Opinion ID: 2065289
Heading Depth: 2
Heading Rank: 2

Heading: Respondent's Relations with Client/Creditors

Text: The Hearing Board focused on respondent's relationships with eight of his clients, each of whom loaned PFI large sums of money. To better understand the parameters of respondent's misconduct, we will examine the facts of each client's situation: (1) Jacqueline Silvertsen Chesbrough retained respondent to represent her as executor of her deceased husband's will in 1970. Between 1970 and 1973, respondent also represented Chesbrough in matters involving claims against the estate, including a lawsuit by her husband's former business partners where settlement proceeds were distributed as late as 1986. In 1978, Chesbrough, on the recommendation of her second husband, businessman Clayton Silvertsen, loaned PFI $25,000. The promissory note contained respondent's personal guarantee of repayment with 12% interest, payable monthly. The Hearing Board determined that Chesbrough was not a person experienced in business matters. She received interest payments on the loan until November 1981, but has not received repayment of the principal. (2) Mary Eichler retained respondent to prepare wills for herself and her husband and to represent her as executor of her husband's will in 1976. Respondent also represented her in a real estate sale in 1978. Eichler also routinely consulted respondent for advice regarding matters she did not understand. Between July 1978 and May 1979, Eichler made three loans to PFI totaling $40,000. The funds for these loans came partially from the 1978 real estate sale. Eichler stated that at the time the loans were made, respondent did not disclose anything regarding the risk of making the loans, any possible conflicts of interest, or any details of his own financial status. She also stated that at the time she made the loans, she believed respondent was her attorney and that he was acting in a way so as to protect her interests. Eichler has received no interest payments since July 1980, and has not received repayment of the principal. In November and December 1981, respondent tendered two checks to Eichler in payment for interest due in each of those months. Each check, however, was returned by respondent's bank because they were drawn on closed accounts. (3) In June 1978, Sharon Westphal-Hix (Westphal) retained respondent to handle matters surrounding the death of her first husband. At that time, Westphal was struggling to support two minor children on a meager fixed monthly income. In July 1978, as respondent was winding up the Hix estate, he suggested that Westphal could earn additional income by investing in PFI. Westphal loaned PFI $15,000 and received a promissory note similar to the ones given to Eichler and Chesbrough. Westphal testified that at the time of that loan she believed respondent was functioning as her attorney and that he was acting to protect her interests through giving her investment advice. Respondent, however, did not disclose any information regarding PFI's financial condition, any potential conflict of interest, or any of the risks involved in investing in PFI. Between July 1978 and March 1979, respondent represented Westphal in two real estate transactions. At respondent's suggestion, Westphal loaned an additional $15,000 to PFI. In October 1980, PFI ceased making interest payments to Westphal. She then contacted respondent, demanding the entire amount due. Respondent informed Westphal that he would be unable to repay her. Westphal, however, continued to regularly contact respondent until she received $20,000, representing a portion of the obligation owed her. (4) From 1979 through 1981, respondent represented Harvey Daeumer and his wife in selling their interests in a business, purchasing a condominium, preparing their wills, and in a dispute with the City of Elgin over storm sewer assessments. In March 1979, respondent mailed Daeumer and his wife a letter suggesting they invest in PFI. Shortly thereafter, Daeumer discussed a potential loan to PFI with respondent. Daeumer was given an opportunity to tour the PFI corporate facility, but was never advised of the respondent's personal financial condition, of respondent's interest in the company, or that respondent was the sole owner of the company. In April 1979, Daeumer loaned $50,000 to PFI. As in the cases of the clients already discussed, Daeumer received a promissory note. When interest payments became delinquent in 1980, Daeumer contacted respondent. Respondent then explained PFI's financial and credit problems. Daeumer testified that, at the time he loaned PFI the money, he viewed respondent as his attorney. Daeumer continued to utilize respondent's legal services during the relevant time period. Daeumer has also never retained another attorney except to bring action against the respondent for the delinquent loan payments. Daeumer has not received payment on the principal of the loan. He also has not received payment of the outstanding interest due. He did, however, receive a check from the respondent for payment of interest for November 1981, but the check was dishonored by respondent's bank for being drawn on a closed account. (5) Madeline Hillquist retained respondent in 1979 to represent her in the sale of her deceased husband's business. Thereafter, respondent also represented Hillquist in purchasing real estate and preparing a will. Hillquist's only sources of income at that time were social security payments and the proceeds from the sale of the business. In June 1979, Hillquist loaned PFI $40,000 from the proceeds of the sale of the business. At that time respondent also represented Hillquist's daughter and son-in-law, the Volmers, in real estate dealings and estate planning. Following Hillquist's loan to PFI, the Volmers also became interested in investing, eventually loaning PFI $14,000 in March 1980. Both loans were evidenced by promissory notes. During the course of their discussions with the respondent, neither Hillquist nor the Volmers were aware of PFI's assets or of respondent's net worth. Mr. Volmer testified that, while he knew that respondent was running the daily operations of PFI, he was unaware of how much respondent had invested in the corporation. He also stated that, due to his inexperience in business matters, he felt he could rely on respondent's advice as an attorney in making the loans. In June 1981, the Volmers and Hillquist received replacement promissory notes listing respondent as the obligor instead of PFI. Respondent failed to discuss any differences that might exist between these and the original notes. As in the case of the other clients, respondent failed to keep up with the interest payments. In March 1983, all three lenders instituted formal proceedings against respondent. A settlement was reached for approximately two-thirds of respondent's obligation. (6) In 1977, respondent represented William Volkening in the sale of real estate. The proceeds from that sale exceeded $1 million. While discussing the conclusion of this sale and the collection of the fee for his services, respondent described PFI to Volkening. At that time, Volkening loaned $100,000 to PFI. Respondent issued a promissory note to Volkening in evidence of the debt. Volkening died in 1979, leaving an estate in excess of $2 million. He named Irene Werner, his housekeeper and companion of 40 years, as executor of his will. After Volkening's funeral, Werner requested that respondent assist her in handling the estate. Prior to his relationship with Werner, Volkening had married another woman. Since 1939, however, he had not resided with his wife. The marriage had never been dissolved. In order to avoid claims by the legal widow, respondent reissued the promissory note for the $100,000 loan, but named Werner as payee instead of Volkening. In November 1979, respondent advised Werner that if she loaned additional money to PFI it would increase the corporation's chances of repaying the original $100,000 obligation. In response, Werner loaned PFI an additional $50,000 in exchange for a second promissory note. This second loan was secured by all the legal fees due to the law firm of Imming, Faber & Roeser from Volkening's estate. Respondent ceased interest payments in 1980. Shortly thereafter, Werner retained other counsel and instituted formal action against respondent. Respondent's former law partners settled with Werner by paying her $50,000. However, she has not received any of the $100,000 loan. Werner also testified that prior to Volkening's death, she had no business or management experience. Respondent had never disclosed the risks to Werner, and she considered respondent to be her attorney. (7) Prior to retiring, Carl Eckholm was president and general manager of Williams Manufacturing Company. In 1979, respondent represented Eckholm in the sale of his home and the drafting of wills for his family. At that time, respondent approached Eckholm for a loan. They discussed the employees of PFI and how PFI was patterned after another successful company called Copolyex. Respondent assured Eckholm that PFI was a well-backed venture. Respondent said nothing, however, regarding the financial status of PFI, his own financial status, or any risks involved in the investment. Eckholm loaned PFI $20,000. A few months later, respondent issued Eckholm a check for interest which was dishonored. After explaining PFI's financial problems to Eckholm, respondent reassigned the promissory note, changing the obligor from PFI to respondent himself. Since that time, however, Eckholm has not received any interest payments or collected any of the principal. (8) During the time period relevant to the case at bar, respondent served as attorney for Starro Precision Products, Inc. (Starro), a company owned by Bruce Stark, Sr., and Bruce Stark, Jr. Respondent also served as a director and trustee of Starro's employee pension plan, which he prepared for the company. In April 1981, the pension fund loaned PFI $20,000, evidenced by a promissory note which respondent personally guaranteed. The Starks had the opportunity to tour PFI's facilities and were aware of respondent's investment and personal involvement in PFI. However, respondent never suggested that there might be any limitations on the pension fund's loaning him money and he never disclosed PFI's or his own financial status.