Court Opinion

ID: 4250347
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:24:50.182432+00
Date Added: 2024-06-11T14:44:15.730727
License: Public Domain

IN THE SUPREME COURT OF IOWA

                              No. 133 / 05-1365

                           Filed January 13, 2006

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,

      Complainant,

vs.

MICHAEL GERARD REILLY,

      Respondent.

      On review of a report of the Grievance Commission.

      Review  of  findings  and  recommendation  of   Grievance   Commission
concerning alleged ethical violations.  LICENSE REVOKED.

      Charles L. Harrington and Teresa A. Vens, Des Moines, for complainant.

      Kristopher K. Madsen, Council Bluffs, for respondent.

CARTER, Justice.
       This  matter  is  before  us  on  a  review  of  the   findings   and
recommendation  of  the  Grievance  Commission  concerning  alleged  ethical
violations by  respondent,  attorney  Michael  G.  Reilly.   The  review  is
undertaken pursuant to  the  provisions  of  Iowa  Court  Rule  35.10.   The
commission found that respondent was guilty  of  a  conversion  of  clients’
funds and had perpetrated a check-kiting scheme that  caused  a  substantial
loss to one of  the  banks  involved  in  the  transaction.   The  Grievance
Commission recommended that Reilly be suspended from practice for  a  period
of three years.  After reviewing the record and  considering  the  arguments
presented, we conclude that the  Grievance  Commission’s  recommendation  is
inconsistent with the discipline that we have  imposed  in  other  cases  in
which clients’ funds have been misappropriated.  Consistency with  our  past
decisions and protection of  the  public  warrants  the  revocation  of  the
offending attorney’s license.
       Michael  G.  Reilly  is  an  attorney  who  has  practiced   law   in
Council Bluffs for many years and has gained a  favorable  reputation  as  a
diligent lawyer.  Respondent represented the parents of Jacob Reid, a  child
who had sustained a serious  eye  injury.   He  diligently  represented  the
Reids in a claim against persons responsible for the injury, and  ultimately
a settlement was arrived at under which Jacob Reid was to  receive  the  sum
of  $137,500.   The  settlement  draft  was  received   by   respondent   on
November 17, 2000, and  he  immediately  deposited  it  in  his  firm  trust
account.  A few days prior to  receipt  of  that  draft,  he  had  caused  a
conservatorship to be opened for Jacob  Reid  and  had  been  designated  as
attorney for the conservatorship.
      Soon after receipt of the settlement funds, checks  were  issued  from
the trust account of respondent’s law firm to the firm  for  the  amount  of
respondent’s  contingent  fee  and  the  firm’s  out-of-pocket  expenses  in
pursuing the case.  After those funds  had  been  withdrawn,  a  balance  of
$99,736.75 remained in the trust account.
      In December 2000 and January  2001,  respondent  withdrew  the  entire
$99,736.75 balance of Jacob Reid’s funds from his firm trust  account.   The
two checks written in December totaling $9000 were drawn by  respondent  for
cash and signed by him.  He has admitted that the  proceeds  were  used  for
his personal obligations.  The January 2001 check was payable to First  Star
Bank in the sum of $90,736.75.  It  was  drawn  by  a  firm  bookkeeper  and
signed by another member of respondent’s  law  firm  based  on  respondent’s
representation that  it  was  to  be  remitted  to  the  conservator’s  bank
account.  Instead, respondent deposited that check in his  personal  banking
account.
       In  August  and  September  2001,  respondent  endeavored   to   make
restitution  of  Jacob   Reid’s   funds   by   depositing   $96,040   in   a
conservatorship account for Jacob Reid that had been established at  Salomon
Smith Barney, Inc.[1]  A friend had agreed  to  loan  respondent  the  funds
necessary  to  accomplish  that  purpose.   Relying   on   that   agreement,
respondent wrote a check on a personal bank account for $96,040  to  Salomon
Smith Barney.  Unfortunately, respondent’s friend was  unable  to  loan  him
the necessary funds, and  the  balance  of  his  personal  bank  account  at
Pinnacle Bank was not sufficient  to  cover  the  check.   It  was  returned
unpaid.
      On  September 24,  2001,  respondent  wrote  a  second  check  on  his
personal bank account at Pinnacle Bank to Salomon Smith  Barney,  this  time
in the amount of $96,070.  Because he had  deposited  a  check  in  Pinnacle
Bank in an amount sufficient to cover that  withdrawal,  the  Pinnacle  Bank
check cleared, and the conservatorship  account  received  the  funds.   The
check deposited in respondent’s Pinnacle  Bank  account  also  cleared,  but
First Star Bank, which had paid that  check,  was  saddled  with  a  $96,000
overdrawn account based on respondent’s  deposit  of  an  insufficient-funds
check in that bank.
      Respondent did not make restitution of  First  Star  Bank’s  loss  for
over a year.  In the meantime, First Star  Bank  had  notified  federal  law
enforcement authorities of its loss.  The resulting  investigation  resulted
in a letter from the United States  attorney  to  our  client  security  and
disciplinary commission revealing the facts that we  have  recited  in  this
opinion.   Further  investigation  by  the  Iowa  Supreme   Court   Attorney
Disciplinary Board confirmed those facts.
      Respondent has at all times conceded the conversion  of  Jacob  Reid’s
funds that had been  paid  into  his  firm’s  trust  account.   He  has  not
conceded any illegality with respect to the check overdraft  at  First  Star
Bank  based  on  his  assertion  that  he  believed  he  would  have   funds
forthcoming to cover the First Star Bank check before  it  was  returned  to
that bank for payment.
      Based on the transactions we have recited,  the  Grievance  Commission
found that respondent had violated DR 9—102(A), which provides:  “All  funds
of clients paid to a lawyer or law firm . . . shall be deposited in  one  or
more identifiable interest-bearing trust accounts maintained  as  set  forth
in DR 9—102(C).”  We have previously held that  this  disciplinary  rule  is
violated in situations in which an attorney has deposited client funds  into
his trust account and then withdrawn  them  for  his  personal  use  without
client permission.  Comm. on Prof’l Ethics & Conduct v. Silver,  395 N.W.2d
877, 879 (Iowa 1986).  The commission  further  found  that  respondent  had
violated Disciplinary Rules  1—102(A)(1)  (a  lawyer  shall  not  violate  a
disciplinary rule), (3) (a lawyer shall not engage in illegal conduct),  (4)
(a lawyer shall not engage in conduct  involving  dishonesty),  and  (6)  (a
lawyer shall not engage in conduct that adversely reflects  on  his  fitness
to practice law).   The  facts  as  agreed  to  by  respondent  establish  a
violation of each of these disciplinary rules by a convincing  preponderance
of the evidence.
      This  court  gives   respectful   consideration   to   the   Grievance
Commission’s recommendation  concerning  the  appropriate  sanction  for  an
attorney’s ethical violations.  Iowa Supreme Ct.  Bd.  of  Prof’l  Ethics  &
Conduct v. Waples, 677 N.W.2d 740, 743 (Iowa 2004).  However, on  review  of
those recommendations under Iowa Court Rule 35.10, we are free to  impose  a
lesser or greater sanction than the discipline recommended by the  Grievance
Commission.  Id.
      We have considered the misappropriation  of  a  client’s  funds  by  a
lawyer as being particularly reprehensible and, almost universally,  calling
for a revocation of license.  Iowa  Supreme  Ct.  Bd.  of  Prof’l  Ethics  &
Conduct v. Anderson, 687 N.W.2d 587, 590 (Iowa 2004); Iowa Supreme  Ct.  Bd.
of Prof’l Ethics & Conduct v. Bell, 650 N.W.2d 648, 652 (Iowa  2002);  Comm.
on Prof’l Ethics & Conduct v. Ottesen, 525 N.W.2d 865,  866  (Iowa  1994);
Comm. on Prof’l Ethics & Conduct v. Shepherd,  431 N.W.2d 342,  344  (Iowa
1988).  Instances in which revocation has not been ordered  for  the  taking
of a client’s funds have involved situations in which  the  attorney  had  a
colorable future claim to the funds or did not take the funds  for  his  own
use.  See, e.g., Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct  v.  Allen,
586 N.W.2d 383, 391 (Iowa 1998); Iowa Supreme Ct. Bd.  of  Prof’l  Ethics  &
Conduct v. Hansel, 558 N.W.2d 186, 192 (Iowa 1997); Comm. on  Prof’l  Ethics
& Conduct v. Rauch, 486 N.W.2d 39,  40  (Iowa  1992).   We  have  not  been
dissuaded from ordering revocation of license in  situations  in  which  the
embezzled  funds  have  been  returned  prior  to  the  discovery   of   the
misappropriation.  Anderson, 687 N.W.2d at 590; Comm.  on  Prof’l  Ethics  &
Conduct v. Pappas, 313 N.W.2d 532, 533-34 (Iowa 1981).   Revocation  of  the
offending attorney’s license has been imposed in  a  situation  involving  a
substantially smaller misappropriation than those occurring in  the  present
case.  Comm. on Prof’l Ethics & Conduct v. Rowe, 225 N.W.2d 103,  104  (Iowa
1975) (client funds totaling $1500 placed in  attorney’s  personal  checking
account—license revoked).
      Several highly regarded members of the  local  bar  have  attested  to
respondent’s character, including his reputation for  truth,  veracity,  and
honesty.  Similar endorsements have been  received  from  the  local  judges
before whom respondent has regularly practiced.  We have no reason to  doubt
that,  before  embarking  on  the  downward   spiral   that   produced   the
transgressions now  under  consideration,  respondent  was  all  that  these
proponents attest he was.  His  fall  from  grace  was  precipitated  by  an
uncontrollable gambling habit that left him constantly  in  need  of  funds.
Unfortunately, that is a matter which, although regrettable  and  cause  for
sympathy, does not obviate the seriousness of the improper attorney  conduct
that has occurred.  See Iowa Supreme Ct. Bd. of Prof’l Ethics &  Conduct  v.
Lett, 674 N.W.2d 139, 143 (Iowa 2004) (revocation ordered  as  sanction  for
misappropriation of funds motivated in part  by  gambling  addiction).   Nor
does  the  fact  that  respondent  has  sought  and  successfully   received
counseling to alleviate his gambling addiction.  Cf. Iowa  Supreme  Ct.  Bd.
of Prof’l Ethics & Conduct v.  Schatz,  595 N.W.2d 794,  796  (Iowa  1999)
(successful treatment  for  depression  subsequent  to  misappropriation  of
funds does not preclude revocation of attorney’s license).
      The misappropriation of client funds  of  which  respondent  has  been
guilty would by itself warrant a revocation of his  license.   The  reckless
check-kiting scheme undertaken in an effort to replace the  funds  that  had
been taken is an aggravating factor.  Even if respondent sincerely  believed
that he would be able to obtain the necessary  funds  to  cover  the  checks
that he had written, this was a reckless disregard for  his  true  financial
position. That disregard caused a very substantial loss for the  First  Star
Bank, which was not repaid for more than  a  year.   It  is  fortunate  that
respondent has been able to make restitution to  both  Jacob  Reid  and  the
First Star Bank.  Circumstances may have been otherwise so as not to  permit
him to do so.  He was not free to take this gamble.
      After fully considering the matter now before us, we  order  that  the
license of respondent, Michael G. Reilly,  is  revoked  effective  with  the
filing of this opinion.  Costs are assessed to  respondent  as  provided  in
Iowa Court Rule 35.25(1).
      LICENSE REVOKED.
      All justices concur except Larson and Wiggins, JJ., who take no part.
-----------------------
      [1]Respondent contends that the difference between this amount and the
total amount of funds that had been misappropriated  equals  the  amount  of
Jacob Reid’s medical expenses that were paid by respondent.