December 18, 2018
Illinois Rule of Professional Conduct 8.4(c) prohibits attorneys from “engag[ing] in conduct involving dishonesty, fraud, deceit, or misrepresentation.” The ARDC’s Review Board, in In re Meyer, 01 SH 81 (Review Bd., April 15, 2004) at 6, recommendation adopted, No. M.R. 19491 (Sept. 24, 2004), has explained that dishonesty, fraud, deceit, and misrepresentation “[do not] mean the same thing, necessarily.” This article will discuss the concept of fraud as it is employed in attorney discipline cases.
Rule 8.4(c)’s prohibition on fraud applies to both attorneys’ professional dealings and their personal affairs. In re Karavidas, 2013 IL 115767 ¶ 78. However, in order for an attorney to be found to have engaged in fraud, there ordinarily must be proof that the attorney acted with an intent to deceive. The terminology section of the Rules of Professional Conduct defines fraud as “conduct that is fraudulent under the substantive or procedural law of the applicable jurisdiction and has a purpose to deceive.” Rule of Professional Conduct 1.0(d). That definition dovetails with how the Illinois Supreme Court has long defined fraud for attorney discipline purposes. In In re Gilmore, 345 Ill. 28, 46 (1931), the Court explained, “Fraud includes anything calculated to deceive, whether it be a single act or combination of circumstances, whether the suppression of truth or the suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or by silence, by word of mouth, or by look or gesture.”
The Supreme Court has noted an exception to the above rule. In 1989, the Court disciplined an attorney who engaged in constructive fraud as to his client, which required no intent to deceive. In re Gerard, 132 Ill. 2d 507 (1989). In that case, the attorney was hired to help an elderly client recover certificates of deposit she believed had been lost or taken from her. They agreed to an attorney’s fee of one-third of any assets the attorney recovered. When the attorney investigated, he discovered that the CD’s, which were worth approximately $450,000, were safe at the banks at which they were purchased. He re-registered the CD’s in the name of a trust he had created for his client and sought a fee of over $159,000 for his work. He did not tell his client that the CD’s had not been lost or taken. The Court concluded that the attorney had engaged in constructive fraud by withholding from his client the fact that he did not have to recover the CD’s or defeat any other claim to them, while at the same time seeking a fee that was clearly excessive for the minimal work he had done. The Court held that the attorney should have revealed to his client that her ownership of the CD’s had never been threatened, and he should have offered to adjust his fee based on that circumstance. The attorney essentially took advantage of his client’s belief that her ownership of the CD’s was disputed.
Charging an attorney with fraud is not something that the ARDC undertakes lightly. Not only is proof of an intent to deceive required, but the ARDC is required to prove all misconduct by clear and convincing evidence. Ill. Sup. Ct. R. 753(c)(6). That standard is higher than the preponderance-of-the-evidence standard employed in civil cases and lower than the beyond-a- reasonable-doubt standard employed in criminal cases. In re Carlson, 93 CH 643 (Review Bd., Nov. 3, 1995) at 17, approved and confirmed, No. M.R. 11984 (March 26, 1996). Proof of suspicious circumstances is not enough to warrant discipline. In re Winthrop, 219 Ill. 2d 526, 550 (2006).
Moreover, the ARDC Administrator is tasked by the Supreme Court with exercising discretion in his charging decisions. In re Thomas, 2012 IL 113035 ¶¶ 98-111. Many factors must be considered before charging an attorney with fraud, including the circumstances under which the attorney acted (or failed to act), whether motive is discernible, and whether the attorney’s actions caused any harm to clients or third parties. The Court relies on the ARDC’s charging discretion to keep the reach of Rule 8.4(c) a reasonable one.
One thing that has always been true about fraud in attorney discipline proceedings is that misconduct accompanied by an intent to defraud or deceive always warrants a more severe sanction than similar misconduct resulting from negligence or inadvertence. For example, attorneys who misappropriate funds from clients or third parties with intent to steal and enrich themselves are almost always disbarred for that misconduct. See In re Rotman, 136 Ill. 2d 401 (1990) (attorney disbarred for intentionally taking over $15,000 from his disabled client in order to pay debts that attorney had incurred while trading commodities); In re Menconi, 2011PR00143 (Review Bd., March 10, 2014), approved and confirmed, No. M.R. 26722 (Sept. 12, 2014) (attorney disbarred for stealing personal injury settlement funds, including funds owed to his elderly aunt and uncle). In contrast, attorneys have been censured or placed on short suspensions for misappropriating client funds where their actions were the result of mistake or bookkeeping lapses. See In re Tuohy, 99 CH 92, petition to impose discipline on consent allowed, No. M.R. 16856 (Sept. 22, 2000) (attorney censured for brief, unintentional conversion of client funds); In re Bishop, 2015PR00124, petition to impose discipline on consent allowed, No. M.R. 28299 (Nov. 18, 2016) (attorney suspended for 30 days for conversion after balance of his trust account fell below amount of money he had agreed to hold in escrow in connection with real estate transaction).
A final note about attorney fraud: clients who have suffered financial loss due to fraudulent conduct by their attorneys, and whose attorneys have been disciplined for that misconduct or have died, may file a claim seeking reimbursement under the ARDC’s Client Protection Program. That program is governed by Supreme Court Rule 780 and ARDC Rules 501-512. In 2017, the Client Protection Program paid out $1,776,419 on 152 claims against 48 lawyers.