Opinion ID: 1125365
Heading Depth: 2
Heading Rank: 1

Heading: The Bearer Bonds (Count I)

Text: On December 19, 1984, Gerhard John Peter committed suicide. The respondent was a former business associate of Peter, and his law firm had performed services for Peter and his companies. The decedent's mother, Theresia Peter, was born in Austria in 1913. She moved to this country in 1949 and lived in Pennsylvania at the time of her son's death. Although Ms. Peter had previously spoken with the respondent on the telephone, she met the respondent in person for the first time at her son's memorial service. On December 24, 1984, the respondent was appointed personal representative of the estate of Gerhard John Peter. Ms. Peter believed, throughout the period of respondent's service as personal representative, that her son had been murdered; the police, however, considered the death to be a clear suicide. Gerhard John Peter had purchased approximately $65,000 in bearer bonds, which were freely negotiable by anyone holding the bonds. Some of the bearer bonds were used by the decedent as collateral for the purchase of an automobile, leaving a balance of about $36,000 in bonds. Ms. Peter was aware of the bonds because her son told her about them in November 1984. In March 1986, an employee at the respondent's law firm prepared an inventory of the estate. Ms. Peter, who was the sole beneficiary of the estate, reviewed the inventory, and on April 8, 1986, she asked the respondent why the bearer bonds were not on the inventory. The respondent told her that he did not have any knowledge or information about the bonds, but that he would look into it. The board found that the respondent told Ms. Peter that he was not aware that her son had bought any bearer bonds, and he expressed doubt that Peter would have done so because of the small amount of interest the bonds paid. These statements were lies. In fact, the respondent had received the bearer bonds from Gerhard John Peter. Over a year before, in February 1985, he had sold the bonds and pocketed the proceeds. The board concluded that the respondent's misrepresentations to Ms. Peter were blatantly deceptive and designed to hide from the beneficiary of the estate that he had sold the bonds and placed the proceeds in a joint account held by the respondent and his wife, Martha Hughen Rudman. He did not tell Ms. Peter about his acquisition and sale of the bearer bonds until June 1988, although the respondent and Ms. Peter had various discussions during this two-year time period. In the summer and fall of 1986, the respondent directed a paralegal at his law firm to find the bearer bonds. He did not inform the paralegal, however, that any investigation would be a charade since the respondent knew exactly what happened to the bonds. The respondent subsequently billed the estate about $1,920 for the pointless search. In addition, the respondent charged, and collected, a total of approximately $32,000 between December 1984 and February 1991, for his services as the personal representative. On October 23, 1986, the respondent wrote a letter to Ms. Peter about his fictitious efforts to determine the identity of the bondholder. Copies of this letter were sent to a lawyer representing Ms. Peter, and a lawyer representing the estate. Neither of these attorneys knew that the respondent was actively misrepresenting the status of the bearer bonds to the estate's beneficiary. On the same day, the respondent filed a verified statement as the personal representative closing the administration of the probate case involving the Peter estate. A copy of this verified motion was served on Ms. Peter's lawyer. Nevertheless, the paralegal at the respondent's office continued the investigation into the location of the bonds. In the spring of 1987, the paralegal discovered exactly what had happened to the bonds and he confronted the respondent with his discovery. On November 24, 1986, Ms. Peter wrote to the respondent stating that the estate had to remain open. She wanted the estate to stay open at least until the bearer bonds were accounted for. The hearing board found that given the circumstances the respondent had a fiduciary duty to keep the estate open. Ms. Peter again wrote the respondent in February 1987 about the bonds. She asked the respondent to send her information about the identity of the individuals or entities collecting interest on the bearer bonds. Ms. Peter got this idea from the respondent himself, since he had told her previously that he could obtain such information. The hearing board concluded that the respondent's representations about the interest on the bonds contributed to the pattern of deceit. In the fall of 1987, Ms. Peter retained another lawyer, Stuart N. Bennett, to represent her in matters involving her son's estate. On January 29, 1988, the respondent filed a motion to discharge the fiduciary (himself) in the probate case. In March 1988, Ms. Peter filed a petition to reopen her son's estate, having previously objected to the discharge of the respondent as personal representative. On March 29, 1988, the respondent sent a letter to Bennett. In this letter, the respondent spent more than two pages of single-spaced typewritten text explaining his efforts to locate the bearer bonds, even though the respondent's paralegal had already discovered the previous year that it was the respondent who had taken the bonds. The hearing board found that this letter purported to detail a so-called investigation that was in fact a sham undertaken by the respondent to deceive the beneficiary of the estate. Moreover, in a May 10, 1988, telephone conversation with Bennett, the respondent told Bennett that although he had tried to investigate the location of the bearer bonds he had been unable to locate them. Finally, the respondent was faced with having to respond, in a court document, to Ms. Peter's motion to reopen and her objections to his discharge as fiduciary. Thus, in June 1988 the respondent admitted to Bennett that he had received the bonds himself, but had not disclosed that fact to Ms. Peter. He told Bennett that he had lied to Ms. Peter because she was not dealing well with her son's death. On July 20, 1988, the respondent filed a response to Ms. Peter's petition to reopen, and he discussed this new disclosure: With respect to the other bearer bonds which were not pledged ... as collateral, these bonds were transferred to [me] prior to Mr. Peter's death in payment of an obligation owed by Mr. Peter to [me]. The response continued, Since the transfer of such bonds to [me] were as payment in full of a preexisting obligation owed to [me], the Estate did not sustain any loss as a result of such transfer. The respondent expressed his deep remorse for having lied to Ms. Peter and to others for over two years in the following way: Moreover, [the respondent] regrets having created any misunderstandings in Mrs. Peter's mind as to the nature of the disposition of such bearer bonds at any time during his administration of the Estate. Nevertheless, the fact remains that the disposition of the bonds represented payment of a preexisting debt of Mr. Peter prior to his death and does not represent a loss to the Estate. (Emphasis added.) A surcharge action was brought against the respondent in March 1989. In December 1989, the respondent refunded the $1,920 that he had billed the estate for his bogus investigation of the bearer bonds. The parties ultimately settled the action with the respondent agreeing to pay $1,000,000. Only a part of this amount had been paid as of the hearing in this case. The hearing board concluded that the respondent breached his fiduciary duty as the personal representative of the estate. The board summarized its findings as follows: The board determined that there are no credible explanations for the respondent's conduct in actively misrepresenting to Mrs. Peter and two attorneys, during a period of more than two years, that he did not have bearer bonds that he had obtained from Mr. Peter shortly before Mr. Peter's suicide. Similarly, the board found there are no credible explanations for the respondent's conduct in concocting a scheme involving innocent third parties (the respondent's own office personnel including... a legal assistant in the respondent's office) to find the very bearer bonds that had been in the respondent's possession and used by him for his own benefit. The board therefore finds that the respondent had a dishonest, or at least selfish, motive in conducting himself as he did in regard to the bearer bonds. The hearing board found that the respondent's conduct, which occurred before the effective date of the Rules of Professional Conduct, January 1, 1993, violated following provisions of the former Code of Professional Responsibility: DR 1-102(A)(4) (engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation); DR 1-102(A)(5) (engaging in conduct prejudicial to the administration of justice); and DR 1-102(A)(6) (engaging in conduct that adversely reflects on the lawyer's fitness to practice law); as well as C.R.C.P. 241.6(3) (violating the highest standards of honesty, justice or morality is grounds for discipline). [1]