Attorney Grievance Commission v. West

BELL, C.J. The Attorney Grievance Commission of Maryland, the petitioner, by Bar Counsel, acting pursuant to Maryland Rule 16-751, 1 filed a Petition For Disciplinary or Remedial Action 2 against Brian Grayson West, the respondent. The petition charged that the respondent violated Rules 1.8, Conflict of Interest: Current Clients: Specific Rules, 3 1.15, Safekeeping ⁵ property, 4 and 8.4, Misconduct, 5 of the Maryland Rules of Professional Conduct, as adopted by Maryland Rule 16-812, Maryland Rules 16-607 6 and 16-609 7 and Maryland Code ⁶ (1989, 2004 Repl.Vol.) § 10-306 of the Business Occupations and Professions Article, pursuant to which “[a] lawyer may not ⁷ use trust money for any purpose other than the purpose for which the trust money is entrusted to the lawyer.” We referred the case, pursuant to Rules 16-752(a), 8 to the Honorable Michael J. Finifter, of the Circuit Court for Baltimore County, for hearing pursuant to Rule 16-757(c). 9 Following a hearing, at which the respondent appeared, participated and testified, the hearing judge found facts by the clear and convincing standard, Maryland Rule 16 — 757(b), 10 as follows (record references and footnotes omitted). “Brian G. West, Respondent, was admitted to the Maryland Bar in 1978. In 1992 he was admitted to practice in Pennsylvania. During times relevant to this matter, Respondent practiced in Towson, Maryland, as a principal with the firm of Koehler & West, Chartered, hereafter ‘K & W.’ ... “The other principal in K & W, Lee Koehler, hereafter ‘Koehler,’ has been a member of the Maryland Bar for approximately 40 years....

Respondent and Koehler have practiced ⁸ together in one form or another for approximately 30 years----K & W was a business oriented practice____The Respondent and Koehler ended their joint practice on July 31, 2008.... “Koehler was unfamiliar with the administrative details of K & W because of his involvement in the resort business up until approximately 1991, when a real estate recession occurred and a number of large loans made to finance those operations went bad. Thereafter, Koehler was involved in litigation with a former business partner. This litigation is still ongoing____ “Koehler’s litigation caused a financial drain on K & W. Koehler did not devote his full attention to the law practice and relied on Respondent to handle the operation of the law firm. Because Respondent has an MBA, Koehler left handling the financial and accounting for K & W to the Respondent.

Respondent also spent a lot of time providing legal services relating to the litigation. In exchange for these services, Koehler gave Respondent a contingent fee on any recovery. In 2004, a partial recovery was obtained____ “K & W maintained an attorney trust account at Mercantile Safe Deposit & Trust, now PNC, dating back to 1996. Although both Respondent and Koehler had signatory authority on this account, Koehler very rarely used the account.

K & W also maintained an operating account at Nations Bank/Bank of America, on which they both had signatory authority. Respondent issued most of the checks and kept the records for both these accounts. Respondent prepared the tax returns and took care of paying taxes for the firm. Koehler and Respondent also had a joint investment account at Janey Montgomery Scott---- “Koehler and Respondent were employees of K & W and received regular draws from the firm.

The firm’s profits were shared equally. K & W was operated informally. When leases for telephone and computer equipment were entered into by the firm, Koehler was aware of those transactions____ “In 1984, Thomas Rankin, hereafter ‘Rankin,’ a neurosurgeon practicing in York, Pennsylvania, decided to begin a ⁹ magnetic imaging/CT scanning business. Koehler was consulted by Rankin for legal advice regarding establishing the business.

Rankin knew Koehler through another neurosurgeon, Dr. Ronald Paul, hereafter ‘Paul.’ Paul had attended college with Koehler. Thereafter, both Koehler and Respondent provided legal services in connection with raising the financing for and the start-up of Magnetic Imaging of York, Limited Partnership, ‘MIY,’ t/a York Imaging Center, ‘YIC.’ After MIY was established, Koehler and Respondent continued to provide legal services to the imaging center---- As time went on Respondent provided much more of the legal services to the imaging center than did Koehler---- “MITs general partner was Advanced Technologies Associates, Inc. The original shareholders of this entity were Rankin, Paul and another neurosurgeon, Ivan Butler, hereafter ‘Butler.’ ... “After the business was organized, Paul became the managing general partner and was responsible for the overall operation. Rankin moved away in 1985 but Butler remained in the area and Paul consulted him from time to time regarding important matters---- “In 1996, the general partners recognized Paul as the managing general partner and authorized him to receive a percentage of the profits as a management fee. Respondent was designated the Administrative Vice-President and, as such, was to assume Paul’s duties in the event that Paul was absent from the area.

Such powers were, however, only exercisable during such periods as were designated in writing from time to time by Paul. While Paul did not consent to Respondent’s exercise of his duties in writing, there was an oral agreement that, when Paul left the area, Respondent was directed to assume his responsibilities.... “Thereafter, Respondent became the executive director of the imaging center and assumed the day to day oversight of its operation. As compensation, Respondent received 90% of Paul’s management fee. Respondent did not discuss taking on the MIY management role with Koehler.

When he heard ¹⁰ about it, Koehler was not in favor, however, he never told Respondent how he felt. Koehler told Paul that Respondent having a separate source of income could create a conflict of interest and working for the imaging center could blur the line between legal counsel and employee____ “After he became the executive director, Respondent continued to act as legal counsel for the partnership. As the attorney for the partnership, Respondent made the distributions to the limited and general partners. This usually occurred twice a year: at the end of the year and at tax time.

Respondent would calculate and recommend to Paul the amounts to be distributed. Paul would then consent to the distribution of this amount and Respondent then transferred such funds from the MIY account to K & W’s trust account and checks were sent to the partners from the trust account. Koehler played no part in handling the distributions____ “Respondent could sign on the limited partnership’s bank accounts. In 1996, Paul’s and Respondent’s signatures were both required on the checks, however, at times, a stamp was used to place Paul’s signature on checks used to pay invoices or bills.

All other partnership bills and invoices were to be paid from the imaging center’s bank account in York. When K & W provided legal services, the firm was to submit an invoice to the bookkeeper, Tiffany Small, and the bill would be paid from the partnership bank account. ... “According to Paul, Respondent was not authorized to make loans to the partners or officers of the corporation. On occasion, the imaging center borrowed money for the purchase of equipment and capital expenditures. Respondent could sign for the partners for these loans____ “The imaging center had a profit sharing plan.

From 1996 through 2005, Respondent and Lee Koehler were trustees for this plan. The profit sharing funds also went into the K & W trust account and from there the funds were distributed by Respondent for the various investments chosen by the plan members____ ¹¹ “In October/November of 2001, while reviewing the financial statements for the business, Paul observed an inordinate amount paid for legal and accounting services. He reviewed the disbursement records for that period and found that Respondent had arbitrarily, without his advice or consent, written a check in June 2001 in the amount of $58,000 to K & W. There was a note in the disbursement records left by Respondent indicating that he felt that he had been underpaid for his trustee services and that he made the unilateral decision to go back 14 years and increase his fee from $1,500 per year to $5,000 per year and wrote the check to his firm for $58,000. Although the check bears Paul’s signature, the signature was placed there by the use of a stamp.

Paul was not aware of the disbursement in June 2001.... Koehler was not aware that his firm received the $58,000 from MIY in 2001.... “After making this discovery, Paul contacted the Respondent by e-mail about the $58,000 disbursement. Paul also asked Respondent to explain a check issued to K & W on September 9, 2001 in the amount of $15,000. This check was designated as a ‘draw.’ Respondent and Paul were not due management fees in September 2001.

Paul also questioned the premature payment of a $5,000 trustee fee to K & W on October 31, 2001.... “Respondent returned Paul’s e-mail on December 1, 2001, a few days after it was sent____In this message, Respondent wrote that he understood Paul’s remarks and was ‘humbled by them.’ Respondent indicated that he wanted to resolve the dispute over the disbursements but was unable to repay the funds immediately because of the ‘nature of his practice’ and the impact thereon from Koehler’s lawsuit. Respondent promised to repay the disputed portion of the $58,000.... “After the exchange of e-mails, Paul and Respondent met. The meeting took place at the imaging center’s office in York, where Respondent had an office.... The primary purpose of the meeting concerned the payment of the $58,000 for the trustee fee.

Prior to the meeting, Paul had investigated the ¹² usual and customary fees for third party administrators and trustees in the York-Harrisburg area and determined that Respondent may have been underpaid for these services. During the meeting, Paul told Respondent that he was very upset that Respondent had issued the $58,000 check, that doing so was totally inappropriate and that Respondent should not have issued the check without Paul’s advice and consent. Respondent admitted that he had erred. Paul and Respondent came to an agreement that, instead of a retroactive reimbursement going back 14 years, Respondent would pay back $30,000.

Respondent told Paul that he was unsure how he would pay this money back, but would come up with a proposal____ “During this meeting, Paul made it clear to Respondent that all invoices for legal fees would have to be reviewed by him prior to being paid. Paul also directed that all checks would require two legitimate signatures and stamp signatures would no longer be used. Respondent continued to be one of the signers and Tiffany Small, the imaging center’s bookkeeper, was made an authorized signer. Paul and Butler were also authorized to sign checks.

Respondent agreed to go along with the changes discussed by Paul at the meeting. ... “During the meeting, Paul asked Respondent if there was anything else that he did not know about and Respondent told him that he had not repaid a loan he received from MIY. Paul was surprised to find out that a $30,000 loan he had authorized in 1997 had not been fully repaid by Respondent and told Respondent that the loan would have to be repaid. Respondent agreed to do so____ “The terms of the 1997 loan are set out in a Promissory Note, dated October 29,1997. Respondent signed the note as Vice President of K & W and promised that K & W would repay the $30,000 loan from MIY Limited Partnership t/a York Imaging Center (the ‘Lender’) with interest in the amount of 10% per annum on or before December 31,1997____ The note was witnessed by Don Wilson, the imaging center’s in-house manager at the time____The note was maintained in ¹³ the MIY offices in York.

Respondent prepared an accounting of the payments made on the loan---- “The first payment on the loan had been made on April 16, 2001 by check in the amount of $15,000 written on the K & W trust account. The second (and final) payment was made by check dated April 30, 2002, written by Respondent on the K & W trust account in the amount of $29,581.59.... “Subsequent to their meeting, Paul received a memorandum dated May 7, 2002 from Respondent. In this memorandum, Respondent proposed that he be paid $65,000 per year as the Privacy Officer to insure that the imaging center was in compliance with Federal privacy laws. The $30,000 trustee fee settlement figure would be paid back from payroll deductions from these funds.

Respondent also proposed that he no longer receive a portion of Paul’s management fee and, instead, be paid $60,000 per year from ATA, to be paid in $15,000 installments each on January 15th, March 15th, July 15th and October 15th. The management fee was to be paid from ATA funds. Since ATA did not have a bank account, the management fee was to be paid by Respondent from funds deposited to K & W’s trust account from MIY. The trustee fee paid to Respondent and Koehler was to be increased from $1,500 to $3,500 per year.

Paul expected that the trustee fee would be paid from the MIY bank account as it had been prior to 2002. Paul sent the memorandum to Butler and they discussed the proposal. Paul then told Respondent that he agreed to the proposal____ “Although Paul instructed Respondent to submit all legal invoices to him before payment, he did not check to see if Respondent was following his instructions. Paul did not check to make sure that Respondent was taking the $60,000 management fee at the agreed intervals.

Respondent did not show Paul invoices for attorney fees owed to K & W and Paul was unaware that attorney fees were paid to K & W from MIY funds deposited to the K & W trust account after 2002. Paul thought that a lot of things Respondent would normally have ¹⁴ charged a legal fee for would be covered under the 2002 salary arrangement____ “In 2002, the imaging center purchased new MRI equipment from the Phillips Corporation. Citicorp financed the purchase. In January 2003, Citicorp sent MIY Limited Partnership a check in the amount of $160,000 to reimburse MIY for used equipment.

On January 16, 2003, this check was deposited by Respondent to the K & W trust account____The check was endorsed by Respondent as Executive Director of MIY payable to Koehler & West, Chtd, Escrow Account.... “Paul was not aware at the time that the Citicorp check was deposited to K & Ws trust account and he did not authorize Respondent to deposit those funds to the law firm’s account. Paul did not find out that the check had been deposited to the K & W trust account until after he made a complaint to the Petitioner in 2006. Normally, checks from a vendor or creditor were deposited to the MIY bank account____ “Respondent was terminated by Paul on November 11, 2005. Paul terminated Respondent for several reasons.

First, Paul thought that Respondent was losing any sense of accountability to him as the managing general partner. Second, Paul discovered that Respondent was not presenting K & W legal invoices to him before writing checks to pay those invoices and, finally, Paul found out that Respondent had, without Paul’s advice or consent, terminated the services of Robert Gantz, hereafter ‘Gantz,’ the partnership’s accountant, and intended to take over the accounting responsibilities himself____ “Respondent, as the attorney for ATA, prepared its tax returns. Gantz prepared the tax returns for MIY and Mag-Scan Associates, a professional corporation which hired and paid the imaging center’s professional people. Gantz also prepared an annual audit required by creditor banks and by the private offering memorandum, which required third party oversight for accounting purposes____ “After his discharge, Respondent was offered a severance package and Respondent and counsel for MIY, Anne Zerbe, ¹⁵ entered into negotiations.

Paul made an offer and Respondent submitted a counter proposal. Respondent, however, wanted to be released from any liability and Paul refused to agree. No compromise was made and the offer was withdrawn. At the time, Paul made the offer to pay severance to Respondent, he was not aware that Respondent owed ATA or MIY money____ “At the time of Respondent’s discharge, he maintained records for MIY and ATA in his law office in Towson.

The partnership wanted these records so that they could continue business without interruption. Many of the records were returned by Koehler. MIY was told that some of the ATA records were kept by Respondent at his home and Koehler did not have access to these records. These records were not returned---- “Koehler communicated with the manager/CEO of the imaging center concerning the return of MIY records.

Koehler told the imaging center that Respondent was unable to provide a reconciliation of receipts and disbursements for ATA because he had surgery on January 16, 2006 and was in the hospital until January 20, 2006. Respondent was to prepare the reconciliation when he returned to work---- “Gantz and Respondent exchanged email messages beginning in February 2006, in which Respondent was asked to provide these records. Although Respondent promised to return the records, as of June 21, 2006, Respondent had failed to do so. Respondent was also asked to explain why there was a discrepancy between the 2005 beginning cash balance per his accounting: $25,484.91; and the ending cash balance per the 2004 tax return: $58,911.

Respondent replied that he had trouble bringing the 2004 tax return into balance and had ‘adjusted cash.’ ... Respondent did not offer any further explanation for the discrepancy____Gantz prepared the ATA tax return for 2005.... “Before his discharge, Respondent provided an annual reconciliation to Gantz showing the amounts transferred to his trust account and the payments made from those funds. Paul ¹⁶ never compared these reconciliations to the financial records for the MIY bank account____ “In early 2005, there was some discussion between Respondent and Paul concerning the purchase of the business by Respondent. The business, however, only broke even in 2005 and it went out of business in June 2006____ “Ivan Butler was one of the shareholders in ATA.

He retired from neurosurgery in 1995. Although, Butler had little involvement in the management of the imaging center, he frequently discussed the running Of the imaging center and any major problems with Paul. Between 2000 and 2005, Butler rarely spoke with the Respondent. At income tax time, Butler got calls from numerous limited partners wanting to know about income tax forms.

Butler would then contact Respondent by email concerning tax returns and disbursement checks and Respondent would promptly respond____ “Butler received distributions from both MIY and ATA. These payments were usually received at the end of March or the beginning of April. These checks would be written on the K & W escrow account and come with a yearly statement on the law firm’s letterhead. Respondent would also provide a K-l.... “Butler was aware of and approved the steps taken by Paul in 2002 and was aware that changes were made in Respondent’s agreement with the imaging center.

Paul discussed with him Respondent’s proposal that he receive a $60,000 annual management fee. Butler did not object to these changes. Butler never discussed the management fee or the trustee fee with Respondent and did not authorize Respondent to change the manner in which these fees were paid.... “In November 2005, Paul told Butler that he was going to discharge Respondent. Butler,agreed with this decision____ “Diana Rankin is the wife of Thomas Rankin.

She came to know Respondent as one of the lawyers who provided legal advice to the imaging center. In 1998, Mrs. Rankin took over her husband’s shares of ATA. At that time she became aware ¹⁷ that Respondent had become an officer and was involved in running the business.... “In 1988 the Rankins moved to Florida and in 1993 they moved to Wisconsin. Her husband’s involvement with the business was limited to communications with Respondent about the business.

From 2000 through 2005, neither Dr. or Mrs. Rankin had any involvement in the management of the imaging center. In late March or early April, Rankin received distributions from the proceeds of the imaging center. The distribution payments were sent by mail along with a letter on the K & W letterhead, a K-l and a check from the K & W escrow account. After 1998, Rankin’s shares were transferred to her and the distribution checks came payable to Mrs. Rankin.

Respondent was consulted concerning transferring the ownership of the shares. Respondent said that he would have to get the approval of Drs. Butler and Paul. He later phoned back and said the transfer was approved.... “The Rankins always had questions concerning the distribution or the K-ls.

Although Mrs. Rankin would contact Respondent concerning these questions, she never felt she got a clear answer. Respondent never provided the documentation so that she would know what was going on. She did not receive copies of the ATA tax returns from Respondent. On at least one occasion, Respondent refused to take her call.

Mrs. Rankin obtained an email address for the Respondent and had a better response from Respondent by this method. Respondent, however, did not respond to all of her email messages. Mrs. Rankin did not call Paul about her questions because Respondent told her that she should communicate with Paul through Respondent____ “In January 2002, Mr. Rankin had an issue with the Internal Revenue Service (IRS) concerning the amount of taxes owed. On or about January 28, 2002, the IRS sent ATA a letter notifying it of a levy to attach to the full amount of any partnership distribution or other funds paid from ATA to Dianna Rankin.

On or about March 5, 2002, Respondent responded to this letter as the attorney for ATA. Although ¹⁸ Respondent informed the IRS that, as of the date of service of the Lien/Levy Notice, ATA had no funds for which the obligation of payment to either Rankin was fixed and determinable and no funds would be transmitted to the IRS, he, pending resolution of the IRS issue, withheld the distribution payment due to Mrs. Rankin in March 2002____ “Respondent timely refuted any efforts by the Internal Revenue Service to lien monies due from ATA to or for the benefit of Dianna Rankin and/or Thomas Rankin. “The Rankins were represented by an attorney named Steve Anderson. It was the Rankins’ position that the distribution for 2002 should be paid to Mrs. Rankin or, if Respondent was unwilling to do that, the funds should be sent to Mr. Anderson to be held in his law firm’s escrow account. Respondent disagreed with the Rankins and said he was going to hold the money in an interest bearing account under his control.

Although Mrs. Rankin did not agree to Respondent’s terms, he refused to release the money to either her or her lawyer---- Petitioner did not produce any evidence of a written demand from Dr. or Mrs. Rankin for interest from the point of payment of the funds in 2003 until the hearing on this matter on October 15, 2008. “Despite Mrs. Rankin’s efforts to have Respondent release the funds, he did not do so until March 2003. At that time he sent a portion of what was owed to the Rankins’ attorney. The balance of the funds were not paid until October 2003. Respondent did not pay interest on the funds withheld____ “Although no funds were received for distributions in 2002, Mrs. Rankin received a K-l for that year.

Respondent prepared this document. Mrs. Rankin testified that there was a discrepancy of as much as $70,000 between the amount listed on the K-l she received for 2003 and the monies that were disbursed to her and she still has questions about how much she received____ “In January or February 2005, Respondent approached Mrs. Rankin about purchasing the imaging center. He told Mrs. Rankin that Drs. Butler and Paul were thinking about ¹⁹ selling and then asked if she would join Respondent and Dr. Ornara in buying the imaging center.

Mrs. Rankin said no. Respondent asked her not to tell Drs. Butler and Paul about his offer; however, she subsequently spoke to them and asked what was going on with the imaging center. They told her that they were considering selling the business to a neurosurgical group---- “In November 2005, Mrs. Rankin spoke with Respondent about the K-l she received that past year.

Her husband had received information from Paul concerning the profits of the company and figured that she should have received more. Respondent was sent an email but did not respond. Shortly thereafter, Mrs. Rankin found out he was discharged and there were no further communications with Respondent____ “In the Summer of 2006, Paul, Butler and Mrs. Rankin made complaints to the Petitioner. Butler did so because he was aware that there were some funds for which Respondent had not accounted and Respondent would not release documents such as the records for ATA needed to file the tax return for ATA____ “Mrs. Rankin complained because she felt that she was owed interest on the money held by Respondent and wanted the ATA documents held by Respondent and wanted documentation for the amounts of the distributions.

She has never been provided these records---- “Petitioner conducted an investigation. In 2007, during the investigation, Respondent produced two Demand Promissory Notes dated January 15, 2002 and January 15, 2003____ “According to Paul, he had not seen or been aware of these notes or loans from ATA to K & W prior to 2007 and Respondent was not authorized to borrow money from ATA either in his personal capacity or as the representative of the law firm. The only money Respondent was authorized to take from the MIY bank accounts were funds relating to the profit sharing plan, the distribution to the partners, his management fee and the trustee fee. Paul was not aware during 2002 ²⁰ through 2005 that Respondent was taking funds from MIY for other purposes.... “Neither Butler nor Mrs. Rankin were aware of loans in 2002 and 2003 to K & W from ATA.

Butler agreed with Paul that Respondent was not authorized to borrow money from ATA. Butler was not aware of either of the Demand Promissory Notes____ “John DeBone is an employee of the Petitioner. His duties include the analysis of attorney trust accounts. In August 2006, he was assigned to the investigation of complaints made against Respondent.

He prepared a summary of the transactions in the K & W attorney trust account for the period January 1,2001 through February 28, 2007. He also prepared other lists and calculations contained in Petitioner’s exhibits 5, 6 and 8. “DeBone’s review of the K & W trust account disclosed that Respondent: commingled personal funds in the trust account; paid personal and firm tax obligations from the trust account, failed to hold some funds owed to Mrs. Rankin in trust and used trust funds for unauthorized purposes.... ” Based on these findings of fact, the hearing judge concluded that the respondent violated each of the charged Rules and § 10-306. With regard to § 10-306 of the Business Occupations and Professions article, prohibiting the use