Opinion ID: 2714911
Heading Depth: 2
Heading Rank: 1

Heading: Simonson Matter (Counts 1-5)

Text: In the Simonson matter, Jackson assisted his client and business partner Doug Simonson in transferring real property that had previously been abandoned in Simonson's bankruptcy. Jackson helped Simonson obtain a loan on the property by falsely signing documents as an agent of the seller (Michael Levenhagen). Later, when the bankruptcy court froze Simonson's assets in an adversary proceeding, Jackson used his lawyer trust accounts to transfer funds for Simonson, in violation of the court's orders. Jackson then represented three other couples (the Levenhagens, Laings, and Lanings) who were sued by the bankruptcy trustee for their participation in the Simonson property transactions. Jackson did not inform these clients (1) that he was 2 No. 201,017-2 personally involved in the transactions at issue, (2) that he was concurrently providing legal advice to Simonson, or (3) that his interests and those of Simonson were adverse to theirs. In response to discovery requests, Jackson intentionally withheld documents that would have assisted his clients' defense because the evidence contradicted Simonson's defenses and revealed Jackson's own culpability.
In early 2004, Doug and Karen Simonson owned a residence in Kirkland, Washington. On April 27, 2004, the property was appraised for sale at $1.1 million. Two days later, the Simonsons filed a petition for bankruptcy, listing the Kirkland residence. Based on representations that the residence property had no equity beyond the secured loans, the bankruptcy court entered an order abandoning the property. Soon thereafter, Doug Simonson, acting as an agent for Global Financial Solutions (GFS), contacted Michael Levenhagen-a potential buyer from Minnesota. GFS is a company that structures real estate investments by pairing investors with good credit with investment properties. Simonson did not tell Levenhagen that the residence property had been in bankruptcy, that he was living in it, or that he expected to receive a commission from the sale. Levenhagen purchased the property for $1 million. As part of the purchase agreement, GFS agreed to pay a buying partnership fee to Levenhagen for the use of his credit and to pay the mortgage. GFS failed to perform on its promise. Levenhagen contacted Simonson and Simonson blamed GFS for all of the issues, casting himself as a fellow victim of GFS. When Levenhagen traveled to Washington to explore selling the residence, he 3 No. 201,017-2 learned for the first time that Simonson had owned the property and that it had been involved in his bankruptcy. Simonson persuaded Levenhagen not to sell the property by telling him it did not have enough value to pay off the loans. Simonson continued to reside in the residence, while Levenhagen made the mortgage payments. In April2005, Simonson retained Jackson, who helped him set up and carry out a plan to transfer the residence so that it would ultimately end up back in Simonson's control while allowing Simonson to pull out cash along the way. Jackson prepared multiple documents to effectuate this complicated series of transfers. The plan was implemented so that on June 7, 2005, Simonson transferred his ownership interest in Network Builders LLC to Levenhagen; this transfer was not recorded. Two days later, Levenhagen quitclaimed the residence to Network Builders and sent the documents to Jackson; these documents were recorded. The reason for this pair of transactions was that Simonson wished to obtain a hard money loan on the Kirkland residence even though he no longer had an ownership interest in it. To that end, Jackson drafted a real estate excise tax affidavit and signed it under penalty of perjury as Levenhagen's agent (the affidavit was necessary for quitclaim deed to be recorded). Jackson then recorded the affidavit and the quitclaim deed. By failing to record the Network Builders transfer and recording the quitclaim deed, the public record reflected that the residence belonged to Network Builders and that Network Builders was still owned by Simonson. On June 13, 2005, Simonson obtained a $167,775.56 loan against the residence, signing the deed of trust as manager of Network Builders. Neither Jackson nor Simonson told Levenhagen that the property had been further encumbered. 4 No. 201,017-2 On June 16, 2005, still unaware of the new loan against the property, Levenhagen transferred Network Builders (and, therefore, the residence) back to Simonson. Simonson told Levenhagen that the transfer was necessary because Kenneth North wanted Simonson to be the seller to a new buying partner. Even though Simonson received substantial funds from the secret loan, he told Levenhagen that he had no funds to make mortgage payments on the residence, so Levenhagen continued to make the payments while Simonson lived at the residence. The residence property changed hands a few more times. Mark Laing owned the property in late 2005. 1 And in December 2007, David Laning took control of the property and Levenhagen was finally repaid for the mortgage payments he had made.
In January 2006, the bankruptcy trustee instituted an adversary proceeding against Simonson based on activity associated with Simonson obtaining a tax refund. 2 The bankruptcy court issued multiple restraining orders restricting the movement of Simonson's assets and eventually froze his assets altogether. Jackson failed to comply with these orders. In numerous transactions, Jackson violated the court's orders by accepting funds on Simonson's behalf and disbursing funds pursuant to Simonson's specific directions-e.g., agreeing to deposit $170,488.86 into his IOLTA Trust Account on behalf of Simonson; issuing an IOLTA 1 Mark Laing bought Network Builders, which owned the property. 2 After the bankruptcy petition was filed, Simonson amended his prepetition tax returns and obtained a tax refund of approximately two hundred thousand dollars. Simonson still had some of the money in his personal accounts. The trustee filed the first adversary proceeding seeking to recover the remainder of the tax refunds Simonson had acquired. 5 No. 201,017-2 account check to Key Bank payable to Merendon Mining, a tax shelter that was the apparent source of Simonson's retroactive tax refund; and purchasing a certified check also payable to Merendon Mining. Jackson then used multiple accounts to conceal the trail of money. Accordingly, the bankruptcy court granted the trustee's motion for sanctions against Jackson and his firm. Jackson argued that he complied with court orders as soon as he became aware of them. But based on the totality of Jackson's demeanor during his testimony, the contradictions between his testimony and the exhibits, and the testimony of other, credible witnesses, the hearing officer concluded that Jackson lied to the bankruptcy court about his knowledge of the restraining orders to conceal his role in perpetrating fraud on the court. Based on the overwhelming evidence, the hearing office found that, in actively and intentionally participating in fraud on the bankruptcy court, Jackson violated 18 U.S.C. § 152. Although the hearing officer acknowledged the bankruptcy court's order granting a motion for sanctions against Jackson's firm, she independently relied on abundant documents and testimony to find that Jackson had violated discovery orders.
In April 2006, the trustee's attorney, Denise Moewes, filed a second adversary proceeding against parties who had played some role in the Kirkland residence transactions. The trustee sought to vacate the order of abandonment, to recover unauthorized postpetition transfers, and to compel turnover of the property. Michael Levenhagen, Mark Laing, David Laning, and their wives were among the named defendants. Five months later, Moewes filed a second amended complaint, adding 6 No. 201,017-2 Simonson as a defendant. Although there were obvious conflicts of interest among Simonson, GFS, and the Levenhagens/Lanings/Laings, Jackson's firm accepted representation of all parties. Jackson arranged for attorney Greg Cavagnaro to represent Simonson but actively assisted Cavagnaro in the representation. Jackson arranged for Stephen Araki to represent the Levenhagens/Lanings/Laings but assisted in representing these clients as well. Jackson and his firm had serious and intractable conflicts with the Leven hag ens. 3 Recall that Jackson falsely signed the tax affidavit as Levenhagen's agent, and Jackson's escrow company closed Simonson's secret loan against the residence, knowing that Levenhagen actually owned the property. Levenhagen was unaware of this misconduct. The hearing officer also found that Jackson had conflicts with the Laings and Lanings. 4 In addition, Simonson's interests often conflicted with the Levenhagens/Laings/Lanings. In representing all of these parties, Jackson actively ignored or concealed relevant facts to protect Simonson, thus compromising his ability to defend the Levenhagens/Laings/Lanings. For example, the complaint sought an order vacating the order of abandonment, alleging that Simonson had fraudulently misrepresented the value of the property to the bankruptcy court. In order to protect 3 When Simonson initially arranged for Jackson to represent the Levenhagens, Laings, and Lanings and to pay their fees, Mike Levenhagen expressed concern about the potential for a conflict of interest. 4 Asof June 21, 2006, the Levenhagens, Laings, and Lanings all had valid potential claims against both Simonson and Jackson. 7 No. 201,017-2 Simonson, Jackson withheld information that the three couples had no knowledge that the property had ever been abandoned in bankruptcy. 5 The hearing officer found that Jackson and his firm violated the RPCs when they failed to disclose any of these conflicts to the Levenhagens, Laings, or Lanings and failed to obtain written consent to waive conflicts before accepting representation. 6 The hearing officer rejected Jackson's argument that he was not the attorney for Simonson or the Levenhagens, Laings, or Lanings during the bankruptcy proceeding. Although Jackson's partner, Stephen Araki, was the attorney of record for the Levenhagens, Laings, and Lanings, the hearing officer found that Jackson did most of the work associated with the representation. And although Greg Cavagnaro was Simonson's attorney of record in the bankruptcy proceeding, Jackson was Simonson's primary legal advisor for all issues related to the proceedings. 5 For example, Jackson had an e-mail from Mike Levenhagen explaining that Simonson was one of Levenhagen's initial contracts and that at the time of the purchase, Levenhagen had no knowledge of the history or prior ownership of the property. Rather, he learned about Simonson's bankruptcy after the purchase in late December 2004. This information was never mentioned in the Levenhagen/Laing/Laning answer. 6 Jackson did not inform the Levenhagens, Laings, or Lanings that he had actively participated in defending Simonson in the first adversary proceeding, that he was still providing legal services to Simonson in connection with the bankruptcy proceeding, or that he was personally involved in the transfers at issue in the lawsuit. The hearing officer found that Jackson's firm should have informed the parties of these previous dealings, which created a significant risk of conflict, and should have obtained written consent to waive those conflicts before accepting representation. Instead, Jackson's firm simply sent a letter dismissing any notion that a conflict existed; the hearing officer found that the letter did not comply with RPC 1.7(b) because it falsely represented that there was no potential for a conflict of interest. 8 No. 201,017-2 To conclude, the hearing officer found that there were serious conflicts of interest but Jackson represented all of these clients to protect his and Simonson's interests.
During the second adversary proceeding, which was brought to recover the property, Moewes made numerous requests for production of documents from the Levenhagens, Laings, and Lanings. These parties promptly sent the requested documents to Jackson. Jackson, upon receipt of the documents, repeatedly withheld highly relevant information and sometimes even modified documents to obscure their relevance. 7 On October 27, 2008, the bankruptcy court issued a 47-page decision finding that Jackson's firm had withheld relevant documents. After a lengthy recitation of specific discovery violations, the hearing officer found that Jackson repeatedly withheld documents during the bankruptcy proceeding, and those he did produce, he produced late enough to prevent Moewes from being able to prepare for court proceedings and depositions. The hearing officer found that Jackson knowingly and intentionally withheld relevant documents to conceal his role in the fraud and to avoid inculpating Simonson. These documents, had they been provided, would have revealed Simonson's involvement with GFS and helped establish that the Levenhagens, Laings, and Lanings were victims and not parties to the bankruptcy fraud. Jackson never informed his clients that he was withholding the documents, and they did not consent to the documents being withheld. 7 Exhibit A-284 is over 1200 pages and contains a full description of irregularities Moewes discovered. 9 No. 201,017-2 At the disciplinary hearing, Jackson was unable to explain why omitted documents had not been produced. He claimed that he had no access to some of the documents because another attorney had withheld documents and because he had given between 6 to 10 boxes of documents to attorney Marc Stern, who only delivered one or two boxes of requested copies back to Jackson. The hearing officer found Jackson was not credible, concluding that Jackson had provided false testimony to support his defense of this charge. Jackson also argued that he was not aware that he needed to produce e-mails. The hearing officer rejected this argument because the requests clearly applied toemails and Jackson actually told his clients to forward e-mails to him.