In re Disciplinary Action against Czarnik, No. A07-1885.

• Decision Date: 15 January 2009
• Docket Number: No. A07-1885.
• Citation: 759 N.W.2d 217
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST Michael Laurence CZARNIK, a Minnesota Attorney, Registration No. 257382.
• Court: Minnesota Supreme Court

759 N.W.2d 217

In re Petition for DISCIPLINARY ACTION AGAINST Michael Laurence CZARNIK, a Minnesota Attorney, Registration No. 257382.

No. A07-1885.

Supreme Court of Minnesota.

January 15, 2009.

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

Jonathan K. Reppe, Northfield, MN, for respondent attorney.

OPINION

PER CURIAM.

On August 28, 2007, the Office of Lawyers Professional Responsibility filed a petition charging respondent Michael Laurence Czarnik with one count of professional misconduct. The petition alleged that Czarnik gave false testimony under oath, in violation of Rules 8.4(c) and (d) of the Minnesota Rules of Professional Conduct. Czarnik answered the petition, and after a hearing, the referee recommended that Czarnik be suspended indefinitely with eligibility to apply for reinstatement after 6 months. We conclude that Czarnik violated Rules 8.4(c) and (d) of the Minnesota Rules of Professional Conduct, and that the appropriate discipline is a 90-day suspension, a requirement that Czarnik take and pass the professional responsibility portion of the state bar examination, and unsupervised probation.

Czarnik was admitted to practice law in Minnesota in 1995. Between January 2001 and July 2005, Czarnik worked for Minnesota Housing Resources, Inc. (MHR), a Minnesota corporation that administers contracts for the rehabilitation of low-income housing. Czarnik served as MHR's employee, legal services contractor, and Chief Financial Officer. Czarnik was also a shareholder in MHR during the same period. In his capacity as Chief Financial Officer, Czarnik was responsible for most of the human resources and financial issues at MHR. While employed at MHR, Czarnik worked with a tax preparer, gathering information eventually used in his 2004 tax return and MHR's 2004 tax return.

Czarnik began working for Dream Home Development (DHD) in February 2004. While working for DHD, Czarnik continued working for MHR as Chief Financial Officer. Czarnik also continued to provide MHR with legal services on a contract basis.

Czarnik left DHD in January 2005. After leaving DHD, Czarnik and other former DHD employees sued DHD seeking past wages and reimbursement for expenses.

On March 10, 2005, Czarnik's deposition was taken under oath in Michael Czarnik, et al. v. Dream Home Development, et al. In that deposition, Czarnik gave the following testimony:

Q. From January of 2004 to January of 2005 did you have any sources of income other than Dream Home Development?

A. Define sources of income.

Q. Did you receive any monies from any other—from anywhere?

A. Stocks, bonds?

Q. Sure, stocks, bonds?

A. Yes.

Q. So with the exception of publicly traded stocks and your bonds did you ever receive any sources of income from anything else?

A. No.

. . .

Q. Did you ever receive any distributions from Minnesota Housing Resources in '04?

A. No.

Q. Receive any income from them at all?

A. No.

Q. In '03 did you receive any?

A. I shouldn't say—I'll go back. Before I did receive salary from Minnesota Housing Resources, before I moved to Dream Home, before I actually became an employee of Dream Home.

Q. Did Minnesota Housing Resources ever pay any of your expenses?

A. No.

Q. Did you ever receive any payments from them whatsoever?

A. No. In the context again after I became employed at Dream Home Development.

. . .

Q. As the CFO of the Minnesota Housing Resources you reviewed their budget, reviewed their expenditures, correct?

A. Correct.

Q. Do you know if there were any monies for legal fees paid in the year 2004?

A. I don't remember. I don't believe there — in 2004?

Q. Yes.

A. In 2004 there were expenses for legal.

Q. For who?

A. I think for Bethel & Associates.

Contrary to this testimony, according to Czarnik's 2004 income tax return, MHR paid Czarnik $20,000 in wages in 2004. Czarnik's 2004 tax return also indicated that Czarnik earned $23,172 from a legal consulting business. Czarnik testified at the disciplinary hearing that $10,500 of the amount for legal consulting represented payments made to Czarnik by MHR in 2004 for legal services. Czarnik could not recall the source of the remaining $12,672 reflected on his tax return.

Czarnik admitted at the disciplinary hearing that he received the $20,000 in wages from MHR in 2004. Czarnik testified that MHR paid Czarnik $20,000 to cover back due wages owed to him. Czarnik also testified at the disciplinary hearing that he was significantly involved in helping MHR acquire property and a mortgage on this property. The money from this mortgage loan was used in part to pay Czarnik's $20,000 in wages, according to Czarnik's testimony at the disciplinary hearing.

At the disciplinary hearing, the Director of the Office of Lawyers Professional Responsibility introduced evidence of six checks issued to Czarnik between April and October 2004, after Czarnik joined DHD in February of that year. Each check was signed by Czarnik on behalf of MHR. The six checks totaled $10,500. Czarnik testified at the disciplinary hearing that he spent over 70 hours providing legal services to MHR in 2004, and kept time records reflecting his services. Czarnik testified that he prepared invoices for his legal work based upon his time records and work product. He submitted each invoice to MHR and signed each of the six checks to himself on behalf of MHR.

In light of these facts, which Czarnik does not dispute, the referee found that

Because of the nature and extent of respondent's involvement in the financial affairs of MHR; the amount of money paid to respondent by MHR in 2004, both as wages and as contract payments for legal services rendered; the number of payments made to respondent in 2004 by MHR; respondent's significant involvement in the MHR transactions that made it possible for him to be paid $20,000 in back due wages; the fact that respondent separately invoiced MHR for each of the six contractor payments he received; that respondent signed the checks from MHR to himself; that respondent, shortly before his March 10 deposition, participated in gathering and providing to a tax preparer information used in preparing both his and MHR's 2004 income tax returns; and the relatively close proximity in time between the payments made to respondent by MHR and his deposition testimony, it is not credible or likely that respondent was unaware of the payments that had been made to him by MHR at the time of his March 10, 2005, deposition. Further, the questions asked of respondent clearly called for disclosure of the payments he received from MHR.

(Emphasis added.)

Czarnik testified that at the time of his deposition, he did not remember receiving payments from MHR in 2004. Czarnik further testified that he did not review any documents relevant to his 2004 income prior to his deposition.

I.

Czarnik contends that his conduct did not violate Rules 8.4(c) and (d) of the Minnesota Rules of Professional Conduct. We disagree.

At a disciplinary hearing, the Director bears the burden of proving by clear and convincing evidence that the attorney violated the Rules of Professional Conduct. In re Westby, 639 N.W.2d 358, 367 (Minn.2002). Because a transcript was ordered, the referee's findings of fact and conclusions of law are not binding on this court. In re Peterson, 718 N.W.2d 849, 853 (Minn.2006); Rule 14(e), Rules on Lawyers Professional Responsibility (RLPR). We nonetheless give "great deference" to the referee's findings, In re Wentzell, 656 N.W.2d 402, 405 (Minn.2003), and will uphold a referee's findings and conclusions "if they have evidentiary support in the record and are not clearly erroneous." In re Moulton, 721 N.W.2d 900, 905 (Minn.2006), amended by In re Moulton, 733 N.W.2d 777 (Minn.2007). Findings that are based on an attorney's "demeanor, credibility, or sincerity," are particularly entitled to deference. Id. Findings of fact will be reversed only if "upon review of the entire evidence, we are left with the definite and firm conviction that a mistake has been made." Id. (quoting In re Pinotti, 585 N.W.2d 55, 62 (Minn.1998)).

Every attorney admitted to practice law in Minnesota must take the following oath:

You do swear that you will support the Constitution of the United States and that of the state of Minnesota, and will conduct yourself as an attorney and counselor at law in an upright and courteous manner, to the best of your learning and ability, with all good fidelity as well to the court as to the client, and that you will use no falsehood or deceit, nor delay any person's cause for lucre or malice. So help you God.

Minn.Stat. § 358.07 (2008) (emphasis added). Building on the attorney oath, Minnesota Rules of Professional Conduct 8.4(c) and (d) provide that "[i]t is professional misconduct for a lawyer to: (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation; [or] (d) engage in conduct that is prejudicial to the administration of justice."

Czarnik does not dispute that his repeated statements—that he did not receive payments from MHR in 2004—were false and made under oath. Czarnik does argue, however, that he did not knowingly lie, but rather did not recall at the time of his deposition receiving compensation from MHR in 2004. There is, however, ample evidence in the record to support the referee's finding that Czarnik was aware of the payments, and still chose to testify falsely. Czarnik was intimately involved in running MHR's financial affairs during his tenure at MHR. With respect to the $10,500 in legal fees Czarnik received from MHR in 2004, Czarnik himself signed, on behalf of MHR, six checks made out to himself. We cannot say that the referee's finding that Czarnik knowingly lied in his deposition was without evidentiary support and clearly erroneous. See In re Moulton, 721 N.W.2d at 905.

Next, Czarnik argues that even if the...