Court Opinion

ID: 4575033
Source: CourtListenerOpinion
Date Created: 2020-10-09 14:11:43.868284+00
Date Added: 2024-06-11T13:31:43.580573
License: Public Domain

THE STATE OF SOUTH CAROLINA
                        In The Supreme Court

            In the Matter of Richard G. Wern, Respondent

            Appellate Case No. 2020-000125

                              Opinion No. 27998
                  Heard August 27, 2020 – Filed October 7, 2020

                                  DISBARRED

            John S. Nichols, Disciplinary Counsel, and Julie Kay
            Martino, Assistant Disciplinary Counsel, both of
            Columbia, for the Office of Disciplinary Counsel.

            Desa Ballard, of Ballard & Watson, of West Columbia,
            for Respondent.

CHIEF JUSTICE BEATTY: In this attorney discipline matter, Respondent
Richard G. Wern admitted misconduct in failing to perform monthly
reconciliations of his trust account, failing to keep adequate records, disbursing
before deposit on 735 client ledgers, failing to adequately supervise his non-lawyer
staff, comingling funds, and running trust-account shortages ranging from
$110,907 to $425,926. Following a hearing, a panel of the Commission on Lawyer
Conduct (the Panel) recommended Respondent receive a six-week definite
suspension in light of Respondent's repayment of the missing client funds and
unexplained delay by the Office of Disciplinary Counsel (ODC) in prosecuting this
matter. Although we find the inordinate delay by ODC troubling, we nevertheless
disbar Respondent.

                                         I.

Respondent was placed on interim suspension on November 6, 2013, after one of
his former associates filed a complaint against him alleging operational and case
management issues, including concerns related to the mismanagement of his trust
account. In re Wern, 406 S.C. 222, 750 S.E.2d 212 (2013). Respondent filed a
petition for reconsideration, and following a hearing, this Court lifted Respondent's
interim suspension upon several conditions. Notably, Respondent was prohibited
from accessing or controlling the law firm's trust or operating accounts. Instead,
his associate was responsible for ensuring all of the requirements of Rule 417,
SCACR, were met and for filing monthly reports with the Office of Disciplinary
Counsel certifying compliance. In re Wern, S.C. Sup. Ct. Order dated Dec. 23,
2013 (Shearouse Adv. Sh. No. 1 at 104). Respondent's law license has remained
active since December 2013.

Formal Charges were not filed against Respondent until May 6, 2019. The reason
for this delay is unclear.1 In his Answer, Respondent admitted the factual
allegations and rule violations alleged in the Formal Charges, which are detailed
below.

                     A. Failing to Perform Monthly Reconciliations
                         and Failing to Keep Proper Records

Prior to 2012, Respondent was not performing monthly three-way reconciliations
of his trust account. Rather, at the end of the year, a member of Respondent's staff
would perform a two-way reconciliation in preparation for filing the firm's tax
return. Respondent admitted never having read Rule 417, SCACR,2 and did not
actively participate in the reconciliations of his trust account until late 2012, after
the underlying disciplinary complaint was filed. Because Respondent failed to
perform three-way reconciliations, he did not have adequate records to show that
he held in trust monies he was required to maintain for each of his clients. He also
failed to maintain client trust account ledgers and adequate receipts of deposits.
These actions violated Rule 1 of Rule 417, SCACR, and Rule 1.15, RPC, Rule
407, SCACR.

                B. Disbursing Before Deposit, Comingling Funds, and
                              Failing to Supervise Staff

Respondent delegated to his office manager the responsibility for determining

1
    We explore the factor of delay in Section III infra.
2
 Rule 417 governs financial recordkeeping and enumerates basic financial records
and minimal accounting controls lawyers must maintain for lawyer trust accounts.
when to withdraw earned fees from the trust account. The office manager would
routinely authorize and direct the transfer of money from the trust account to the
operating account or the payroll account. From January 2011 to September 2013,
there were more than 290 transfers from the trust account, which occurred with no
notation of the associated client file and no documentation that any of the money
being transferred was, in fact, earned fees. These bulk transfers of money resulted
in disbursement before deposit on 735 client ledgers. Some deficits were tens of
thousands of dollars, and many of the disbursements occurred months before
deposit. In addition, Respondent routinely deposited funds into his trust account
without proper attribution, and from time to time, he intentionally left earned fees
in his trust account to ensure it was not overdrawn.

Respondent knew or should have known about his staff's actions in transferring
money from the trust account to cover law firm expenses, payroll, and other
distributions; however, Respondent failed to implement any measures to ensure the
handling of the trust account complied with Rule 417, SCACR, and failed to
ensure his non-lawyer staff's conduct was compatible with his professional
obligations regarding handling client funds. These actions violated Rules 1.15(a),
1.15(f), 1.15(g), and Rule 5.3, RPC, Rule 407, SCACR.

                           C. Trust Account Shortages

On January 19, 2012, a law firm formed by lawyers who formerly worked for
Respondent requested that Respondent transfer client funds held in trust for his
former client J.F. The client ledger balance indicated Respondent should have held
in trust a total of $679,153, of which $347,335 was to be held in trust for J.F.
However, the balance of Respondent's trust account was $253,227. Thus,
Respondent's trust account was short by $425,926.

Around this time, Respondent liquidated some personal assets and made deposits
into his trust account totaling $250,000. Despite these infusions of cash, his trust
account was still short. After transferring monies held for J.F. to the successor law
firm, Respondent's trust account balance should have been $358,067; however, the
balance was only $37,641—a shortage of $320,426.

Respondent began performing the required three-way reconciliations beginning in
October 2012. However, from November 2012 through August 2013,
Respondent's trust account was short every month by $110,907. These actions
violated Rule 1.15(f), RPC, Rule 407, SCACR. Respondent also violated Rule
2(c) of Rule 417, SCACR, by writing checks on the trust account to cash.
                                         II.

A hearing before the Panel was held on August 28, 2019, to consider evidence in
mitigation and aggravation and determine the proper sanction to recommend to this
Court. As aggravating factors, the Panel considered Respondent's substantial
experience in the practice of law and lengthy pattern of misconduct resulting in
multiple rule violations, finding "Respondent undoubtedly should have known
about and understood his ethical obligations to properly oversee the operation of
his trust account and to protect and preserve the client funds that were entrusted to
him." The Panel also highlighted Respondent's admission that he had never read
Rule 417, SCACR, prior to ODC's investigation or performed any three-way
reconciliations of his trust account before October 2013.

In mitigation, the Panel focused primarily on ODC's delay in bringing the
disciplinary proceedings. The Panel observed the investigation was initiated in
2012, and Formal Charges were authorized in 2013; however, Formal Charges
were not filed with the Commission on Lawyer Conduct until May 2019. In
considering the appropriate sanction, the Panel observed:

      Had this case come before the Hearing Panel shortly after Formal
      Charges were authorized in 2013, then it is likely that this Hearing
      Panel would have considered a recommendation of disbarment due to
      the gravity of Respondent's misconduct and the risk of significant
      client harm caused by the misconduct. However, the Hearing Panel
      has struggled greatly with the length of time that this matter has been
      pending. Approximately seven years have passed since the
      misconduct occurred and, in the meantime, Respondent has continued
      to practice law without any additional disciplinary issues . . . .

The Panel ultimately recommended that Respondent receive a six-week suspension
for the misconduct and be credited "time served" for the six weeks of interim
suspension in 2013. The Panel further recommended Respondent be ordered to
pay the costs of the proceedings and that the conditions prohibiting Respondent's
trust account access and requiring monthly reports be lifted.

ODC takes exception to the Panel's analysis of aggravating and mitigating factors,
as well as the sanction the Panel recommended.
                                         III.

"The sole authority to discipline attorneys and decide appropriate sanctions rests
with this Court." In re Davidson, 409 S.C. 321, 327, 762 S.E.2d 556, 559 (2014)
(citations omitted). "The Supreme Court may accept, reject, or modify in whole or
in part the findings, conclusions and recommendations of the [Panel]." Rule
27(e)(2), RLDE, Rule 413, SCACR. "This Court has never regarded financial
misconduct lightly, particularly when such misconduct concerns expenditure of
client funds or other improper use of trust funds." In re Taylor, 396 S.C. 627, 631,
723 S.E.2d 366, 367 (2012) (citation and quotations omitted). Consistent with
Respondent's admission of misconduct in his Answer to the Formal Charges, we
find Respondent committed misconduct as set forth above. Thus, the remaining
issue before this Court is the appropriate sanction. See Rule 7(b), RLDE, Rule
413, SCACR (misconduct shall be grounds for one or more sanctions).

Even though the investigation into Respondent's financial misconduct was complex
and time-consuming, ODC's delay in prosecuting this matter is inexcusable. ODC
has offered no specific explanation, much less a reasonable one, for the five-and-a-
half year delay between the authorization and the filing of Formal Charges.
However, the question remains to what extent, if any, this unjustified delay
mitigates the gravity of Respondent's financial misconduct. The parties have not
cited, and our research has not revealed, any South Carolina case on point.

Other jurisdictions handle delay in disciplinary prosecution in varying ways. Some
treat it as a mitigating factor to be considered like any other, even in the absence of
a showing of prejudice to the respondent, and others consider delay only if it
results in prejudice or unfair prejudice to the respondent. See, e.g., In re Howes,
52 A.3d 1, 18 n.22 (D.C. Ct. App. 2012) (observing a twelve-year delay between
the misconduct and the disciplinary hearing did not demonstrate the requisite
prejudice to warrant mitigation of sanction); Hayes v. Alabama State Bar, 719
So. 2d 787, 790–91 (Ala. 1998) (finding the bar's unexplained "inordinate delay" in
pursuing charges warranted dismissal of the charges); In re Peasley, 90 P.3d 764,
777–78 nn.20-21 (Ariz. 2004) (finding a three-year delay from the filing of the
initial complaint until a formal complaint was filed to be a mitigating factor but
finding the remaining four-year delay was attributable to the complexity of the
case and the Respondent's own litigation tactics and therefore was not a mitigating
factor); People v. Albani, 276 P.3d 64, 76 (Colo. 2011) (finding a five-year delay
in disciplinary proceedings that impacted witnesses' ability to recall underlying
events and statements resulted in prejudice, but not unfair prejudice, and therefore
concluding delay "will not be weighed heavily"); In re LiBassi, 867 N.E.2d 332,
336 (Mass. 2007) (finding "delay in the prosecution of attorney misconduct does
not constitute a mitigating factor absent proof that the delay has substantially
prejudiced the defense, or evidence of the resulting public opprobrium." (citation
and quotations omitted)); In re Preszler, 232 P.3d 1118, 1133 (Wash. 2010)
(explaining "[d]elay is a mitigating circumstance when the respondent attorney is
able to establish that the proceeding's time span resulted in unfair prejudice to him
or her, or is caused by unjustified prosecutorial delay").

We find unjustified delay on the part of ODC may properly be considered as a
mitigating factor where a Respondent demonstrates unfair prejudice as a result
thereof. However, we find Respondent did not suffer any prejudice under the facts
of this case. To the contrary, during the pendency of these proceedings,
Respondent benefitted by continuing to practice law and practicing without the
concomitant responsibility of overseeing his trust account, as this Court had
reassigned that task to his associate. Further, it does not appear Respondent
suffered any public opprobrium or detriment to his practice, as Respondent
repeatedly noted that more than $21.5 million passed through his trust account
since 2013.

To be clear, we do not condone, in any respect, the inordinate delay caused by
ODC in this case. However, we cannot ignore Respondent's longstanding pattern
of using money that was not his from his trust account, and we conclude this
misconduct warrants disbarment. See In re Beck, 412 S.C. 585, 587, 773 S.E.2d
576, 577 (2015) (disbarring an attorney who, for approximately eleven years, used
funds from his trust account for purposes for which those funds were not intended
"including funding other clients' litigation, cash advances to clients, office
operating expenses, payroll, and personal expenses"). Accordingly, we reject the
Panel's recommendation and disbar Respondent from the practice of law in this
state. Within fifteen (15) days of the date of this opinion, Respondent shall file an
affidavit with the Clerk of Court showing he has complied with Rule 30, RLDE,
Rule 413, SCACR, and shall also surrender his Certificate of Admission to the
Practice of Law to the Clerk of Court. Within thirty (30) days of the date of this
opinion, Respondent shall pay or enter into a payment plan with the Commission
on Lawyer Conduct to pay the costs of these disciplinary proceedings, which total
$13,141.66.
DISBARRED.

KITTREDGE and JAMES, JJ., concur. FEW, J., concurring in a
separate opinion. HEARN, J., dissenting in a separate opinion.
JUSTICE FEW: I concur in the majority's decision to disbar Mr. Wern.
However, there are two important aspects of this case as to which my perspective
differs from that of the majority. First, in my opinion, this case has absolutely
nothing to do with Rule 417, SCACR. Mr. Wern intentionally took his clients'
money out of his trust account, and he knew doing so was stealing. He directed the
withdrawals from the account with full knowledge of the crimes he was
committing, and at other times he delayed legitimate withdrawals to cover up his
crimes. The fact he accomplished the crimes by directing an employee to do the
necessary acts does not implicate Rule 417. The record-keeping requirements of
Rule 417 were designed to protect a law-abiding attorney and her clients from
having trust funds stolen by a third party, or if funds are lost or stolen, to ensure
early detection. When the attorney is the person doing the stealing, no record-
keeping rule is going to stop him. Mr. Wern's attempt to hide his thefts behind
Rule 417 is disingenuous.

Second, I have a different perspective on ODC's delay in bringing formal charges
against Mr. Wern. Initially, I agree with the majority's characterization of the
delay as "inexcusable." However, ODC is an agency of this Court. ODC is set up
under Rule 413 of the South Carolina Appellate Court Rules, which we wrote. If
ODC engaged in inexcusable delay—and the entire Court agrees it has—then the
responsibility for the failure falls ultimately to this Court. See Rule 5(a), RLDE,
Rule 413, SCACR ("The Supreme Court shall appoint a member of the South
Carolina Bar who has been admitted under Rule 402, SCACR, as the disciplinary
counsel."). It is simply not enough for this Court to say "we do not condone . . .
the inordinate delay caused by ODC in this case." To say merely this is to blame
the current disciplinary counsel for our failure,3 and effectively to "condone" our
own lack of supervision over the professionals we employ. The delay is ours, and
we must take the necessary steps—through rulemaking, staffing, and other
means—to improve the operations of ODC to prevent this delay from ever
happening again.

3
  The current disciplinary counsel is relatively new to the job, and if anything, is
the person responsible for getting this case and others in the backlog of the office
moving toward resolution.
JUSTICE HEARN: I respectfully dissent as to the decision to disbar Respondent
because I believe that sanction is excessive, particularly in light of Respondent's
lengthy, unblemished disciplinary history as well as the prejudice he sustained due
to the delay by the Office of Disciplinary Counsel (ODC) in resolving this matter.
Accordingly, I would impose a one-year suspension.

          Respondent cannot be excused for his extreme carelessness and inattention
to his responsibilities with respect to his trust account, and I do not excuse him.
However, as soon as he became aware of the gravity of his ethical infractions,
Respondent took immediate steps to rectify the situation and replenish the funds in
his trust account. Shortly thereafter, he also hired an associate who was responsible
for ensuring his trust account was in full compliance with the disciplinary rules from
that point forward, a period of nearly six years. While I certainly appreciate that his
clients were harmed in the sense that their monies were being used for Respondent's
personal and office expenses, there is no evidence in this record that any client was
actually harmed or ever complained about Respondent's conduct. Moreover, the
inexplicable delay by ODC in resolving the complaint against Respondent most
assuredly prejudiced him. Therefore, in my view, the extreme sanction of
disbarment is not warranted, and I believe our prior jurisprudence bears this out. See
In re Murph, 350 S.C. 1, 5, 564 S.E.2d 673, 675 (2002) (describing disbarment as a
"severe sanction"). For example, we issued a two-year suspension for an attorney
who mismanaged his trust account, delegated responsibilities to his
spouse/bookkeeper whom he failed to adequately train, had negative client ledger
balances, attempted to restore the trust account with personal funds and earned fees,
and hired an accountant to reconcile his records. In re Swanner, 408 S.C. 191, 192-
94, 758 S.E.2d 711, 712-13 (2014). Swanner also improperly issued loans to clients
and failed to diligently pursue the appeal of a decision denying his client's claim,
and he had received two prior admonitions and a letter of caution. Id. at 195-97 n.1,
758 S.E.2d at 713-14 n.1. Despite these facts, which are similar to those presented
here but also included cognizable harm to clients and an extensive prior disciplinary
history, this Court did not disbar.

       Conversely, we have found disbarment warranted when clients sustained
concrete harm as a result of more egregious conduct, accompanied by serious prior
disciplinary infractions. In In re Johnson, this Court disbarred an attorney who not
only misappropriated client funds and failed to maintain his trust and escrow
accounts, but also neglected client matters, pled guilty to assault and battery and
willful tax avoidance, failed to pay an expert witness and a court reporter, and
previously received a private reprimand, a public reprimand, and an interim
suspension. 385 S.C. 501, 504-05, 685 S.E.2d 610, 611 (2009). Mr. Wern's conduct
here in no way approaches the delicts committed by Johnson, nor does he have any
prior disciplinary history, yet the majority votes to disbar. More recently, in In re
Beck, we disbarred an attorney who violated approximately five ethical rules
including the misappropriation of client funds for over eleven years and had a prior
disciplinary history wherein he had received a letter of caution but yet admittedly
continued to violate the same rule. 412 S.C. 585, 588-89, 773 S.E.2d 576, 578
(2015). See also In re Warren, 416 S.C. 613, 614-15, 787 S.E.2d 528, 529 (2016)
(disbarring an attorney who, among other things, stole money from a trust for which
he served as trustee and accepted over $40,000 in fees but did not complete work as
promised or reimburse fees for the incomplete work); In re Pennington, 393 S.C.
300, 301-02, 713 S.E.2d 261, 261-62 (2011) (concluding disbarment was warranted
where an attorney, in addition to other violations, accepted fees for representing
clients but did no work on the clients' matters, contributed to a client going to jail
after the attorney failed to make payments for the client who had entrusted the
attorney to pay the checks at issue in the client's pending fraudulent check charges,
and did not pay a client's medical providers and insurers out of the client's settlement
funds). I find it significant that in all these cited cases, clients sustained concrete
injury because of the attorney's misconduct. Here, however, the complaint was
lodged by an associate who left Mr. Wern's employ and no client ever complained.
Most importantly, I believe it should matter that Respondent practiced law for thirty-
three years without any complaint against him. In my view, Respondent's grievance-
free disciplinary history for over three decades is a factor which should strongly
mitigate against disbarment.

        Finally, I am admittedly troubled by ODC's lengthy delay in prosecuting this
matter. Respondent was in his mid-sixties when the allegations of misconduct
initially arose. Even accepting the Panel's assumption that Respondent would have
been disbarred at that time, the prejudice to him resulting from ODC's delay is
readily apparent—the passage of time has now rendered the possibility of
Respondent obtaining other employment extremely unlikely.

       Accordingly, I would suspend Respondent for one year.