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Iowa Supreme Court Attorney Disciplinary Bd. v. Engelmann

Supreme Court of Iowa

November 22, 2013

Marc R. ENGELMANN, Respondent.

Page 157

Grievance commission reports respondent committed ethical violations and recommends suspension of his license to practice law. LICENSE REVOKED.

Charles L. Harrington and Wendell J. Harms, Des Moines, for complainant.

David R. Treimer, Davenport, for respondent.

WATERMAN, Justice.

Marc R. Engelmann, an experienced real estate attorney, is serving a three-year sentence in federal prison after a jury convicted him on nine felony counts, alleging bank fraud, wire fraud, and conspiracy. His convictions were affirmed on appeal. He represented a seller in nine real estate transactions in which he submitted HUD-1 statements that falsely overstated the sales prices in order to secure inflated mortgage loans. The jury found he

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" act[ed] knowingly and with intent to deceive [the lenders] for the purpose of causing some financial loss, loss of property or property rights, or ... detriment." The lenders suffered losses of $392,937.73, which Engelmann was ordered to pay in restitution. Disciplinary proceedings were held in abeyance pending resolution of his criminal appeal. His license to practice law has been under temporary suspension.

The Iowa Supreme Court Attorney Disciplinary Board brought a complaint against Engelmann, alleging he committed multiple violations of the Iowa Rules of Professional Conduct during these nine transactions. The Board recommended revocation, and Engelmann, through counsel, offered to " surrender his license" if his convictions were affirmed. A division of the Grievance Commission of the Supreme Court of Iowa found Engelmann violated the rules as charged and, after considering his temporary suspension and thirty-six-month prison sentence, recommended an additional six-month disciplinary suspension. For the reasons explained below, we revoke his license to practice law.

I. Scope of Review.

Our review of attorney disciplinary proceedings is de novo. Iowa Ct. R. 35.11(1). The burden is on the Board to prove attorney misconduct by a convincing preponderance of the evidence. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Lickiss, 786 N.W.2d 860, 864 (Iowa 2010). " This burden is less than proof beyond a reasonable doubt, but more than the preponderance standard required in the usual civil case." Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Lett, 674 N.W.2d 139, 142 (Iowa 2004). We respectfully consider the commission's findings and recommendations, but are not bound by them. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Rhinehart, 827 N.W.2d 169, 171 (Iowa 2013). If we find a violation, we " may impose a lesser or greater sanction than the discipline recommended by the grievance commission." Iowa Ct. R. 35.11(1).

II. Background Facts and Proceedings.

Engelmann has been practicing law in the Quad Cities since graduating from law school in 1976. He started with a general practice, but became increasingly focused on real estate law. Several decades ago, the Iowa Title Guaranty Division certified Engelmann to write title guarantees and generate abstracts. Engelmann primarily represented lenders, and this area of his practice thrived. He represented up to twenty lenders in real estate closings, including Wells Fargo Bank, Valley Bank, Quad City Bank, and First Central State Bank. Engelmann also represented buyers and sellers. By 2006, eighty percent of his practice was real estate related. In one two-month period that year, Engelmann represented lenders at over fifty closings and represented buyers or sellers at another fifty closings. By the time of the misconduct at issue, he had practiced law for three decades with an unblemished record and had closed thousands of real estate transactions for his clients.

Engelmann was among the many casualties of the market crash in 2008, after purchasers of real estate sold by his clients defaulted on nine mortgage loans he helped obtain through fraud. On May 17, 2011, federal prosecutors filed a nine-count felony criminal indictment against him, alleging one count of conspiracy to commit bank fraud or wire fraud, two counts of bank fraud, and six counts of wire fraud. He pled not guilty, and his case proceeded to a jury trial. The federal district court summarized the evidence presented at trial:

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Defendant is an attorney in the Quad Cities area and represented James Laures (Laures) in the mortgage closings of at least nine residential properties. The transactions involved Laures as seller and Robert Herdrich (Herdrich) and Darryl Hanneken (Hanneken) as buyers. The parties agreed upon the purchase price for each property, but also agreed to list on the loan documents an inflated price of between $30,000 and $35,000 more than the actual purchase price for each property. The various lenders then loaned Herdrich and Hanneken money for the transaction based on the inflated price listed on the loan documents. Laures received the inflated price for each sale and then returned approximately $30,000 for each property to Herdrich and Hanneken after each closing as a " kickback."
Defendant admits he knew about the two different prices and that Laures returned money to the buyers. Defendant also knew that the inflated price was not being listed on the HUD-1 forms that were submitted to the lenders. Government witnesses testified that Defendant never disclosed the inflated price or the kickbacks to the lenders or the closing company, Excel Title. Defendant's assistant, Cathy Gockel, testified that Defendant instructed her not to disclose the inflated price or kickbacks to Excel Title. FBI Special Agents Jeff Huber (SA Huber) and Jim McMillan (SA McMillan) testified that Defendant admitted during an interview that the lenders did not know about the inflated price or the kickbacks. Defendant, however, testified that Excel Title was aware of the dual prices and kickbacks because Defendant had disclosed that information to Excel Title and believed that Excel Title would have informed the lenders of this information, and, therefore, he had no intent to defraud.

United States v. Engelmann, 827 F.Supp.2d 985, 987 (S.D.Iowa 2011), vacated in part, 701 F.3d 874 (8th Cir.2012), aff'd after remand, 720 F.3d 1005 (8th Cir.2013). Engelmann charged a $350 fee for each of the nine closings, a volume discount from his standard $400 fee. There is no evidence or claim he otherwise personally benefited financially from these transactions.

On September 13, 2011, the jury convicted Engelmann on all nine counts. The jury rejected Engelmann's defense that he acted in good faith and had no intent to defraud because the lenders' agent was aware of the true sale prices and the kickbacks. To convict on each count, the jury instructions required the jury to find Engelmann possessed an " intent to defraud" [1] defined as follows:

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[T]o act knowingly and with the intent to deceive someone for the purpose of causing some financial loss or loss of property or property rights to another or bringing about some financial gain to oneself or another to the detriment of a third party.
On January 26, 2012, the federal court sentenced Engelmann to thirty-six months in prison and ordered him to pay $392,937.73 in restitution. Engelmann moved for a new trial, contending a witness violated the sequestration order during trial and a jury instruction on his good-faith defense was erroneous. The district court denied his motion. Id. at 993. Engelmann appealed.

On March 20, while Engelmann's appeal was pending, the Board filed a complaint, alleging Engelmann violated Iowa Rules of Professional Conduct 32:1.2(d), 32:1.16(a)(1), 32:4.1(a), 32:4.1(b), and 32:8.4(b). The Board also alleged that Engelmann's felony convictions met the requirements for revocation or suspension under Iowa Code section 602.10122(1). The Board gave notice pursuant to Iowa Court Rule 35.7(3)( c ) of its intent to invoke issue preclusion on all matters resolved in Engelmann's criminal trial.

Engelmann requested that the Board hold the disciplinary proceedings in abeyance until the Eighth Circuit issued its decision on his appeal. Engelmann filed denials to the paragraphs in the Board's complaint that alleged he made false representations, intentionally concealed facts, knew of the fraudulent nature of the transactions, or committed any of the charged crimes. He also denied that issue preclusion should apply in the grievance commission proceedings and denied that he committed the alleged rule violations. His motion to hold the proceedings in abeyance, however, stated that if he " is unsuccessful in his appeal to the 8th Circuit, he will acquiesce in the suspension of his license without the necessity of the discovery and hearing process."

The Board agreed to postpone Engelmann's hearing. Engelmann consented to the temporary suspension of his license. That suspension has remained in effect since June 20, 2012. The disciplinary hearing before the commission took place on December 4. Engelmann's counsel again asked the commission to delay issuing its report until the Eighth Circuit ruled on Engelmann's appeal. His counsel stated on the record, " [I]f the conviction stands, Mr. Engelmann will surrender his license." Engelmann did not testify at the hearing, but his ...

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