In re Mulroe , 2011 IL 111378 ( 2011 )

ILLINOIS OFFICIAL REPORTS
Supreme Court
In re Mulroe, 2011 IL 111378
Caption in Supreme In re MARK GERARD MULROE, Attorney-Respondent.
Court:
Docket No. 111378
Filed September 22, 2011
Held Where an attorney allowed the balance in a trust account to fall below the
(Note: This syllabus amount held in escrow and the Hearing Board found violations of
constitutes no part of disciplinary rules in this conversion and recommended a three-month
the opinion of the court suspension, but found that he had not engaged in conduct involving
but has been prepared dishonesty, fraud, deceit or misrepresentation in violation of Rule
by the Reporter of 8.4(a)(4), the supreme court rejected the Administrator’s claim that these
Decisions for the circumstances raised a presumption of dishonesty for purposes of Rule
convenience of the 8.4(a)(4) where the Hearing Board’s finding of lack of dishonest motive
reader.) as to the funds was not contrary to the manifest weight of the
evidence–request to craft a bright line rule declined.
Decision Under Disciplinary proceeding.
Review
Judgment Respondent suspended.
Counsel on Steven R. Splitt, of Chicago, for the Administrator of the Attorney
Appeal Registration and Disciplinary Commission.
Mark Gerard Mulroe, of Arlington Heights, respondent pro se.
Justices JUSTICE GARMAN delivered the judgment of the court, with opinion.
Chief Justice Kilbride and Justices Freeman, Thomas, Karmeier, Burke,
and Theis concurred in the judgment and opinion.
OPINION
¶1 On June 20, 2007, the Administrator of the Attorney Registration and Disciplinary
Commission filed a one-count complaint against respondent, Mark Gerard Mulroe. The
complaint alleged that respondent converted third-party funds; failed to hold property of a
third person that was in his possession in connection with a representation separate from his
own property, in violation of Rule 1.15(a) of the Illinois Rules of Professional Conduct;
failed to promptly deliver to the third person the funds that person was entitled to receive,
in violation of Rule 1.15(b) of the Illinois Rules of Professional Conduct; engaged in conduct
involving dishonesty, deceit, fraud, or misrepresentation, in violation of Rule 8.4(a)(4) of the
Illinois Rules of Professional Conduct; engaged in conduct that is prejudicial to the
administration of justice, in violation of Rule 8.4(a)(5) of the Illinois Rules of Professional
Conduct; and engaged in conduct which tends to defeat the administration of justice or to
bring the courts or the legal profession into disrepute, in violation of Supreme Court Rule
770.1
¶2 The Hearing Board found that respondent had converted funds and violated Rules
1.15(a), 1.15(b), and 8.4(a)(5). The Board concluded, however, that the Administrator did
not prove by clear and convincing evidence that respondent violated Rule 8.4(a)(4). The
Board recommended that respondent be suspended from the practice of law for three months
and be ordered to attend a seminar on professionalism and office management prior to the
conclusion of his suspension. The Administrator timely filed exceptions to the report and
recommendation of the Review Board. Ill. S. Ct. R. 753(d)(2) (eff. Sept. 1, 2006). The
Review Board affirmed the Hearing Board’s factual findings and findings of misconduct, but
recommended a six-month suspension.
¶3 We allowed the Administrator’s petition for leave to file exceptions. Ill. S. Ct. R. 753(e).
¶4 I. BACKGROUND
¶5 Respondent was admitted to practice law in Illinois in 1989. He began his own legal
practice doing transactional work in 1992. Respondent bought into a friend’s business, which
helps recovering addicts, and other ventures. Helping these businesses became a significant
function of his law practice. At the time of the hearing, respondent estimated that he spent
1
We note that Rule 8.4 of the Illinois Rules of Professional Conduct was amended, effective
January 1, 2010, and no longer follows the same structure. We have applied the previous version of
the rule to respondent’s case.
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less than 20% of his time on his law practice.
¶6 Even though he did not usually handle client funds, respondent asked his paralegal,
Denise Wagner, to open an IOLTA client trust account on his behalf for his law practice
based on the Commission registration form he was sent one year. This account was in
addition to the practice’s operating account. Respondent used the IOLTA account as a “pass
through” account to park money that he used for business purposes. He delegated financial
responsibilities including billing and the payment of the law practice’s expenses to Wagner,
who testified that “[m]ost of the money that *** came in went directly to the IOLTA
account.” However, no checks had been ordered for the IOLTA account, so the money was
routinely moved into the operating account before being used to make payments. Eventually,
Roy Gibson, respondent’s banker, began to transfer money between accounts to pay expenses
without consulting respondent. Respondent admitted that he did not regularly balance his
accounts, but left much of that responsibility to Gibson and Wagner.
¶7 In 2002, Julie Fishman filed a petition for dissolution of marriage against her husband,
Adam Fishman. Adam was a friend of respondent. In July 2003, the Fishman marital home
was sold and the proceeds, $141,506.14, were held in an escrow account by Julie’s attorney,
Jonathan Sherwell. Respondent agreed to represent Adam and, when Julie discharged
Sherwell in October 2005, respondent agreed to take possession of the Fishman funds until
the allocation was determined by the court. On November 3, 2005, Sherwell transferred
$113,397.65 to respondent’s IOLTA account, which represented the total amount of the
funds after all court-approved disbursements had been made. In December 2005, the
dissolution was finalized and the trial court awarded Julie $127,783 to be paid from the
escrow. Both Julie and Adam filed motions to reconsider after the judgment was entered.
Respondent agreed to represent Adam free of charge in the postdissolution matters. At that
point, Julie was representing herself.
¶8 Between November 3, 2005, and February 28, 2006, respondent made transfers from the
IOLTA account to his business account to make payments for his personal and business
expenses. As of February 28, 2006, the IOLTA account had been drawn down to $174.81.
Respondent never received authorization from the court or from Julie or Adam Fishman to
use the funds to pay his business and personal expenses.
¶9 On August 16, 2006, the trial court entered an order directing respondent to release the
funds to Julie. Both Julie and Adam told respondent that they intended to appeal the order.
Adam asked respondent to represent him on appeal. Respondent declined, but filed a notice
of appeal on Adam’s behalf. Respondent subsequently received letters from Julie, dated
September 15 and September 26, 2006, demanding that he transfer the funds to her and make
a full accounting. Before the Hearing Board, respondent testified that he had a conversation
with Julie shortly after he received the September 26 letter in which he told her the amounts
she referenced in her letter were not accurate. Julie told him she was planning to appeal the
order. Respondent did not transfer the funds or provide an accounting, but he testified that
if he had written a check on his operating account at that time, it would have cleared and that
his net worth at the time was approximately $2 million to $3 million.
¶ 10 On November 3, 2006, the trial court heard Julie’s “Verified Petition for Rule to Show
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Cause Why Respondent Should not be Held in Indirect Contempt of Court (Disbursement
of Escrow).” The court directed respondent to transfer the Fishman funds to Julie by
November 13, 2006, to avoid being held in contempt. On November 3, 2006, respondent did
not hold the Fishman funds in his IOLTA account. Between November 3 and November 8,
2006, he made three deposits to his business account, totaling $151,000. On November 6,
respondent drafted a check on his business account to Julie for $115,606.49, the amount of
the Fishman funds plus interest. The check was dated November 8, 2006. He testified before
the Hearing Board that he postdated the check so that there would be time to verify the
correct amount owed. On November 7, 2006, respondent wire transferred the escrow funds
into Julie’s account. He testified that Julie never returned his check. On November 8, 2006,
Julie sent a complaint to the ARDC regarding respondent’s conduct.
¶ 11 Before the Hearing Board, respondent presented several character witnesses, who attested
to respondent’s engagement in the community, his pro bono work, and his excellent
reputation for honesty and integrity. Brian Rowland testified that, at all relevant times,
respondent had access to $115,000 from their business enterprises and that respondent could
have accessed this money without Rowland’s permission. Respondent also testified on his
own behalf, stating that he never intended to deprive Julie of her money, admitting
wrongdoing, and expressing remorse. Respondent has had no prior discipline.
¶ 12 The Hearing Board found that respondent converted Julie Fishman’s funds in the amount
of $115,606.49. The Board further found that he failed to hold the escrow funds separate
from his own property, that he failed to promptly deliver the funds to Julie, and that his
misconduct is prejudicial to the administration of justice and brings the legal profession into
disrepute, violating Rules 1.15(a), 1.15(b), and 8.4(a)(5) of the Illinois Rules of Professional
Conduct. The Board concluded, however, that the Administrator did not prove by clear and
convincing evidence that respondent engaged in conduct involving dishonesty, deceit, fraud,
or misrepresentation. It found respondent’s testimony to be credible and did not believe that
he intended to deprive Julie of the escrow funds. Further, the Board found that respondent
had the financial means to deliver the funds at all relevant times and that he honestly
believed he was not to distribute the funds to Julie until the issues on appeal were resolved
or dismissed. It concluded that the conversion was a technical one, not motivated by an
intention to deprive Julie of her funds. The Board, therefore, recommended that the
allegation that respondent violated Rule 8.4(a)(4) of the Illinois Rules of Professional
Conduct (eff. July 6, 2001) be dismissed. The Hearing Board recommended that respondent
be suspended from the practice of law for three months and be ordered to attend a seminar
on professionalism and office management prior to the conclusion of his suspension.
¶ 13 The Review Board agreed with the Hearing Board’s conclusion that respondent’s actions
did not violate Rule 8.4(a)(4), but recommended a six-month suspension.
¶ 14 II. ANALYSIS
¶ 15 The Administrator challenges the findings of the Hearing and Review Boards that
respondent did not violate Rule of Professional Conduct 8.4(a)(4). The Administrator also
argues to this court that the proper sanction in this case is to suspend respondent from the
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practice of law for three years.
¶ 16 A. Rule 8.4(a)(4)
¶ 17 The Administrator argues that, when respondent agreed to hold client funds and
“refus[ed] to follow basic financial protocol to protect those funds,” respondent engaged in
dishonest conversion, such that his actions violated Rule 8.4(a)(4) of the Illinois Rules of
Professional Conduct. Rule 8.4(a)(4) directs: “A lawyer shall not *** engage in conduct
involving dishonesty, fraud, deceit or misrepresentation.”
¶ 18 The findings of fact made by the Hearing Board will generally not be disturbed unless
they are against the manifest weight of the evidence. In re Cutright, 233 Ill. 2d 474, 488
(2009). “A decision is against the manifest weight of the evidence only if the opposite
conclusion is clearly evident.” Id. This deferential standard of review recognizes that the
Hearing Board is in a better position to observe the demeanor of witnesses, judge credibility,
and resolve conflicting testimony. Id.
¶ 19 The Hearing Board concluded that the Administrator did not prove by clear and
convincing evidence that respondent engaged in conduct involving dishonesty, deceit, fraud,
or misrepresentation. It credited respondent’s testimony and found that he did not intend to
deprive Julie of the escrow funds. The Board found that respondent had the financial means
to deliver the funds at all relevant times and that he had an honest belief that he was not to
distribute the funds until the issues on appeal were resolved or dismissed. The Administrator
argues before this court that the undisputed facts in this case establish that respondent acted
recklessly with respect to the protection of the funds, in violation of his fiduciary duty to hold
and protect the funds, and that this recklessness is sufficient to satisfy the scienter
requirement of Rule 8.4(a)(4).
¶ 20 We agree with the Administrator that the responsibility of holding client funds is a
serious fiduciary duty and should not be treated lightly. We have, on more than one occasion,
emphasized the importance of this responsibility, deeming “explanations [for conversion]
such as ‘poor bookkeeping,’ ‘failure to fully understand the duty’ and ‘no dishonest motive’
completely unacceptable.” In re Timpone, 157 Ill. 2d 178, 194-95 (1993) (quoting In re
Grant, 89 Ill. 2d 247, 253 (1982)). However, the question at hand is not whether respondent
committed conversion, but whether the conversion constituted “conduct involving
dishonesty, fraud, deceit, or misrepresentation” such that respondent violated Rule 8.4(a)(4).
¶ 21 In In re Cutright, 233 Ill. 2d 474, 488 (2009), we addressed the Administrator’s argument
that an attorney violates Rule 8.4(a)(4) when he recklessly disregards a legal obligation. In
that case, the Hearing Board found that Cutright gave the judge before whom he was
appearing free legal services by reviewing his tax forms, violating several rules of
professional conduct. Id. at 482. It also found that when Cutright failed to inform opposing
counsel of these gifts, he was merely unaware of his ethical obligations and did not intend
to deceive anyone. Id. at 482-83. The Board therefore concluded that the Administrator did
not prove a violation of Rule 8.4(a)(4). Id. at 483. In our review, we noted that “where this
court has concluded that the respondent violated Rule 8.4(a)(4), there was some act or
circumstances that showed the respondent’s conduct was purposeful.” Id. at 489 (citing In
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re Rinella, 175 Ill. 2d 504 (1997) (respondent provided testimony he knew to be false during
a hearing before the Hearing Board), and In re Winthrop, 219 Ill. 2d 526 (2006) (respondent
relayed information he knew to be false to benefit one client at the detriment of another)).
We also noted that, where this court found no violation of Rule 8.4(a)(4), the court “came
to that conclusion after determining there was no evidence the misconduct in that case was
intentional.” Cutright, 233 Ill. 2d at 489 (citing In re Witt, 145 Ill. 2d 380 (1991) (the court
was not persuaded that the respondent’s silence was intended to perpetrate a fraud)).
¶ 22 In the case at hand, the Hearing Board similarly found that respondent was unaware of
his ethical responsibilities with respect to the proper procedures for handling client money
and that he did not intend to deprive Julie of her funds. We cannot say that this conclusion
was against the manifest weight of the evidence, as the Hearing Board was in a superior
position to judge the credibility of witnesses and there was no evidence that responded
gained any advantage through his sloppy bookkeeping practices. There is nothing in the
record to indicate any deceptive or dishonest intent. As we stated in Cutright, “[e]ach case
is unique and the circumstances surrounding the respondent’s conduct must be taken into
consideration.” Cutright, 233 Ill. 2d at 490. While a pattern of recklessness with respect to
handling client funds may, in some cases, indicate a dishonest intent, we cannot say that, in
this case, respondent’s careless bookkeeping practices were clear evidence of dishonesty.
¶ 23 The Administrator urges us to conclude, however, that failing to follow proper
procedures for safeguarding client funds is inherently dishonest and that recklessness with
respect to client funds creates a presumption of dishonesty. This court has previously
addressed a similar argument and has found that, while facts indicating poor bookkeeping
practices or a failure to fully understand the attorney’s duty “do not excuse or negate the
conversion of client funds, they are evidence that the conversions were not due to dishonest
motive, but instead due to the careless practices respondent employed.” In re Timpone, 157
Ill. 2d 178, 195 (1993). Because the circumstances surrounding conversion cases vary
greatly, we decline to craft a bright line rule that reckless conversion creates a presumption
of dishonesty in violation of Rule 8.4(a)(4) in every case. See Cutright, 233 Ill. 2d at 490.
¶ 24 B. Sanction
¶ 25 The Administrator has also challenged the recommended sanction for respondent’s
conduct, arguing that respondent’s misconduct warrants a three-year suspension from the
practice of law. Respondent urges us to adopt the Hearing Board’s recommended sanctions.
The Hearing Board recommended a three-month suspension and attendance of a seminar on
professionalism and office management and the Review Board recommended a six-month
suspension. These recommendations are merely advisory, however, and we retain the
ultimate responsibility for imposing discipline on attorneys. Cutright, 233 Ill. 2d at 490-91.
While each case must be decided on its unique facts, we “strive for consistency and
predictability in the imposition of sanctions.” Id. at 491. In determining the proper sanction,
we consider evidence in mitigation and aggravation. Id.
¶ 26 As this court has emphasized before, ignorance of the responsibilities imposed upon
attorneys by the Code of Professional Responsibility does not excuse respondent’s
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misconduct. In re Cheronis, 114 Ill. 2d 527, 535 (1986). “It is a paramount obligation of each
member of the bar to study the Code of Professional Responsibility and abide by its terms
and principles. This court has stated repeatedly that commingling or conversion of clients’
funds will not be countenanced.” Id. (collecting cases). However, our primary goal in
imposing sanctions is not to punish the attorney, but to protect the public and maintain the
integrity of the legal profession. Cutright, 233 Ill. 2d at 491.
¶ 27 In arriving at its recommendation, the Hearing Board compared respondent’s case to the
situation in In re Cheronis. In that case, the attorney had never had a separate escrow account
for client funds, commingled client funds with his own, and did not immediately tender all
of the funds to the client when they were requested, but repaid the client in installments over
a period of months. Cheronis, 114 Ill. 2d at 536. The Hearing and Review Boards found no
dishonest motive behind the conversions, and Cheronis cooperated fully with the
Administrator and the Hearing Board, expressed remorse, and took corrective measures by
opening a client trust account. Id. at 537. Other mitigating factors included the fact that
Cheronis made full restitution to the client, had performed substantial pro bono legal work,
and had a good reputation in the community. Id. This court found that these mitigating
factors, combined with the aggravating factor of Cheronis’s near-bankruptcy and the
resulting risk to his clients, warranted a three-month suspension from the practice of law. Id.
at 536-37.
¶ 28 The Hearing Board in this case noted that respondent admitted wrongdoing, expressed
remorse, and cooperated throughout the proceedings. He had not been previously disciplined
and he offered several character witnesses who testified to his excellent reputation for
honesty. Respondent spends large amounts of time providing pro bono services to members
of his community and he had made full restitution to Julie. The Hearing Board also
considered the large sum that respondent converted and Julie’s testimony regarding the
financial hardship she suffered while waiting for the disbursement of the funds. Drawing
close parallels with Cheronis, the Hearing Board recommended a three-month suspension
and attendance of a seminar on professionalism and office management as an appropriate
sanction for respondent’s conduct.
¶ 29 The Review Board compared the facts in respondent’s case to two different cases where
discipline was imposed on consent, and concluded that, in line with those cases, a six-month
suspension was warranted. The Board also found that probation was not a useful tool in this
case, as respondent had already corrected the problems in his banking practices.
¶ 30 In In re Young, the respondent deposited $3,209.04 in escrow funds into an account that
he used for personal business and was found to have converted those funds. In re Young, 111
Ill. 2d 98, 101 (1986). The clients contacted Young several times over an eight-month period
concerning the money and respondent refused to return the escrow funds from their former
residence until the title company waived the title exception, per the escrow agreement. Id.
Five days after the title company waived the title exception, Young tendered a cashier’s
check to the clients for the full sum of the amount held in escrow, including interest and
attorney fees. Id. at 102. The Hearing Board in that case concluded that Young did not have
a dishonest motive, there was a bona fide title problem which justified his retention of the
clients’ money, and that Young had sufficient assets to repay the money to the clients. Id. at
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 104-05. Young was cooperative with the Hearing Board and repentant for the conversion,
had no prior discipline, had a good reputation in the community, and engaged in community
activities and pro bono work. Id. at 105. Further, Young no longer actively maintained a
legal practice, only conducting a small amount of legal work in connection with his other
business dealings. Id. Given these considerations, this court found that censure was the
appropriate sanction. Id.
¶ 31 We find that the current case closely parallels Young and Cheronis. Though respondent
maintained an IOLTA account, he used the account as he would any other business account,
commingling client funds with his operating funds and resulting in conversion. This practice
violated respondent’s professional duty to maintain client funds in a separate account and put
client funds at risk. These practices will not be countenanced. However, as in Young and
Cheronis, the Hearing Board in this case found that there was no dishonest intent behind the
conversion and we have concluded that this finding was not against the manifest weight of
the evidence. Respondent made full restitution to Julie, admitted wrongdoing, expressed
remorse, and otherwise cooperated fully with the Hearing Board. The Board also accepted
respondent’s testimony that the delay in delivering Julie’s funds to her resulted from
respondent’s genuine belief that the funds were not due until after all appeals had been
resolved. Respondent performs substantial pro bono work, participates in other charitable
activities, and has never before been disciplined in more than 20 years of legal practice.
Multiple witnesses testified to respondent’s excellent reputation for honesty and
trustworthiness. In aggravation, we note that respondent converted a large sum, more than
$100,000, and his lack of care with respect to his banking practices put the money at risk.
Though Julie testified to financial hardship she suffered due to the delay in receiving her
funds, we note that this hardship was not caused by respondent’s conversion, but by his
misunderstanding that the funds were not to be disbursed until appellate proceedings were
completed. We therefore do not consider this an aggravating factor.
¶ 32 For the foregoing reasons, we conclude that the Hearing Board recommended an
appropriate discipline. Accordingly, respondent is suspended from the practice of law for
three months and ordered to attend a seminar on professionalism and office management
prior to the conclusion of his suspension.
¶ 33 Respondent suspended.
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