In re Morrell

• Decision Date: 28 October 1996
• Docket Number: No. 95-BG-1794.,95-BG-1794.
• Citation: 684 A.2d 361
• Parties: In re Michael X. MORRELL, Respondent. A Member of the Bar of the District of Columbia Court of Appeals.
• Court: D.C. Court of Appeals

684 A.2d 361

In re Michael X. MORRELL, Respondent.

A Member of the Bar of the District of Columbia Court of Appeals.

No. 95-BG-1794.

District of Columbia Court of Appeals.

Argued October 8, 1996.

Decided October 28, 1996.

John D. Cline, with whom Nancy E. Weiss was on the brief, for respondent.

Julia L. Porter, Assistant Bar Counsel, with whom Leonard H. Becker, Bar Counsel, and Michael S. Frisch, Senior Assistant Bar Counsel, were on the brief, for the Office of Bar Counsel.

Before FERREN, STEADMAN, and RUIZ, Associate Judges.

FERREN, Associate Judge:

The Board on Professional Responsibility concluded that Michael X. Morrell, respondent, violated several provisions of the Code of Professional Responsibility, including: Disciplinary Rule (DR) 1-102(A)(3) (illegal acts involving moral turpitude); DR 1-102(A)(4) (dishonest, deceitful, or fraudulent conduct); DR 9-103(A) (misappropriation of client funds); and DR 9-103(B) (failing to keep complete records and to account for client funds).¹ The Board recommended that this court impose the ultimate sanction of disbarment. Morrell makes four arguments for rejecting the Board's report and recommendation: (1) the Bar Counsel's initial complaint contained an inadequate oath under D.C.Code § 11-2503(b) (1995 Repl.) because it was not based on personal knowledge; (2) the delay in filing and prosecuting the complaint violated Morrell's Due Process rights; (3) the Hearing Committee's failure to issue its report within the 60 days required by D.C. Bar R. XI § 9(a) requires dismissal of the complaint; and (4) the Board's report failed to explain adequately why the Hearing Committee (whose findings were adopted by the Board) rejected the testimony of one of Morrell's witnesses. We hold that bar counsel's complaint under oath need not be based on personal knowledge but may be based on information and belief, that Morrell suffered no actual prejudice from the several claimed delays in the proceedings, and that the Hearing Committee's findings, which the Board adopted, as well as the Board's conclusions, were adequately explained and amply supported by the testimony and documents in the record. We adopt the Board's proposed sanction of disbarment for Morrell's flagrant violations of the rules governing attorney conduct.

I.

The Hearing Committee found that Morrell engaged in a pattern of misconduct in the course of his legal representation of Laboratories Besins Iscovesco (Lab Besins), a French pharmaceutical company, and its United States affiliate, LaSalle Laboratories, Inc. (LaSalle), between 1983 and 1990. The Board concluded that the findings of fact in the Hearing Committee's report were supported by substantial evidence in the record. See In re Smith, 403 A.2d 296, 302 (D.C. 1979). The series of events culminating in the charges before us can be summarized as follows:

In 1983, while an attorney at Warner & Stackpole, Morrell began representing Lab Besins, which was interested in marketing two drugs in the United States that it was successfully selling in France. From the outset, Morrell misrepresented to Lab Besins that he and his firm had the necessary experience to obtain approval of the drugs by the Food and Drug Administration (FDA). Shortly thereafter, Morrell left Warner & Stackpole but continued to represent Lab Besins as a sole practitioner. He agreed with Antoine Besins, who was in charge of Lab Besins' foreign operations throughout the time period at issue in this case, that Lab Besins would pay him $300,000 for submitting the drug applications to the FDA, exclusive of the costs of clinical trials that might become necessary.

In December 1984, Morrell joined the law firm of Akin, Gump, Strauss, Hauer & Feld (Akin, Gump); payments due under his retainer agreement with Lab Besins were subsequently forwarded to Akin, Gump.

After learning from the FDA in 1985 that clinical trials would be necessary to win approval for the drugs, Morrell proposed to Lab Besins that a consulting firm he owned and controlled, the Georgetown Group, be used to coordinate payments for the trials. Lab Besins was to pay the Georgetown Group for conducting the trials, but none of the money sent to the Georgetown Group was intended to compensate Morrell in any manner. By letter, Morrell informed Lab Besins that the total budget would be $300,-000; however, between 1985 and 1988, he sent invoices to Lab Besins for slightly over $1,000,000, claiming that the prior budget was inadequate to complete the trials and navigate the approval process. The invoices to Lab Besins all indicated that the money was for clinical trials. Unknown to Lab Besins, however, Morrell spent almost half the $1,000,000 on personal expenses. (Morrell never provided Lab Besins with any accounting of the funds sent to the Georgetown Group to conduct the clinical trials.) Akin, Gump knew nothing about the billing arrangement Morrell established by using the Georgetown Group; nor was it aware that Morrell kept a large amount of the funds for his own use.

In 1988, Morrell, with the help of William Bologna, a friend who ran a public relations firm with significant experience in the pharmaceutical industry, negotiated a Co-Marketing Agreement between Lab Besins and the pharmaceutical company Schering-Plough. Schering-Plough agreed to make an initial investment of $7.5 million to facilitate approval and marketing of the drugs in exchange for a portion of the revenues. Under the agreement, if the FDA had not approved one of the drugs by June 30, 1990, or if both of the drugs were not approved by June 30, 1991, Schering-Plough would take over the approval and marketing process, and Lab Besins would receive only a royalty on all sales, a much less lucrative arrangement for Lab Besins. Morrell assured Lab Besins officials that the deadlines easily would be met.

Lab Besins created LaSalle to receive the Schering-Plough investment and conduct the approval and marketing operations. LaSalle was to be Lab Besins' wholly owned subsidiary. Morrell misrepresented to Lab Besins that Schering-Plough required him to be in charge of LaSalle. Lab Besins, through Antoine Besins, agreed to make Morrell president and CEO of LaSalle, with the understanding that Morrell would wind down his work at Akin, Gump and join LaSalle full-time by the end of 1988 or the beginning of 1989. Morrell, however, continued to have Akin, Gump bill LaSalle for his legal services, causing LaSalle (whose finances he controlled as president and CEO) to pay Akin, Gump approximately $400,000 between April 1988 and April 1990. Indeed, Morrell created two copies of some of the invoices: one copy went to Akin, Gump, indicating that the bill was for legal services; the other copy was sent to LaSalle, depicting the moneys owed as charges for use of office space.

Morrell also caused LaSalle to pay Bologna $300,000 as a finder's fee for Bologna's role in facilitating the agreement between Lab Besins and Schering-Plough. Morrell informed Antoine Besins that he was making the payment. Morrell did not tell Besins, however, that Bologna was going to pay Morrell $150,000. Furthermore, Morrell created two false invoices to Bologna to cover up the "kick-back" he received.

During that same time period, while Morrell was receiving a salary from Akin, Gump and billing his services to LaSalle, he caused LaSalle to pay himself well over $1,000,000 in direct compensation. Akin, Gump required all attorneys to turn over to the firm all compensation received for professional services; it also had a policy requiring attorneys to obtain firm approval before acquiring stock in a company that was a firm client. A large majority of Morrell's billings at the firm were for services rendered to Lab Besins or to its American subsidiary, LaSalle, created in 1988 to market drugs in the United States. Akin, Gump was not aware that Morrell was receiving compensation from LaSalle, a firm client, nor was Lab Besins or Antoine Besins aware that Morrell was billing LaSalle personally for his services.

Morrell's contract with LaSalle provided that he was to receive no more than $300,000 per year, plus a bonus once the products were authorized and sold. Although his employment agreement contained no provision that he was to be compensated with company stock, Morrell caused LaSalle to issue him ten shares of stock, or approximately 9% of the company. After he issued himself the stock, Morrell filed and signed, under penalty of perjury, a false tax return indicating that Lab Besins was the 100% owner of LaSalle. Neither Lab Besins nor Bologna nor Akin, Gump was aware at the time of Morrell's ownership interest in LaSalle.

After LaSalle failed to obtain FDA approval of either drug within the deadline provided in the Co-Marketing Agreement, Schering-Plough exercised its right to take over the approval process and the marketing of the drugs. Lab Besins and Akin, Gump learned of all Morrell's activities detailed above shortly thereafter, and both terminated Morrell's employment with their respective organizations in the middle of 1990. Akin, Gump ultimately paid Lab Besins and LaSalle $3.2 million to settle their claims against the firm.

Laurence Hoffman, the managing partner of Akin, Gump, filed a complaint against Morrell with the Office of Bar Counsel on July 14, 1992, shortly after the firm had reached a settlement agreement with Lab Besins. The Office of Bar Counsel filed a petition instituting formal disciplinary proceedings in March 1994, following an extensive period of discovery and consideration of the allegations against Morrell.

The Hearing Committee, and then the Board, concluded that Morrell had violated DR 1-102(A)(3), DR 1-102(A)(4),² DR 9-103(A),³ and DR 9-103(B).⁴ Morrell misappropriated hundreds of thousands of dollars sent by Lab Besins to the Georgetown Group to conduct clinical trials, caused LaSalle to pay him funds well in excess of his authorized salary, received a...