Case Title: Disciplinary Counsel v. Dukat

Citation: 1997-Ohio-167

Docket Number: 19962781

State: ohio

Court: Ohio Supreme Court

Date: 1997-07-16T00:00:00Z

Document:
OFFICE OF DISCIPLINARY COUNSEL v. DUKAT. 
[Cite as Disciplinary Counsel v. Dukat (1997), ___ Ohio St.3d ___.] 
Attorneys at law – Misconduct – Eighteen-month suspension to end 
March 28, 1998 – Conviction for mail fraud. 
 
(No. 96-2781 – Submitted May 6, 1997 – Decided July 16,1997.) 
 
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and 
Discipline of the Supreme Court, No. 96-46. 
 
In January 1992, James C. Dukat of  Ashland, Ohio, Attorney Registration 
No. 0010176 (“respondent”), was General Counsel for Valley Systems, Inc.  
Sometime that month, while walking through the corporate offices, he encountered 
Valley Systems’ chief financial officer, Nick Pace.  Pace told respondent that 
because Valley Systems currently did not have the cash available, he wanted to 
underreport the Valley Systems payroll to Lumbermen’s Mutual Casualty 
Company (“Lumbermens”) in Texas in order to pay a lower Texas workers’ 
compensation premium.  Respondent, who had been working to replace 
Lumbermen’s as Valley Systems’ insurance carrier effective April 1992, in order 
to save $750,000 to $1 million in annual premiums, explained to Pace that Valley 
Systems had $313,000 on deposit with Lumbermen’s in Texas.  If the payroll were 
 
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underreported, the audit upon termination of Lumbermen’s as Valley Systems’ 
insurance carrier would result in a loss of the deposit or Valley Systems would 
have to pay more money.  At that point, Pace, with respondent’s tacit agreement, 
decided to underpay the premium. 
 
Pace thereupon prepared the payroll report and filed it.  Respondent did not 
prepare or sign the report, sign the checks, or transmit the report to Lumbermen’s.  
In September 1992, respondent discovered that Pace was falsifying Valley 
Systems’ books to show a $2 million profit when there was actually a $2 million 
loss.  At that time respondent found that Pace not only had understated expenses 
and overstated income, but he also had not accrued funds for the January 1992 
underpayment to Lumbermen’s, which was approximately $319,000. 
 
The Securities and Exchange Commission began an investigation of Valley 
Systems in the fall of 1992, and respondent cooperated in informing the agency of 
the underpayment to Lumbermen’s and in providing testimony regarding Pace’s 
illegal activities.  Subsequently the United States Attorney brought a mail fraud 
charge against respondent to which respondent pled guilty. Lumbermen’s claim 
against Valley Systems was paid. 
 
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On March 29, 1996, respondent was sentenced to two years’ probation, and 
on May 30, 1996, pursuant to Gov.Bar R. V(5)(A)(2), we suspended respondent 
from the practice of law for an interim period.  On June 13, 1996, relator, Office of 
Disciplinary Counsel of the Supreme Court, filed a complaint charging that 
respondent’s actions violated several Disciplinary Rules. 
 
A panel of the Board of Commissioners on Grievances and Discipline of the 
Supreme Court (“board”) heard the matter, including evidence in mitigation, and 
concluded that respondent had violated DR 1-102(A)(4) (engaging in conduct 
involving dishonesty, fraud, deceit, or misrepresentation) and 1-102(A)(6) 
(engaging in conduct that adversely reflects on the attorney’s fitness to practice 
law).  Based on the fact that Lumbermen’s recovered all the unpaid premium, the 
panel recommended that respondent be suspended from the practice of law for 
eighteen months, a period coterminous with his federal probation.  The board 
adopted the findings, conclusions, and recommendation of the panel. 
___________________ 
 
Geoffrey Stern, Disciplinary Counsel, and Sally Ann Steuk, Assistant 
Disciplinary Counsel, for relator. 
 
James C. Dukat, pro se. 
 
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___________________ 
 
Per Curiam.  A lawyer is prohibited by the Disciplinary Rules from 
participating in fraudulent or dishonest schemes.  Respondent’s conduct involved, 
at least, the tacit approval of a scheme concocted by a company’s financial officer 
to file a false payroll report in order to minimize the amount of workers’ 
compensation premium that the company was required to pay. 
 
In this case, respondent may have thought that Lumbermen’s would soon be 
replaced as insurance carrier and that the deposit forfeited by Valley Systems to 
the insurer would approximately cover the premium payment shortfall.  
Nonetheless, the fact is that respondent participated in a fraudulent scheme.  
 
In mitigation we note that respondent did not partake in the mechanics of, 
supervise, or profit from the fraud.  Nor was the fraud a part of a pattern of 
designed deceit.  Respondent’s conduct was not the equivalent of the pattern of 
submission of false workers’ compensation claims which warranted an indefinite 
suspension in Greater Cleveland Bar Assn. v. Cassaro (1980), 61 Ohio St.2d 62, 
15 O.O.3d 109, 399 N.E.2d 545.  Nor was respondent’s tangential involvement in 
the submission of the false report as direct as that in Columbus Bar Assn. v. 
Newsom (1979), 59 Ohio St.2d 56, 13 O.O.3d 39, 391 N.E.2d 741, where an 
 
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attorney’s submission of false insurance claims on his own behalf also warranted 
an indefinite suspension.  We further note in mitigation that Valley Systems repaid 
Lumbermen’s for the shortfall. 
 
We adopt the findings and conclusions of the board.  Respondent did violate 
the above-mentioned Disciplinary Rules.  We adopt also the board’s 
recommendation that respondent’s suspension from the practice of law in Ohio be 
coextensive with the probationary period he is currently serving for his federal 
felony conviction and that the suspension end on the date that sentence ends.  
Respondent is therefore suspended from the practice of law until March 28, 1998.  
Costs taxed to respondent. 
Judgment accordingly. 
 
MOYER, C.J., DOUGLAS, RESNICK, F.E. SWEENEY, PFEIFER, COOK and 
LUNDBERG STRATTON, JJ., concur.