The Minnesota Supreme Court has indefinitely suspended an attorney, giving him the right to petition for reinstatement after nine months has passed, where the attorney admitting to various misconduct, including "assisting his client in the fraudulent transfer of assets during a lawsuit".
The Court's Order does not go into the attorney's misconduct in much detail, but apparently what happened is that the attorney assisted his client with an asset purchase agreement which left his client unable to pay a settlement with a creditor that the client entered into shortly thereafter.
Nevertheless, this Order once again demonstrates the peril to attorneys who feel compelled, for whatever reason, to assist their clients with fraudulent transfers. Cheating creditors is not a game, and not the proper office of any attorney. The state bar disciplinary authorities are quick to punch the ticket, at least temporarily, of any attorney who is caught doing such a thing.
Model Rule of Professional Conduct 1.2(d), and similar rules in states that have not adopted the MPRC, provides:
(d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.
The "fraudulent" conduct of Rule 1.2(d) has routinely been found to apply to fraudulent transfers, and additionally a fraudulent transfer is a felony in a surprising number of states.
MPRC Rule 8.4 can catch an attorney who assists with fraudulent transfers another way:
It is professional misconduct for a lawyer to: * * *
(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;
(d) engage in conduct that is prejudicial to the administration of justice; * * *
Thus, assist a client with a fraudulent transfer can be an "act of dishonesty" or "prejudicial to the administration of justice" that can lead to professional discipline.
A similar case occurred a few years ago in California, with the attorney there receiving a two year suspension in Matter of Morris, and the opinion in that case is well worth reading.
Note that an attorney has to be culpable in assisting with a fraudulent transfer; attorneys who are unwittingly asked to document transactions that they do not reasonably suspect is a fraudulent transfer will typically not lead to discipline; is known as the mere scrivner defense.
My advice is to avoid these situations is simple: Do the right thing. Assisting clients in cheating their creditors is not the right thing, even if the client is a long time client and friend who is desperate to salvage assets so as to avoid financial ruin. Don't make their problem you problem. Nobody but you and your client will have sympathy for your plight, and especially not bar counsel, bar courts, or your fellow attorneys.
CITE AS
Disciplinary Action Against Sheehan, 2015 WL 4599270 (Minn., July 23, 2015). Full Opinion at http://goo.gl/zjqXzO
This article at http://onforb.es/1RgaFQx and http://goo.gl/AI1J4W
