Imming, In re

• Decision Date: 27 September 1989
• Docket Number: No. 67738,67738
• Citation: 545 N.E.2d 715,131 Ill.2d 239,137 Ill.Dec. 62
• Parties: , 137 Ill.Dec. 62 In re Richard Cornell IMMING, Attorney, Respondent.
• Court: Illinois Supreme Court

Page 715

545 N.E.2d 715

131 Ill.2d 239, 137 Ill.Dec. 62

In re Richard Cornell IMMING, Attorney, Respondent.

No. 67738.

Supreme Court of Illinois.

Sept. 27, 1989.

[131 Ill.2d 241] [137 Ill.Dec. 63] Deborah M. Kennedy, Chicago, for the Administrator of the Attorney Registration and Disciplinary Commission.

Sidney Z. Karasik, Chicago, for respondent.

Justice STAMOS delivered the opinion of the court:

On January 24, 1986, the Administrator of the Attorney Registration and Disciplinary Commission filed a four-count complaint charging attorney-respondent Richard Cornell Imming with engaging in prohibited business transactions with clients, accepting employment when his professional judgment may be affected by his own interests, engaging in conduct prejudicial to the administration of justice, causing prejudice or damage to his clients and overreaching in his attorney-client relationships in violation of several provisions of the Code of Professional Responsibility (the Code) (107 Ill.2d R. 1-101 et seq.).

On July 27, 1987, the Hearing Board issued a report finding that the Administrator had proved the misconduct alleged in the complaint and recommended that the respondent be disbarred. The respondent filed exceptions to the report and recommendation on October 5, 1987. In an order dated November 16, 1988, the Review Board affirmed the findings and conclusions of the Hearing Board, but recommended that respondent be suspended from the practice of law for a period of two years. The Administrator and respondent both filed exceptions to the report and recommendation of the Review Board. 107 Ill.2d R. 753(e).

BACKGROUND

A. Respondent and Polypropylene Films, Inc.

Respondent was admitted to practice law in Illinois in 1963. Respondent concentrated his legal practice in real estate, estate planning and finance for corporate clients. Beginning in 1971, respondent began involvement in a plastic manufacturing company. Due to respondent's increased activity in the business world, he reduced the size of his law practice.

In 1977, respondent formed his own plastic manufacturing firm known as Polypropylene Films, Inc. (PFI). Respondent was the president and sole shareholder of PFI, and obtained the initial financing for the business by borrowing $400,000, obtaining a $75,000 mortgage on his home and liquidating certain personal assets. However, PFI had difficulty meeting its expenses. From 1977 through 1981, the respondent obtained funds by arranging for loans from several of his legal clients. These loans were evidenced by unsecured promissory notes issued by PFI with an annual interest rate of 12% or 15% annually. Respondent also personally guaranteed the repayment of these loans.

PFI never earned a profit. The corporation's income tax returns for 1978 and 1979 show a negative taxable income of $642,696 and $859,000. PFI did not file a tax return for 1980 because there was not taxable income to report and the corporation could not afford to pay its tax accountants. Respondent never advised his client/creditors of PFI's negative taxable income. He also did not make accurate financial statements or balance sheets available for public review. Respondent did supply PFI's suppliers with documents containing certain financial projections, but he testified that he never allowed his clients to view them because he believed the information might have misled them.

During 1978 and 1979, respondent paid the daily operating expenses of PFI with the funds he borrowed from his clients. Sometime in 1979 or 1980, the corporation During the summer of 1980, respondent sent several written communications to his client/creditors, purportedly to explain the interruption of the interest payments. The first communication, a form letter, blamed the situation on "general economic conditions," but failed to mention respondent's credit problems. In July of 1980, respondent targeted a second letter to client/creditors with substantial cash assets, suggesting that each client/creditor could assist PFI in raising additional capital by purchasing common stock in PFI, and that any additional investment would help ensure PFI's repayment of the debt owed the client. Shortly thereafter, respondent sent a third communication stating that PFI would resume interest payments in 30 days because July sales "were good" and "August should be good or better."

[137 Ill.Dec. 64] began to suffer severe financial difficulties due to the rising costs of materials and respondent's inability to obtain these materials on credit. Thus, PFI was unable to meet its obligations to pay monthly interest installments on the loans from respondent's clients.

As of January 1981, PFI had made no additional interest payments. At this time, respondent devised a plan which would make PFI "attractive to a major investor." Respondent intended to reassign all the promissory notes from PFI to himself as payor of the obligation, while issuing preferred stock to himself as payment for assuming the notes. In effect, this would make it appear, on the face of corporate records, that PFI had no debt. This plan never came to fruition, however, as no new investors came forward. Despite this, respondent sent a final letter to the client/creditors on October 19, 1981, stating that he expected PFI to be sold on October 31, 1981. This sale also did not materialize. Neither PFI nor the respondent ever resumed interest payments.

By 1982, PFI had ceased to function. On March 11, 1983, respondent filed a petition in the United States Bankruptcy Court for the Northern District of Illinois seeking protection under chapter 13 of the Bankruptcy Code. (In re Imming (N.D.Ill., filed Mar. 11, 1983), No. 83-B-3308.) Only client/creditors who had initiated formal actions against respondent were scheduled as creditors. Respondent did not disclose those clients who had not initiated any formal action.

During the time when respondent was in contact with his client/creditors, from 1977 through 1981, respondent never advised any of them to seek the advice of other counsel. He also failed to disclose the financial status of either PFI or himself. During 1981, when respondent reassigned the promissory notes making himself the obligor on the debts, he failed to disclose any of the details surrounding PFI's operating problems.

B. Respondent's Relations with Client/Creditors

The Hearing Board focused on respondent's relationships with eight of his clients, each of whom loaned PFI large sums of money. To better understand the parameters of respondent's misconduct, we will examine the facts of each client's situation:

(1) Jacqueline Silvertsen Chesbrough retained respondent to represent her as executor of her deceased husband's will in 1970. Between 1970 and 1973, respondent also represented Chesbrough in matters involving claims against the estate, including a lawsuit by her husband's former business partners where settlement proceeds were distributed as late as 1986.

In 1978, Chesbrough, on the recommendation of her second husband, businessman Clayton Silvertsen, loaned PFI $25,000. The promissory note contained respondent's personal guarantee of repayment with 12% interest, payable monthly. The Hearing Board determined that Chesbrough was "not a person experienced in business matters." She received interest payments on the loan until November 1981, but has not received repayment of the principal.

(2) Mary Eichler retained respondent to prepare wills for herself and her husband and to represent her as executor of her husband's will in 1976. Respondent also represented her in a real estate sale in Eichler has received no interest payments since July 1980, and has not received repayment of the principal. In November and December 1981, respondent tendered two checks to Eichler in payment for interest due in each of those months. Each check, however, was returned by respondent's bank because they were drawn on closed accounts.

                [137 Ill.Dec. 65] 1978.  Eichler also routinely consulted respondent for advice regarding matters she "did not understand."   Between July 1978 and May 1979, Eichler made three loans to PFI totaling $40,000.  The funds for these loans came partially from the 1978 real estate sale.  Eichler stated that at the time the loans were made, respondent did not disclose anything regarding the risk of making the loans, any possible conflicts of interest, or any details of his own financial status.  She also stated that at the time she made the [131 Ill.2d 246] loans, she believed respondent was her attorney and that he was acting in a way so as to protect her interests
                

(3) In June 1978, Sharon Westphal-Hix (Westphal) retained respondent to handle matters surrounding the death of her first husband. At that time, Westphal was struggling to support two minor children on a meager fixed monthly income. In July 1978, as respondent was winding up the Hix estate, he suggested that Westphal could earn additional income by investing in PFI. Westphal loaned PFI $15,000 and received a promissory note similar to the ones given to Eichler and Chesbrough. Westphal testified that at the time of that loan she believed respondent was functioning as her attorney and that he was acting to protect her interests through giving her investment advice. Respondent, however, did not disclose any information regarding PFI's financial condition, any potential conflict of interest, or any of the risks involved in investing in PFI.

Between July 1978 and March 1979, respondent represented Westphal in two real estate transactions. At respondent's suggestion, Westphal loaned an additional $15,000 to PFI. In October 1980, PFI ceased making interest payments to Westphal. She then contacted respondent, demanding the entire amount due. Respondent informed Westphal that he would be unable to repay her. Westphal, however, continued to regularly contact respondent until she received $20,000, representing a portion of the...