1. The referee's finding that attorney engaged in a pattern of misconduct, which amounted to an intent to deceive the bankruptcy court and the creditors, is not clearly erroneous.
2. The appropriate disciplinary action on this record is a six-month suspension.
Heard, considered, and decided by the court en banc.
The opinion of the court was delivered by: Per Curiam
In this attorney discipline proceeding, we review the referee's finding that respondent, Joseph A. Wentzell, intentionally misrepresented or omitted material facts to the bankruptcy court during his representation of three Chapter 11 debtors in federal bankruptcy proceedings. We hold that the referee did not err in concluding that Wentzell acted intentionally. We also review the referee's recommendation of suspension for a minimum of six months; we conclude that a six-month suspension is appropriate.
Wentzell was admitted to the practice of law in Minnesota in 1985, and prior to his admission here he practiced in Texas for three years. Throughout his career he has represented numerous debtors in Chapter 7, 11, 12, and 13 bankruptcy proceedings and is knowledgeable about the requirements of bankruptcy laws.
On October 15, 2001, the director of the Offices of Lawyers Professional Responsibility (director) filed a petition against Wentzell charging him with failing to comply with applicable federal laws, rules, and regulations; representing a bankruptcy debtor when his firm was a creditor of the debtor and when he was claiming to hold real property of the debtor in trust; making false or misleading statements; and failing to disclose material facts, in violation of Rules 1.7(b) (conflict of interest), 1.8(a) (prohibited transactions), 3.3(a)(1) (candor towards the tribunal), 3.4(c) (fairness to opposing party and counsel), 4.1 (truthfulness in statements to others), and 8.4(a), (c), and (d) (prohibiting violations of the rules; engaging in fraud, dishonesty, deceit, or misrepresentation; and engaging in conduct prejudicial to the administration of justice) of the Minnesota Rules of Professional Conduct. In his answer, Wentzell denied that he violated the Rules of Professional Conduct. He argued that any mistakes or omissions made during the course of his representation were due to excusable neglect. In mitigation, he offered his lack of prior disciplinary history, and his participation in the bar and in his community.
The matter was assigned to a referee who conducted a two-day hearing. Upon hearing all the evidence, the referee found that Wentzell failed to comply with applicable federal statutes, rules, and regulations; improperly conducted business transactions with his client; gave misleading statements to the court and opposing counsel; and intentionally failed to disclose material facts during his representations to the bankruptcy court and the referee in violation of Rules 1.7(b), 1.8(a), 3.3(a)(1), 3.4(c), 4.1, and 8.4(c) and (d) of the Minnesota Rules of Professional Conduct. The referee rejected Wentzell's claims of excusable neglect and found that Wentzell refused to accept responsibility for the wrongful nature of his conduct and instead blamed, in turn, his secretary, the Attorney-Advisor, sleep apnea, and a faulty computer program. Based on these findings, and in the absence of mitigating factors, the referee recommended that Wentzell be suspended from the practice of law for a minimum of six months. Wentzell sought review.
Wentzell ordered a transcript of the referee's hearing. Therefore, according to Rule 14(e), Rules on Lawyer's Professional Responsibility (RLPR), the referee's findings and conclusions of law are not binding on this court. See In re Westby, 639 N.W.2d 358, 367 (Minn. 2002). Even so, we give great deference to a referee's findings and will not reverse those findings unless they are clearly erroneous, especially in cases where the referee's findings rest on disputed testimony or in part on respondent's credibility, demeanor, or sincerity. In re Barta, 461 N.W.2d 382, 382 (Minn. 1990). To find that a referee's findings were "clearly erroneous," this court must be "left with the definite and firm conviction that a mistake has been made." In re Strid, 551 N.W.2d 212, 215 (Minn. 1996) (quoting Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987)).
The referee's findings detail the following story. Wentzell began representing a married couple and their adult son in 1996 and over the next two years provided legal assistance in resolving various issues with their creditors. His work on these matters resulted in a total of $47,981 in attorney fees, $17,600 of which was paid in November of 1997. When Wentzell filed his clients' Chapter 11 bankruptcy petitions in February of 1998, his clients still owed his firm over $12,000 for services rendered in 1997, unrelated to the bankruptcy filing. Two days before the petition was filed, the husband and wife transferred to Wentzell their property interest in nine lots and a tract of real estate. Other than the deed and a certificate of real estate value, there was no retainer agreement or other documentation explaining whether Wentzell received these lots in consideration for legal services to be rendered in association with the pending bankruptcy or whether these lots were payment for the services already rendered.
Although required under bankruptcy law, Wentzell failed to disclose this transfer in either the debtors' schedules, statement of financial affairs, or statement of compensation. The only reference to the transfer was provided in an affidavit attached to his employment application, which states "[t]hat the retainer received prior to the commencement of this action was real estate residential lots which are being held in Affiant's name pending further order of this Court." Wentzell's affidavit did not fully explain how many lots were transferred, whether they were for pre-petition or post-petition services, or their value. Wentzell subsequently sold one of the lots and gave the proceeds to his debtor clients without the bankruptcy court's knowledge or approval. Wentzell also failed to list his firm as a creditor in the schedules as required under bankruptcy law, even though his clients still owed Wentzell's firm over $12,000 for services previously rendered.
Wentzell made numerous inconsistent statements about the nature of the real estate transfers and the pre-petition payment of attorney fees. In an affidavit and at a meeting of the creditors, Wentzell stated that the property was being held in trust for his retainer. It was not until Wentzell sought to be approved as counsel for the debtors that Wentzell told the bankruptcy court that he owned some of the lots, which he had received as compensation for services rendered pre-petition. Wentzell's characterization of these lot transfers changed again during the disciplinary proceedings when he testified to never having owned the property; he claimed that his clients owned the land and the sale of one of the lots was in the "ordinary business" of selling lots, which justified selling the lots without notifying the court. Throughout ...