In The Matter of The DISCIPLINARY PROCEEDING v. SHEPARD

239 P.3d 1066

In the Matter of the DISCIPLINARY PROCEEDING AGAINST Richard Dale SHEPARD, an attorney at law.

No. 200,720-1.

Supreme Court of Washington,En Banc.

Argued May 6, 2010.

Decided Sept. 9, 2010.

As Corrected Nov. 19, 2010.

Reconsideration Denied Nov. 24, 2010.

Brett Andrews Purtzer, Tacoma, for Petitioner.

Kevin M. Bank, Washington State Bar Association, for Respondent.

CHAMBERS, J.

¶ 1 The Washington State Bar Association Disciplinary Board (Board) unanimously recommended Richard Dale Shepard be suspended from the practice of law for two years after it found Shepard had committed four counts of attorney misconduct. The misconduct stemmed from Shepard's participation in a living trust scam targeted at seniors. Shepard argues that a two year suspension is too harsh and urges this court to adopt the hearing officer's recommendation of a six-month suspension. We conclude that a two-year suspension is an appropriate sanction for Shepard's misconduct.

Facts and Procedural History

¶ 2 Shepard was a solo practitioner in Tacoma who focused about a third of his practice on basic estate planning. ¹ In 2003, he was contacted by Steven Cuccia, President of Coranda Living Trust Services (Coranda), about entering into a business arrangement. Cuccia intended to sell living trusts to seniors in Washington and wanted Shepard to be available to provide legal advice to his customers. Under the proposed agreement, clients who purchased a Coranda Living Trust Package (CLTP) from Cuccia would be referred to Shepard for legal services relating to those trusts. Cuccia would independently market and sell the trusts and would arrange to have each purchaser sign a fee agreement with Shepard. The fee agreement required clients to pay Shepard a flat fee of $200 in exchange for his agreement to independently review and make recommendations regarding each client's estate planning needs. During the meeting, Cuccia informed Shepard that he was not a lawyer, but told him he was a “certified estate planner.” Clerk's Papers (CP) at 119. Cuccia did not mention that he had been previously convicted in California for selling fraudulent insurance products to seniors. Shepard agreed to the proposal.

¶ 3 After affiliating with Shepard, Cuccia began selling living trusts to seniors. Cuccia visited the homes of prospective clients and gave a presentation about the benefits of using a living trust over other estate planning tools. Many of the elderly couples visited by Cuccia did not understand the differences between various estate planning options, and much of the information Cuccia provided them was either inaccurate or misleading. In particular, Cuccia 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 living trusts they were purchasing worked. Most clients would have been better served by executing simple wills and advance medical directives rather than the living trusts they purchased from Cuccia. Shepard never accompanied Cuccia on these sales visits. He did not discuss other estate planning options with prospective clients or review their various financial situations before they agreed to purchase the CLTP from Cuccia.

¶ 4 As part of Cuccia's sales pitch, prospective clients were told that an attorney would review the estate planning documents and were presented with an attorney-client fee agreement whereby the clients retained Shepard and agreed to pay him $200 for his services. Among other things, the fee agreement provided:

1. SCOPE OF SERVICE. Client(s) retain Attorney to provide the following legal services:

(a) Review and Consultations. Independent review of Client(s) estate planning needs to make recommendations regarding appropriate planning tools and supporting documents. Includes a personal telephone consultation to verify key information and provide answers to Client(s) legal questions.

(b) Document and Asset Review. Review available financial and real estate documents for proper title designation. Order and supervise drafting of all plan documents, review final documents, and issue opinion letter with plan documents.

Ass'n Ex. 202, at 00020. ²

¶ 5 Shepard did not draft or produce the trust packages sold by Cuccia. Both the CLTP and Shepard's fee agreement were generated by a third party, Attorney's Trust Document Service, Inc. (ATDS), a contract paralegal service that provides legal forms to attorneys. Shepard discussed the CLTP with ATDS and suggested certain changes. Upon agreement with Cuccia to purchase a CLTP, clients were asked to fill out a questionnaire that included the client's assets and the names, addresses, and ages of intended beneficiaries. 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 Shepard, but he did not carefully review them. ³ 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 Cuccia who delivered them, along with a form letter written by Shepard explaining how to execute the trusts, to the clients for completion and execution. When the trusts were finally delivered, Shepard considered his job complete and never followed up with any of his clients to ensure that the trust documents were executed correctly.

¶ 6 Shepard did not provide the services promised in his fee agreement. He never discussed with his clients their estate planning needs and never discussed with them the advisability of entering into a living trust. He did not review their assets to determine an appropriate estate planning strategy. Though he did speak with his clients after they had already purchased the CLTP from Cuccia, these conversations were very brief and were limited to verifying the information provided on the questionnaire. Shepard never discussed the financial condition of his clients, the size of their estates, or other simpler estate planning options available to his clients. During the brief telephone calls he did make, Shepard never disclosed that he had an ongoing business relationship with Cuccia and Coranda and that this might give rise to a conflict of interest. In all, Shepard represented over 70 people or couples and received $200 from Cuccia for each one.

¶ 7 Although many of the purchasers of the CLTP were couples, Shepard often only spoke to one spouse over the phone. In some cases, Shepard made notes during the calls about concerns he had regarding the competency of clients. In one instance, one of Shepard's clients, William Bishop, specifically notified Shepard that his wife, Lavera Bishop, was incompetent to execute a trust. Although Shepard's fee agreement stated that “an in-office consultation ... is required if undue influence or incapacity issues appear possible,” Ass'n Ex. 202, at 000120, Shepard made no effort to investigate the accuracy of the information, nor did he require the Bishops to come to his office to speak with him. Mr. Bishop signed the trust documents for his wife using a previously executed power of attorney that specifically did not allow Mr. Bishop to revoke or change any estate planning or testamentary documents for Mrs. Bishop. Shepard did not discuss the prior power of attorney with the Bishops, and as a result the trusts they purchased and attempted to execute were legally invalid.

¶ 8 At some point in 2003, Shepard was introduced to Steven Cuccia's brother, Anthony Cuccia, an insurance agent. Steven Cuccia informed Shepard that Anthony would be working with him, offering insurance products to clients who purchased CLTPs. Steven and Anthony Cuccia, along with Steven's wife Michelle and two other individuals, intended to use the personal and financial information obtained through the sale of the CLTPs 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 the insurance products purchased from the Cuccias were eventually canceled, and the premiums returned, but only after intervention by the office of the insurance commissioner (OIC).

¶ 9 Shepard became aware of possible problems with his business arrangement with Cuccia by at least March 2004, when he was contacted by Sharon Prendergast, the daughter of two of his clients. Prendergast was upset about the practices of Shepard and Cuccia, and informed Shepard that she believed her parents were not competent to execute the trust documents provided by Coranda because her 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. She also informed Shepard that in addition to the CLTP her parent's had purchased, Cuccia had attempted to sell her parents both an annuity and a reverse mortgage. Shepard spoke with Cuccia about his conversation with Prendergast, but made no changes with regard to the way the trusts or insurance products were sold.

¶ 10 In December 2004, Shepard sent a letter to the Washington State Bar Association (Bar) requesting an informal opinion about possible RPC violations that an attorney might commit while performing “estate planning consultation services.” Resp't Ex. R2. In the letter, Shepard presented a “hypothetical” situation that essentially outlined the practices of Cuccia and Coranda in selling the trust packages. Id. However, the hypothetical lawyer that Shepard created in the letter actually performed the services promised his clients. Id. Shepard opined that the hypothetical scenario he created would not raise ethical concerns for the lawyer, but nevertheless asked for an opinion from the Bar. Id. Shepard never received a response from the Bar.

¶ 11 In February...