Opinion ID: 835309
Heading Depth: 1
Heading Rank: 4

Heading: issues regarding employment history and financial dealings

Text: Some aspects of applicant's employment history give us greater cause for concern than his past substance abuse. First, there is his termination from Dean Witter. The record shows that, after terminating applicant's employment, Dean Witter sought an arbitration award against applicant due to his retention of a substantial signing bonus. Dean Witter won an award of over $100,000 against applicant, which it later reduced to a judgment. Applicant discharged that obligation when he filed for bankruptcy in 1997. We have found in the past that an applicant's lack of interest in making restitution to those harmed by his past misconduct weighs against his claim for reinstatement. In re Graham, 299 Or. 511, 520-21, 703 P.2d 970 (1985). Here, when the trial panel asked applicant whether he had attempted to make amends with Dean Witter and his other past creditors, applicant responded that he didn't give that a lot of thought, but acknowledged that his behavior was selfish. Second, there is the matter of applicant's relationship with Money Market One. As mentioned above, applicant was subject to a statutory disqualification by the NASD due to his 1996 conviction for driving under the influence of intoxicants and causing bodily injury. The record shows that, in 1997, Money Market One applied to the NASD to employ applicant as a registered representative selling money market investments, that Money Market One proposed to provide a particular supervisory plan for applicant, that NASD readmitted applicant to the securities industry based on its assumption that applicant would adhere to that plan, and that applicant never went to work for Money Market One, but worked as a securities dealer for other firms. In short, it appears that, once applicant regained his securities license, he reneged on his agreements with both Money Market One and NASD. Applicant acknowledged in his deposition that Epstein of Money Market One went through a fair amount of trouble to help him regain his license and was pretty pissed off about the whole thing. However, when the Bar questioned applicant about whether his decision to work for a securities firm other than Money Market One was consistent with the terms of the reinstatement of his NASD license, applicant became upset and insisted that the Bar [didn't] understand how that business works, apparently. We find that applicant's behavior raised ethical and, possibly, legal questions that, when coupled with his insistence that he did nothing wrong, negatively reflects on his claim of good moral character. None of the issues raised by applicant's employment history are dispositive of his application, but they do undermine his claim to good moral character to some extent. The trial panel interpreted applicant's history negatively as showing evidence of situational ethics. We agree. We have often considered evidence of an applicant's handling of financial affairs in assessing whether he or she is of good moral character. See In re Taylor, 293 Or. 285, 293, 647 P.2d 462 (1982) (listing cases). Applicants are expected to honor scrupulously all financial obligations. In re Scallon, 327 Or. 32, 39, 956 P.2d 982 (1998). In the cases of applicants previously disbarred for misconduct who are still in financial trouble, we have expressed concern at the danger that [the] continuing pressure of financial need may again lead the [applicant] to violate the law and his professional trust. In re Koken, 214 Or. 357, 362, 329 P.2d 894 (1958). In this case, applicant's personal financial dealings gave the Bar cause for concern. The trial panel was primarily troubled by the applicant's recent applications for home loans, applications for unemployment benefits, and bankruptcy filings. We deal with each of those in turn. Applicant signed home loan applications that left the liability information blank, and relied on the mortgage broker to fill in that section with information from the applicant's credit report. The Bar insists that this hardly reflects the level of responsibility expected of lawyers when it comes to reading and signing important legal documents. We disagree. The mortgage broker testified credibly that, consistent with his normal practice, he had instructed applicant and his wife to leave the liability information blank. Applicant's inattention to the significance of the blanks was somewhat irregular and less than commendable, but we are not convinced that his failure to second-guess his mortgage broker raises doubts as to his good moral character. The Bar also argues that the loan application failed to disclose the tax debt that applicant and his wife were paying off at the time, that a question on the application clearly called for such disclosure, and that applicant signed the loan application solely on the strength of his wife's assurance that the mortgage broker had stated that the ultimate lender would not require that information. Again, the Bar argues that that behavior reflects a lack of responsibility on applicant's part. The trial panel apparently agreed: [T]he facts are that even by his testimony he signed blank forms   , and too readily relied on the advice and interpretation of others such as the mortgage broker or his wife. The role of the attorney is to take responsibility for the legal meaning of what he is signing. The trial panel apparently believed that applicant's responsibilities as an attorney required him to second-guess and refuse to cooperate with both his wife and the mortgage broker. At least in these circumstances, we disagree. The text of the loan application arguably called for applicant to disclose existing tax debt, but it was not clear. The mortgage broker testified credibly that applicant's wife had disclosed the existence of a tax lien to him, and testified that he had told applicant's wife that the lender did not require that information. We do not believe that applicant acted unreasonably in relying on the mortgage broker's statements. Nor are we prepared to announce that, as a rule, a lawyer must insist on including information on a loan application when a mortgage broker states that such information is not required. We reject the Bar's argument that applicant's behavior with regard to the loan applications reflects badly on his character. The Bar also raised the question of applicant's application for unemployment benefits. The trial panel noted that applicant gave his mother's address in California on his application for unemployment benefits, despite the fact that he had already closed his purchase of the house in Oregon. The trial panel, however, did not find that that action indicated some kind of fraud on applicant's part. In our view, the evidence on that question is not conclusive; it neither helps nor hurts applicant's case and we do not attach great significance to it. We are more concerned by applicant's bankruptcies. The fact that applicant filed for bankruptcy, standing alone, is not a factor that we consider in determining whether he has good moral character. Taylor, 293 Or. at 293, 647 P.2d 462. However, the bankruptcy statutes do not prevent us from examining the circumstances surrounding the bankruptcies, as these circumstances illustrate an applicant's judgment in handling serious financial obligations. Id. A bankruptcy does not reflect adversely on an applicant's character if it is compelled by an extraordinary hardship, such as an unusual misfortune, a catastrophe, an [overriding] financial obligation, or unavoidable unemployment. Id. at 294, 647 P.2d 462 (quoting In re Gahan, 279 N.W.2d 826, 831 (Minn.1979)). On the other hand, we may find that applicant lacks good moral character if the circumstances of the bankruptcy show a selfish exercise of legal rights and a disregard of moral responsibilities. Id. We have held, however, that for an applicant seeking admission to the bar, a past bankruptcy does not disqualify the applicant per se. Scallon, 327 Or. at 39, 956 P.2d 982. Scallon is instructive on that point. In Scallon, several years before applying for admission to the Oregon State Bar, the applicant had filed for bankruptcy after several of his creditors on his student loans sued him or threatened to sue. Id. at 35, 956 P.2d 982. By Scallon's own admission, he had defaulted on those loans because of poor handling of his financial affairs. Id. at 35-36, 956 P.2d 982. This court held, however, that the bankruptcy was no reason to disqualify Scallon from admission: [W]hen applicant could not manage his affairs successfully, and when his failure led to several legal actions being filed or threatened against him, he was as entitled as any other debtor to seek protection from his creditors in bankruptcy.    We decline to hold that a bankruptcy in the history of an applicant for admission to the Bar per se is disqualifying, even if it appears that the financial difficulties that led to the bankruptcy were the fault of the applicant. Id. at 39, 956 P.2d 982. After the bankruptcy, however, Scallon continued to experience financial difficulties due to his mishandling of his money, and fell behind on his tax payments. That did not disqualify him, either, because he had always filed returns and acknowledged the taxes that he owed, and for the most part, he had paid them. Id. at 41, 956 P.2d 982. Additional evidence showed that, while this court was holding Scallon's case under advisement, he satisfied all of his delinquent tax obligations. Id. at 38, 956 P.2d 982. This court held that the record contained sufficient evidence of financial responsibility to justify Scallon's admission: It    appears to us that applicant understands and appreciates the reasons that led to his past financial difficulties, is determined to avoid their repetition, and is capable of carrying out that determination. In that regard, applicant is willing to accept the recommendation    that he be admitted conditionally. Id. at 42, 956 P.2d 982. Accordingly, we admitted Scallon subject to several conditions. Id. Applicant's situation in the 1997 bankruptcy is not identical to Scallon's. For one thing, Scallon's bankruptcy was precipitated purely by his poor money management; applicant's was prompted by debt that he had accumulated largely due to his drug addiction. For another, the debts discharged in the bankruptcy proceedings were different: Scallon's only significant debt was about $27,000 in student loans, whereas applicant discharged over $200,000 of debt including consumer debt, a judgment for unpaid rent, and the aforementioned judgment obtained against him by Dean Witter. However, both Scallon and applicant could not manage their affairs successfully, and that failure led to several legal actions being filed or threatened against them. [5] Both applicants were entitled to seek protection from their creditors in bankruptcy. We are more concerned with applicant's behavior after the 1997 bankruptcy. Scallon accumulated tax debt after his bankruptcy due to his irresponsible financial behavior, but he paid off all that debt. Id. at 36-38, 956 P.2d 982. Applicant, like Scallon, accumulated federal and state tax debt between 2002 and 2005, as well as approximately $95,000 of consumer debt. Applicant sought to then discharge his consumer debt through yet another bankruptcy proceeding in 2005. [6] There is no evidence that applicant's creditors had filed or threatened suit against him. The timing of the bankruptcy petition was particularly troubling: applicant filed after taking on over $400,000 of additional debt for a new house. The fact that applicant sought bankruptcy protection twice in eight years, and that he bought a house less than three months before filing the second time, suggests that, unlike Scallon, applicant does not appreciate the reasons for his past financial difficulties and is not particularly determined to avoid their repetition. Applicant nevertheless insists that the debt that he and his wife discharged in bankruptcy was primarily due to unforeseen expenses, particularly child care, and that he and his wife purchased a house in Portland to get out of debt and begin building up equity. Even if we accept those claims at face value, they do not establish that applicant was compelled to file for bankruptcy by any extraordinary hardship. The expenses that come with raising a family generally do not qualify as an unusual misfortune. They are a necessary burden that everyone who chooses to raise a family knows that they must bear. The fact that applicant discharged those expenses in bankruptcy after taking on a much larger debt for a new home suggests that applicant viewed the bankruptcy proceeding as a convenient means of escaping the consequences of his own inability to manage finances, rather than as a remedy of last resort for unforeseen expenses. Applicant also asserts that his decision to file for bankruptcy was motivated by the fact that he and his wife had both lost their jobs. As stated above, a bankruptcy will not reflect adversely on applicant's character if it is motivated by an extraordinary hardship, such as unforeseen unemployment. We are not convinced, however, that this unemployment was entirely unforeseen. The internal memoranda that applicant submitted as exhibits indicate that he was having difficulties with his supervisor at ACCA as early as April, and applicant's testimony indicated that those difficulties had become severe by late July or early August, when he and his wife obtained the loan. Applicant's testimony also indicates that, when he and his wife visited Portland in June and July, he was already looking for a new job. In other words, applicant and his wife took on over $400,000 of debt, over and above their existing consumer and tax debt, at a time when applicant should have known that his job was in jeopardy. That action suggests that applicant's sense of financial responsibility was not much greater in 2005 than it was in 1997. Applicant's character references also do not help him here. Applicant's friend, Karger, and brother-in-law, Moore, both testified that applicant had become more responsible as a husband and father, but cross-examination revealed that neither witness was aware of the details of applicant's financial situation. Much of the character testimony that applicant presented describes him as responsible, but does not support applicant's specific claim that he has become more fiscally responsible since the 1997 bankruptcy. Even if it did, we would be inclined to give more evidentiary weight to the bankruptcies themselves and the circumstances surrounding them, as we discussed above. Applicant has filed for bankruptcy twice in a span of eight years, discharging similar consumer debts in the process and purchasing a new house shortly before the later filing. The circumstances surrounding the bankruptcy raise doubts as to the applicant's moral character. We do not necessarily agree with the Bar's contention that those events indicate a coordinated plan to obtain a new home in Portland at the expense of his past creditors. However, we are left with a substantial doubt whether applicant is prepared to honor his financial obligations in the manner expected of lawyers admitted to the Bar.