Iowa Supreme Court Attorney Disciplinary Bd. v. Olson

• Decision Date: 09 December 2011
• Docket Number: No. 11–1280.,11–1280.
• Citation: 807 N.W.2d 268
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. Steven F. OLSON, Respondent.
• Court: Iowa Supreme Court

807 N.W.2d 268

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,

v.Steven F. OLSON, Respondent.

No. 11–1280.

Supreme Court of Iowa.

Dec. 9, 2011.

Charles L. Harrington and Amanda K. Robinson, Des Moines, for complainant.

Steven F. Olson, Bloomington, Minnesota, pro se.

MANSFIELD, Justice.

This attorney disciplinary proceeding comes before us on the report of a division of the Grievance Commission of the Supreme Court of Iowa. See Iowa Ct. R. 35.10(1). The Iowa Supreme Court Attorney Disciplinary Board alleged the respondent, Steven F. Olson, violated ethical rules by communicating directly with a represented party, making misrepresentations of fact to that party, and engaging in fraud and deceit toward that party. The commission found two of the alleged violations had occurred and recommended Olson be ordered to cease and desist from the practice of law in Iowa for thirty days. Upon our consideration of the commission's findings of fact, conclusions of law, and recommendations, we are unable to conclude by a convincing preponderance of the evidence that Olson committed any of the alleged violations. Therefore, we dismiss the complaint.

I. Factual and Procedural Background.

Olson is a member of the Minnesota and South Dakota bars. His offices are located in Minnesota. Olson also is admitted to practice in the tribal courts of the Sac & Fox Tribe of the Mississippi (the Tribe). His law firm regularly represents the Tribe. Olson is not a member of the Iowa bar.

DNA Today, LLC is a now-defunct software company that was formerly based in West Des Moines. The company offered software that potentially could be used to store information about a person's ancestry and verify whether that person was a bona fide member of an Indian tribe. At some point in 2005, DNA Today approached the Tribe about its software. Eventually the parties agreed the Tribe would provide funding to the company.

In July 2005, the Tribe loaned one million dollars to DNA Today secured by “all assets of the Company,” including “source code or similar software.” Steven Whitehead, the President of DNA Today, personally guaranteed repayment of the one million dollar debt.

The debenture agreement also contained terms under which the Tribe could convert its debt interest into stock. Additionally, the agreement required DNA Today to keep the collateral free and clear of any other security interests. The agreement was governed by the laws of the Tribe and deemed to have been executed on Indian lands.

The agreement was prepared by Olson and negotiated between Olson and Whitehead. Olson and Whitehead continued to deal directly with each other after that.

Under the terms of the debenture agreement, DNA Today was required to pay interest to the Tribe of $25,000 per quarter and to repay the one million dollars in principal on the one-year anniversary of signing—i.e., July 2006. By the fall of 2005, however, DNA Today was in default with the Tribe. DNA Today was actively searching for other investors. One possible deal that would have required the Tribe to subordinate its debt fell through in the spring of 2006.

In or about March 2006, without notifying the Tribe, DNA Today took out a $200,000 secured line of credit with a commercial bank. This was in violation of the debenture agreement, which prohibited DNA Today from encumbering its assets with other security interests.

In late May 2006, DNA Today signed an agreement to retain Windstone Capital of Scottsdale, Arizona as a broker to use its best efforts to raise $5 million in outside capital for the company. The agreement required a $25,000 cash retainer with $15,000 due upon signature and the remaining $10,000 payable in thirty days. DNA Today paid the initial $15,000, but was unable to pay the remaining $10,000 of Windstone's retainer.¹

Meanwhile, DNA Today was not compensating its team of computer programmers, who were located in France. As a result, they had ceased working for the company. By July 2006, DNA Today was in a very precarious financial position. As Whitehead explained to Olson in an e-mail:

[W]e are in need of immediate relief if we are to stabilize the company to insure that we will be operational over the next several months....

....

... We are at a serious crossroads that not only [a]ffects us, bu[t] the tribe as well....

....

The biggest risk is holding our team, including the technical team, together. The[ ] guys in France are refusing to provide services for us until they get paid. This will be a very big problem if it goes on much longer. Our staff has forfeited pay for many pay periods, but can no longer afford to do so. We are at partial staffing as a result, which is also dangerous.

I urge [you] to review this situation with full and deep consideration. With the tribe's support, we can make it through and should be in great shape to cash in on the market that is so strong for us. Without any support, the tribe's investment and our company are in serious jeopardy—and I mean serious. This is not a scare tactic, it is reality.

Whitehead's e-mail included suggestions of how the Tribe might provide additional funding to DNA Today.

On July 11, 2006, a meeting took place between DNA Today and the Tribe. No attorneys were present. On July 25, 2006, Olson faxed a letter on behalf of the Tribe to Whitehead regarding another potential business meeting to occur on July 26. The July 26 meeting took place, again without attorneys present.

On July 27, 2006, according to Whitehead's later explanation to his investors, Whitehead called Olson to find out what the Tribe planned to do. Olson returned the call on July 28. In that call, Whitehead warned Olson that “our business was in serious jeopardy of shutting down and that we would likely lose the Windstone deal, which would mean that the tribe would never get their money back for the debenture.” In the mean time, Whitehead contacted Windstone and obtained yet another extension of the deadline to pay the remaining $10,000 of the broker fee.

Olson recalled these events similarly. As Olson explained:

He [Whitehead] came to the Tribe in July—in late June, early in July, and explained that he was completely out of money and that he was going to have to close the doors unless the Tribe loaned him some additional money.

Well, the Tribe didn't do anything for an extended period of time. I don't know if any of you have ever dealt with Indian tribes, but I suspect you—some of you have dealt with governing bodies, political entities. And a tribal council is like any political entity, it makes decisions very slowly, and perhaps even more slowly than most traditional governing bodies that we're accustomed to dealing with in the non-Indian world.

And as a consequence of that delay he [Whitehead] was at the point by the end of July where he was in default with the Tribe, but he also owed virtually every other creditor, according to what he was telling the Tribe at the time. He really had no other resources, and he had no other direction to go because he didn't have the $25,000 in the business coffers that it would take to get this broker, the Windstone broker that he talked about when he was here, to put together a deal that could then go out and be marketed to potential investors. As he indicated, this was an investment broker; this was not a venture capital firm, this was not any kind of a firm that had a banking firm or that had actual resources.

Around this time, Olson learned DNA Today had taken out the $200,000 secured line of credit several months before in violation of the parties' debenture agreement. On August 2, 2006, Olson filed a UCC financing statement with the Iowa Secretary of State regarding DNA Today's assets, including the software source code.

On August 7, 2006, Olson filed a complaint in tribal court against DNA Today and Whitehead alleging default under the loan and security agreement and seeking damages and an injunction. The injunction would prohibit the defendants from disposing of or interfering with any effort by the Tribe to take possession of the Tribe's collateral. On August 8, 2006, the tribal court issued a temporary restraining order, which Olson did not immediately serve on DNA Today.

During the month of July, when discussions began about the Tribe possibly providing additional funding to DNA Today, Olson for the first time had direct contact with Frank Carroll of the Davis Brown law firm. Olson recalled receiving a phone call from Carroll and being told by Carroll that he represented DNA Today for purposes of negotiating the new agreement, but not with respect to the existing financing. Carroll testified he did not recall placing any limitations with Olson on his representation of DNA Today. In any event, Whitehead and Olson continued to correspond with each other directly on matters other than the potential new agreement, while copying Carroll on their communications.

Notably, Whitehead's recollection on this subject was not far from Olson's. Whitehead testified that the Davis Brown firm was fine with his contacting Olson directly so long as it was for informational purposes as opposed to negotiations for contracting or legal issues.

Between August 7 and August 9, 2006, drafts of a “Collateral Agreement” were exchanged between the Davis Brown law firm and Olson. Frank Carroll was away from the office, so Julie McLean Johnson and Jason Stone of the same law firm communicated with Olson. The gist of the negotiations was that the Tribe would provide some additional funds and DNA Today would deposit a copy of the software source code. The parties did not come to an agreement, however. Among other things, DNA Today objected to giving the Tribe a copy of the source code as the Tribe had requested, instead preferring to have the code deposited with a third-party escrow agent. The amount of funding also was in dispute. DNA Today sought $30,000 to $50,000 in immediate cash and a commitment from the...