High court's decision split on Portland law firm's ethics breach

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PORTLAND — In a divided opinion, the state’s highest court decided Thursday that six lawyers at one of Maine’s largest firms had violated one of the ethics rules governing the conduct of lawyers.

The Maine Supreme Judicial Court ruled in a 3-1 decision that lawyers at Verrill Dana in Portland had violated a Maine Bar rule by failing to have sufficient policies and procedures in place to prevent and respond to the conduct of one of the firm’s partners, who was eventually charged and later convicted of theft of clients’ money. He served two years in federal prison and was disbarred.

The Maine Board of Overseers of the Bar filed a complaint against Verrill Dana lawyers David Warren, James Kilbreth III, Eric Altholz, Mark Googins, Roger Clement Jr. and Juliet Browne. Warren was the firm’s managing partner in 2007, the year the misdeeds of John Duncan came to light. Kilbreth was chairman of the firm’s executive committee. The remaining four respondents comprised the committee.

When Warren learned in June 2007 that Duncan had funneled money from a client’s account to his own instead of the firm’s account, Warren told Kilbreth. Warren confronted Duncan with the evidence. Duncan said the money was owed to the firm for attorney’s fees. He said he should have directed the money – totaling $77,500 – to the firm. Warren asked Duncan to repay the money. Duncan offered to resign, but Warren told him to wait. Duncan assured Warren that no other clients had been affected.

Warren briefed the executive committee of Duncan’s actions on July 9, 2007. The committee and Warren agreed not to accept Duncan’s resignation, but accepted his apology and his reimbursement to the firm. The committee agreed that Warren should notify Kurt Klebe, the firm’s head of the private clients group, to put into place practices that would prevent the firm’s attorneys from being able to do what Duncan had done.

Warren waited to contact Klebe that summer, saying later he feared Duncan was fragile and might be pushed “over the edge” if Klebe began his probe. executive committee members checked with Warren about their directive, but “acquiesced” in his decision to wait, the court’s decision said.

It wasn’t until Oct. 2, 2007, that Warren met with Klebe to tell him about Duncan’s misconduct. Klebe’s immediate investigation turned up more instances of Duncan’s illicit practices with other client accounts. At the end of October, the executive committee voted to fire Duncan, effective Dec. 31, 2007.

When an independent audit showed that Duncan had billed clients for work he hadn’t performed and took money from their accounts to pay himself, the committee voted to fire Duncan immediately and notified the Maine Board of Overseers of the Bar, as well as the U.S. Attorney’s Office and the Cumberland County District Attorney’s Office.

That audit revealed that Duncan had stolen roughly $300,000 from clients and the firm over the previous decade.

The Board of Overseers filed a complaint against the firm’s six lawyers, saying they violated Bar rules by not immediately reporting Duncan’s conduct to the board and by failing to have sufficient policies and procedures in place to prevent and respond to such conduct.

A single Maine Supreme Judicial Court justice presided over a three-day hearing on the matter at 8th District Court in Lewiston last year. Justice Donald Alexander ruled in December 2010 that the six lawyers acted reasonably and in good faith, given the information they had at the time.

The Board of Overseers appealed his decision to the full court, which affirmed Alexander’s decision that the firm’s lawyers had not violated the Maine Bar rule that says lawyers should immediately report misconduct to the board.

Three of four justices voted that the firm’s lawyers failed to have sufficient policies and procedures in place to prevent and respond to the sort of conduct in which Duncan engaged.

Justice Joseph Jabar dissented on that point, writing that there was “substantial evidence” in the case records to support Justice Alexander’s conclusion that the attorney representing the Board of Overseers failed to prove the six lawyers at the firm didn’t have “measures in place to reasonably assure that the firm’s attorneys would conform to the code in conducting their professional affairs.”

Jabar wrote that Auburn lawyer Bryan Dench, who testified during the hearing last year as an expert witness, found that Verrill Dana’s practices and policies were no different from what was in place at his law firm and at other law firms around the state.

A statement issued by Verrill Dana’s managing partner, Keith Jones, said, “Our colleagues were faced with the difficult task of dealing with what turned out to be an extraordinary breach of trust by a longtime colleague with an impeccable reputation within the firm and the community.”

Regarding the portion of the earlier decision that the full court upheld on Thursday, Jones said: “We are pleased that the decision confirmed Justice Alexander’s finding that each individual did not violate his or her obligation to report Mr. Duncan’s conduct more quickly than they did.”

He said of the court’s finding of a violation, “We continually review our internal policies and procedures to ensure that they meet appropriate ethical standards. We are reviewing the decision to ensure that our current policies and procedures comply with the court’s new ruling. As the procedures we had in place in 2007 were common among law firms across the state, we believe that all law firms will need to review their policies in light of this new guidance.”

Board of Overseers’ lead counsel, J. Scott Davis, could not be reached for comment.

Christopher Williams is a staff writer at the Sun Journal in Lewiston. He can be reached at cwilliams@sunjournal.com.