In re Hansmeier, A19-0173
| Citation | 942 N.W.2d 167 |
| Decision Date | 22 April 2020 |
| Docket Number | A19-0173 |
| Parties | IN RE Petition for DISCIPLINARY ACTION AGAINST Paul Robert HANSMEIER , a Minnesota Attorney, Registration No. 0387795. |
| Court | Supreme Court of Minnesota (US) |
Susan M. Humiston, Director, Timothy M. Burke, Deputy Director, Office of Lawyers Professional Responsibility, Saint Paul, Minnesota, for petitioner.
Paul R. Hansmeier, Sandstone, Minnesota, pro se.
The Director of the Office of Lawyers Responsibility filed a petition for disciplinary action against respondent Paul Hansmeier, alleging that Hansmeier violated Minnesota Rules of Professional Conduct 8.4(c) and (d), by making knowing misrepresentations and omissions of material fact in a personal bankruptcy proceeding. Based on the referee’s findings and our own review of the record, we conclude that Hansmeier’s misconduct warrants disbarment.
Paul Hansmeier was admitted to the practice of law in Minnesota in 2007. In September 2016, Hansmeier was indefinitely suspended from the practice of law with no right to petition for 4 years. In re Hansmeier , 884 N.W.2d 863, 863 (Minn. 2016) (order). He was suspended for his misconduct in four civil matters arising out of a porn fraud scheme he began in 2011.1 As relevant here, Hansmeier’s misconduct included making misrepresentations to tribunals, making false statements in legal documents and during legal proceedings, transferring funds to avoid paying sanctions, and perpetrating a fraud upon the court. Id. Hansmeier remains suspended.
The case before us involves misconduct related to Hansmeier’s personal bankruptcy. In July 2015, Hansmeier filed a Chapter 13 voluntary petition for bankruptcy. His filings included schedules A–J and a statement of financial affairs, which he signed as true and correct under penalty of perjury. He also submitted a Chapter 13 plan.
Four months later, the U.S. bankruptcy trustee filed a motion to convert the bankruptcy from Chapter 13 to Chapter 7 based on Hansmeier’s alleged bad faith and failure to propose a confirmable plan. On December 3, 2015, the bankruptcy court granted the motion.
The bankruptcy court found that Hansmeier: (1) failed to disclose a trust, significant monetary transfers leading up to the filing of the petition, and accurate household expenses; (2) failed to notify the trustee and court of his intent to sell his home and that he had moved to a rental property; and (3) failed to amend his schedules to reflect a substantial reduction in monthly expenses. The court stated that:
[t]he misleading information on the schedules, the statement of financial affairs, Chapter 13 plan, timing of the case being the filing,2 coupled with [Hansmeier’s] pre-petition actions and omissions before various courts across the country indicate that this case was designed for one purpose only, to thwart the collection efforts of creditors.
A bankruptcy appellate panel for the Eighth Circuit Court of Appeals affirmed. As explained in that opinion:
Each of these factors was present in this case.
In re Hansmeier , 558 B.R. 299, 303 (8th Cir. B.A.P. 2016) (quoting Molitor v. Eidson , 76 F.3d 218, 220 (8th Cir. 1996) ).
On January 29, 2019, the Director filed a petition for discipline with our court, alleging that Hansmeier had violated Rules 8.4(c) and (d), Minnesota Rules of Professional Conduct. The Director asserted that, "[i]n continuation of his efforts to avoid court ordered disclosure of financial information, hide assets and avoid payment of sanctions entered against him, respondent filed for bankruptcy and, in his bankruptcy filings and during the bankruptcy proceeding, knowingly made false and misleading statements and omissions of material fact." The Director alleged five misrepresentations by omission—the same misrepresentations found by the bankruptcy judge when granting the motion to convert.
An evidentiary hearing was held before a referee on June 27, 2019. The referee ordered a transcript to assist in the preparation of his report. On July 31, 2019, the referee issued his findings of fact, conclusions of law, and recommendation for discipline. The referee found that four of the five misrepresentations alleged in the petition were substantiated by the record.
First, the referee found that Hansmeier failed to disclose the Mill Trust. Hansmeier established the Mill Trust—a self-settled, irrevocable trust with a spendthrift clause—in 2010. Hansmeier is the grantor and sole manager of the trust, and his wife is the trustee. His wife testified in her Rule 2004 bankruptcy examination that, as trustee, she "was in charge of using the money as [she] saw fit for [their] family." Hansmeier retained the right to veto any distribution of funds. Schedule B in the bankruptcy filing shows that Hansmeier disclosed only an account called "SELF SETTLED TRUST MONYET" with a value of $8,554. On the statement of financial affairs, Hansmeier wrote: The Mill Trust and Monyet, LLC, are separate, but related, entities. The Mill Trust is not disclosed by name anywhere in the filings.
Second, the referee found that Hansmeier failed to disclose transfers totaling in excess of $500,000. Between May 2013 and May 2014, 19 wire transfers were completed from the brokerage account for Monyet, LLC to various entities. The final transfer was of all available cash in the account. In total, the 19 transfers added up to $590,333. Of that amount, $245,000 was transferred to Hansmeier’s wife. No transfers were disclosed in the bankruptcy filings.
Third, the referee found that Hansmeier failed to notify the trustee and bankruptcy court of his intent to sell his home, a condominium. In his July bankruptcy filing, Hansmeier disclosed a one-half interest in a Minneapolis condominium with a total value of $885,000. In September, Hansmeier sent an email to his bankruptcy counsel about the possibility of selling his home. In September or October, Hansmeier and his wife entered into a listing agreement with a real estate broker. As of late October, significant renovations of the condominium were underway. Hansmeier only filed a motion to sell the condominium with the bankruptcy court on November 25—after the bankruptcy trustee discovered the property listing—and by that time he had already entered into a purchase agreement stating that the home would be sold on December 10. The property sold for $1.2 million. The bankruptcy court found it reasonable to conclude Hansmeier might never have disclosed the sale nor turned over sale proceeds without the trustee discovering the property was listed.
Fourth, the referee found that Hansmeier failed to notify the trustee and bankruptcy court of his move to a new residence and the resulting change in household expenses, although the referee noted that the change was a temporary increase, rather than decrease, of those expenses. On October 5, 2015, Hansmeier and his wife moved to a rental property in Woodbury under a six-month lease. For a time, Hansmeier’s wife was paying the Minneapolis condominium mortgage payments and the Woodbury rent payments. This move was not disclosed nor were the bankruptcy schedules amended to reflect the change in household expenses. The move was first addressed during the bankruptcy examinations in late October.
As to the fifth misrepresentation alleged in the petition, the referee was unable to find that Hansmeier knowingly misrepresented his household expenses. Hansmeier testified in his examination that his wife pays all monthly expenses, including the mortgage loan and household expenses. On Schedule J, Hansmeier claimed that the monthly household expenses totaled $9,779. On Schedule I, he claimed his wife’s net monthly income was $4,889.41. Although there is a discrepancy between the expenses and the income purportedly used to pay the expenses, the referee acknowledged the difference could have been made up from other sources.
The referee concluded that "[t]he Director has prove[n] by clear and convincing evidence that the Respondent made knowingly false statements and omissions in his personal bankruptcy matter in violation of Rule[s] 8.4(c) and (d), [Minnesota Rules of Professional Conduct ]." Based on these violations, six aggravating factors, and no mitigating factors, the referee recommended disbarment.
Because neither party ordered a transcript of the disciplinary hearing, we "accept [the] referee’s factual findings as conclusive" and "similarly accept as conclusive the conclusions that the referee draws from the facts, such as whether the attorney’s conduct violated the Rules of Professional Conduct." In re Montez , 812 N.W.2d 58, 66 (Minn. 2012) ; see Rule 14(e), Rules on Lawyers Professional Responsibility (RLPR).3 We review de novo "the referee’s interpretation of the Rules of Professional Conduct, and other conclusions of law that do not rely on the referee’s factual findings." Montez , 812 N.W.2d at 66.
The only issue before us is the appropriate discipline to impose for Hansmeier’s misconduct. In deciding what discipline is appropriate, we afford great weight to the referee’s recommendation, but we alone make the final determination. In re Coleman , 793 N.W.2d 296, 308 (Minn. 2011). The purposes of attorney discipline "are to protect the public, to protect the judicial system, and to deter future misconduct by the disciplined attorney as well as by other attorneys." In re Oberhauser , 679 N.W.2d...
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