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12/15/88 In Re Brian J. Demuth

December 15, 1988



533 N.E.2d 867, 126 Ill. 2d 1, 127 Ill. Dec. 785 1988.IL.1791

Disciplinary proceeding.


JUSTICE STAMOS delivered the opinion of the court.


This is a disciplinary proceeding against respondent, Brian J. Demuth. On March 3, 1986, the Administrator of the Attorney Registration and Disciplinary Commission filed a three-count complaint with the Hearing Board, charging respondent with violations of several provisions of the Code of Professional Responsibility (the Code) (107 Ill. 2d R. 1 -- 101 et seq.). In a report and recommendation filed November 4, 1987, the Hearing Board found that respondent had committed the following misconduct: engaging in a conflict of interest by representing both parties to a loan transaction; neglect of a legal matter; conversion; and entering into a prohibited business transaction with a client. The Hearing Board recommended that respondent be suspended from the practice of law for 18 months and until further order of court.

Both the Administrator and respondent filed exceptions to the report and recommendation. By order dated March 18, 1988, the Review Board affirmed the findings and Conclusions of the Hearing Board, but recommended respondent be suspended for a period of two years. We granted respondent's petition for leave to file exceptions to the Review Board's recommendation. 107 Ill. 2d R. 753(e)(5).


Respondent was admitted to practice law in Illinois on April 29, 1977. The transactions that gave rise to this proceeding occurred in 1980. They involved three individuals: respondent, Charles Pinckard, and Dr. Sabah Khalifa. (In addition, respondent introduced testimony concerning a transaction involving Pinckard, Khalifa and another individual, Dennis Jenkins.) Respondent and Pinckard met and became friends when Pinckard was represented by a law firm where respondent was employed as an attorney. Khalifa was a business partner, friend, and client of respondent. Respondent performed various legal services for Khalifa both before and after the transactions at issue.

We summarize the evidence adduced at the hearing as it relates to each instance of misconduct.

Conflict of Interest; Neglect of a Legal Matter

In the fall of 1980, Pinckard approached respondent in an effort to obtain financing for repairs to a building Pinckard owned in the Hyde Park area of Chicago. In a series of conversations, respondent and Khalifa discussed the possibility of Khalifa's loaning $18,000 to Pinckard so he could undertake to repair his building. Eventually, Khalifa agreed to lend $18,000 to Pinckard. Khalifa would receive 20% interest on the loan, or $4,000 if the property were sold within six months. Khalifa was also to have a security interest in the property.

Respondent, Pinckard and Khalifa met on October 15, 1980, in respondent's office to consummate the loan transaction. Khalifa produced a cashier's check payable to himself in the amount of $18,000. Respondent affixed on the check a restrictive endorsement that read as follows: "pay to the order of Brian J. Demuth escrow account." According to respondent, this was done at Pinckard's request because Pinckard did not have a bank account and had no convenient means of negotiating the check. Khalifa endorsed the check at respondent's request and then returned the check to respondent. Pinckard testified that he did not see or receive the check. At the meeting, Pinckard executed a promissory note. Respondent deposited the cashier's check into his escrow account on or about October 15.

On October 15, 1980, respondent told Khalifa that respondent would prepare and file the security documents on Pinckard's property to secure Khalifa's loan. Respondent drafted mortgage documents and had them executed by Pinckard and Khalifa on October 15, 1980. However, these and other documents necessary to create a security interest for Khalifa were never filed.

Also on October 15, 1980, Khalifa asked respondent what respondent was getting out of the loan transaction; respondent replied that he would receive a few hundred dollars from Pinckard. Ultimately, Pinckard received from respondent $16,000 in a series of payments as proceeds of the loan. Pinckard testified that respondent charged him $2,000 as a finder's fee. He also testified that any funds he received from respondent were proceeds of the loan from Khalifa and that he never received a personal loan from respondent. Respondent conceded he retained $2,000. He maintains, however, that he only received a few hundred dollars for his work on the loan transaction. ...

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