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

Heading: counts 1 and 2airplane loan

Text: ¶ 14. Count 1 alleged a violation of SCR 20:1.8(a). [5] In general, this rule prohibits a lawyer from entering into a business transaction with a client unless the terms are fair and reasonable to the client; in addition, the terms must be fully disclosed and transmitted to the client in the manner which can be reasonably understood by the client. The client then must be given a reasonable opportunity to seek the advice of independent counsel and consent in writing to the transaction. ¶ 15. Count 2 alleged a violation of SCR 20:8.4(c). [6] This rule, among other things, states that it is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation. ¶ 16. The testimony at the hearing before the referee established that Knickmeier borrowed $12,000 from J.R. on September 3, 1998, in order to purchase an airplane for himself. J.R. did not have a pilot's license. At the time of this transaction, Knickmeier executed a promissory note which required the repayment of the loan within 12 months with monthly payments of $200 at an interest rate of 15 percent per year. ¶ 17. The referee determined that although that agreement was in writing as required by SCR 20:1.8, the loan nevertheless violated that rule because J.R.'s written agreement to this transaction had not been obtained until approximately 12 days after Knickmeier had obtained the $12,000 from him. In addition, the referee found that: The airplane had been purchased solely for Knickmeier's benefit; the loan had not been repaid within the time specified; and the terms of the contract had not been complied with. According to the referee, the fact that the airplane was adequate collateral for the loan was irrelevant because J.R. was unable to use his economic resources as freely as he desired since the loan had not been repaid within the agreed upon timeframe. Furthermore, the referee noted that Knickmeier had acknowledged that he was aware that he was required to obtain the signed consent of his client before taking the loan from him. ¶ 18. The referee was not persuaded by Knickmeier's altruism defense or his argument that he was merely acting to protect J.R. from wasting his assets on alcohol and drug addictions. The referee observed that statutory procedures set out for guardianships in Wis. Stat. ch. 880 (2001-02), [7] were available for dealing with a spendthrift client. See Wis. Stat. § 880.03. According to the referee, Knickmeier's claim that he took J.R.'s money to protect it from being wasted rings hollow in light of the fact that the airplane only benefited Knickmeier and most of the loan payments were made only after J.R. had filed his grievance and the OLR had filed the misconduct complaint against Knickmeier. The referee concluded that the OLR had established by clear, satisfactory, and convincing evidence that Knickmeier had violated SCR 20:1.8(a) by knowingly engaging in an impermissible business transaction with his client. ¶ 19. Similarly, with respect to Count 2, based on the evidence and testimony at the hearing, the referee concluded that Knickmeier had failed to disclose to J.R. at the time of the $12,000 airplane loan that Knickmeier himself had a checkered financial historyto wit, Knickmeier had made multiple Chapter 13 filings in federal bankruptcy court and at the time of this loan, Knickmeier's debts totaled more than $100,000. According to the referee, information regarding the lawyer's creditworthiness, or lack thereof, would be important information for a client to have in order to make an informed decision about whether to consent or reject the lawyer's request for a loan. ¶ 20. Likewise, the referee was not persuaded by Knickmeier's argument that he had acted out of altruism in trying to protect J.R. from himself; instead, the referee found that Knickmeier had intentionally acted to conceal his own poor credit status with intent to mislead J.R. into lending him the $12,000. Thus, the referee concluded that the OLR had established by clear, satisfactory, and convincing evidence that Knickmeier had violated SCR 20:8.4(c) by engaging in intentional fraud, dishonesty, deceit or misrepresentation in obtaining the airplane loan.