Opinion ID: 1232513
Heading Depth: 1
Heading Rank: 4

Heading: counts 8 and 9motorcycle loan

Text: ¶ 36. Count 8 alleged another violation of SCR 20:1.8(a). ¶ 37. Count 9 alleged another violation of SCR 20:8.4(c). ¶ 38. The testimony before the referee established that on April 20, 1999, Knickmeier withdrew $10,800 from J.R.'s trust account and then used that money to purchase a motorcycle which Knickmeier and J.R. were to jointly own even though J.R. did not have a license to operate a motorcycle. Knickmeier's share in the motorcycle purchase was financed by a $5400 loan (half of the $10,800 he had withdrawn) from the trust account funds. The remaining $5400 from that withdrawal paid for J.R.'s one-half ownership of the motorcycle. At the hearing before the referee, Knickmeier acknowledged that he had not discussed his own financial background with J.R. prior to making this loan to himself from J.R.'s monies in the trust account; Knickmeier also acknowledged that he knew at the time that J.R. did not have a valid license to operate the motorcycle. ¶ 39. The referee also heard testimony that in August of 1999 Knickmeier sold the motorcycle and received $8000 for it. Knickmeier then split that $8000 equally between himself and J.R. but Knickmeier did not pay off any of his prior $5400 indebtedness from his $4000 share of the proceeds from the motorcycle sale. ¶ 40. Based on the evidence and the testimony he had heard, the referee determined that although the promissory note executed by Knickmeier with respect to the motorcycle loan was fair and reasonable in its terms, and even though J.R. had apparently consented to the transaction in a contemporaneous writing, the problem was that J.R. . . . was not able to make an informed or considered decision as to whether his economic resources should or should not be deployed in this loan. [J.R.] testified that he was often intoxicated (Respondent corroborated) and had a poor memory as to this transaction. Respondent did not keep contemporaneous account records in his Trust Account regarding the loan to himself of $5,400. He also did not repay the loan in accord with the contract. This result was predictable. Respondent acted intentionally to use [J.R.'s] money to get a motorcycle for himself. He had an obligation as a lawyer seeking a loan from a client to make full disclosure of his financial status. ¶ 41. The referee concluded that by intentionally failing to disclose very relevant factsi.e., Knickmeier's multiple and recent bankruptcy filings and his then outstanding indebtedness of over $100,000 Knickmeier had prevented his client from making an informed decision on whether or not to extend the $5400 loan and J.R. had not been given a fair opportunity to make an independent decision regarding the loan. ¶ 42. Thus, the referee concluded that with respect to Count 8, Knickmeier had engaged in misconduct as proscribed by SCR 20:1.8(a) by improperly entering into a business transaction with his client without disclosing important, negative financial information about himself to the client. The result, according to the referee, was that J.R. was intentionally misled into participating in the business transaction. The referee asserted that his conclusion concerning Knickmeier's intent was bolstered by the fact that Knickmeier had defaulted on the loan, had not provided J.R. with the requested accounting, and then, when the motorcycle was sold, did not use any of his share of the proceeds to pay off the loan. ¶ 43. Similarly, with respect to Count 9, the referee concluded that when Knickmeier subsequently sold the motorcycle and did not use any of his share of the sale proceeds to pay down his outstanding loan balance, he violated the rule which proscribes a lawyer from engaging in fraud, misrepresentation, dishonesty or deceit. The referee reasoned that even if Knickmeier had properly obtained the loan for the motorcycle (which the referee determined he had not) Knickmeier still had no right to use the sale proceeds for any other purposes other than paying down the outstanding loan balance without his client's consent. According to the referee, the evidence clearly established Knickmeier's fraud and his intent not to repay the loan. The referee concluded that Knickmeier's sole goal was to get money from his client in any way he could for his own ends.