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Iowa Supreme Court dismisses Bar complaint against a lawyer who was unknowingly involved in fraudulent transfers of a client’s assets

Hello and welcome to this Ethics Alert blog which will discuss the recent Iowa Supreme Court opinion dismissing a disciplinary action against a lawyer who “unknowingly” participated in the fraudulent transfers of a client’s assets to the client’s wife and relatives to avoid creditors. The disciplinary opinion is Iowa Supreme Court Attorney Discipline Board v. Mason James Ouderkirk, No. 13–1124 (March 28, 2014) and the disciplinary opinion is here:

According to the opinion, the lawyer represented a wealthy farmer (Rodney Heemstra) who shot and killed his neighbor (Tommy Lyon) and was ultimately convicted of involuntary manslaughter. The lawyer represented the client at the outset of the criminal proceedings and during part of the civil wrongful-death litigation, which later resulted in a multimillion dollar judgment against the client who apparently vowed that the widow “would not get one dime” of his money. The lawyer was involved in the transfers of the client’s assets to revocable trusts, his wife, and relatives.

The deceased neighbor’s widow filed a civil action against the client and several relatives and the court ultimately found that the transactions were fraudulent. Although he was not named as a defendant in the subsequent civil litigation, the lawyer was required to respond to a motion to compel his testimony under the crime-fraud exception of the privilege. The court ruled in that case that “(b)ased on the current state of the record in this case, the court does not find that the Plaintiffs have made a prima facie showing of fraud encouraged or participated in by (the lawyer’s client).”

The deceased neighbor’s widow also filed a Bar complaint against the lawyer and he was charged with violating multiple Bar rules. After a 2 day evidentiary hearing, the Iowa Grievance Commission found that the lawyer had been deceived and was told that there were had valid reasons for transferring the property and that much of the property was being sold to a bona fide purchaser.

The commission also found that, although the lawyer lacked actual knowledge of the fraudulent nature of the transfers, he failed to recognize the “red flags” of one of the fraudulent conveyances and violated several Bar rules, including engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation and conduct prejudicial to the administration for justice. The commission found this conduct to be “an uncharacteristic lapse of his professional judgment” and recommended a public reprimand.

The Supreme Court opinion stated that: “(f)undamentally, it was the (client’s) misrepresentations that triggered the lengthy court proceedings to unwind their fraudulent transactions, not (the lawyer’s) conduct. The opinion concluded that the Board failed to prove “by a convincing preponderance of the evidence” that (the lawyer’s) conduct violated any Bar Rules and dismissed the Bar complaint with prejudice.

Bottom line: This case is unusual since there are very few published Bar discipline opinions which outright dismiss a complaint against a lawyer. This opinion is very lengthy and provides great detail regarding the reasons for the dismissal and citing to numerous cases to support it. Notwithstanding the dismissal of the complaint, the lawyer was required to retain a lawyer and defend himself in the lengthy Bar discipline matter and respond to the motion to compel his testimony in the civil litigation.

Be careful out there!

Disclaimer: this Ethics Alert blog is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
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