Court Opinion

ID: 2691545
Source: CourtListenerOpinion
Date Created: 2014-08-01 21:06:07.007307+00
Date Added: 2024-06-11T09:54:22.358724
License: Public Domain

[Cite as Cincinnati Bar Assn. v. Kellogg, 126 Ohio St.3d 360, 2010-Ohio-3285.]

                        CINCINNATI BAR ASSN. v. KELLOGG.
[Cite as Cincinnati Bar Assn. v. Kellogg, 126 Ohio St.3d 360, 2010-Ohio-3285.]
Attorney misconduct, including money-laundering conviction — Indefinite
        suspension.
    (No. 2009-2302 — Submitted March 30, 2010 — Decided July 20, 2010.)
    ON CERTIFIED REPORT by the Board of Commissioners on Grievances and
                    Discipline of the Supreme Court, No. 08-092.
                                  __________________
        Per Curiam.
        {¶ 1} Respondent, Paul Joseph Kellogg of West Chester, Ohio, Attorney
Registration No. 0062303, was admitted to the practice of law in Ohio in 1993.
        {¶ 2} In December 2008, relator, Cincinnati Bar Association, filed a
complaint charging respondent with multiple violations of the Code of
Professional Responsibility arising from his August 2008 conviction in the United
States District Court for the Southern District of Ohio on two counts of money
laundering, two counts of conspiracy to commit money laundering, one count of
conspiracy to obstruct proceedings before the United States Federal Trade
Commission (“FTC”), and one count of conspiracy to obstruct proceedings before
the United States Food and Drug Administration (“FDA”).
        {¶ 3} In May 2009, a three-member panel of the Board of
Commissioners on Grievances and Discipline conducted a hearing, wherein it
heard testimony from respondent and two character witnesses, and admitted 18
exhibits, including several stipulations of the parties. At the hearing, relator
suggested that the appropriate sanction for respondent’s misconduct is
disbarment, while respondent asked the panel to recommend a two-year
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suspension with either a partial stay or credit for his voluntary withdrawal from
the practice of law upon his conviction.
       {¶ 4} In July 2009, the panel approved a proposed agreed order
permitting relator to amend its complaint to allege that respondent’s conduct
violated either the Ohio Code of Professional Responsibility or the Ohio Rules of
Professional Conduct. The original complaint alleged violations of only the Rules
of Professional Conduct, but the conduct occurred prior to the effective date of
those rules.
       {¶ 5} After considering all the evidence, the panel made findings of fact,
including a finding that respondent’s misconduct occurred before February 1,
2007, the effective date of the Rules of Professional Conduct.        The panel
concluded that respondent had committed six violations of the Code of
Professional Responsibility and recommended that respondent be suspended from
the practice of law for two years, with the final six months of the suspension
stayed on the condition that he comply with the requirements of his supervised
release.
       {¶ 6} On December 14, 2009, we imposed an interim felony suspension
on respondent’s license pursuant to Gov.Bar R. V(5)(A)(4). In re Kellogg, 123
Ohio St.3d 1518, 2009-Ohio-6503, 918 N.E.2d 163. And on December 22, 2009,
the board adopted the panel report in its entirety and recommended that
respondent’s suspension begin to run on January 15, 2009, the date that he began
serving his prison sentence.
       {¶ 7} Relator objects to the board’s recommended sanction, arguing that
pursuant to our precedent, respondent’s felony convictions for money laundering
warrant permanent disbarment.        Respondent urges us to adopt the board’s
recommended sanction, which he contends reflects the panel’s assessment of the
unique facts and circumstances of his case.         However, we reject these

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recommendations and find that the appropriate sanction for respondent’s
misconduct is an indefinite suspension.
                                         Misconduct
        {¶ 8} From the time he was admitted to practice until 2003, respondent’s
practice consisted mainly of estate-planning and small-business matters.                       In
August 2003, he accepted a position as general counsel for a rapidly growing
nutraceutical company owned by his childhood friend, Steve Warshak.
        {¶ 9} In late 2003 and early 2004, numerous government agencies,
including the FTC, the FDA, and attorneys general from 17 states, began to
investigate the company’s operations. And in March 2004, the first of six class-
action suits was filed against the company.                  The primary focus of these
investigations, other than the FDA’s, and lawsuits was the company’s practice of
enrolling its customers into a “continuity program,” under which the company
automatically shipped and charged customers for products that they had not
ordered.
        {¶ 10} As a result of the FTC and FDA investigations, a federal grand
jury indicted respondent on nine felony counts. In February 2008, a jury found
him guilty of two counts of conspiracy to commit money laundering, two counts
of money laundering, and one count of conspiracy to obstruct proceedings before
the FTC for his role in a scheme to protect Warshak’s assets from the FTC and
future legal claims by transferring $14 million into two separate trusts. Although
outside counsel prepared the trust documents, respondent reviewed them to ensure
that they complied with Ohio law and served as the trustee for both trusts. The
jury also found respondent guilty of a single count of conspiracy to obstruct
proceedings before the FDA, for instigating the removal of a misbranded1

1. The misbranded product claimed to contain ingredients that it did not. At the criminal trial, a
warehouse employee testified that he had repackaged the product, originally in boxes that

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supplement from the company’s warehouse after learning that an FDA inspection
of the facility was imminent. The jury acquitted respondent of the remaining
counts.
          {¶ 11} Despite a guideline sentencing range of 235 to 293 months, and a
probation office’s recommendation of a 188-month sentence, the trial court
sentenced respondent to one year and one day in federal prison, making him
eligible for a 15 percent reduction in his prison time. He was released to a
halfway house in August 2009, and upon the expiration of the remainder of his
prison term in November 2009, began serving a three-year period of supervised
release.
          {¶ 12} Based upon these findings, the board concluded that respondent’s
conduct, all of which occurred prior to February 1, 2007, violated DR 1-
102(A)(3) (prohibiting a lawyer from engaging in illegal conduct involving moral
turpitude), 1-102(A)(4) (prohibiting a lawyer from engaging in conduct involving
dishonesty, fraud, deceit, or misrepresentation), 1-102(A)(5) (prohibiting a lawyer
from engaging in conduct prejudicial to the administration of justice), 7-
102(A)(7) (prohibiting a lawyer from counseling or assisting his client in conduct
that the lawyer knows to be illegal or fraudulent), 7-102(A)(8) (prohibiting a
lawyer from knowingly engaging in illegal conduct), and 7-109(A) (prohibiting a
lawyer from suppressing any evidence that he or his client has a legal obligation
to reveal or produce). We accept these findings of misconduct.
                                            Sanction
          {¶ 13} When imposing sanctions for attorney misconduct, we consider
relevant factors, including the ethical duties that the lawyer violated and the
sanctions imposed in similar cases. Stark Cty. Bar Assn. v. Buttacavoli, 96 Ohio
St.3d 424, 2002-Ohio-4743, 775 N.E.2d 818, ¶ 16.                           In making a final

identified it as promoting prostate health, into boxes that identified it as promoting heart health.
The repackaged product was then put into the company’s stock to be sold to customers.

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                               January Term, 2010

determination, we also weigh evidence of the aggravating and mitigating factors
listed in Section 10(B) of the Rules and Regulations Governing Procedure on
Complaints and Hearings Before the Board of Commissioners on Grievances and
Discipline (“BCGD Proc.Reg.”). Disciplinary Counsel v. Broeren, 115 Ohio
St.3d 473, 2007-Ohio-5251, 875 N.E.2d 935, ¶ 21. Because each disciplinary
case involves unique facts and circumstances, we are not limited to the factors
specified in the rule and may take into account “all relevant factors” in
determining which sanction to impose. BCGD Proc.Reg. 10(B).
       {¶ 14} Here, respondent both conspired to commit and committed money
laundering by assisting in the creation of two trusts designed to protect $14
million of Warshak’s assets—the ill-begotten gains of the company’s “continuity
program”—from the FTC and future lawsuits by its customers. By instructing an
employee to “get rid of” a misbranded product housed in the company’s
warehouse, he also set in motion a scheme to conceal evidence of the company’s
misdeeds from federal investigators.     This conduct involving dishonesty and
moral turpitude violated the very laws that respondent took an oath to uphold.
       {¶ 15} As for aggravating factors, the board determined that respondent
acted with a dishonest or selfish motive, although he apparently did not benefit
financially from his actions, and that he engaged in multiple offenses of
misconduct. BCGD Proc.Reg. 10(B)(1)(b) and (d). And in mitigation, the board
found that respondent has no prior disciplinary record, has made some efforts to
rectify the consequences of his misconduct, has been cooperative in the
disciplinary proceedings, has established that he is a person of good character,
despite his criminal convictions, and has been penalized by the criminal justice
system for his misconduct. BCGD Proc.Reg. 10(B)(2)(a), (c), (d), (e), and (f).
       {¶ 16} The board also considered that respondent has accepted
responsibility for his actions and has expressed remorse. It noted that, with the
federal court’s blessing, respondent continued to work for the company, assisting

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the bankruptcy trustee in his efforts to sell the company as a going concern, and
that he immediately ceased practicing law upon his sentencing. Additionally, it
appears that the board considered respondent’s leukemia, which was diagnosed
near the time of his misconduct, to be a mitigating factor.
       {¶ 17} Weighing these factors, the board recommended that we impose a
two-year suspension, with six months stayed, beginning on January 15, 2009, the
date that respondent began serving his prison sentence. While we may defer to
the expertise of the panel or board, accepting their findings of misconduct or their
recommended sanctions for misconduct, as the ultimate arbiter of misconduct and
sanctions in disciplinary cases, we are not required to do so.          Disciplinary
Counsel v. Kelly, 121 Ohio St.3d 39, 2009-Ohio-317, 901 N.E.2d 798, ¶ 11, citing
Cincinnati Bar Assn. v. Powers, 119 Ohio St.3d 473, 2008-Ohio-4785, 895
N.E.2d 172, ¶ 21.
       {¶ 18} In support of its objections, relator cites a number of cases in
which this court has permanently disbarred attorneys who engaged in money
laundering and other comparable crimes.             But those cases do not hold that
permanent disbarment is the presumptive sanction for money laundering. And
even when there is a presumption in favor of permanent disbarment, that
presumption may be rebutted by evidence in mitigation. See, e.g., Disciplinary
Counsel v. Smith, 101 Ohio St.3d 27, 2003-Ohio-6623, 800 N.E.2d 1129, ¶ 9
(“Absent any mitigating factors, disbarment is the appropriate sanction for an
attorney’s misappropriation of client funds”); Disciplinary Counsel v. Hunter, 106
Ohio St.3d 418, 2005-Ohio-5411, 835 N.E.2d 707, ¶ 42 (Moyer, C.J., dissenting)
(“by definition, a presumptive sanction of disbarment does not preclude the
application of mitigation. That is, the presumption in favor of disbarment in the
case of theft from clients is a rebuttable one”).
       {¶ 19} The cases relator cites in favor of permanent disbarment are
factually distinguishable from the facts presented here. In Toledo Bar Assn. v.

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                                January Term, 2010

Cook, 114 Ohio St.3d 108, 2007-Ohio-3253, 868 N.E.2d 973, numerous
aggravating factors—including respondent’s prior disciplinary record for self-
dealing, her deceptive explanations for her actions, and her failure to recognize
how her actions violated the ethical standards for lawyers or why those standards
even exist—weighed in favor of a more severe sanction, but there were no
mitigating factors warranting leniency.
       {¶ 20} In Disciplinary Counsel v. Bein, 105 Ohio St.3d 62, 2004-Ohio-
7012, 822 N.E.2d 358, respondent had engaged in a pattern of criminal conduct
over a five-year period, showed no remorse, downplayed his role in the criminal
conspiracy, caused significant financial harm to the victims of his thefts and
conspiracy, and was motivated by financial gain. Moreover, relator did not learn
about the respondent’s federal convictions until six years after the respondent was
sentenced. Id. at ¶ 4, 5, 8, 12. The only mitigating factors weighing in favor of
leniency were the respondent’s lack of a prior disciplinary record, his cooperation
during the disciplinary process, and the imposition of other penalties in his
criminal case. Id. at ¶ 9. And in Cincinnati Bar Assn. v. Banks (2002), 94 Ohio
St.3d 428, 763 N.E.2d 1166, the respondent failed to participate in the
disciplinary proceedings against him, and he knowingly gave materially false
testimony on four separate occasions during his criminal trial in federal court.
       {¶ 21} Of the cases cited by relator, the related cases of Disciplinary
Counsel v. Jones (1993), 66 Ohio St.3d 74, 609 N.E.2d 150, and Disciplinary
Counsel v. Williams (1993), 66 Ohio St.3d 71, 609 N.E.2d 149, are perhaps the
most analogous to the case at bar. Those respondents engaged in a conspiracy to
launder more than $50,000 that they believed to be the proceeds from the sale of
illegal drugs. In permanently disbarring Jones, we acknowledged the mitigating
evidence that he had initiated the scheme due to economic hardship and that he
had submitted numerous letters attesting to his good character. But we also noted
that Jones’s active participation in the laundering scheme and his “belief that his

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conduct did not involve moral turpitude” were aggravating factors. We also
disbarred Williams for his participation, despite evidence that he had cooperated
with the government, that he had accepted responsibility for his crime, and that he
was the least culpable participant in the scheme.
       {¶ 22} But recently, in Disciplinary Counsel v. Gittinger, 125 Ohio St.3d.
467, 2010-Ohio-1830, 929 N.E.2d 410, we imposed an indefinite suspension on
an attorney convicted of money laundering and conspiracy to commit bank fraud,
based in part upon a condition in the respondent’s federal criminal sentence that
prohibited him from practicing law during his five-year term of supervised
release.
       {¶ 23} Here, based upon the seriousness and severity of respondent’s
crimes, we agree that his misconduct warrants a greater sanction than the board
has recommended. We observe that despite federal guidelines recommending a
sentence of 19 to 24 years in prison, respondent served only ten and one-half
months, seven and one-half months in prison and three months in a halfway
house, and is currently serving three years of supervised release. If we were to
impose the board’s recommended sanction, respondent could resume the practice
of law more than two years before the expiration of that supervised release.
       {¶ 24} But even if we were to accept relator’s arguments that we should
reject two factors that the board considered mitigating—namely respondent’s
leukemia diagnosis, which relator argues should be rejected because it has not
been causally linked to respondent’s criminal conduct, and respondent’s
acceptance of responsibility for his actions, which relator questions, arguing that
respondent tried to minimize his culpability—the mitigating factors in this case
would still weigh in favor of a sanction less severe than permanent disbarment.
       {¶ 25} In particular, we note that respondent has assisted the company’s
bankruptcy trustee in his efforts to sell the company as a going concern, which
preserved the jobs of more than 200 innocent employees.          Respondent also

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                                January Term, 2010

cooperated with a federal investigation of the legal firm that drafted the trusts and
provided counsel to the company. Moreover, the letters and testimony offered by
respondent demonstrate that he is known for his honesty and integrity, despite his
criminal convictions, and that the conduct leading to his convictions was an
aberration, rather than the norm. BCGD Proc.Reg. 10(B)(2)(c), (d), and (e).
       {¶ 26} Based upon the foregoing, we conclude that the appropriate
sanction for respondent’s misconduct is an indefinite suspension. Accordingly,
Paul Joseph Kellogg is hereby indefinitely suspended from the practice of law in
the state of Ohio.     Respondent may petition for reinstatement once he has
completed the term of supervised release imposed by the federal court in his
underlying criminal case, but not before the two-year period that respondent must
wait before petitioning for reinstatement pursuant to Gov.Bar R. V(10)(B). Costs
are taxed to respondent.
                                                             Judgment accordingly.
       PFEIFER, LUNDBERG STRATTON, LANZINGER, and CUPP, JJ., concur.
       O’CONNOR and O’DONNELL, JJ., dissent.
       BROWN, C.J., not participating.
                              __________________
       O’DONNELL, J., dissenting.
       {¶ 27} I respectfully dissent. The appropriate sanction for this level of
misconduct is disbarment. As the majority opinion recounts, respondent did not
plead guilty but rather contested the charges and was found guilty by a jury of two
counts of conspiracy to commit money laundering, two counts of money
laundering involving $14 million, and conspiracy to obstruct official proceedings
before two federal agencies, the Federal Trade Commission and the Food and
Drug Administration.
       {¶ 28} The federal sentencing guidelines suggest a prison sentence for
such conduct of 20 to 25 years. Respondent served less than one year. Despite

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mitigation, our role is to protect the public from lawyers who fail to adhere to the
highest ethical standards, not coddle offending attorneys. Respondent’s conduct
is the epitome of disrespect for the system of justice he swore to uphold.
Accordingly, I would disbar respondent for this conduct.
       O’CONNOR, J., concurs in the foregoing opinion.
                              __________________
       Susan R. Bell and Peter Rosenwald, for relator.
       Bieser, Greer & Landis, L.L.P., David C. Greer, and James P. Fleisher, for
respondent.
                            ______________________

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