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09/27/89 In Re Richard Cornell Imming

September 27, 1989



545 N.E.2d 715, 131 Ill. 2d 239, 137 Ill. Dec. 62 1989.IL.1508

Disciplinary proceeding.


JUSTICE STAMOS delivered the opinion of the court.


On January 24, 1986, the Administrator of the Attorney Registration and Disciplinary Commission filed a four-count complaint charging attorney-respondent Richard Cornell Imming with engaging in prohibited business transactions with clients, accepting employment when his professional judgment may be affected by his own interests, engaging in conduct prejudicial to the administration of Justice, causing prejudice or damage to his clients and overreaching in his attorney-client relationships in violation of several provisions of the Code of Professional Responsibility (the Code) (107 Ill. 2d R. 1--101 et seq.).

On July 27, 1987, the Hearing Board issued a report finding that the Administrator had proved the misconduct alleged in the complaint and recommended that the respondent be disbarred. The respondent filed exceptions to the report and recommendation on October 5, 1987. In an order dated November 16, 1988, the Review Board affirmed the findings and Conclusions of the Hearing Board, but recommended that respondent be suspended from the practice of law for a period of two years. The Administrator and respondent both filed exceptions to the report and recommendation of the Review Board. 107 Ill. 2d R. 753(e).


A. Respondent and Polypropylene Films, Inc.

Respondent was admitted to practice law in Illinois in 1963. Respondent concentrated his legal practice in real estate, estate planning and finance for corporate clients. Beginning in 1971, respondent began involvement in a plastic manufacturing company. Due to respondent's increased activity in the business world, he reduced the size of his law practice.

In 1977, respondent formed his own plastic manufacturing firm known as Polypropylene Films, Inc. . Respondent was the president and sole shareholder of PFI, and obtained the initial financing for the business by borrowing $400,000, obtaining a $75,000 mortgage on his home and liquidating certain personal assets. However, PFI had difficulty meeting its expenses. From 1977 through 1981, the respondent obtained funds by arranging for loans from several of his legal clients. These loans were evidenced by unsecured promissory notes issued by PFI with an annual interest rate of 12% or 15% annually. Respondent also personally guaranteed the repayment of these loans.

PFI never earned a profit. The corporation's income tax returns for 1978 and 1979 show a negative taxable income of $642,696 and $859,000. PFI did not file a tax return for 1980 because there was no taxable income to report and the corporation could not afford to pay its tax accountants. Respondent never advised his client/creditors of PFI's negative taxable income. He also did not make accurate financial statements or balance sheets available for public review. Respondent did supply PFI's suppliers with documents containing certain financial projections, but he testified that he never allowed his clients to view them because he believed the information might have misled them.

During 1978 and 1979, respondent paid the daily operating expenses of PFI with the funds he borrowed from his clients. Sometime in 1979 or 1980, the corporation began to suffer severe financial difficulties due to the rising costs of materials and respondent's inability to obtain these materials on credit. Thus, PFI was unable to meet its obligations to pay monthly interest installments on the loans from respondent's clients.

During the summer of 1980, respondent sent several written communications to his client/creditors, purportedly to explain the interruption of the interest payments. The first communication, a form letter, blamed the situation on "general economic conditions," but failed to mention respondent's credit problems. In July of 1980, respondent targeted a second letter to client/creditors with substantial cash assets, suggesting that each client/creditor could assist PFI in raising additional capital by purchasing common stock in PFI, and that any additional investment would help ensure PFI's repayment of the debt owed the client. Shortly thereafter, respondent sent a third communication stating that PFI would resume interest payments in 30 days because July sales "were good" and "August should be good or better."

As of January 1981, PFI had made no additional interest payments. At this time, respondent devised a plan which would make PFI "attractive to a major investor." Respondent intended to reassign all the promissory notes from PFI to himself as payor of the obligation, while issuing preferred stock to himself as payment for assuming the notes. In effect, this would make it appear, on the face of corporate records, that PFI had no debt. This plan never came to fruition, however, as no new investors came forward. Despite this, respondent sent a final letter to the client/creditors on October 19, 1981, stating that he expected PFI to be sold on October 31, 1981. This sale also did not materialize. Neither PFI nor the respondent ever resumed interest payments.

By 1982, PFI had ceased to function. On March 11, 1983, respondent filed a petition in the United States Bankruptcy Court for the Northern District of Illinois seeking protection under chapter 13 of the Bankruptcy Code. (In re Imming (N.D. Ill., filed Mar. 11, 1983), No. 83 -- B -- 3308.) Only client/creditors who had initiated formal actions against respondent were scheduled as creditors. Respondent did not disclose those clients who had not initiated any formal action.

During the time when respondent was in contact with his client/creditors, from 1977 through 1981, respondent never advised any of them to seek the advice of other counsel. He also failed to disclose the financial status of either PFI or himself. During 1981, when respondent reassigned the promissory notes making himself the obligor on the debts, he failed to disclose any of the details surrounding PFI's operating problems.

B. Respondent's Relations with Client/Creditors

The Hearing Board focused on respondent's relationships with eight of his clients, each of whom loaned PFI large sums of money. To better understand the parameters of respondent's misconduct, we will examine the facts of each client's situation:

(1) Jacqueline Silvertsen Chesbrough retained respondent to represent her as executor of her deceased husband's will in 1970. Between 1970 and 1973, respondent also represented Chesbrough in matters involving claims against the estate, including a lawsuit by her husband's former ...

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