Iowa Supreme Court Attorney Disciplinary Board v. Robert Allan Wright Jr.
840 N.W.2d 295, 2013 WL 6385773, 2013 Iowa Sup. LEXIS 123 (2013)
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Rule of Law:
An attorney violates rules of professional conduct by failing to competently investigate a dubious client scheme, by entering into business transactions with current clients where the attorney has an adverse pecuniary interest (a contingent fee) without proper disclosure and advice for independent counsel, and by engaging in deceit by failing to disclose substantial risks and conflicting interests to clients in such transactions.
Facts:
- In 2011, attorney Robert Wright Jr. represented client Floyd Lee Madison, who claimed he was the beneficiary of an $18,800,000 Nigerian inheritance, conditional upon paying $177,660 in Nigerian taxes.
- Wright agreed to represent Madison in securing these funds in consideration for a 10% contingent fee upon receipt of the inheritance.
- Wright approached Danny Wayne Rynearson, a current client, about loaning money to Madison for the Nigerian transaction, leading the Rynearsons to make two loans totaling $24,500 payable to Wright.
- Wright approached Linda Putz, another current client awaiting a workers’ compensation settlement, about loaning money to Madison, resulting in Putz loaning $25,000 (her entire settlement proceeds) payable to Wright.
- The Rynearsons and Putz were promised substantial returns ($50,000 and $100,000 respectively) from Madison upon his receipt of the inheritance.
- Wright also solicited loans for Madison from three former clients—Toryan White ($7,000), Vern Stodden ($160,000), and Bob Nunneman ($20,000)—without advising them to seek independent counsel.
- All loan proceeds were deposited into Wright's trust account and subsequently transferred to persons believed to be involved in the Nigerian transaction.
- Madison never recovered any funds from the supposed Nigerian inheritance, and all loans made by Wright's clients remained unpaid.
Procedural Posture:
- The Iowa Supreme Court Attorney Disciplinary Board (Board) filed a complaint against Robert Wright Jr. alleging violations of several rules of professional conduct.
- A division of the Grievance Commission of the Supreme Court of Iowa held a hearing on the complaint.
- The Grievance Commission found that Wright’s actions violated several ethical rules and recommended a suspension of his license to practice law.
- Wright appealed the commission’s recommendation to the Iowa Supreme Court.
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Issue:
Does an attorney violate the Iowa Rules of Professional Conduct by promoting and soliciting loans for a 'Nigerian inheritance' scheme from current clients without conducting a competent investigation, fully disclosing the risks, advising independent counsel, or disclosing the attorney's own adverse contingent fee interest?
Opinions:
Majority - Hecht, Justice
Yes, an attorney violates the Iowa Rules of Professional Conduct when they fail to competently investigate a dubious client scheme, enter into business transactions with current clients where the attorney has an adverse pecuniary interest without proper disclosure and advice for independent counsel, and engage in deceit by failing to disclose substantial risks and conflicting interests to clients in such transactions. The Court found Wright violated Rule 32:1.1 (Competence) because he failed to make a competent analysis of Madison’s Nigerian legal matter; a cursory internet search for an “anti-terrorism certificate” would have revealed the scheme was likely a scam, and he disbursed over $200,000 without verifying the authenticity of documents or the authority of the persons involved. Wright also violated Rule 32:1.8(a) (Business Transactions with Clients) in his dealings with Rynearson and Putz, his current clients. His undisclosed 10% contingent fee in Madison’s inheritance created a pecuniary interest adverse to their interests. He failed to advise them in writing to seek independent legal counsel and did not obtain their written informed consent to the transaction's essential terms, including his role and conflict of interest, as required by the rule. The Court emphasized that lawyers have a duty to explain "carefully, clearly and cogently why independent legal advice is required" in such situations. However, the Court found no violation of Rule 32:1.8(a) for transactions with White, Stodden, and Nunneman, as they were not "current clients" when solicited. Finally, Wright violated Rule 32:8.4(c) (Dishonesty, Fraud, Deceit, Misrepresentation) by failing to disclose to Rynearson and Putz the substantial risks inherent in the loans, that he did not intend to protect their interests in these transactions, and his own contingent fee interest in Madison’s inheritance claim, which constituted deceit. The Court affirmed the commission’s findings of these violations and imposed a twelve-month suspension of Wright’s license, commencing after his existing temporary suspension is lifted, citing aggravating factors such as multiple clients harmed, significant financial loss, Wright's experience, and prior disciplinary record, while also noting his pro bono service as a mitigating factor.
Analysis:
This case serves as a crucial reminder for attorneys regarding the high standards of competence, transparency, and ethical conduct required in client dealings, especially when financial transactions or potentially fraudulent schemes are involved. It reinforces that lawyers must independently verify questionable client claims and cannot blindly facilitate client ventures, particularly those bearing common scam characteristics. The ruling strictly interprets Rule 32:1.8(a), emphasizing that any business transaction with a current client where the attorney has an adverse interest requires meticulous disclosure, written advice for independent counsel, and explicit written client consent, lest the attorney be found to have engaged in deceit. This decision signals severe disciplinary consequences for attorneys who prioritize personal gain or a client's risky endeavor over their duty to protect the financial interests and provide competent advice to other clients.
