Iowa Supreme Court Attorney Disciplinary Board v. Marc R. Engelmann
2013 Iowa Sup. LEXIS 122, 840 N.W.2d 156, 2013 WL 6145298 (2013)
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Rule of Law:
An attorney's license to practice law will be revoked when they are convicted of multiple felonies involving dishonesty and fraud, such as bank and wire fraud, which were committed in the course of client representation and demonstrated an intent to cause financial harm to third parties.
Facts:
- Marc R. Engelmann, an experienced real estate attorney, represented seller James Laures in nine residential property sales to buyers Robert Herdrich and Darryl Hanneken.
- For each transaction, the parties agreed on an actual purchase price but created documents for lenders showing an inflated price, typically $30,000-$35,000 higher than the actual price.
- Engelmann knew about the two different prices and that the seller would give the buyers a cash "kickback" of approximately $30,000 after each closing.
- Engelmann prepared and submitted HUD-1 settlement statements and other closing documents to the lenders that falsely reflected the inflated sales prices.
- Based on these fraudulent documents, lenders issued mortgage loans for the inflated amounts.
- The buyers eventually defaulted on the loans, causing the lenders to suffer financial losses totaling $392,937.78.
Procedural Posture:
- Marc Engelmann was indicted in the U.S. District Court for the Southern District of Iowa on nine felony counts, including conspiracy, bank fraud, and wire fraud.
- He pled not guilty, and a jury convicted him on all nine counts.
- The federal district court sentenced Engelmann to 36 months in prison and ordered him to pay $392,937.73 in restitution.
- Engelmann appealed his criminal conviction to the U.S. Court of Appeals for the Eighth Circuit.
- While the criminal appeal was pending, the Iowa Supreme Court Attorney Disciplinary Board filed a complaint against Engelmann with the Grievance Commission of the Supreme Court of Iowa.
- Engelmann consented to a temporary suspension of his law license.
- The Eighth Circuit affirmed Engelmann's criminal convictions.
- The Grievance Commission found Engelmann violated professional conduct rules and recommended a six-month disciplinary suspension.
- The matter came before the Iowa Supreme Court for a final decision on the appropriate sanction.
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Issue:
Is revocation of a law license the appropriate sanction for an attorney convicted of nine felony counts of bank fraud, wire fraud, and conspiracy for conduct undertaken while representing a client?
Opinions:
Majority - Waterman, J.
Yes. Revocation is the appropriate sanction for an attorney who commits multiple felonies involving fraud with the intent to cause financial loss. The court found that Engelmann violated multiple Iowa Rules of Professional Conduct, including those prohibiting making false statements, assisting a client in criminal or fraudulent conduct, failing to withdraw from representation that would result in a violation of the law, and committing a criminal act that reflects adversely on a lawyer’s honesty. The court applied issue preclusion based on Engelmann's federal criminal convictions, accepting the jury's finding that he acted with an "intent to defraud," which was defined as acting with the intent to cause financial loss. The court distinguished this case from prior cases like Bieber and Wheeler, where six-month suspensions were imposed, by highlighting that Engelmann's misconduct involved nine serious felonies (not just one), caused substantially greater financial harm, and most importantly, was done with the specific intent to cause financial loss to the lenders, a mental state not present in the other cases. The court concluded that Engelmann's conduct, aggravated by his expertise in real estate law and the repetitive nature of the fraud, warranted the most severe sanction of revocation.
Analysis:
This decision clarifies the line between suspension and revocation in attorney disciplinary cases involving fraud by emphasizing the attorney's mental state as the determinative factor. The court establishes that a finding of specific intent to cause financial harm, rather than merely intending to obtain a loan through misrepresentation, will lead to the profession's ultimate sanction. This holding serves as a stark warning to transactional attorneys, particularly specialists, that facilitating client fraud, regardless of personal profit beyond standard fees, constitutes a fundamental breach of professional duty that warrants revocation of their license. The case solidifies the principle that an attorney's specialized experience can serve as an aggravating factor, as they are held to a higher standard of diligence and ethical awareness.
