appeal from the report of the Iowa Supreme Court Grievance
commission recommends a six-month suspension of
attorney's license. LICENSE SUSPENDED.
L. Brown and Alexander E. Wonio of Hansen, McClintock &
Riley, Des Moines, for appellant.
Wendell J. Harms, Tara van Brederode, and Susan A. Wendel
(until withdrawal), for appellee.
attorney disciplinary case, we are called upon once again to
remind the Iowa bar that while our ethics rules allow
attorneys to engage in financial transactions with clients
and to represent both party clients in a financial
transaction, the demanding nature of the disclosures required
and the necessity of documenting informed consent mean that
these matters may not be undertaken lightly as a matter of
Iowa Supreme Court Attorney Disciplinary Board (Board)
charged attorney Mark Hamer with multiple violations of the
Iowa Code of Professional Responsibility for Lawyers (code)
and the Iowa Rules of Professional Conduct
(rules) arising from (1) several loan transactions
occurring between multiple clients of Hamer without adequate
conflict-of-interest disclosures and informed consent, (2)
several loan transactions involving Hamer and a client
without adequate conflict-of-interest disclosures and
informed consent, (3) two failed joint investments in which
Hamer and his client suffered substantial losses, and (4) a
clearly excessive and dishonest attorney's fee collected
through a bonus to which the client did not agree. Hamer
denied the allegations.
an evidentiary hearing involving only two witnesses but over
2200 pages of documents, the Iowa Supreme Court Grievance
Commission (commission) found Hamer violated numerous code
and rule provisions with respect to the loans and the
attorney's fee issues but declined to find an ethical
violation in connection with the failed investments. As a
result, the commission recommends that Hamer's license to
practice law be suspended for six months.
our de novo review, we conclude Hamer engaged in a number of
ethical violations in connection with the loan transactions
between Hamer's clients and between Hamer himself and
Douglas Paul. We also find Hamer engaged in deceit in
connection with the bonus payment for legal work. Based on
the violations, we conclude a six-month suspension is the
Factual and Procedural Background.
Background to the Events at Issue.
received his license to practice law in Iowa in 1972 and
represented businesses, entrepreneurs, franchisors, and
franchisees for forty years. During all times relevant to the
allegations in the complaint, Hamer worked for a prominent
Iowa City law firm.
1982, Douglas Paul, an entrepreneur in the field of
education, founded an education writing and editing business
that eventually became known as Buckle Down Publishing
Company. Buckle Down developed customized curriculum
materials for school districts. Paul also owned ZAPS Learning
Company, an ACT and SAT student-test-preparation company. In
1988, Hamer became Paul's attorney for both business and
personal matters. In addition to their business relationship,
Hamer and Paul became friends and frequently socialized
2004, Hamer helped Paul sell both Buckle Down and ZAPS. Paul
sold his interest in Buckle Down for $23 million cash and
some preferred stock. Paul also sold his interest in ZAPS for
$1.5 million. DLP Management, an entity wholly owned by Paul,
was formed to handle the money generated by the sale of
B. Bonus for the Successful Sale of Buckle
was pleased with the Buckle Down sale and wanted to reward
the people who worked on the transaction. Paul considered
giving a cash bonus to Hamer, an accountant, and a secretary.
The record does not clearly establish the amount of the
proposed bonus that Paul was considering giving Hamer.
April 15, Hamer accepted the bonus for his secretary, but
told Paul that a cash bonus for himself was problematic
because he would be required to share the bonus with the
other partners of the law firm. Five days later, Hamer told
Paul that the legal fees in connection with the Buckle Down
transaction were $268, 447.13. Paul paid the fees on April 21
and received an unitemized bill. The unitemized bill did not
state it included a $110, 000 bonus fee. When Paul received
the unitemized bill he requested an itemized fee statement,
but Hamer demurred. He told Paul he would give Paul an
itemized bill the following week but did not do so.
28, a Paul-owned entity made a five-year loan of $1, 000, 000
at 2.5% yearly interest to a Hamer-owned entity, Quad Four,
L.L.C. Paul claimed this attractive loan was three percent
below what Hamer would have otherwise been required to pay
and was made in lieu of a cash bonus on the Buckle Down
transaction that Hamer would have had to share with other
members of the firm if paid as part of the bill.
the years, Paul continued to press Hamer several times for an
itemized bill related to the Buckle Down transaction,
including in an email on January 21, 2009. Hamer did not
provide an itemized bill, however, until Paul's new
lawyer sent a demand letter asking for documentation in early
Paul received the itemized bill in February 2010, there was a
note in Hamer's handwriting attached to the file copy of
Paul's payment check stating the bill included a $110,
000 bonus. The note attached to the check included the words
"CF Doug Paul 4/20/04." Paul later testified that
the notation meant nothing to him. Paul stated he did talk to
Hamer on April 20, 2004. He claimed, however, there was no
discussion about the bonus but only about the total amount of
Paul's Investments with Other Hamer Clients in
the sales of Buckle Down and ZAPS in 2004, Paul began making
investments that he and Hamer called "private
banking." In these transactions, Paul directly loaned
money to individuals and businesses.
March 2004 to August 2005, Hamer presented to Paul, and Paul
accepted, opportunities to loan money to nine individuals or
entities who were also clients of Hamer. In all but one of
the loans, Hamer made no effort to get Paul's informed
consent in writing. Paul would later testify he had no
knowledge the other parties in these loans were Hamer's
clients. He also testified that Hamer never discussed the
perils of multiple representation or obtained Paul's
verbal informed consent to any real or potential conflicts of
interest arising out of the transactions. Paul also testified
Hamer informed him that most of the loans would be secured by
adequate collateral. In fact, Hamer never perfected the
various security interests or filed the required mortgages
nor did he advise Paul that Paul would need to do so himself.
signed a multiple-client representation letter dated December
29, 2004, that he received from Hamer for one of the
transactions. The letter began, "As we understand your
request, we will be dealing with the documentation and
reporting relating to these transactions." The letter
was lengthy and contained mostly generalizations:
Before entering in this agreement, we believe it is necessary
and appropriate for us to spell out for you the potential
ramifications of our representation of you.
As you may be aware, the Iowa Code of Professional
Responsibility for Lawyers, and in particular Canon 5,
requires that a lawyer must exercise independent professional
judgment on behalf of his client. In this connection, any
lawyer requested to undertake representation of multiple
clients having potentially differing interests must weigh
carefully the possibility that his judgment may be impaired
or his loyalty divided if he accepts the employment and the
lawyer must resolve all doubts about the propriety of the
representation prior to accepting the engagement. Once a
lawyer accepts such employment and in the event the interests
of the clients do become actually differing, the lawyer must
withdraw from the employment.
There are, of course, many instances in which a lawyer may
properly serve multiple clients having potentially differing
interests in matters not involving litigation. For example,
if the interests vary only slightly, it is generally likely
that the lawyer will not be subjected to an adverse influence
and can retain his independent judgment on behalf of each
client and if the interests do become differing, withdrawal
is less likely to have a disruptive effect upon the clients.
However, in those instances in which a lawyer is justified in
representing multiple clients, it is nevertheless essential
that each client be given the opportunity to evaluate his
need for independent representation and to obtain other
counsel if desired. Further, each client should be fully
advised concerning the implication of the common
representation (which we hope this letter will do) and be
fully advised as to any other circumstances that might cause
one of the clients to question the undivided loyalty of the
lawyer to the engagement and or interests of all the clients
(which we will do later in this letter).
In regard to our requested representation, we have evaluated
our knowledge of your respective interests. It appears to us
that all of you are experienced; that you are willing and
capable of completing these transactions; that you can make
relatively equal though substantially different business
decisions; and, finally, that you appear to share the same
business philosophy. While those factors alone are not enough
to suggest that you should enter into this transaction, these
factors do suggest to us that your individual interests and
goals are sufficiently similar to convince us that we can
represent you without any concern of the propriety of the
multiple representation and without any concern that our
judgment will be impaired or our loyalty divided among you.
On the other hand, however, you must both be advised (and
we're sure already know) that the undersigned have
previously represented all of you extensively and for many
years. We anticipate continuing to represent all of you on a
variety of matters. In addition, we anticipate that all of
you will request that we give our opinion as to the
structure, wisdom and advisability of your business
transaction as it related to each of you and that we will
provide our opinion(s) to you at all times during the
We do not anticipate that there will be any conflicts arising
which might threaten the transaction between you. However, in
the event of such a conflict, we anticipate the termination
of our representation in the area of the conflict and the
continuation of our representation on other matters. We would
not, in such a case, represent either party relative to any
conflict between you. In other words, in the event of any
conflict between you which would require the assistance of
legal counsel, you would all be required to employ counsel
other than ourselves or those in this firm.
If, after careful consideration of all the factors contained
in this letter, you want [Hamer's law firm] to represent
you with regard to these transactions, then you should sign
the Consent attached to this letter, and have it witnessed
to this letter was a consent form, which Paul and the
borrowers signed. Hamer prepared a similar letter for one of
the other loans, but this letter was never presented to Paul,
and he did not sign it.
discontinued private banking facilitated by Hamer because two
of the loans "went south" in 2006 and 2007. The
borrower on one loan defaulted in 2006. Paul understood the
loan would be secured by a mortgage on real estate owned by
the borrower. Paul instructed Hamer to seize the collateral.
Hamer demurred. He told Paul the collateral was not easily
liquidated but offered to talk to the borrower "to
straighten things out." After Hamer spoke with the
borrower, the borrower caught up on overdue interest payments
and then made occasional payments against the principal. The
terms of the loan, however, were never formally modified in
writing. The loan was eventually repaid in March 2009.
borrower on a second loan defaulted in 2007. Paul understood
that this loan was secured by an investment portfolio. Paul
instructed Hamer to seize the portfolio. Hamer refused. Hamer
advised Paul that Hamer could not take the action because the
borrower was his client. Hamer told Paul that if Paul wished
to pursue collection, he would have to seek other
representation. Paul did not pursue other representation and
eventually agreed to reduce the interest rate and extend the
terms of the troubled loan. The troubled loan has since been
extended multiple times and, as of Paul's 2013 complaint,
about $350, 000 remained unpaid. Under the new terms of the
loan, the loan is scheduled to be paid in full in 2029.
Paul's Loans to Hamer and Hamer-Owned Entities.
addition to the loan that Paul made to Hamer's Quad Four,
L.L.C., Paul made two other loans to entities that Hamer
either owned or had an interest in-one in July 2004 and the
other in March 2006. All of these loans were fully repaid as
Paul and Hamer's Joint Investments in Platinum
Exploration and Unified Worldwide Transport.
2004 to 2006, Paul and Hamer made joint investments in two
entities, Platinum Exploration, Inc. (Platinum) and Unified
Worldwide Transport, L.L.C. (UWT).
2004, Paul invested almost $2, 000, 000 in Platinum, while
Hamer invested $100, 000 in the enterprise. Platinum,
according to Paul, was a Texas oil exploration company that
offered investments in a group of wells and guaranteed a
recovery of the investment in twenty-four months through
monthly payments. After the twenty-four months, the investor
would be paid based on the profits of the wells.
introduced the Platinum investment to Paul. The monthly
payments stopped after seventeen months because, according to
Paul, the guaranteed payments were found to be illegal in
Texas. A company that took over Platinum made a few more
distributions and then collapsed.
also invested about $4, 500, 000, and Hamer invested at least
$600, 000, in UWT. UWT purported to be a communications
company involved with voice-over internet protocol with
long-distance telephone contracts on the verge of a buyout
but was later revealed to be a sham with no equipment or
customers. UWT made a few small dividend distributions before
it folded. Paul also loaned over $2, 000, 000 to UWT in 2005
and 2006. Hamer prepared the paperwork for the loan,
including security agreements in UWT equipment. UWT defaulted
on both loans.
pursued legal action against UWT in California, eventually
obtaining a judgment against the company. UWT, however, had
no available assets. For his litigation efforts, Paul
collected aggravation but no money.
filed a complaint with the Board on February 14, 2013. In the
complaint, Paul accused Hamer of gaining his
"unquestioning trust" and then abusing the
relationship by representing the 2004 and 2005 private
banking loans as being vetted and secured when they were not.
Paul alleged he suffered losses due to Hamer's abuse of
the attorney-client relationship. Paul also accused Hamer of
erratic billing and failing to promptly provide a detailed
billing record on request.
Board forwarded the complaint to Hamer and asked for a
response. Hamer denied any wrongdoing, arguing Paul was a
sophisticated client and understood the nature and risks of
all of the transactions at issue.
Board filed a complaint with the commission on September 30,
2015. The complaint included four counts with fifteen
subdivisions alleging multiple violations of the pre-2005
code and post-2005 rules.
of the complaint concerned the loans between Paul and other
Hamer clients. For the period before the adoption of our
current disciplinary rules, the Board alleged violations of
various provisions of the prior code. The Board alleged Hamer
violated DR 5-105(B) and DR 5-105(C). These code provisions
together forbid beginning and continuing the representation
of multiple clients if the lawyer's "exercise of
independent professional judgment on behalf of [one] client
will be or is likely to be adversely affected by . . .
represent[ing] another client. Iowa Code Prof'l
Responsibility DR 5-105(B)-(C).
Board also alleged a violation of DR 5-105(D). This code
provision allows multiple representation only "if it is
obvious that the lawyer can adequately represent the interest
of each client and if each consents to the representation
after full disclosure of the possible effect of such
representation on the exercise of the lawyer's
professional judgment on behalf of each." Id.
period after the adoption of the rules, the Board alleged
multiple violations parallel to those brought under the prior
code. Specifically, the Board alleged Hamer's
representations of Paul violated rule 32:1.7(a)(2). Under
this rule, a lawyer is generally prohibited from representing
a client when a concurrent conflict of interest involves
"a significant risk that the representation of one or
more clients will be materially limited by the lawyer's
responsibility to another client." Iowa R. Prof'l
Board also alleged a violation of rule 32:1.7(b). Under this
rule, a lawyer may represent a client when there is a
concurrent conflict of interest "if . . . the lawyer
reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected
client" and, among other things, "each client gives
informed consent, confirmed in writing." Id. r.
II concerned the loans that Paul made to Hamer or Hamer-owned
entities. The Board alleged Hamer violated DR 5-104(A) during
the period prior to the adoption of our current rules. This
provision states that "[a] lawyer shall not enter into a
business transaction with a client if they have differing
interests . . . and if the client expects the lawyer to
exercise professional judgment [on the client's behalf]
unless the client has consented after full disclosure."
Iowa Code Prof'l Responsibility DR 5-104(A).
Board also alleged a violation of rule 32:1.8(a). This
provision states that
[a] lawyer shall not enter into a business transaction with a
client or knowingly acquire . . . [a] pecuniary interest
adverse to the client unless . . . the transaction and terms
. . . are fair and reasonable to the client[;] . . . are
fully disclosed and transmitted in writing . . . [to] the
client; . . . the client is advised in writing of the
desirability of seeking and is given a reasonable opportunity
to seek the advice of independent legal counsel . . .; and
the client gives informed consent, in a writing signed by the
client, to the essential terms of the transaction and the
lawyer's role in the transaction.
Prof'l Conduct 32:1.8(a).
III concerned the joint investments Hamer and Paul made in
Platinum and UWT. In this count, the Board also alleged
violations of DR 5-104(A) and rule 32:1.8(a).
in count IV, the Board alleged ethics violations in
connection with the undisclosed bonus Hamer included in his
unitemized bill to Paul for legal services. The Board
alleged, among other things, that Hamer violated DR
1-102(A)(4), which prohibits lawyers from "engag[ing] in
conduct involving dishonesty, fraud, deceit, or
misrepresentation." Iowa Code Prof'l Responsibility
DR 1-102(A)(4). The Board also alleged that Hamer violated DR
2-106(A), stating lawyers shall not collect a "clearly
excessive fee." Id. DR 2-106(A).
filed a response on April 22, 2016. Hamer admitted the
transactions occurred but denied any conflict of interest,
failure to disclose, or lack of consent on Paul's part.
Hamer agreed he offered Paul the private financing
opportunities at issue. Hamer denied allegations of conflict
of interest and allegations he did not fully disclose to Paul
the multiple representations and their potential effects.
Hamer denied failing to explain to Paul how independent
counsel might address Paul's interests differently and
although he most certainly did not have a discussion
detailing how each and every possible other
"counsel" may have approached Paul's interests,
Respondent did not conflict with Paul's interest in any
way and a complete disclosure of the circumstances was made
to Paul upon which Paul could, and did, make an informed
decision-as he always did and this included discussions of
denied telling Paul the loans would be fully secured with
adequate collateral. Hamer agreed he never took steps to
perfect Paul's security interests but denied that this
was ever intended to be his responsibility. He stressed the
decisions whether to make the loans ...