Barta, In re, C5-89-149

• Decision Date: 19 October 1990
• Docket Number: No. C5-89-149,C5-89-149
• Citation: 461 N.W.2d 382
• Parties: In re Petition for Disciplinary Action against Loren M. BARTA, an Attorney at Law of the State of Minnesota.
• Court: Minnesota Supreme Court

Page 382

461 N.W.2d 382

In re Petition for Disciplinary Action against Loren M. BARTA, an Attorney at Law of the State of Minnesota.

No. C5-89-149.

Supreme Court of Minnesota.

Oct. 19, 1990.

Syllabus by the Court

Respondent's misconduct warrants indefinite suspension from the practice of law.

William J. Wernz, Director of the Office of Lawyers Professional Responsibility, Kenneth L. Jorgenson, Sr. Asst. Director, St. Paul, for appellant.

Michael J. Hoover, and George W. Flynn, Cosgrove, Flynn, Gaskins & Haskell, Minneapolis, for respondent.

Heard, considered, and decided by the court en banc.

PER CURIAM.

The Director of the Office of Lawyers Professional Responsibility commenced three petitions for disciplinary action against respondent Loren M. Barta. The first petition alleged that Barta's federal felony conviction on December 14, 1988 for tax evasion and filing false tax returns was conclusive evidence that Barta violated the Code of Professional Responsibility. Two later petitions alleged trust account violations and misappropriation of client trust funds. A referee hearing was held, and the referee found Barta had committed the charged violations and recommended he be indefinitely suspended from the practice of law.

The Director of the Office of Lawyers Professional Responsibility must prove misconduct by clear and convincing evidence. In re Larsen, 459 N.W.2d 115, 116 (Minn.1990). This court will not set aside the findings of a referee in a disciplinary action unless they are clearly erroneous; moreover, this court has deferred to referees' findings when they rested on disputed testimony or in part on a respondent's demeanor, credibility, or sincerity. Id. Barta ordered a transcript in this case, hence this court need not treat the findings as conclusive but may subject them to review on the record. Id.; Rule 14(e), Rules on Lawyers Professional Responsibility (RLPR).

Tax Fraud and Tax Evasion

The referee found that Barta in 1983 and 1984 violated the Code of Professional Responsibility ¹ by evading the payment of federal taxes on the income derived from his law practice and by filing false tax returns for 1983 and 1984. Barta concedes that he may not dispute this finding. Rule 19(a), RLPR. Barta was sentenced to six months in prison and is now on probation which, unless modified, will end in June 1992. Barta's probation includes a condition requiring that he "[e]xpedite payment of taxes, penalties, and interest." At the time of oral argument, Barta still owed back taxes, interest, and penalties for the tax years in question.

Trust Account Violations

Barta admits violations in the handling of trust funds. Barta kept a non-interest-bearing client trust account from January 1983 to January 1986, which violated DR 9-103(A), (B), Minn.Code Prof. Resp. (1985), and Minn. R. Prof. Conduct 1.15. Barta also kept an interest-bearing account from September 1987 until his stipulated temporary suspension from law practice in February 1989. Barta never conducted monthly reconciliations nor maintained subsidiary client ledgers for either account, which violated DR 9-102 and 9-103, Minn.Code Prof. Resp., Minn. R. Prof. Conduct 1.15, and Lawyers Professional Responsibility Board Opinion No. 9. The first account experienced continual shortages of funds, and Barta commingled personal funds in the trust account and did not make payments from his business account to cover bank service charges on the trust account, which violated DR 9-102(A) and DR 1-102(A), Minn.Code Prof. Resp., and Minn. R. Prof. Conduct 1.15(a) and 8.4(c), (d). The second, interest-bearing account earned $247.35 net interest, but Barta neither distributed the interest to his clients nor paid it to the IOLTA board, which violated Minn. R. Prof. Conduct 1.15. Barta has yet to make restitution of this interest. In 1987, 1988, and 1989, Barta falsely certified that he was maintaining required trust account records when he renewed his attorney registration, which violated Minn. R. Prof. Conduct 1.15 and 8.4. From January 1983 to February 1989, Barta repeatedly permitted nonlawyer employees of his law office to sign checks drawn on the client trust accounts, which violated Lawyers Professional Responsibility Board Opinion No. 12.

Misappropriation of Client Funds

Barta contested charges of misappropriating funds from clients Jeffrey Kukacka and Jacqueline Maras at the referee hearing and before this court. We have reviewed the referee's findings on the record, which includes documents introduced into evidence without objection by both Barta and the Director, as well as transcripts of three days of witness testimony.

A. Kukacka Matters

Jeffrey Kukacka retained Barta to represent him in a bankruptcy claim, a tort claim and a workers' compensation claim in 1984. Kukacka's $600 cash payment for bankruptcy representation was not reported on Barta's tax return for 1984 but was established at the hearing through witness testimony and documents prepared by Barta and admitted into evidence. On August 20, 1984, when the city of Montgomery paid a $1,500.00 tort settlement to Mr. Kukacka, Barta had the settlement deposited in his client trust account. Barta then drew checks on the account to Mr. Kukacka and to pay costs, and paid himself $650 of his agreed fee of $750 for the representation. This left a balance of $100.00 in the Kukacka trust account, equal to Barta's unpaid earned fee. The referee found that the $100.00 remainder of Barta's fee was later paid by Barta to himself (not by issuing a check, but by being absorbed in a transfer of trust account funds to Barta at some later time).

When the workers' compensation action was settled on January 23, 1985, the insurer agreed to pay Kukacka $4,647.99 for temporary total disability benefits and $5,809.91 for permanent partial disability benefits. Barta had filed a fee petition and his fees totaling $2,291.58 were to be deducted from those payments and paid directly to Barta. Prior to February 26, 1985, two checks payable to Kukacka arrived and Barta had Kukacka endorse the temporary total disability check, in the amount of $4,647.93, so that he could receive his fees immediately. On February 26, 1985, Barta then paid himself $2291.58 after depositing this check in his trust account. Barta told Kukacka that when the attorney fee checks arrived, he would reimburse Kukacka for the fee payment. The Kukacka bankruptcy matter was ongoing when Barta deposited Kukacka's workers' compensation proceeds. On March 11, 1985, Barta received two checks for the total amount of attorneys fees and deposited them in his trust account on March 14, 1985. Barta had negotiated a settlement of a claim with one of the bankruptcy creditors and paid himself from the workers' compensation trust funds an additional fee of $1,900 without consulting his client. On March 14, 1985, Barta also sent that bankruptcy creditor a settlement check for $1,700, again taking the money from the trust account. After that payment, no other matters were pending for the Kukackas, and Barta had $1,047.93 in trust from Jeffrey Kukacka's disability checks. At least once Mr. or Mrs. Kukacka asked Barta for the remainder of the disability funds. Barta never provided an accounting nor returned the retained funds to Kukacka. At the referee hearing and before this court he claimed to have performed legal services during the following year that equalled or exceeded in value the amount held in trust. We believe the evidence in the record supports the referee's findings and conclusions of law that Barta misappropriated Kukacka's workers' compensation funds in...