State v. O'Hagan

• Decision Date: 27 August 1991
• Docket Number: No. C5-90-2246,C5-90-2246
• Citation: 474 N.W.2d 613
• Parties: STATE of Minnesota, Respondent, v. James Herman O'HAGAN, Appellant.
• Court: Minnesota Court of Appeals

Page 613

474 N.W.2d 613

STATE of Minnesota, Respondent, v. James Herman O'HAGAN, Appellant.

No. C5-90-2246.

Court of Appeals of Minnesota.

Aug. 27, 1991.

Review Denied Sept. 25, 1991.

Syllabus by the Court

1. The evidence, viewed in the light most favorable to the state, is sufficient to sustain appellant's convictions.

2. The trial court did not abuse its discretion by allowing one of the state's witnesses to testify, on redirect, about his feelings toward appellant, because appellant's defense was based in part on his close personal relationship with the witness. The trial court did not err by allowing into evidence a draft financial statement of appellant's net worth.

3. The trial court did not abuse its discretion by refusing to include an element of "willful, reckless, or malicious disregard" of the property owner's rights when it instructed the jury as to the definition of the phrase "manifests an indifference" as contained in Minn.Stat. § 609.52, subd. 2(5)(a) (1986).

4. Concealing and retaining possession of another's property without the owner's consent in violation of Minn.Stat. § 609.52, subds. 2(1), 2(5)(a), is a continuous offense for the purpose of the statute of limitations.

5. For purposes of sentencing, appellant's conduct constitutes two separate offenses involving Northrup funds and six separate offenses involving Mayo funds.

6. The trial court did not abuse its discretion by departing upward durationally on all eight of the sentences imposed and departing upward dispositionally on four of the sentences imposed.

Hubert H. Humphrey, III, Atty. Gen., St. Paul, Michael O. Freeman, Hennepin County Atty., Lisa A. Berg, Asst. County Atty., Minneapolis, for respondent.

William J. Mauzy, Mauzy & Short, Minneapolis, for appellant.

Considered and decided by PARKER, P.J., and FOLEY and THOREEN ^*, JJ.

OPINION

PARKER, Judge.

On January 5, 1990, appellant James H. O'Hagan was charged by complaint filed in Hennepin County District Court with eight counts of theft in violation of Minn.Stat. § 609.52, subds. 2(1), 2(5)(a) (1986) (by temporary control), and nine counts of theft in violation of Minn.Stat. § 609.52, subd. 2(4) (1986) (by swindle). The charges arose out of allegations that O'Hagan, an attorney, illegally handled monies in client settlement funds. At trial O'Hagan admitted to his personal use of the monies, but claimed he had permission to do so.

After a lengthy jury trial, O'Hagan was convicted of the eight counts of theft by temporary control and found not guilty on the six theft by swindle charges. The trial court sentenced him to eight concurrent, executed prison terms and imposed the maximum fine of $20,000 on each conviction, for a total fine of $160,000. Four of the sentences represent upward durational departures and the other four sentences represent both dispositional and durational upward departures.

This appeal is taken from the judgment of conviction. O'Hagan challenges the sufficiency of the evidence, the evidentiary rulings, the jury instructions, and the sentences imposed. He also argues that two of the theft counts were barred by the statute of limitations. We affirm.

FACTS

Between 1963 and 1989, O'Hagan practiced law with the firm of Dorsey & Whitney in Minneapolis, Minnesota. O'Hagan was a successful attorney, highly respected by clients and fellow attorneys. He became a senior partner in the firm and handled many major litigation matters, specializing in medical malpractice and securities cases. Although a partner, he enjoyed much independence and, to some extent, could be viewed as operating his own practice within the firm. During the period of 1986 to 1988, he was the number one or number two producer for the Dorsey firm, with annual billings in excess of $2 million.

Northrup King Settlement Funds

From the late 1970's until November 1989, O'Hagan defended Northrup King & Co. and its parent Swiss corporation, Sandoz, Inc., against a class action suit known as the Boose litigation. Northrup shareholders brought suit against Northrup, claiming they had been misled by a 1975 press release. The shareholders alleged the release, which had been issued shortly before Sandoz acquired Northrup, improperly misled them as to the likelihood of a takeover by Sandoz and that they sold their shares, to their detriment, in reliance on the press release.

Richard Burt was the general counsel for Sandoz. Burt had settlement authority and was responsible for the Boose litigation on behalf of Northrup and Sandoz. The shareholders were represented by the law firm of Popham, Haik, Schnobrich & Kaufman.

On October 17, 1986, shortly before trial was to commence, the parties reached an oral agreement to settle for two dollars per share, up to a maximum of $1 million. Accounting for the interest on the $1 million had not yet been discussed. On October 29, 1986, Northrup wired $1 million to the Dorsey general trust account. On the same day, at O'Hagan's direction, $500,000 of the $1 million was transferred out of the Dorsey general trust fund into a separate, interest-bearing account. The interest-bearing account was entitled "Dorsey & Whitney as trustee for Northrup King" (Northrup account). O'Hagan was the sole authorized signer on the account. Also at O'Hagan's direction, two checks dated October 30, 1986, were drawn on the remaining $500,000 in the Dorsey general trust account. One was in the amount of $350,000 payable to First Bank Minneapolis and the other was in the amount of $150,000 payable to the Dakota State Bank. It was later discovered that these two checks went toward paying off loans O'Hagan had at the above-named banks. O'Hagan was not charged with diversion of these funds ($350,000 and $150,000), because any charges were barred by the three-year statute of limitations.

However, on January 7, 1987, three checks were drawn, at O'Hagan's direction, on the other $500,000 which had been previously transferred to the interest-bearing Northrup account: (1) $135,000 payable to Investor's Savings Bank; (2) $30,000 payable to National City Bank; and (3) $85,000 payable to National City Bank. Similarly, on February 27, 1987, at O'Hagan's direction, a check was drawn on the Northrup account for $250,000 payable to Dakota County State Bank. These withdrawals form the basis of counts I and II of the complaint.

Richard Burt testified that although he had overall responsibility for the Boose litigation on behalf of Sandoz and Northrup, he had little or no recollection of the settlement. Burt testified that he did not remember, but he assumed that the settlement funds were handled according to "standard practice," meaning that "funds left with an attorney for any purpose of the client are not [to be] used by the attorney." He did not recall giving O'Hagan any authority to transfer money from the settlement fund to his own loan accounts. Burt also had no recollection of discussing or giving O'Hagan authority to use or retain the interest on the money placed in the settlement fund.

O'Hagan admits he applied the money to his own personal use. He testified he did not ask Burt if he could borrow the money and that Burt never gave him express permission to use the money. However, O'Hagan believed he had "discretion" to use the money, so long as it was repaid with full interest when it was due.

It took until July 1988 for plaintiffs' counsel to locate all of the class members and process the claims. The court approved payments to the class and plaintiffs' counsel in August 1988, and thereafter substantially all of the $1 million was paid out to the class and plaintiffs' counsel. O'Hagan had transferred nearly all of the $1 million back into the Dorsey general trust account prior to the time it was to be paid to the class and plaintiffs' counsel.

The final Northrup settlement document was silent on the question of who would receive the interest on the escrow funds. In the fall of 1989, however, the IRS conducted an audit of Northrup and made inquiries about the interest on the $1 million. Edward Resler, Northrup's then-assistant general counsel, contacted Dorsey. In November 1989 Dorsey advised O'Hagan that it had audited the Boose litigation account and that it intended to pay the interest to Northrup. O'Hagan then paid Dorsey, which thereafter returned the interest money to Northrup. Because of the inquiry by Resler into the Northrup litigation, Dorsey conducted an audit of all of O'Hagan's trust accounts in November 1989.

Regarding the Northrup funds, O'Hagan was charged with two counts of theft for the withdrawals occurring on January 7, 1987, and February 27, 1987. These are counts I and II of the complaint. The jury found O'Hagan guilty of these charges.

Mayo Clinic Settlement Funds

Since 1970, O'Hagan had been the lead lawyer for the Mayo Clinic in medical malpractice litigation. Benjamin Hippe has been in the office of the general counsel for Mayo since 1962. O'Hagan and Hippe had worked closely together since 1970 and had developed a close professional relationship. O'Hagan represented Mayo in three lawsuits which are here relevant.

In January 1987 a lawsuit was brought against Mayo on behalf of a child, represented by attorney John Carey. Carey testified that the parties settled for $270,000. According to Ben Hippe, however, O'Hagan told Hippe the case settled for $595,000. A check for the latter sum from Mayo, dated January 16, 1987, was deposited into an interest-bearing account, with O'Hagan as the sole signer on the account. Subsequently, a check was drawn for $270,000 for John Carey and his client. At O'Hagan's direction, the remaining $325,000 was distributed from the account on January 22, 1987, by three cashier's checks: $100,000 payable to Wayzata Bank and Trust Company; $100,000 payable to Investor's Savings Bank of Minneapolis; and $125,000 payable to Dakota County State Bank. It was later discovered these checks went to pay off loans on accounts...