Iowa Supreme Court Bd. of Professional Ethics and Conduct v. Sikma

• Decision Date: 21 June 1995
• Docket Number: No. 95-339,95-339
• Citation: 533 N.W.2d 532
• Parties: . Robert L. SIKMA, Respondent. Supreme Court of Iowa
• Court: Iowa Supreme Court

Page 532

533 N.W.2d 532

IOWA SUPREME COURT BOARD OF PROFESSIONAL ETHICS AND CONDUCT, Complainant, v. Robert L. SIKMA, Respondent.

No. 95-339.

Supreme Court of Iowa.

June 21, 1995.

Norman G. Bastemeyer and Charles L. Harrington, Des Moines, for complainant.

N. Richard Willia, Gildemeister, Willia & Keane, Sioux City, for respondent.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, LAVORATO, and NEUMAN, JJ.

McGIVERIN, Chief Justice.

This attorney disciplinary proceeding involves the conduct of attorney Robert L. Sikma in his handling of his business relationship with a client, Rashelle Katseres. The Grievance Commission found Sikma violated two disciplinary rules and recommended a three month suspension of his license to practice law. Based upon our de novo review of the record, we agree with the Commission's conclusions and substantially adopt its recommended discipline.

I. Background facts and proceedings. Respondent Robert L. Sikma is an attorney licensed to practice law in the state of Iowa and has been engaged in a private general practice in Sioux City since 1978. Sometime around 1987, Sikma became acquainted with Rashelle Katseres. This disciplinary proceeding arises from Sikma's ensuing professional and business relationships with Katseres.

A. Factual summary. A few years after their acquaintance, Katseres retained Sikma to draft a will for her and to evaluate a possible workers' compensation claim regarding the death of her husband in 1988. In February 1990, Sikma prepared the will which Katseres had requested and which specifically mentioned disposition of $120,000 in treasury bonds. Also, in the spring of 1991, Sikma filed a federal workers' compensation claim for Katseres. As of October 1991, the workers' compensation matter had not yet been resolved.

In June 1991, an alleged entrepreneur in the telemarketing industry, Andrew Armstrong, sought out Sikma regarding Armstrong's efforts to establish Morningstar Communications (Morningstar) as a going business concern in the Sioux City area. Armstrong was the president, secretary, and treasurer of Morningstar and offered to make Sikma chairman and chief executive officer (CEO) of the organization. Sikma had some previous experience in this type of business from his own prior investments and was quite interested in Armstrong's proposal. After contacting the three references Armstrong had provided, Sikma accepted Armstrong's offer and received a signing bonus of $2,000. Sikma was also paid a salary of $1,000 every two weeks for about two hours of work each day. Sikma hoped to increasingly devote more time to Morningstar and to receive a better salary and stock in the company as it became more financially sound. Eventually, he hoped the success of the company would enable him to retire from the practice of law.

As chairman and CEO, Sikma's duties included drafting, reviewing, and negotiating contracts with companies hiring Morningstar. Once Morningstar began negotiating with companies already familiar with its telemarketing services, Sikma did less of the company's contract work and began seeking prospective customers and investors.

In addition to his work at Morningstar, Sikma maintained his legal practice. His legal work in the summer of 1991 included continued representation of Katseres in her workers' compensation case, although Katseres had also hired another attorney, Andrew Orr, to prepare a new will and to represent her in an unrelated contract dispute.

Sikma's legal work also included representation of Michael Hanna, a friend and frequent house guest of Katseres. Hanna had at least two traffic charges pending in the summer of 1991, and Sikma was handling them for him. On July 24, 1991, Sikma appeared in court on behalf of Hanna and disposed of Hanna's charges pursuant to a plea bargain. Later that day, he telephoned Hanna at Katseres' residence to tell him the results of the court proceeding. After notifying Hanna of the disposition of his charges, Sikma proceeded to discuss with Hanna and then with Katseres his recent involvement with Morningstar and the investment opportunities with the company. These telephone conversations are at the core of this disciplinary proceeding. Although their context and content are disputed by the parties, we find the following version of the conversations most supported by the record.

As mentioned, Sikma telephoned Hanna to inform Hanna of the resolution of his case. When Sikma called, Hanna commented to Sikma that he had been trying unsuccessfully to contact him and inquired as to why Sikma had not returned his calls. Sikma advised Hanna that he was working as the CEO at Morningstar and related that this work took more of his time than he had expected, making him hard to reach at his law office. Hanna then asked what Morningstar was, and Sikma explained to him that it was a telemarketing company that was just getting off the ground.

During this telephone conversation between Sikma and Hanna, Katseres was in the background and interrupted to find out with whom Hanna was talking. After learning the person was Sikma, Katseres took the telephone receiver from Hanna and spoke briefly with Sikma about Katseres' workers' compensation case. Sikma advised her that he had no further news regarding her case.

Katseres then inquired about the new company Sikma had been discussing with Hanna, as she had overheard part of their telephone conversation. Sikma told Katseres that Morningstar was a new telemarketing company or something to that nature. Katseres asked why Sikma had not told her about this "good deal." Sikma responded that he had just recently been hired as CEO and was working for the company a few hours a day. Sikma commented that he liked dividing his time between the company and his law practice because the work was less stressful. Katseres then asked why Sikma had not brought this information to her attention earlier. Sikma explained that he did not feel it was appropriate for him to tell her about Morningstar because he is not supposed to approach clients with business proposals, but he left the impression that he had invested his own money in the company and that it was a good investment. On further inquiry, Sikma referred Katseres to Armstrong, the president and owner of Morningstar. Sikma provided Katseres with Armstrong's telephone number and again told her that he could not counsel her with regard to this matter and that she should consult with another adviser, broker, or lawyer.

As a result of her telephone conversation with Sikma, Katseres talked with Hanna about the possibility of investing some money from one of her soon-to-mature treasury bills. Hanna suggested to her that she limit her investment to no more than $5,000, and Katseres disagreed. The disagreement led to a major argument about what Katseres was going to do with her money and Hanna, who had been staying in Katseres' home, left for several days. Besides this conversation with Hanna, there is no evidence in the record that Katseres consulted with any other person or a professional advisor, except Sikma himself, concerning an investment in Morningstar.

Subsequently, Katseres telephoned Sikma and told him that she had left a message for Armstrong, but that he had never returned her telephone call. Sikma told Katseres that he had not talked with him and that all Sikma could tell her was that she had to talk with Armstrong.

Thereafter, Katseres did meet with Armstrong, and, on or about August 3, 1991, she invested $20,000 in Morningstar stock by cashing in a treasury bond she owned. Katseres also became employed by the company in the third week of September but was fired shortly thereafter.

A month later, when the company began experiencing financial problems, Armstrong asked Katseres to invest more money into the company. Complying with his request, Katseres, in the presence of Sikma and with his knowledge, gave Armstrong a check in the sum of $2,000 as a loan to Morningstar. This loan was evidenced by a promissory note signed by Armstrong on behalf of the company.

A few days later, Armstrong requested additional financing by Katseres. Katseres agreed to co-sign a line of credit for the company in the amount of $40,000, if her demands were met in return. In general, Katseres wanted Sikma more involved in the operations and financial matters of the company. In particular, Katseres demanded: (1) that Sikma individually invest "an additional $10,000" in the company, and (2) that Sikma personally guarantee the $40,000 line of credit. Responding to her demands and to Armstrong's commitment to Katseres, Sikma personally initialled and signed Katseres' written list of demands. Sikma also personally and as CEO of the company signed a guarantee for the $40,000 line of credit. Besides his written guarantee, Katseres contends Sikma also orally assured her of the financial soundness of the company. Sikma's guarantee never took effect, however, because Katseres never did co-sign for a line of credit for Morningstar.

On October 1, 1991, Sikma made his first "investment" in Morningstar. On that date, he made a personal loan to Morningstar in the sum of $25,000. Thereafter, he made an additional loan in the sum of $15,000, plus he paid $10,000 worth of a credit card debt incurred by Morningstar. Not until Sikma made these loans did Katseres learn that Sikma had not previously made a direct financial contribution to Morningstar.

Ultimately, Morningstar filed for bankruptcy. At this time, Sikma found out that Armstrong had prior felony convictions in Texas based on his operation of a similar telemarketing business in that state. Katseres lost her $22,000 investment. Sikma also lost his $50,000 financial contribution.

B. Grievance Commission proceedings. Upon notice from Katseres of Sikma's handling of his professional and business relationships with her, the Iowa Supreme Court Board of Professional Ethics and Conduct (Board) filed a...