Iowa Supreme Court Attorney Disciplinary Bd. v. Willey

• Decision Date: 15 October 2021
• Docket Number: No. 21-0214,21-0214
• Citation: 965 N.W.2d 599
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. Bruce A. WILLEY, Respondent.
• Court: Iowa Supreme Court

965 N.W.2d 599

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,

v.Bruce A. WILLEY, Respondent.

No. 21-0214

Supreme Court of Iowa.

Submitted September 16, 2021

Filed October 15, 2021

Tara van Brederode and Allison A. Schmidt, Des Moines, for complainant.

David L. Brown and Alexander E. Wonio of Hansen, McClintock & Riley, Des Moines, for respondent.

Oxley, J., delivered the opinion of the court, in which all justices joined.

OXLEY, Justice.

Attorneys who engage in business dealings with their clients create an inherent conflict of interest under our rules of professional conduct. Such conflicts are not prohibited—as long as the attorney first meets strict disclosure requirements and provides adequate information so their clients can make an informed consent to the conflict. Attorney Bruce A. Willey appears before us for the second time for engaging in similar conduct for which we previously disciplined him but with different clients and in deals that predate the conduct giving rise to Willey's previous discipline. The Iowa Supreme Court Grievance Commission (commission) recommends we suspend Willey's license for thirty days on the theory that had we known about this conduct we would have suspended his license for a longer period the first time. Upon our de novo review of the record, we suspend Willey's license for thirty days.

I. Background Facts and Proceedings.

Willey was admitted to practice law in Iowa in 1993. He is an experienced attorney and a certified public accountant (CPA), who specializes in tax and business law.

The conduct bringing Willey to the Board's attention involves business dealings with Willey's client, David Wild, and Willey's recruitment of other clients into those ventures. Wild is a self-proclaimed project developer in industries involving timber, renewable energy, and land development in the United States as well as internationally. Willey and Wild developed an attorney–client relationship and were business partners between approximately 2006 and 2014. Willey formed at least twenty entities for Wild over that time. Willey never received payment from Wild for his legal work, estimated to total between $20,000 and $100,000, believing he would see a return through one of Wild's ventures. Despite Wild's claimed experience, he never completed a successful venture with Willey. Their relationship ended when the events involved in this case went south and a judgment was entered against Wild.

A. Prior Disciplinary Proceedings. We disciplined Willey in 2017 based on a transaction between two of Willey's clients, Synergy Projects, Inc. (Synergy), a business owned by David Wild and organized by Willey, and Henry Wieniewitz. Iowa Sup. Ct. Att'y Disciplinary Bd. v. Willey (Willey I ), 889 N.W.2d 647, 649–52 (Iowa 2017). In June 2010, Willey presented an investment opportunity to Wieniewitz in the form of an unsecured loan from Wieniewitz to Synergy that was memorialized through a promissory note drafted by Willey. Id. at 650. Despite Willey's reassurances and description of the opportunity as "safe and common," Wieniewitz never received repayment of his $100,000 loan or the promised $300,000 of additional payments. Id. at 650–52. We determined Willey had violated rule 32:1.7(a)(2) by representing both the lender and borrower in a loan transaction, putting them "at odds from the beginning." Id. at 656. He also violated rule 32:1.7(b)(4) by failing to obtain informed consent from Wieniewitz where Willey never told Wieniewitz that Wild and Synergy were his clients or the extent of his involvement in Wild's business. Id. We suspended Willey's license for sixty days for violating our conflict of interest and informed consent rules. Id. at 656, 658.

B. Current Disciplinary Proceedings. The complaint in this case arose from Willey's representation of another David Wild company, Catalyst Resource Group (Catalyst), and another Willey client, Midwest S.N. Investors, LLC (Midwest), involving events between 2007 and 2009.

Willey organized Catalyst in August 2007 and served as its attorney. R.O.F. Management, Inc., a company in which Willey and Wild co-owned shares of stock, managed Catalyst. Orion's Pride, owned by Willey, and Braveheart, owned by Wild, were equal members of Catalyst.

In a scheme that neither Willey nor Wild were able to adequately describe to the commission, Catalyst entered a joint services agreement (JSA) in early 2008 with Ramis Limited (Ramis), a London company. According to Willey, Ramis had access to a lucrative investment trading platform involving leased bank notes that was used in Asia and Europe but was significantly restricted in the United States. According to the JSA, Ramis had access to "opportunities for securitized and/or structured project funding with financial institutions" that could achieve "moderate to high level returns"—it just needed cash to bring these opportunities to fruition. For its part, Catalyst claimed to hold certain assets, namely cash, and agreed to provide the cash as investment capital to fund Ramis's expertise in private placements. Catalyst represented it had "sufficient knowledge and experience in financial matters to be able to evaluate the relative risks and merits of this JSA" and that it was an "accredited investor" under the Securities Act of 1933, although Wild testified that was untrue. The agreement contemplated Catalyst transferring between $500,000 and $700,000 to Ramis and receiving access to $50 to $100 million worth of lines of credit to fund Catalyst's unidentified projects.

To fund Catalyst's investment with Ramis, Willey agreed to approach some of his contacts. Willey secured a $500,000 loan from Laurus Technologies, Inc., with whom Willey had no attorney–client relationship.

Willey also arranged a $200,000 loan from Midwest through its owner, Nate Kaeding. Willey served as Midwest's attorney, as well as Kaeding's personal attorney, at the time.

Willey drafted a promissory note and a personal guaranty to be executed by Wild for both the Laurus and the Midwest loans. Wild signed the $200,000 note on behalf of Catalyst, promising to repay Midwest $250,000 within ninety days, and signed the personal guaranty in his individual capacity. Wild was judgment proof at the time he signed the guaranty and had other financial difficulties that Willey knew about, but Willey did not ask him to provide Midwest or Kaeding with a financial statement to support the personal guaranty. The Laurus and Midwest loans were also secured by "so much of member units owned by [Wild] in WL Partners, LLC holder of a 2.62% interest in The IDEA Group, LLC, a bio-fuels company." While Willey testified Wild's 2.62% equity interest in The IDEA Group was worth more than $700,000, he provided no documentary support for that valuation and could not answer basic questions about its assets or income to support his valuation.

The funds from the Laurus and Midwest loans were deposited in Willey's trust account in early May 2008. Willey wired $500,000 to Ramis; Willey and Wild split $100,000; and $100,000 went into Catalyst's checking account. Although Willey denied any memory of doing so, records reveal that on May 22, Willey borrowed $67,552.47 from the Catalyst checking account and two days later a $65,000 judgment by confession in favor of American Express against Willey was paid and released as fully satisfied. Willey never informed Midwest that he would personally benefit from the funds loaned to Catalyst.

Under the terms of the JSA, Ramis offered no security for return of the $500,000 investment, and Catalyst never saw another penny despite Willey's minimal collection efforts. In turn, Catalyst never repaid the Laurus or Midwest loans used to fund the Ramis deal. Over the next three-and-a-half years, Willey provided numerous excuses to Kaeding about why the promised ninety-day repayment of the Midwest loan was delayed and identified varying sources to fund purportedly imminent, yet always elusive, repayment of the Midwest loan. Willey alleges he personally paid Midwest $15,000 after Kaeding threatened litigation. Despite involving counsel, Midwest has not filed actions against Catalyst, Wild, or Willey or brought any ethics complaints against Willey.

Wild and Willey's relationship soured after Wild was sued on the Laurus note. Avnet Technologies, as successor to Laurus's interest in the note, received a judgment against Wild on the personal guaranty used to secure Laurus's $500,000 loan to Catalyst. Prior to filing this ethics complaint, Wild brought a civil action against Willey for malpractice, breach of fiduciary duty, fraudulent misrepresentation, and equitable indemnity premised on the events that led to the Avnet judgment against him. The claims were dismissed for failure to timely designate an expert and statute of limitations problems. Wild appealed the dismissals, and the Iowa Court of Appeals affirmed. Wild v. Willey , No. 18-0172, 928 N.W.2d 159, 2019 WL 2314579, at *8 (Iowa Ct. App. Mar. 6, 2019).

After his unsuccessful civil action against Willey, Wild filed an ethics complaint with the Board in November 2018, and the Board filed the complaint at issue here on March 28, 2019. On February 16, 2021, the commission issued its report and recommendation finding the Board failed to establish Willey violated the Iowa Rules of Professional Conduct in his representation of Wild, concluding Wild was a sophisticated businessman and Willey adequately disclosed information required to make his consent informed as revealed in the consent Wild signed. It did find, however, Willey violated rules 32:1.7, 32:1.8(a), and 32:8.4(c) in his representation of Midwest and recommends a thirty-day suspension. The commission reasoned that we would have suspended Willey's license for a longer period in 2017 had we known about these prior events. Willey argues there is insufficient evidence to support a finding he violated any of the Iowa Rules of Professional Conduct in his...