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In re Austin

September 2, 2004



Before Schwelb, Ruiz, and Reid, Associate Judges.

The opinion of the court was delivered by: Ruiz, Associate Judge

Argued January 15, 2004

In this disciplinary proceeding, the Board on Professional Responsibility, with one member dissenting, has recommended that Eugene T. Austin be suspended from the practice of law for eighteen months with reinstatement conditioned on proof of fitness and on the payment of full restitution to his client and to the Clients' Security Trust Fund of the District of Columbia Bar. The Board's recommendation is based on findings by a hearing committee that respondent engaged in improper business transactions with a client in violation of Rule 1.8 (a) (prohibiting business transactions with clients that create conflicts of interest) and related acts of dishonesty in violation of Rule 8.4 (c) (defining, inter alia, dishonesty as professional misconduct) of the District of Columbia Rules of Professional Conduct. Although the Board adopted the committee's findings, it disagrees with the committee's conclusion that respondent's acts amounted to theft and fraud, and that his repeated acts of dishonesty call for disbarrment. Bar Counsel, in her submission to the court, supports the hearing committee's recommendation for disbarrment arguing that the Board's recommended sanction fails to apprehend the severity and extent of respondent's misconduct and is inconsistent with the sanctions imposed in other cases involving serious and pervasive dishonesty. The Board responds by asserting that Bar Counsel's allegations of theft and fraud are inconsistent with the specification of charges and that the record does not support a finding by clear and convincing evidence that respondent acted with fraudulent intent.

We agree with the Board that respondent violated Rules 1.8 (a) and 8.4 (c). However, we find that the specification of charges and subsequent filings by Bar Counsel gave respondent sufficient notice of the charges of theft and fraud and that his misconduct is of a magnitude that calls for disbarrment. Accordingly, we order respondent disbarred from the practice of law in the District of Columbia, and condition his future re-admission to practice on full restitution to his client and the Clients' Security Trust Fund.


The hearing committee heard from six witnesses: Lettie Garland Saunders (the complainant), Willie T. Saunders (her nephew), Francis X. Gaegler, Jr., Christina Spears, Karen Palmer, and John Irving Kraemer. Respondent filed an answer to the complaint but did not attend, nor was he represented during, the hearing.

We begin with a recitation of the hearing committee's findings of fact. In late 1994, respondent was introduced to Ms. Lettie Saunders by his neighbors, who were Ms. Saunders's relatives. She was interested in finding a lawyer who could represent her in connection with a probate claim involving her brother's estate. Respondent agreed to represent her in connection with that matter. Ms. Saunders, who was 73 years of age when she retained respondent as her counsel, grew up in Chatham, Virginia, and only completed the fifth grade, leaving school when she was fourteen or fifteen years of age. As a result, she has minimal reading and writing skills. She lives in Washington, D.C., where she previously worked cleaning houses, earning approximately $50 per day, until she retired in 1991. She never married and has no children. In 1962, Ms. Saunders purchased her own home at 3050 Vista Street, N.E. where she lives with one of her sisters, who is disabled. Since her retirement, Ms. Saunders's only income comes from Social Security benefits, which amounted to $5,845.20 annually in 1994.

Around the time respondent agreed orally to represent Ms. Saunders in connection with the probate matter, he advised her to obtain a loan, secured by a mortgage on her home (a "reverse mortgage"), to finance the prosecution of her claim against her brother's estate. Ms. Saunders, however, does not recall asking respondent to assist her in obtaining such a mortgage on her property. On December 14, 1994, respondent sent an agreement to Ms. Saunders providing that she would pay him "an advance legal fee" of $250 for his assistance in applying for the mortgage and an hourly fee of $65. In addition, the agreement stated that respondent had agreed to represent Ms. Saunders in connection with the probate matter, but that the terms of that representation would be covered by a second retainer agreement. Later, respondent gave Ms. Saunders a second retainer agreement which provided that she agreed to retain him "to investigate and prosecute the equitable claim against the estate of my deceased brother, Edward R. Saunders. . . ." This retainer agreement again stated that Ms. Sanders would pay respondent an advance legal fee of $250 and an hourly fee of $65. Ms. Saunders does not dispute signing this agreement, but she asserts that she told respondent that she could not afford the fees described in the letter. As a result, respondent agreed to represent Ms. Saunders on a contingency fee basis.

In February 1995, several months after he had provided Ms. Saunders with the first engagement letter to obtain a reverse mortgage, respondent completed an application on behalf of Ms. Saunders and her sister for a loan from Capital City Mortgage Corporation, to be secured by a first deed of trust on Ms. Saunders's home. The loan application stated that Ms. Saunders sought a loan of $22,500 to pay off the balance of the mortgage on her brother's house, to pay "accrued legal fees in order to ensure continuance of civil litigation, prosecuting [her] creditor's claim ($30,000 -- $100,000) against [her] deceased Brother['s] Estate," and to pay a credit card bill of approximately $1,000. According to Ms. Saunders's testimony before the hearing committee, she never discussed obtaining a loan for these purposes. The application disclosed Ms. Saunders's minimal savings and income. It stated that she had only $1,500 in personal savings and received less than $6,000 a year in Social Security benefits. Respondent stated in the application he prepared, however, that she would be able to make the required loan payments because she planned to sell her home within the next year and expected to receive between $50,000 and $75,000 from her claim against her brother's estate by the end of 1995.

On February 3, 1995, Capital City Mortgage Corporation tentatively approved a $22,500 loan to Ms. Saunders at a rate of twenty percent per annum. Prior to closing, respondent wrote a letter to the settlement agent and Ms. Saunders stating that he had spent eighty hours providing legal services on her behalf and was therefore entitled to a fee of $5,200. Respondent's request was not supported by time records or any other document reflecting the services he had provided. Subsequently, respondent reduced his fee request by $2,500 and, after deducting the $100 in cash that he already had received from Ms. Saunders in December 1994, he told Ms. Saunders that she now owed him $2,600 of the loan proceeds as his fee. Although Ms. Saunders does not remember obtaining the loan, a settlement sheet dated March 8, 1995, indicated that Capital City Mortgage Corporation in fact approved the loan and funded it. According to the settlement sheet, $10,222.19 of the loan proceeds were paid to Household Finance Corporation to pay off Ms. Saunders's line of credit secured by a first deed on her home, $2,600 was paid to respondent, $7,272.34 was paid to Ms. Saunders, and the remainder was used to pay the fees and taxes associated with the loan.

In April 1995, respondent entered his appearance on behalf of Ms. Saunders in the probate of her brother's estate. Shortly after he entered his appearance in the probate matter, respondent told Ms. Saunders that she owed him $1,495 for time spent in that matter from January 9 to March 31, 1995. No time records or any other documentation were provided reflecting the services he claimed to have rendered. A few days later, Ms. Saunders told respondent that she could not afford his fee. Respondent nevertheless "took" the $1,495 from Ms. Saunders as his fee and then prepared and presented to her a new retainer agreement for representing her in the claim against her brother's estate. The new agreement provided that he would retain the $1,495 as payment for services already rendered and thereafter would be entitled to a contingency fee of thirty percent of the gross amount of any judgment, award, or settlement in the probate matter.

On August 8, 1995, the personal representative for the brother's estate filed a petition for determination of the validity of Saunders's claim, in which he asserted that it should be barred for various reasons. The court granted the petition and held evidentiary hearings. Respondent represented Ms. Saunders during the hearings. On February 5, 1997, the court issued an order disallowing Ms. Saunders's claim against the estate in its entirety. The ruling was not appealed.

With respect to the conflict of interest charges in violation of Rule 1.8 (a), the hearing committee found that respondent admits that between June 1995 and December 1996, while representing Ms. Saunders in the probate matter, he sought and received a number of personal loans from her. At the time, respondent was aware of Ms. Saunders's limited financial resources and lack of sophistication. According to Ms. Saunders's testimony, when respondent first requested money from her, he told her that it was improper for an attorney to borrow money from his client, but that he was facing foreclosure on his home and needed the money "to keep his house out of foreclosure." Respondent did not advise Ms. Saunders to seek the advice of independent counsel nor did he provide any collateral or security in exchange for any loans. Rather, respondent provided Ms. Saunders non-negotiable promissory notes setting forth the amount borrowed and his promise to repay the principal amount by a date certain with interest at the rate of ten percent per annum. In the case of some loans, respondent did not create a new promissory note, but rather modified an existing promissory note by changing the amount of principal borrowed and, in one instance, extending the date of repayment. Ms. Saunders and respondent then initialed the changes to the original promissory note. Most of the loans were in the form of cash except for one, which was by check. Ms. Saunders ...

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