readmission and that he continue substance abuse counseling through KYLAP. Id. Hill did not contest the Board's findings of guilt on the twelve ethical violations but argued that in light of the mitigation evidence he presented, even the Board's recommended sanction was excessive. Id. at 875, 882. Finding Hill's mental health to be a mitigator, we stated:
Hill's request for a modest suspension from practice coupled with stringent conditions for ongoing therapeutic treatment and the Board's proposal for a 180–day suspension unduly depreciate the substantial harm that Hill's calculated, extended, and pervasive deceit caused to his clients, to our system of justice, and to the public's trust in the legal profession. We believe that a suspension from the practice of law for 180 days or less provides insufficient time for assessing the durability of Hill's commitment to his treatment regimen, the efficacy of his ongoing treatment. It is also an insufficient time for evaluating the nature of Hill's integrity and character once he is relieved of, or at least in control of, the maladaptive behavior patterns that so egregiously influenced his conduct in the past. In other words, it is our considered opinion that Hill, the legal profession, and the public we are bound to serve, will benefit if the effect of Hill's rehabilitation can be assessed over a greater period of time.
We also conclude that the Bar Counsel's recommendation for a five-year suspension fails to adequately account for the rehabilitative measures Hill is already undertaking. A five-year suspension under the circumstances of this case underestimates the value of a disciplinary measure that protects the public by punishing and temporarily removing the wrongdoer, while at the same time leaves open a path to reinstatement within a reasonable time, if the wrongdoer can prove that he has regained the character and fitness worthy of the public trust.
Id. at 885.
We expressed the rule for when mental health disabilities may be accorded mitigation effect in a lawyer disciplinary case as follows:
For evidence of a lawyer's disability to be accorded a mitigating effect in a KBA disciplinary case, it must be shown that the disability caused the misconduct. KBA v. Steiner , 157 S.W.3d 209, 213 (Ky. 2005) (the burden of establishing a successful mitigation defense remains with the attorney);[ ] KBA v. Christian , 320 S.W.3d 687 (Ky. 2010). The attorney must also show a recovery from the condition demonstrated by "meaningful and sustained proof of successful rehabilitation." Id. at 690 (citing ABA Standards for Imposing Lawyer Sanctions Section 9.32(i)(3)). Moreover, "the misconduct must have stopped and recurrence proved to be unlikely." Id. In this vein, consideration should also be given to the attorney's involvement in Alcoholics Anonymous and "earnest participation in the Kentucky Lawyer's Assistance Program." KBA v. Hawkins , 260 S.W.3d 337, 339 (Ky. 2008) ; ABA Standards for Imposing Lawyer Sanctions Section 9.32.[ ]
Steiner is a case in which the attorney sought mitigation for misappropriating funds and defrauding his clients and his law firm/partners of funds due them over six years and in over 100 instances due to mental illness after his son's death due to a drug overdose. However, the KBA's witness, a board-certified psychiatrist, testified that Steiner was not suffering from any sort of mental disorder, such as depression, that would have caused him any impairment in cognition or judgment. The Court found the psychiatrist's testimony controlling. As recommended by the Board of Governors, Steiner was permanently disbarred. Id. at 211-15.
Section 9.32 factors ... may be considered in mitigation.
Mitigating factors include: (a) absence of a prior disciplinary record; (b) absence of a dishonest or selfish motive; (c) personal or emotional problems; (d) timely good faith effort to make restitution or to rectify consequences of misconduct; (e) full and free disclosure to disciplinary board or cooperative attitude toward proceedings; (f) inexperience in the practice of law; (g) character or reputation; (h) physical disability; (i) mental disability or chemical dependency including alcoholism or drug abuse when: (1) there is medical evidence that the respondent is affected by a chemical dependency or mental disability ; (2) the chemical dependency or mental disability caused the misconduct; (3) the respondent's recovery from the chemical dependency or mental disability is demonstrated by a meaningful and sustained period of successful rehabilitation; and (4) the recovery arrested the misconduct and recurrence of that misconduct is unlikely ; (j) delay in disciplinary proceedings; (k) imposition of other penalties or sanctions; (l) remorse; (m) remoteness of prior offenses. (emphasis added).
Hill , 476 S.W.3d at 884 n.4.
Hill , 476 S.W.3d at 884.
Here, the licensed psychologist describes Pepper's gambling, along with the alcohol use, as more likely a symptom of the mood disorder which developed into an addiction. Pepper, failing to heed advice about gambling, became involved with Booth and began helping Booth launder his illegal gambling proceeds; he conspired with Booth over a course of nine years. In terms of a causal connection between the gambling and the money laundering behaviors, Pepper states that but for his gambling activity, he would not have had the problems and issues which later developed into the criminal case in 2020.
Upon review of the preceding cases, we conclude the facts in the criminal financial misconduct cases do not readily compare with Pepper's case. The Court's decision to disbar the attorney in Rorrer , acknowledging the precedent in which attorneys have been disbarred due to committing criminal offenses involving dishonesty in financial matters, explained that while Rorrer used his professional skills to help launder drug money, his dishonesty was key in the whole scheme.
Rorrer, far from being less culpable in the money laundering than the other participants, was in fact the central figure in the operation: he instigated the transaction by connecting Hawkins and Caporale; he facilitated it by writing a phony contract; and he offered his own office space to complete the transaction.... It is apparent that lawyering is a special skill, and Rorrer used that skill in accomplishing this transaction when he brought the parties together, recommended that they launder the money via a false construction contract, drew up that contract, and recommended to Hawkins that she deposit the money in small amounts to conceal the transaction from the IRS.
Rorrer , 222 S.W.3d at 228 n.11 (quoting United States v. Robertson , 67 Fed. Appx. 257, 272-73 (6th Cir. 2003) ). Citing Vincent , this Court concluded that Rorrer's serious criminal conduct brought dishonor to both Rorrer and to the entire bench and bar and warranted permanent disbarment. 222 S.W.3d at 229.
Pepper's conspiracy to launder money constitutes serious criminal financial misconduct, but the facts of his case differ greatly from the facts in Rorrer such that he may be viewed as fit and of good moral character to once again practice law after completing the terms of the discipline imposed. While Pepper had a significant role in the money laundering, it was apparently not to the point he could be considered the mastermind of a complex scheme with many layers of dishonesty. Pepper cooperated in the federal case from the beginning, pled guilty in federal court, received probation, paid a significant fine, and accepted responsibility for his actions within this disciplinary proceeding. In regard to mitigating factors personal to Pepper, he explained his challenging family situation and provided evidence of his mood disorder related to the gambling behaviors which ultimately placed him in the position to conspire with Booth to launder Booth's illegal gambling proceeds.
Following Vincent ’s guidance, our first consideration is whether Pepper is guilty of such unprofessional and unethical conduct which is calculated to bring the bench and bar into disrepute. Pepper points out his is a case in which there are no victims, a circumstance unlike many attorney financial misconduct cases. As a case involving no theft, and in contrast to Rorrer's scheme of dishonesty, we view Pepper's case as morally distinguishable and more in line with McAfee , Vincent , and a more recent disciplinary case, McEnroe , in which this Court concluded that a five-year suspension was the appropriate discipline.
Pepper has no prior disciplinary record; he timely accepted responsibility in federal court for his criminal actions and timely paid his fine; he has cooperated in this disciplinary process; made commitments and shown progress in dealing productively with family and personal problems, including the now-recognized mood disorder and the related symptom of gambling, which led to a gambling addiction; has successfully dealt with his alcohol addiction for seventeen years which offers further support, beyond his initial progress described by his counselor, that his gambling addiction can likewise be controlled; and has accepted KYLAP assistance as part of the negotiated sanction.
However, there are aggravating factors to be considered. Pepper, like Grigsby, engaged in a pattern of misconduct which spanned numerous years. While gambling may be a symptom of Bipolar Disorder and Pepper became addicted to gambling, Pepper indicates that he knew he was in a problematic situation, to say the least, and attempted to distance himself from Booth. Nevertheless, he continued to help Booth launder money for years afterward, a benefit being gambling debt relief. Despite recognizing his gambling had put him in a position with Booth that he desired to distance himself from, he, like Grigsby, did not seek KYLAP's assistance until charged with a crime stemming from his addiction.
Steiner, 157 S.W.3d at 215, reminds us:
In recognition of the significant effects mental, psychological or emotional conditions may have, and have had, on our profession, this court set up the Kentucky Lawyers Assistance Program (KYLAP) in 2003. See, SCR 3.910. Its function is to assist members of our bar in dealing with and working through "impairments" within the context of various practices. Under KYLAP, impairment "includes any mental, psychological or emotional condition that impairs or may foreseeably impair a persons’ ability to practice law .... Impairment may result from addiction to intoxicants or drugs, chemical dependency, substance abuse, mental disease, mental disorder or defect, or psychological or emotional illness." SCR 3.900(1).
While the circumstances of this case do not warrant Pepper's permanent disbarment, we must allow time to reveal whether he is fit to return to the practice of law, see Hill , 476 S.W.3d at 885, key being his success in managing his mood disorder and related gambling addiction. Pepper has been able to control his alcohol use since 2004, his therapist indicates he is making progress in handling the mood disorder and his life's stressors, and as a condition of federal probation, cannot gamble. With a full five-year suspension with successful mood disorder maintenance and gambling control, and no other harmful addictive behavior, we can be better assured Pepper may regain the trust of his clients, the public in general, the courts, and the Kentucky Bar Association. III. CONCLUSION AND ORDER
Having concluded that a full five-year suspension, with the stated conditions, is appropriate under the circumstances of this case, we accept in part the negotiated sanction.
It is therefore ORDERED that:
1. H. Harris Pepper, Jr., KBA Member Number 84068, is found guilty of violating SCR 3.130 (8.4)(b) as charged in KBA File 20-DIS-0046;
2. Pepper is suspended from the practice of law in the Commonwealth of Kentucky for a period of five (5) years. The period of suspension shall begin on February 27, 2020 and shall continue until Pepper is reinstated to the practice of law by this Court pursuant to SCR 3.510 ;
3. Pepper is referred to KYLAP and shall be evaluated by a professional recommended by them. He shall fully comply with all recommendations resulting from such evaluation and his KYLAP Supervision Agreement throughout the period of his suspension;
4. Pepper shall execute, and maintain in effect, a release in favor of the Office of Bar Counsel so that the Office of Bar Counsel may obtain status report information concerning his participation in KYLAP;
5. Pepper shall remain compliant with his community-based mental health treatment and his therapist's counseling recommendations;
6. In the event Pepper violates the terms of his federal criminal probation, the Office of Bar Counsel may seek to revoke the disciplinary suspension and may seek permanent disbarment of Pepper;
7. To the extent he has not already done so, Pepper must comply with SCR 3.390 ; and
8. Pepper is directed to pay all costs associated with these disciplinary proceedings against him, said sum being $96.20 for which execution may issue from this Court upon finality of this Opinion and Order.
/s/ Lisabeth T. Hughes
DEPUTY CHIEF JUSTICE HUGHES
Conley, Hughes, Keller, Lambert, Nickell, and VanMeter, JJ., concur. Minton, C.J., not sitting.