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Richard Dale Shepard (WSBA No. 16194, admitted 1986), of Tacoma, was suspended for two years, effective September 9, 2010, by order of the Washington State Supreme Court following an appeal. This discipline is based on conduct involving failure to act diligently in representing a client, failure to communicate, conflicts of interest, and the unauthorized practice of law. For further information, see In re Shepard __ Wn.2d __, 239 P.3d 1066 (2010).
In 2003, Mr. Shepard, a solo practitioner, agreed to enter into a business arrangement with Mr. C, who intended to sell living trusts in Washington. Under the proposed agreement, clients who purchased a living trust package from Mr. C would be referred to Mr. Shepard for legal services relating to those trusts. Mr. C would independently market and sell the trusts and would arrange to have each purchaser sign a fee agreement with Mr. Shepard. The fee agreement required clients to pay Mr. Shepard a flat fee of $200 in exchange for his agreement to independently review and make recommendations regarding each client’s estate-planning needs. Mr. C informed Mr. Shepard that he was not a lawyer. He told him he was a “certified estate planner,” but did not mention that he had been previously convicted in California for selling fraudulent insurance products.
After affiliating with Mr. Shepard, Mr. C began selling living trusts to seniors. Many of the prospective clients did not understand the differences between various estate-planning options. Much of the information provided by Mr. C was either inaccurate or misleading. In particular, Mr. C exaggerated the costs and difficulty of probating an estate in Washington. Many clients were sold trusts that they did not need without being fully informed on how the trusts worked. Mr. Shepard never accompanied Mr. C on these sales visits. As part of Mr. C’s sales pitch, prospective clients were told that an attorney would review the estate-planning documents and were presented with the previously mentioned attorney-client fee agreement.
Both the trust packages sold by Mr. C and Mr. Shepard’s fee agreements were generated by ATDS, a third-party contract paralegal service. Upon agreement with Mr. C to purchase a living trust package, clients were asked to fill out a questionnaire that included the client’s assets and beneficiary information. The questionnaire was then sent to ATDS, which would generate the trust documents and a short table summarizing the client’s answers on the questionnaire. These documents were forwarded to Mr. Shepard, but Mr. Shepard did not carefully review them. Mr. Shepard simply called his clients to verify the information provided in the questionnaire was accurate. Once the information was verified, the trust packages were forwarded to Mr. C, who delivered them to the clients along with a form letter written by Mr. Shepard explaining how to execute the trusts. When the trusts were finally delivered, Mr. Shepard considered his job complete and never followed up with any of his clients to ensure that the trust documents were executed correctly.
Mr. Shepard did not provide the services promised in his fee agreement, never discussed with his clients their estate-planning needs, and did not review the clients’ assets to determine an appropriate estate-planning strategy. During the brief telephone calls he did make to clients, Mr. Shepard never disclosed that he had an ongoing business relationship with Mr. C which might give rise to a conflict of interest. In all, Mr. Shepard represented more than 70 clients and received $200 for each one.
Although many of the living trust package purchasers were couples, Mr. Shepard often spoke to only one spouse over the phone. He sometimes made notes during the calls about concerns he had regarding clients’ competency. In one instance, one of Mr. Shepard’s clients specifically notified Mr. Shepard that his wife was incompetent to execute a trust. Although Mr. Shepard’s fee agreement stated that an in-office consultation was required if undue influence or incapacity issues appeared possible, Mr. Shepard made no effort to investigate the accuracy of the information and did not require the couple to come to his office to speak with him. The husband signed the trust documents for his wife using a previously executed power of attorney that specifically prohibited his revoking or changing any estate-planning or testamentary documents for his wife. Mr. Shepard did not discuss the prior power of attorney with the couple, and as a result the trusts they purchased and attempted to execute were legally invalid.
At some point in 2003, Mr. Shepard was introduced to Mr. C’s brother, an insurance agent who worked with Mr. C offering insurance products to clients who purchased trust packages. Mr. C and Mr. C’s wife and brother intended to use the personal and financial information obtained through the sale of the trust packages to sell annuities and reverse mortgages to clients through fraudulent means. Many clients who purchased the trust packages were pressured into purchasing these insurance products, most of which were eventually canceled and the premiums returned after intervention by the Office of the Insurance Commissioner (OIC).
Around March 2004, Mr. Shepard was contacted by Ms. P, the daughter of two of his clients, who informed Mr. Shepard that her parents were not competent to execute the trust documents. Ms. P’s mother had Alzheimer’s disease and her father was bedridden. She was concerned that the documents they had signed were not executed properly, which turned out to be correct. Ms. P also informed Mr. Shepard that, in addition to the trust package her parents had purchased, Mr. C had attempted to sell her parents both an annuity and a reverse mortgage. Mr. Shepard spoke with Mr. C about his conversation with Ms. P, but made no changes with regard to the way the trusts or insurance products were sold.
In February 2005, Mr. Shepard was contacted by an OIC investigator. OIC had received an anonymous letter expressing concern that Mr. C and his wife, along with two other individuals, were running a living trust mill. OIC informed Mr. Shepard of their investigation of Mr. C and his wife for their role in selling insurance products to seniors and told Mr. Shepard about Mr. C’s prior felony conviction in California. Despite this information, Mr. Shepard continued to accept clients referred to him by Mr. C well into 2005. The OIC informed both the Bar Association and the Attorney General’s Office about their concerns regarding Mr. and Mrs. C, their business, and Mr. Shepard. The Bar began investigating Shepard’s role in the scheme.
In response to the ongoing investigations, Mr. Shepard initiated efforts to mitigate problems with his conduct. He sent letters to his clients urging them to make an appointment with him to review their trust documents and informed clients of the investigations.
Mr. Shepherd’s conduct violated RPC 1.3, requiring a lawyer to act with reasonable diligence and promptness in representing a client; former RPC 1.4, requiring a lawyer to keep a client reasonably informed about the status of a matter, promptly comply with reasonable requests for information, and explain a matter to the extent necessary to permit the client to make informed decisions regarding the representation; former RPC 1.7(b), prohibiting a lawyer from representing a client if the representation of that client may be materially limited by the lawyer’s own interests, unless the lawyer believes the representation will not be adversely affected and the client consents in writing after a consultation and a full disclosure of the material facts; RPC 5.3(a) requiring a partner in a law firm, with respect to a nonlawyer associated with a lawyer, to make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person’s conduct is compatible with the professional obligations of the lawyer; and RPC 5.5(b), prohibiting a lawyer from assisting a person who is not a member of the Bar in the performance of activity that constitutes the unauthorized practice of law.
Kevin M. Bank represented the Bar Association at the hearing. Kathleen A.T. Dassel represented the Bar Association on appeal. Brett A. Purtzer represented Mr. Shepard. Gregory J. Wall was the hearing officer. |