Veith, Matter of

• Decision Date: 14 December 1992
• Docket Number: No. 68154,68154
• Citation: 252 Kan. 266,843 P.2d 729
• Parties: In the Matter of Douglas VEITH, Respondent.
• Court: Kansas Supreme Court

Page 729

843 P.2d 729

252 Kan. 266

In the Matter of Douglas VEITH, Respondent.

No. 68154.

Supreme Court of Kansas.

Dec. 14, 1992.

Curtis E. Watkins, of Geisert & Watkins, P.A., Kingman, argued the cause and was on the brief, for respondent.

Bruce E. Miller, Disciplinary Adm'r, argued the cause and was on the brief, for petitioner.

PER CURIAM:

This is an original action in discipline filed by the Disciplinary Administrator against Douglas Veith, presently residing in the Kansas City area, an attorney admitted to the practice of law in Kansas and formerly a member of the bar of the State of Nebraska.

The formal complaint filed by the Disciplinary Administrator is based upon disciplinary proceedings before the Supreme Court of Nebraska, which resulted in the disbarment of Mr. Veith in that state. State ex rel. NSBA v. Veith, 238 Neb. 239, 470 N.W.2d 549 (1991). A panel of the Kansas Board for Discipline of Attorneys (Board), which heard this matter, received voluminous evidence, including a complete transcript of the Nebraska proceedings, numerous exhibits from those proceedings, and the testimony of Mr. Veith and a supporting witness. In addition, the Board received numerous letters attesting to Mr. Veith's good character.

The proceedings before the Board were presented by the Disciplinary Administrator pursuant to Supreme Court Rule 202 (1992 Kan.Ct.R.Annot. 152), which provides in part:

"A final adjudication in another jurisdiction that a lawyer has been guilty of misconduct shall establish conclusively the misconduct for purposes of a disciplinary proceeding in this state."

Following the hearing, the Board filed its report in which it recommended that Mr. Veith be indefinitely suspended from the practice of law in Kansas. Respondent's presentation and evidence before the Board and his exceptions filed to its report do not controvert or question the factual findings of the Nebraska court but are directed solely to issues asserted in mitigation of the discipline to be imposed here. In essence, respondent admits the facts found by the Nebraska court are correct and that he has violated the disciplinary rules as determined by the Nebraska court. In the proceedings before the Board and this court he seeks leniency in the imposition of discipline.

The Nebraska Supreme Court, in a comprehensive opinion, set forth the factual background as follows:

"The undisputed facts in the record here reveal that Veith was admitted to the practice of law in the State of Nebraska in June 1982. At all times relevant, Veith was the managing attorney in a five-attorney office-sharing arrangement in Bellevue, Nebraska. As managing attorney, Veith received the monthly bank statements regarding the general law business and client trust accounts. Each of the attorneys used the trust account for his respective clients' trust funds.

"In July 1988, Veith was informed by the bank that it had transferred funds from the trust account to the general law business account to cover a shortage of funds. At various other times Veith transferred or authorized the transfer of funds to the business account from the client trust account.

"During the period of August 1988 through February 1989, Veith, although he was generally aware of periodic deficits in both the trust and business accounts, failed to reconcile the accounts or take other action to avoid the deficit problem. Between September 1988 and March 1989, the trust account had negative balances. At a minimum, throughout this period, it should have contained $16,900 in client trust funds. Between July 1988 and March 1989, Veith withdrew as income $70,000 from the business account. On March 3, 1989, one of the associated attorneys questioned Veith about the trust account balance. Veith acknowledged that the trust account had over a $3,000 negative balance. He secured a $10,000 personal loan from a bank and deposited that money into the trust fund that same day to cover the deficiency in the client trust fund account of the complaining associated lawyer. Subsequently, Veith borrowed $25,000 from a friend to cover deficiencies in the other associated attorneys' trust funds. On March 27, 1989, Veith secured a loan from a relative in the amount of $10,600, which he deposited in the trust account to cover trust funds for which Veith was accountable to his own clients.

"Meanwhile, on March 9, 1989, all the attorneys in the office-sharing arrangement, including Veith, made a conference call to the NSBA Counsel for Discipline, explaining the matter and setting in motion an investigation.

"The Committee on Inquiry of the Fourth Disciplinary District, after an October 16, 1989, hearing, recommended that formal charges be filed against Veith. These charges were reviewed by the Disciplinary Review Board and were filed as an original action in this court on May 29, 1990. The formal charges allege that the actions of Veith, as set forth above, constitute a violation of his oath of office, as provided by Neb.Rev.Stat. § 7-104 (Reissue 1987), and of DR 1-102 and DR 9-102.

"Section 7-104 provides that every attorney admitted to practice law in Nebraska shall take and subscribe an oath swearing to support the Nebraska and U.S. Constitutions and to faithfully discharge the duties of an attorney and counselor to the best of his or her abilities. An attorney's violation of a disciplinary rule and failure to act competently by neglecting a matter entrusted to him or her is conduct violative of an attorney's oath as a member of the bar. State ex rel. Nebraska State Bar Assn. v. Divis, 212 Neb. 699, 325 N.W.2d 652 (1982). See State ex rel. NSBA v. Hahn, 218 Neb. 508, 356 N.W.2d 885 (1984) (the oath requires lawyers to observe the established codes of professional ethics). DR 1-102 and DR 9-102 provide as follows:

DR 1-102 Misconduct.

(A) A lawyer shall not:

(1) Violate a Disciplinary Rule.

....

(3) Engage in illegal conduct involving moral turpitude.

(4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.

(5) Engage in conduct that is prejudicial to the administration of justice.

(6) Engage in any other conduct that adversely reflects on his fitness to practice law.

DR 9-102 Preserving Identity of Funds and Property of a Client.

(A) All funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, shall be

deposited in one or more identifiable bank or savings and loan association accounts maintained in the state in which the law office is situated and no funds belonging to the lawyer or law firm shall be deposited therein [with exceptions not applicable here].

(B) A lawyer shall:

....

(3) Maintain complete records of all funds, securities, and other properties of a client coming into the possession of the lawyer and render appropriate accounts to his client regarding time (sic).

"Following a formal hearing on November 16, 1990, a referee, on December 7, 1990, filed her report with this court. The referee found that Veith had violated the disciplinary rules under which he was charged. The referee recommended, among five components, that Veith be suspended from the practice of law for a period of 8 months. The NSBA filed an exception to the report, arguing that the referee's recommendation of suspension for a period of 8 months was too lenient under the facts and circumstances as established by the record of this case.

"In his answer to the formal charges, Veith admits violating DR 1-102(A)(1) and DR 9-102(B)(3) but none of the other enumerated provisions of DR 1-102 or DR 9-102. In essence, Veith admits to commingling the business and client trust fund accounts but attributes it to negligence. He denies attempting to intentionally or dishonestly convert the funds, perpetrate a fraud, or deceive or misrepresent matters to his associated counsel or clients. In contrast, the NSBA argues that Veith has gone beyond commingling and has converted or wilfully misappropriated the client trust funds." 238 Neb. at 242-45, 470 N.W.2d 549.

In finding Mr. Veith guilty of the charges against him, the Nebraska court stated:

"In attorney discipline proceedings, conversion refers to an attorney's misappropriation of a client's property to the attorney's own use or some other improper use. See ABA/BNA Lawyers' Manual on Professional Conduct 45:106 (1985). Misappropriation is 'any unauthorized use ... of clients' funds entrusted to [a lawyer], including not only stealing, but also unauthorized temporary use for the lawyer's own purpose, whether or not he derives any personal gain or benefit therefrom.' In re Wilson, 81 N.J. 451, 455 n. 1, 409 A.2d 1153, 1155 n. 1 (1979). See Baca v. State Bar of California, 52 Cal.3d 294, 801 P.2d 412, 276 Cal.Rptr. 169 (1990) (an attorney's failure to use entrusted funds for the purpose for which they were entrusted constitutes misappropriation). Misappropriation caused by serious, inexcusable violation of a duty to oversee entrusted funds is deemed willful, even in the absence of a deliberate wrongdoing. Edwards v. State Bar of California, 52 Cal.3d 28, 801 P.2d 396, 276 Cal.Rptr. 153 (1990). See, Giovanazzi v. State Bar of California, 28 Cal.3d 465, 619 P.2d 1005, 169 Cal.Rptr. 581 (1980) (mere fact that an attorney's trust account balance falls below the amount deposited in and purportedly held in trust supports a finding of misappropriation); Matter of Iverson, 51 A.D.2d 422, 381 N.Y.S.2d 711 (1976) (an act of conversion is complete when the clients' trust account is overdrawn or when, through mismanagement or misconduct on the part of the attorney, the balance of the account is less than the clients' interest in it). Thus, under DR 9-102, wrongful or improper intent is not an element of misappropriation. See, In re Wilson, supra; Archer v. State, 548 S.W.2d 71 (Tex.Civ.App.1977) (DR 9-102 does not require elements of fraud, culpability, or willfulness); State v. Stoveken, 68 Wis.2d 716, 229 N.W.2d 224 (197...