In re Disciplinary Action against Houge

• Decision Date: 23 April 2009
• Docket Number: No. A07-2332.,A07-2332.
• Citation: 764 N.W.2d 328
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST Benjamin S. HOUGE, a Minnesota Attorney Registration No. 47387.
• Court: Minnesota Supreme Court

764 N.W.2d 328

In re Petition for DISCIPLINARY ACTION AGAINST Benjamin S. HOUGE, a Minnesota Attorney Registration No. 47387.

No. A07-2332.

Supreme Court of Minnesota.

April 23, 2009.

Martin A. Cole, Director, Timothy R. Burke, Senior Assistant Director, Office of Lawyers Professional Responsibility, St. Paul, MN, for petitioner.

Benjamin S. Houge, Stillwater, MN, pro se.

OPINION

PER CURIAM.

The Director of the Office of Lawyers Professional Responsibility (Director) petitions this court to take disciplinary action against Minnesota attorney Benjamin S. Houge for several acts of misconduct arising from Houge's representation and employment of a client, X. The court-appointed referee found that Houge violated eight Rules of Professional Conduct by testifying falsely, submitting false evidence, failing to correct false testimony, making other false statements, assisting in violation of court orders, and failing to supervise a non-lawyer assistant. Houge denies misconduct and argues that he is entitled to a new hearing because the Director had a conflict of interest and because Houge was forced to disclose privileged information in violation of due process. We conclude that the referee did not err in finding that Houge committed professional misconduct. We also adopt the referee's recommended discipline and suspend Houge's license indefinitely with no right to petition for reinstatement for a minimum of two years.

Houge was admitted to practice law in Minnesota in 1974. He has represented numerous clients in attorney malpractice matters as well as a variety of other matters. In November of 2000, Houge began representing X, a client who became a friend. X was in the business of purchasing and refinancing foreclosed real estate properties. X had previously been convicted of bank fraud and theft by swindle. On June 6, 2002, Houge and X executed an "independent contractor agreement." The agreement provided that X would research foreclosed properties and perform negotiation, analysis, and other necessary services for Houge's law practice. The agreement set compensation on a barter basis of $2,000 per month as credit against X's outstanding legal fees.

That summer X received his third felony conviction after he pleaded guilty to one count of theft by swindle. (Houge did not represent X in this criminal matter.) In the sentencing hearing, the Hennepin County District Court sentenced X to 17 months commitment to the Commissioner of Corrections, but stayed execution of the sentence for 10 years. The court's probation order required X, among other things, to spend 365 days in the Hennepin County Adult Corrections Facility, or "workhouse," refrain from "self-employment in the real estate and mortgage or finances field[s]," and pay restitution. The amount of restitution was to be determined in a later proceeding.

Four days after sentencing, on November 5, 2002, Houge and X executed a new "employment agreement." The new terms assigned all commissions from transactions that X worked on to X's ex-wife; compensated X with a barter arrangement at $750 per week as a credit against X's outstanding legal fees; provided that Houge would supervise X's transactions; and assigned a percentage of the commissions collected by X's ex-wife to Houge for supervising X's transactions. X pursued at least three transactions under this agreement.

On February 18, 2003, Houge represented X in a pending civil matter brought by the victim of the 2002 theft-by-swindle conviction in Ramsey County District Court. On February 24, 2003, Houge represented X in the restitution hearing in the related Hennepin County criminal matter, where X was ordered to pay $51,620 in restitution. The terms of X's work for Houge were discussed before the court at both hearings.

On March 28, 2003, the Hennepin County District Court received a letter from an adversary of X's ex-wife in a civil dispute claiming that X had been violating the terms of his probation and work release by engaging in self-employed real estate activities. The letter further alleged that X effected this deception through a sham employment arrangement with Houge's law practice. On April 17, 2003, Houge responded with an affidavit to the Hennepin County District Court describing X's work for Houge. That same day, Houge represented X in a hearing to determine whether X should be released from the workhouse and put on electronic home monitoring to accommodate health concerns. The district court denied home monitoring, but indicated that the court would order further investigation of X's arrangements with Houge.

Within a week of this hearing, X shifted employers from Houge to Fiteck, L.L.C. Houge helped to form Fiteck, which was established in Minnesota on April 23, 2003. Houge testified that he spoke with a probation officer at the workhouse about the new terms of X's employment. Houge remained involved with Fiteck to provide legal services, for which he was compensated.

On September 16, 2004, the investigating probation officer requested that X's probation be revoked.¹ The officer provided three grounds for probation revocation: (1) that X "pursued self-employment in the real estate field" without approval, (2) that the Attorney General had filed a civil suit against X alleging that he committed fraud and violated consumer protection laws, and (3) that X had been receiving commissions for negotiating real estate deals and financial transactions. In the revocation proceeding, Houge was subpoenaed to produce documents relating to the terms of X's employment. At the conclusion of the revocation proceeding, the district court found that X violated his probation. The probation violation finding was based on the employment arrangement between X and Houge, which the district court found had caused harm to several members of the public that X solicited for refinancing. The court revoked X's probation and executed the sentence on the 2002 theft-by-swindle conviction.

Thereafter, the Lawyers Professional Responsibility Board (Board) received complaints alleging professional misconduct by Houge from the Attorney General's office, the Hennepin County Attorney's office and the Hennepin County District Court judge who presided over X's criminal matter. On March 16, 2005, the Director's office wrote a letter to Houge detailing these complaints and requesting information. In response, Houge commenced a declaratory judgment action in Ramsey County District Court alleging that the information that the Director requested for the disciplinary proceeding was protected by the attorney-client privilege, and that the privilege applied because Houge represented X for matters in which the Attorney General and Hennepin County Attorney were X's adversaries.

In response to Houge's lawsuit, the Director withdrew the requests for documents and offered to stipulate to a protective order for any confidential or otherwise privileged information. Under the proposed order, the Attorney General would not have had access to privileged documents. Houge did not agree to the Director's proposal and responded with a proposed order of his own that would have required the Director's office to refer his disciplinary proceeding to special counsel based on conflict-of-interest issues. The district court dismissed Houge's complaint for lack of jurisdiction.

Houge subsequently stipulated to a hearing before a panel of the Lawyers Professional Responsibility Board. The stipulation signed by Houge set the panel hearing for November 19, 2007, and specifically stated that Houge "agrees not to seek any, and that there shall be no, continuance, postponement, rescheduling, extension or the like of the hearing date." Five days before the panel proceeding, on November 14, 2007, Houge filed a Petition for Declaratory Judgment and/or Writ of Mandamus in this court alleging, inter alia, a violation of procedural due process if the Director's disciplinary action was not referred to special counsel, or, alternatively, necessary modification to the rules of procedure for ethics complaints to protect privileged and confidential information. In an order filed November 19, 2007, we declined to stay the panel proceeding, but specifically reserved the merits of the claim for later briefing. After briefing, we issued an order denying Houge's petition. On November 29, 2007, the panel authorized the Director to file a petition in this court for Houge's discipline. The Director filed the petition on December 12, 2007, and we appointed a referee on January 10, 2008.

The referee notified both parties of a telephone scheduling conference set for February 6, 2008. Houge could not be reached for this meeting at the telephone numbers he provided, and the referee set the hearing date for April 11, 2008. The referee's findings further state that, on March 21, 2008, Houge filed a motion to delay the hearing, and that Houge did not timely provide an exhibit list or a witness list.

The disciplinary hearing began on April 11, 2008. On that date, X appeared and asserted his Fifth Amendment right not to testify in Houge's disciplinary matter because X was awaiting sentencing in a separate criminal matter. X also asserted attorney-client privilege for all communications to which the privilege would attach. But X stated under oath that he would waive the attorney-client privilege and his Fifth Amendment rights for this disciplinary matter after he was sentenced in the criminal case. Houge repeatedly stated during his April 11 testimony that X's assertion of the attorney-client privilege prevented him from talking about relevant matters.

The disciplinary hearing resumed on May 3, 2008. Because X's sentencing had been continued and then postponed, X would not waive his Fifth Amendment right. But X did waive the attorney-client privilege, and Houge told the referee that he would not require X's testimony. Following the hearing, the referee found that Houge violated ...