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In re Petition for Disciplinary Action against Michael F. Swensen: ETHICS - disbarment for conversions, falsehoods, improper business dealings

Original Jurisdiction Per Curiam
In re Petition for Disciplinary Action against
Michael F. Swensen, a Minnesota Attorney, Filed: November 15, 2007
Registration No. 216847 Office of Appellate Courts
Disbarment is the appropriate disciplinary sanction for an attorney who (1)
violated Minn. R. Prof. Conduct 8.4(c) by converting rent payments and sale proceeds
that were due a client, inducing the client to transfer the clients property interest to the
attorneys spouse, making false statements to the client and a third party, and falsely
drafting, notarizing, and signing documents; and (2) violated Minn. R. Prof. Conduct
1.8(a) by engaging in business transactions with a client on unreasonable and undisclosed
terms, without advising the client in writing to seek independent legal counsel, and
without obtaining the clients written consent to the transactions.
Heard, considered, and decided by the court en banc.
This attorney discipline case arises out of a petition filed by the Director of the
Office of Lawyers Professional Responsibility against respondent Michael F. Swensen,
who was admitted to practice law in Minnesota on May 10, 1991. By order filed on July
23, 2007, we deemed the allegations of the petition admitted. Based on those allegations,
we conclude that respondent violated Minn. R. Prof. Conduct 8.4(c) and 1.8(a) and that
his misconduct warrants disbarment.
The Mound Property
Respondent represented L.J. in various real estate transactions from 1999 to 2004.
Respondent and his wife, attorney Patricia Ryerson,1 advised L.J. to purchase an
investment property located in Mound, Minnesota. Respondent and Ryerson proposed to
L.J. that they would renovate the property and split the profits with her upon resale. L.J.
purchased the property on May 19, 1999, for 5,000, and she later spent ,744.11 on
repairs and supplies. L.J. requested that the property be resold as initially agreed, but
respondent and Ryerson repeatedly assured her that they would obtain refinancing for the
property and purchase her interest. Respondent and Ryerson rented out the property
beginning in September 1999, the proceeds from which were to be used to pay the
mortgage. Instead, respondent and Ryerson converted the rental income to their own use.
1 A separate petition for disciplinary action was filed against Ryerson on July 17,
2007. We express no opinion here as to whether Ryersons actions violate the rules of
professional conduct.
The property was foreclosed in February 2003 and purchased by an assignee of the
mortgagee at a sheriffs sale the following month. Respondent told L.J. that he and
Ryerson had obtained refinancing for the property, and he and Ryerson asked her to
attend a closing on September 23, 2003. It was at the September 23 closing that L.J. first
learned that the property was in foreclosure, that the redemption period would expire on
September 27, and that the proposed refinancing consisted of selling the property to
Mark OBrien. L.J. initially objected to the transaction, but respondent and Ryerson
convinced her that the sale was the only means of avoiding loss of her entire interest upon
expiration of the redemption period. L.J. sold the property to Mark OBrien on
September 26, 2003. Although the stated purchase price was 5,000, OBrien received
a ,000 sellers equity gift to which L.J. neither knowingly nor willingly agreed.
The September 26 sale netted ,778.33, ,000 of which was paid to L.J. and
,778.33 of which was paid to VR Construction, a company belonging to Ryerson that
had no legal interest in the property.
The Minneapolis Property
Respondent and Ryerson also advised L.J. in 1999 to purchase an investment
property located in Minneapolis. The two attorneys proposed that L.J. fund the purchase
and renovation of the property and that they renovate the property and obtain refinancing
in order to purchase L.J.s interest. Respondent and Ryerson told L.J. that the investment
would reduce her overall tax burden. L.J. purchased the property for 0,000 on
September 23, 1999, and she later contributed an additional ,000 to pay for property
Ryerson directed L.J. to sign a blank quit claim deed to the Minneapolis property
in January 2000, explaining that the deed would only be filed to convey L.J.s interest if
L.J. died. Ryerson later completed the blank deed, making it appear that L.J. had
conveyed to Ryerson a one-half interest in the Minneapolis property. Respondent
notarized L.J.s signature although he did not actually witness her sign the deed. The
deed was recorded on November 29, 2001, without L.J.s knowledge or consent.
Respondent and Ryerson rented out the Minneapolis property from December 1999 to
January 2003, the proceeds from which were to be used to pay the mortgage.
In September 2001, respondent drafted a contract for deed conveying the
Minneapolis property in its entirety from Ryerson to respondents father for ,200,000.
The contract for deed bore the forged signature of respondents father. Respondent and
Ryerson used the contract for deed to secure a mortgage loan on the property to
respondents father, with respondent misrepresenting to the mortgagee that his father had
made regular payments under the contract for deed. Although respondents father never
authorized respondent to act on his behalf in relation to the Minneapolis property,
respondent signed the mortgage documents purporting to be his fathers attorney-in-fact.
The second mortgagee foreclosed on the Minneapolis property in October 2002.
When L.J. contacted Ryerson upon receipt of the foreclosure pleadings, Ryerson told L.J.
that she and respondent had obtained refinancing and that there was no reason for
concern. Respondent later informed L.J. that a buyer had been found and that her
investment would be repaid out of the sale proceeds. On January 16, 2003, respondent
directed L.J. to sign a quit claim deed transferring her interest in the property to Ryerson.
On the same day, respondent and Ryerson conveyed the Minneapolis property by
warranty deed to respondents father, using the mortgage loan obtained with the
September 2001 contract for deed to fund the purchase.2 At closing, Ryerson received
more than 5,000 as the payoff on the contract for deed to respondents father. It has
been deemed admitted that the contract for deed was a sham transaction used, together
with the quit claim deeds, to divest [L.J.] of her interest in the property. Although L.J.
had invested more than 7,000 in the property, respondent and Ryerson paid her only
2,388.07 for her interest in the September 2001 contract for deed. Ryerson
subsequently directed respondents father to sign a blank quit claim deed of the
Minneapolis property, which Ryerson completed to transfer ownership of the property to
Mark OBrien, the same third party who had purchased the Mound property.
Ensuing Litigation and Disciplinary Action
L.J. brought an action against respondent, Ryerson, and Mark OBrien in 2004,
seeking recovery of the Mound and Minneapolis properties and damages for fraud and
breach of fiduciary duties. As a result of a June 2005 settlement agreement among
respondent, Ryerson, and L.J., respondents father reconveyed the Minneapolis property
to L.J.
Charges of unprofessional conduct were issued against respondent on January 22,
2007, and a panel of the Lawyers Professional Responsibility Board found probable
cause for public discipline. Pursuant to the panels direction, the Director filed a petition
2 The petition filed by the Director suggests, but does not specifically state, that the
mortgage loan used to fund the purchase was the loan obtained with the contract for deed.
for disciplinary action dated May 24, 2007, and respondent admitted service of the
petition on June 1. Respondents answer was due 20 days after service of the petition
under Rule 13(a), Rules on Lawyers Professional Responsibility (RLPR). He failed to
file an answer by the deadline, and the Director alleges that respondent was notified
twice, once by telephone, that his answer was overdue. The Director moved for summary
relief on July 20, and we granted the Directors motion, ordering that the allegations in
the petition be deemed admitted. See Rule 13(b), RLPR. On July 31, respondent filed an
answer, in which he generally denied or disclaimed knowledge of most of the allegations
in the petition, and also filed a motion for extension of time to answer. The Director
opposed respondents motion. In our order of August 13, 2007, we construed
respondents motion as a motion to vacate the order for summary relief, and we denied
the motion.
An attorney against whom a petition for disciplinary action has been filed has 20
days after service of the petition to file an answer. Rule 13(a), RLPR. If the attorney
fails to file an answer within the 20-day period, the allegations in the petition shall be
deemed admitted. Rule 13(b), RLPR. Respondent filed his motion to vacate and
proposed answer after we had granted the Directors motion for summary relief and more
than eight weeks after respondent was served with the petition. Neither respondent nor
the Director cites any authority for vacating, over the objection of the Director, an order
of this court deeming facts to be admitted as a result of a failure to answer in a timely
manner.3 In addition to failing to offer a credible explanation for his delay, respondents
proposed answer is effectively a general denial and provides no response to the detailed
and disturbing facts alleged by the Director. Under these circumstances, we decline to
vacate our order for summary relief, and we accept the facts as stated in the Directors
petition as controlling.
Because we have ordered that the allegations in the Directors petition be deemed
admitted and there is no basis for vacation of that order, the only issue before us is the
appropriate discipline to impose. Respondent requests that any discipline imposed be
limited to no more than a two-year suspension. The Director recommends that the
respondent be disbarred. We agree with the Director.
The purposes of imposing discipline for attorney misconduct are the protection of
the public, the protection of the judicial system, and the deterrence of future misconduct
by the disciplined attorney and other attorneys. In re De Rycke, 707 N.W.2d 370, 373
(Minn. 2006). Punishment of the attorney is not a goal of the disciplinary process. In re
Wyant, 533 N.W.2d 397, 401 (Minn. 1995). We consider four factors in determining the
appropriate disciplinary sanction: 1) the nature of the misconduct, 2) the cumulative
weight of the violations of the rules of professional conduct, 3) the harm to the public,
3 This case is distinguishable from In re Wood, in which we granted an attorneys
request to file an answer after we had ordered that the allegations in the petition be
deemed admitted, because in Wood the Director did not oppose the attorneys request. In
re Wood, 716 N.W.2d 341, 344 (Minn. 2006).
and 4) the harm to the legal profession. De Rycke, 707 N.W.2d at 373-74 (quoting In
re Oberhauser, 679 N.W.2d 153, 159 (Minn. 2004)).
Minnesota Rule of Professional Conduct 8.4(c) states that [i]t is professional
misconduct for a lawyer to * * * engage in conduct involving dishonesty, fraud, deceit, or
misrepresentation. We conclude that respondent violated Rule 8.4(c) by converting to
his own use rental payments from the Mound property that were supposed to be paid
toward L.J.s mortgage, converting sale proceeds from the Minneapolis property that
were due L.J., and inducing L.J. to transfer her property interest in the Minneapolis
property to Ryerson by misrepresenting to L.J. that the property was being sold and that
her investment would be returned from the sale proceeds. This conduct is akin to the
misappropriation of client funds, which usually merits the sanction of disbarment unless
the attorney presents clear and convincing evidence of substantial mitigating
circumstances which show that the attorney did not intentionally convert the funds. In
re Swerine, 513 N.W.2d 463, 466 (Minn. 1994).
We conclude that respondent also violated Rule 8.4(c) by misrepresenting to L.J.
that he and Ryerson had obtained refinancing for the Mound property, misrepresenting to
the mortgagee of the Minneapolis property that his father had made payments under the
contract for deed, fraudulently drafting the contract for deed for the Minneapolis
property, falsely notarizing L.J.s signature on the quit claim deed to the Minneapolis
property, and signing the Minneapolis property mortgage documents as his fathers
attorney-in-fact without authorization to do so. See, e.g., In re Samborski, 644 N.W.2d
402, 407 (Minn. 2002) (disbarring attorney where [i]n addition to misappropriating
client funds, [the attorney] made misrepresentations and gave false documents to clients
to conceal the misappropriation). As in In re Graham, in which we disbarred an
attorney for misconduct that included the fabrication of documents, [t]he nature of
respondents misconduct is rooted in dishonesty and deceit. 503 N.W.2d 476, 479
(Minn. 1993).
We further conclude that respondent violated Minn. R. Prof. Conduct 1.8(a) by
engaging in business transactions with L.J., his client, on unreasonable and undisclosed
terms, without advising her in writing to seek independent legal counsel, and without
obtaining her written consent to the transactions.4 Violations of Rule 1.8(a) merit
serious disciplinary sanctions. In re Olsen, 487 N.W.2d 871, 874 (Minn. 1992). In
Wyant, for example, we disbarred an attorney for borrowing over .4 million from
4 Minnesota Rule of Professional Conduct 1.8(a) provides:
(a) A lawyer shall not enter into a business transaction with a client or
knowingly acquire an ownership, possessory, security, or other pecuniary
interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the interest
are fair and reasonable to the client and are fully disclosed and
transmitted in writing in a manner that can be reasonably understood by
the client;
(2) the client is advised in writing of the desirability of seeking and is
given a reasonable opportunity to seek the advice of independent legal
counsel on the transaction; and
(3) the client gives informed consent, in a document signed by the
client separate from the transaction documents, to the essential terms of
the transaction and the lawyers role in the transaction, including
whether the lawyer is representing the client in the transaction.
clients for his own benefit and for the benefit of his law firm and a corporation of which
he was a part owner. 533 N.W.2d at 398, 402. The financial condition of the borrowers
rendered the loans unreasonable, and the attorney failed to disclose his adverse interests,
advise his clients to seek independent counsel, or obtain written consent to the conflicts
of interests. Id. at 398-99. Moreover, in In re Pearson we indefinitely suspended an
attorney for, inter alia, entering into a business transaction with a client without
disclosing conflicting and/or differing interests. 352 N.W.2d 415, 419 (Minn. 1984).
Viewed in its totality, respondents misconduct is similar to that of the attorney in
In re Peterson, 456 N.W.2d 89 (Minn. 1990). In Peterson, we disbarred an attorney who
induced his client, a 20-year-old who had sustained serious head injuries, to lend
0,000 to the attorneys real estate company. Id. at 90-91, 93. The attorneys conflict
of interest was not disclosed, the terms of the transaction were unreasonable, and the
attorney did not discuss the arrangements with the clients parents. Id. at 90. The
attorney also made false representations to third parties and forged the signatures of bank
officers on a document. Id. at 91-92. As in Peterson, the nature and cumulative weight
of respondents misconduct lead us to conclude that disbarment is warranted. Id. at 93.5
We reject respondents attempt to blame Ryerson for his wrongdoing. In Wyant,
the attorney disclaimed responsibility for the loans his clients made to his law firm and to
his corporation, blaming his business partner for the improprieties. 533 N.W.2d at 398-
5 We recognize that client vulnerability, which was a factor in the Peterson analysis,
is not present here. See Peterson, 456 N.W.2d at 90-91, 93. But this difference is not
dispositive, as the absence of client vulnerability in this case does not excuse
respondents grievous misconduct.
99. We found the attorneys attempt to shift the blame to his partner * * *
unpersuasive, emphasizing that the fact that the attorneys partner was more directly
involved in the solicitation and execution of the loans * * * does not absolve [the
attorney] for his own involvement. Id. at 401. We noted that the attorney was present
at some point in some of the discussions * * * regarding the loans and was aware that
the terms of the loans were unfair and that the necessary disclosures had not been made.
Id. at 398-400. Similarly, under respondents theory, even if Ryerson is more culpable
than respondent, that greater culpability does not absolve respondent of responsibility for
his misdeeds committed in concert with her. Even apart from his cooperation with
Ryerson, however, respondent himself made misrepresentations to L.J. and to the
mortgagee of the Minneapolis property, falsely notarized L.J.s signature, and obligated
his father under a mortgage without authorization. In the aggregate, respondents
violations of the rules of professional conduct clearly warrant disbarment.6
An attorneys failure to answer the petition with any mitigating circumstances
bars our consideration of such issues. In re Ladd, 463 N.W.2d 281, 283 (Minn. 1990).
Respondent did note at oral argument that he has never previously been subject to
disciplinary action, and lack of disciplinary history can be a mitigating factor in a
6 We also note that many of the allegations, now deemed admitted, against
respondent involve serious misconduct that is in no way dependent on the existence of an
attorney-client relationship. We have held in the past that a lawyers ethical obligations
are not limited to actions occurring in the practice of law, but extend to business dealings
unconnected with the practice of law. In re Pugh, 710 N.W.2d 285, 289 (Minn. 2006).
disciplinary proceeding. See, e.g., In re Hanvik, 609 N.W.2d 235, 241 (Minn. 2000). But
even if we were to take respondents claim into account, lack of previous discipline
alone will not mitigate severe misconduct. In re Pugh, 710 N.W.2d 285, 289 (Minn.
Therefore, we order that respondent Michael F. Swensen be, and hereby is,


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