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Theodore P. Hunter (WSBA No. 8453, admitted 1978), of Seattle, was suspended for six months, effective December 22, 2004, by order of the Washington State Supreme Court following a hearing. This discipline was based on his conduct between 1996 and 1999 involving conflicts of interest.
In 1982, Mr. Hunter incorporated PEI, a nonprofit corporation and tax-exempt organization. PEI’s purpose is to promote use of renewable resources and encourage the efficient use of limited resources. During time periods pertinent to the disciplinary proceeding, Mr. Hunter served as a member of the PEI Board, its president, its registered agent, and as a lawyer for the organization, providing his legal services at a reduced rate in exchange for office space. Starting in 1995, Mr. Hunter served in the combined offices of president, treasurer, and “Executive Committee.” The PEI Board, which typically met once a year, consisted of Mr. Hunter’s friends and business acquaintances. For these reasons, a great deal of PEI’s corporate power was concentrated in Mr. Hunter himself.
Matter 1: Between 1996 and 1998, Mr. Hunter leased two or three computers to PEI. The lease payments were invoiced to PEI on Mr. Hunter’s bills for professional services. When the leases terminated, PEI purchased the computers for $1. Mr. Hunter did not provide the leases or his invoices to the PEI Board, did not fully disclose and transmit in writing the terms of the leases to the PEI Board, did not provide PEI with the opportunity to seek the advice of independent counsel in connection with the transactions, and did not obtain the PEI Board’s prior written consent to the leases. Although PEI was not actually harmed by its lease of computers from Mr. Hunter, there was potential injury in that the unreviewed lease terms could have enriched Mr. Hunter at PEI’s expense.
Matter 2: In 1997, Mr. Hunter was looking for a waterfront residence as a second home. In February 1997, Mr. Hunter entered into an agreement for the purchase of a waterfront home on Lake Leland in Jefferson County (Parcel 1). Subsequently, the sellers of Parcel 1 imposed an easement providing pedestrian access to the lake in favor of two nearby parcels (Parcels 2 and 3) owned by other members of the sellers’ family. When Mr. Hunter discovered this, he amended his agreement to purchase Parcel 1 so that it was contingent on the availability of Parcels 2 and 3 “at a reasonable price.” Subsequently, on behalf of PEI, Mr. Hunter signed agreements to purchase Parcels 2 and 3 for $15,000 per parcel. For each agreement PEI issued a $300 check as earnest money. Mr. Hunter thereafter learned that Parcel 2 contained the well that provided water to the house he was purchasing on Parcel 1.
The transactions simultaneously closed in June 1997, with PEI taking title to Parcels 2 and 3. Immediately thereafter Mr. Hunter signed a quitclaim deed for PEI transferring Parcel 2 to himself. Mr. Hunter paid $14,892.06 to close the purchase of Parcel 2, but he did not reimburse PEI for the $300 PEI had paid as earnest money.
Although, prior to the closing of the purchases, a PEI employee had voiced concerns about the PEI purchases, Mr. Hunter did not, prior to closing, consult with the PEI Board about the acquisitions, provide the Board with full disclosure regarding the material facts of the purchases, or obtain the prior written consent of the PEI Board.
Matter 3: In 1998, an individual inquired into Mr. Hunter’s interest in purchasing a 15-acre parcel of property near Parcels 2 and 3. The prospective seller subsequently subdivided the 15-acre parcel into two 7.5-acre lots. Meanwhile, a PEI employee learned that Mr. Hunter intended to add to PEI’s land holding at Lake Leland and requested that Mr. Hunter schedule a board meeting to address the proposed purchase. Mr. Hunter declined to do so. The owner of the two lots offered to sell both for $85,000. Mr. Hunter had PEI purchase one of the lots for $50,000, while Mr. Hunter purchased the other for $35,000. A limited pre-sale appraisal that had been obtained by the seller indicated that both parcels had the same value, and a subsequent tax assessment valued the parcels identically. In purchasing the property and allocating the $50,000 purchase price to PEI, Mr. Hunter did not, prior to the closing of the purchase, fully disclose the material facts to the PEI Board, consult with the PEI Board, or obtain the PEI Board’s prior written consent.
Mr. Hunter’s conduct violated RPC 1.7(b), prohibiting a lawyer from representing a client if the representation may be materially limited by the lawyer’s own interests, unless the lawyer reasonably believes the representation will not be adversely affected and the client consents in writing after a full disclosure; and RPC 1.8(a), prohibiting a lawyer from entering into a business transaction with a client or knowingly acquiring an ownership, possessory, security, or other pecuniary interest adverse to a client unless the transaction and its terms are fair and reasonable and fully disclosed and transmitted in writing to the client, the client is given opportunity to seek the advice of independent counsel, and the client consents.
Linda B. Eide and Nancy Bickford Miller represented the Bar Association. Leland G. Ripley represented Mr. Hunter at the hearing, and Michael R. Caryl represented Mr. Hunter on appeal. Randolph I. Gordon was the hearing officer. |