Cornelius, In re

• Decision Date: 15 March 1974
• Docket Number: No. 1944,1944
• Citation: 520 P.2d 76
• Parties: In the Matter of the Conduct of Stanley P. CORNELIUS, Attorney at Law, Respondent.
• Court: Alaska Supreme Court

Page 76

520 P.2d 76

In the Matter of the Conduct of Stanley P. CORNELIUS Attorney at Law, Respondent.

No. 1944.

Supreme Court of Alaska.

March 15, 1974.

Opinion on Rehearing April 22, 1974. See 521 P.2d 497.

Roger M. Leed and Croil Anderson, Seattle, Wash., Terry C. Aglietti, Anchorage, for respondent.

Mary F. LaFollette, Anchorage, M. Gregory Papas, Juneau, for Alaska Bar Association.

Before RABINOWITZ, C. J., and CONNOR and FITZGERALD, JJ.

OPINION

CONNOR, Justice.

This is a disciplinary proceeding against an attorney, Stanley P. Cornelius (hereinafter referred to as respondent). The trial committee of the Alaska Bar Association recommended, and such recommendations were adopted by the Board of Governors of the Bar Association, that respondent be suspended from the practice of law for up to 42 months. This suspension was recommended because the committee found against the respondent on four counts of a five-count complaint. The four counts which were proved charged that respondent, through his activities in a particular business venture, had violated several of the Alaska Bar Rules and the Canons of Professional Ethics. The major charges were that respondent had suborned litigation, solicited professional employment, and entered into a partnership between lawyers and non-lawyers where part of the employment consisted of the practice of law; and that respondent had wrongfully converted, to his own use and benefit, money entrusted to him and took advantage of the confidence reposed in him by his clients. ¹ The facts underlying the complaint and subsequent disciplinary recommendation are complex and detailed, but an exposition of the main features is necessary in order to reveal the basis for the disciplinary action.

In 1969, respondent was in the employ of an Anchorage law firm which was retained to render an opinion concerning title to certain lands on the North Slope. To further this end, respondent was sent to Fairbanks to search the land records of the Bureau of Land Management (hereinafter referred to as BLM). In the course of this title search, he found that offers for noncompetitive oil and gas leases had been filed with the BLM covering various tracts of land lying partially within the exterior boundaries of the Arctic Wildlife Refuge, a federal land reserve. Since these lands were located in the vicinity of lands then being offered for lease by competitive bid by the state for oil exploration, they presented a possibility of great potential value. The attorney representing the offerors of the noncompetitive leases had developed a theory that since a number of prospecting permits, issued by the BLM, had been issued prior to the time the reserve was established, the tracts were legally excluded from the reserve. When the interests held under the prospecting permits were relinquished, the theory continued, without a subsequent appropriation by executive order for inclusion in the Wildlife Refuge, the land reverted to the public domain and was open to non-competitive oil and gas leasing under the Federal Mineral Leasing Act.

Following his search of the Fairbanks land records, respondent concluded that there were indeed tracts of unappropriated land within the boundaries of the Wildlife Refuge upon which no oil and gas lease offers were pending. However, his firm's client disclaimed any interest in pursuing this possibility. Respondent then returned several times to Fairbanks and discovered from the land records that a situation similar to that of the Wildlife Refuge also existed with regard to certain lands located within Naval Petroleum Reserve No. 4, on Alaska's North Slope. Upon obtaining information regarding prospecting permits in effect at the time of withdrawal of Reserve No. 4, respondent was able to obtain legal descriptions of at least 39 tracts of land located in Reserve No. 4, and 5 tracts located in the Wildlife Refuge. These tracts, he believed, were susceptible to his theory, that is, they were public lands open to non-competitive leasing because prospecting permits existed at the time of the Wildlife Refuge and Reserve No. 4 withdrawals; and when the permits were relinquished, the lands reverted to the public domain. It was likely however that it would probably be necessary to litigate the matter.

Respondent's discovery of tracts possibly open to noncompetitive oil and gas leasing led to the formation of Starling Brokers, a partnership which consisted of respondent, his father, Starling Cornelius, and Hillen L. Arnold. The partnership was organized to act as agents for clients in obtaining oil and gas leases on land located within Petroleum Reserve No. 4 and the Wildlife Refuge. The services offered by the partnership were to include the filing and perfecting of offers for leases utilizing respondent's theory and the information he had culled from the land records. The business was operated from respondent's law office (he had by now withdrawn from the law firm).

Potential offerors were solicited by Starling Brokers; representations were made that respondent was familiar with the procedures of obtaining oil and gas leases, and that potential sites had been located. It was also pointed out that litigation was a possibility, and respondent would pursue the case up through appellate levels.

For each lease offer, a potential investor-offeror was required to deposit $710 with Starling Brokers and $1,280 with the BLM as tender for the first year's rent; the deposit would be refunded by BLM if the lease was denied. Starling Brokers was also to receive 50% interest in each lease offer, in consideration for which it was to prepare the offers, use the $710 deposit for any expenses incurred in obtaining the leases including litigation through federal appellate levels, with respondent to act as attorney, and pay any additional expenses over and above the initial $710 deposit.

In September of 1969, a total of 46 offers to lease were filed through the agency of Starling Brokers, 7 of which were in the Wildlife Refuge and 39 in Reserve No. 4. Investors deposited $58,880 with BLM and $31,950 with Starling Brokers (one lease offeror was not an investor with the partnership). In October of 1969, it was discovered that a substantial majority of the offers filed on Reserve No. 4 could not be proven to correspond with prospecting permit descriptions and so would have to be withdrawn. When the BLM rejected each offer to lease, respondent sent the investor-offerors the decision and informed them that notices of appeal from the rejections had been filed. In December of 1969, respondent, representing himself as attorney for the offerors, withdrew the 39 offers to lease in Reserve No. 4 and requested refund of the advance rents, payable 'to those who had remitted the various amounts' (a 30-day delay in obtaining refund checks was anticipated).

Because of the general interest in non-competitive gas and oil leases on the North Slope at the time, Starling Brokers concluded that new oil and gas lease offers should be filed as soon as possible. In order to expedite the filing of a second set of lease offers before the refund from the BLM for the first set of offers was obtained, respondent arranged financing with members of a firm known as Viking Petroleum to obtain the sum of $49,920. The money was to be deposited with the BLM as advance rent on the second set of lease offers, and Viking Petroleum was to receive an interest in each lease, taken from respondent's interest through Starling Brokers. It was further agreed that if the lease offers were finally rejected, the refunds would go to Viking Petroleum; but if the leases were granted, respondent would personally be liable to Viking Petroleum for the $49,920. Using the advance rent payments obtained from Viking, 39 lease offers were filed in December of 1969; each offer represented respondent, Arnold and a Viking officer as the offerors and sole parties in interest. Neither Starling Cornelius nor any of the earlier investor-offerors signed the new lease applications nor did their names appear thereon. No statement of interest was filed with BLM disclosing any interest on the part of the original investors or the other members of the Viking group.

On January 5, 1970, the refund on the first (withdrawn) group of lease offers was made in checks payable not to the offerors but to the three partners of Starling Brokers. These checks were endorsed by the partners and deposited in the partnership checking account for total deposits of $47,360. ² At the end of January, the investor-offerors were informed that their original lease offers were withdrawn but that they retained the same interest in the new lease offers. They were not informed that their names did not appear on the second set of lease offers as offerors or parties in interest.

The three partners of Starling Brokers, respondent, Arnold and Starling Cornelius, were also financially interested in and partners in Starling Construction Company, which operated from respondent's law offices, and in Starling Co., Inc. Respondent, Arnold and others were financially interested in and officers in Northland Homes, Inc., which ceased operations in September of 1970.

Between September 1969 and the end of December 1969, deposits in the Starling Brokers' account totaled $32,037.50, all but $87.50 attributable to money advanced by the investor-offerors. During that same period, $23,564.10 was disbursed from the account, leaving a balance of $8,478.40. The bulk of these disbursements, $17,318.90, was made to or on behalf of Starling Construction Co., Starling Co., Inc., respondent or other parties of Starling Brokers for purposes unconnected with the oil and gas leases. From January 1970 to mid-July 1970, $59,407 was deposited in Starling Brokers' general account, all but $552 attributable to the refund from BLM ($47,360) and advances from a third filing ($11,495). ³ During this same period,...