In re Disciplinary Action against Varriano, No. A07-354.

• Citation: 755 N.W.2d 282
• Decision Date: 04 September 2008
• Docket Number: No. A07-354.
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST Richard D. VARRIANO, a Minnesota Attorney, Registration No. 131507.
• Court: Minnesota Supreme Court

755 N.W.2d 282

In re Petition for DISCIPLINARY ACTION AGAINST Richard D. VARRIANO, a Minnesota Attorney, Registration No. 131507.

No. A07-354.

Supreme Court of Minnesota.

September 4, 2008.

Martin A. Cole, Director, Patrick R. Burns, First Assistant Director, Office of Lawyers Professional Responsibility, St. Paul, MN, for petitioner Office of Lawyers Professional Responsibility.

Bruce D. Quick, Mark A. Friese, Fargo, ND, for respondent Richard D. Varriano.

OPINION

PER CURIAM.

The Office of Lawyers Professional Responsibility charged respondent Richard D. Varriano with trust account violations, failure to enter into written retainer agreements and provide settlement statements, improperly providing financial assistance to a client, representing two different clients despite an unconsented-to conflict of interest, and reciprocal discipline for violations determined by the North Dakota Supreme Court. The referee assigned to hear the case found multiple violations of the Minnesota Rules of Professional Conduct, and recommended an indefinite suspension, with eligibility to apply for reinstatement after one year. The Director contests the referee's conclusion that Varriano did not violate Rules 1.15(a) and 8.4(c) with respect to a check-cashing incident. We adopt the referee's findings, with the exception that we conclude the check-cashing incident constitutes a violation of Rule 1.15(a), and we impose the referee's recommended discipline of indefinite suspension for at least one year.

The referee made the following findings of fact. Varriano was admitted to practice law in Minnesota in 1981, and in North Dakota in 1988. He is a solo practitioner, and serves as a "three-quarter-time" public defender in Moorhead, Minnesota. He handles 750 to 1000 files per year, and practices with a very limited staff of one secretary working two hours a day. Varriano divorced in 2002, and has subsequently experienced financial difficulty.

Since 2002 Varriano has owed past-due taxes and penalties to the Internal Revenue Service (IRS), which has filed liens totaling $17,919.86 with the Cass County Recorder's Office in North Dakota. The IRS has been garnishing Varriano's personal and business accounts since 2002. Varriano admits that he has used his client trust account to shelter his personal funds from the IRS.

In 2004 Wells Fargo Bank reported to the Director of the Office of Lawyers Professional Responsibility (Director) that there was an overdraft on Varriano's client trust account. Upon inquiry, the Director discovered that Varriano was using his trust account to deposit his own funds and to pay business and personal expenses. The Director closed the investigation once he was reassured that Varriano had ceased these improper uses of the account, and he instructed Varriano not to use the account improperly again.

On December 9, 2005, the trust account was again overdrawn, and Varriano informed the Director that all funds in the trust account were earned fees. Varriano continued to use the trust account as a personal/business account until January 2006, and he commingled his funds with those of clients from September 27 to October 6, 2004, from December 3 to 9, 2004, and from January 21 to 31, 2005.

In March 2005 K.H. approached Varriano with a check for $6,166 from the United States Department of the Treasury, made out to H.S. for social security benefits, and purportedly endorsed by H.S. K.H. asked Varriano for his assistance in cashing the check. Varriano had represented K.H. on approximately 15 criminal matters, including various theft charges, and was aware of K.H.'s criminal history. Varriano did not know H.S., and he made no attempt to verify that H.S. had authorized K.H. to negotiate the check. Varriano believed that K.H. had permission from H.S. to negotiate the check. Varriano deposited the check into his trust account and issued a trust account check for $3,600 to K.H., keeping the remainder for himself. He said at the referee hearing that he kept the remainder as repayment of a loan he had made to K.H., but he had previously stated in a letter to the Director that K.H. told him the remainder was his "for providing the check cashing duty."

On July 27, 2005, H.S. signed a claim form with the Treasury Department alleging that the endorsement on the social security check was forged. After an investigation, the Treasury Department determined that the forgery was established and reclaimed the $6,166 from Wells Fargo Bank. Wells Fargo reversed the deposit on June 14, 2006, which resulted in an overdraft to Varriano's trust account.

Between April 2004 and January 2006, Varriano did not maintain trust account books and records required by Minn. R. Prof. Conduct 1.15.

In 2004-2005 Varriano represented three clients in personal injury actions, using oral contingent fee agreements. Upon the conclusion of each matter, Varriano failed to provide the client with a proper accounting detailing the amount of the recovery and the fees and costs withdrawn. In February 2005 Varriano represented a client in a criminal matter and charged the client a $5,000 nonrefundable retainer. Varriano did not enter into a written fee agreement with the client.

In 2004-2005 Varriano made four separate loans, totaling $3,651.78, to K.H., whom he was representing on criminal matters. Three of the loans were for the purpose of making restitution on behalf of K.H., and one was a loan directly to K.H.

In June 2003 Varriano was representing M.P. on charges of possession of a controlled substance. The police had discovered the evidence when they executed a search warrant at the home of M.P.'s mother, G.K. Varriano filed a motion to suppress the evidence, and he called G.K. to testify at the omnibus hearing on June 25, 2003. To make M.P.'s argument for suppression, Varriano needed to establish that M.P. had an expectation of privacy in G.K.'s home. Although G.K. had apparently indicated in advance that she would testify that her son maintained his residence at her home, to Varriano's surprise, at the hearing, she testified under oath that M.P. did not maintain a residence at her home and did not have permission to stay there on the day of the search. The motion to suppress was denied.

Varriano subsequently contacted G.K. and asked her to sign an affidavit stating that she testified falsely at the June 25, 2003, hearing. He told her that she had committed perjury, and that she might be charged with perjury after the affidavit was filed, but that he would represent her. He also said that her age and lack of criminal record would likely result in an acceptable disposition if she were convicted. G.K. signed the affidavit, which Varriano filed with the court in support of a motion to reconsider. Varriano did not explain to G.K. that her interest conflicted with that of her son, and he did not obtain her consent to the conflict. She was later charged with perjury, tried, and convicted in January 2004. Varriano represented her through trial. On appeal, the court of appeals affirmed her conviction.

Varriano's disciplinary history includes a public reprimand by the Eighth Circuit Court of Appeals in 2002, and a public reprimand in North Dakota in 2006.

On August 14, 2007, the Director filed an amended and supplementary petition for disciplinary action,¹ charging Varriano with trust account violations, failure to enter into written retainer agreements and provide settlement statements, improperly providing financial assistance to a client, conflict of interest in the G.K. matter, making false statements in a disciplinary investigation, and reciprocal discipline. We appointed the Honorable Bruce W. Christopherson to act as referee, and a hearing was held on December 28, 2007. At the beginning of the hearing, the charges of making false statements in a disciplinary investigation were withdrawn. Although the hearing had been continued to allow for testimony from G.K., she did not appear to testify.

The referee filed his Findings of Fact, Conclusions of Law, and Recommendation for Discipline on January 30, 2008. In addition to the facts already stated, the referee found that Varriano's commingling of client funds with his personal funds in the trust account placed client funds at risk of attachment or garnishment by the IRS, that Varriano did not act in an intentionally dishonest manner in the negotiation of H.S.'s social security check, that payments made on behalf of K.H. constituted financial assistance to a client in connection with pending litigation, and that Varriano's discussion with G.K. about the effects of signing and submitting the affidavit he requested on behalf of M.P. constituted legal advice given under circumstances in which a reasonable person would rely upon the advice. This legal advice, together with Varriano's promise to represent G.K. if perjury charges were brought, created an attorney-client relationship with G.K. Varriano's simultaneous representation of M.P. and G.K. resulted in a conflict of interest.

The referee concluded that Varriano committed multiple violations of the Minnesota Rules of Professional Conduct: use of his trust account for personal and business expenses and commingling his earned funds with client funds in violation of Minn. R. Prof. Conduct 1.15(a) and (b); failure to maintain proper trust account books and records in violation of Minn. R. Prof. Conduct 1.15(h) (2005); failure to enter into written nonrefundable retainer agreements and contingent fee agreements, and failure to provide settlement statements in violation of Minn. R. Prof. Conduct 1.15(b) and (c) (2005) and In re Lochow, 469 N.W.2d 91, 98 (Minn.1991); providing financial assistance to a client in connection with pending litigation in violation of Minn. R. Prof. Conduct 1.8(a) and (e) (2005); providing legal advice in violation of Minn. R. Prof. Conduct 1.7(b) (2005); improperly charging a nonrefundable retainer, failing to explain to a...