Attorney’s Fraudulent Transfer Did Not Violate Professional Ethics

Some attorneys are concerned about advising clients about asset protection because the attorneys believe that it may be professionally unethical to help a client who is found to make a fraudulent transfer of his property. The Florida Bar’s rules of conduct make it unethical for an attorney to participate or assist a crime or fraud. It is one thing to an attorney to advise a client to make a fraudulent transfer of the client’s property; it is another matter when the attorney, himself, makes a fraudulent conveyance of the attorney’s assets to hinder or delay the attorney’s own judgment creditors. It would seem that the latter case, where the attorney himself, makes the fraudulent conveyance for his own benefit creates the greater risk of violating the Bar’s rules of conduct.

In 2015, a Florida attorney was targeted by the Florida Bar for conducting his own fraudulent transfers. A former client obtained a money judgment against the attorney’s professional association. The attorney formed a second professional association and began practicing law through the new P.A. The trial court found that the attorney make a fraudulent transfer of assets from the first P.A. to the second P.A., and the court entered judgments against both P.A.s. and the attorney personally.

The Bar then brought an ethical complaint against the attorney based upon the trial court’s ruling that the attorney made fraudulent transfers from his first P.A. to his second P.A. and himself individually to hinder or delay the collection of the judgments. The court had found fraudulent transfers of assets including goodwill and cash from the first P.A. that was initially subject to the money judgment.

The attorney fought the ethical complaint, and the matter was tried before a circuit court judge serving as a referee. The referee issued a written report finding no violation of the Bar’s rules of professional conduct. The referee said that the attorney’s transfer of his practice to a new P.A. did not constitute a fraudulent transfer of “goodwill” because the attorney’s practice had no goodwill other than his coming to work every day. As to alleged fraudulent transfer of money, the referee said that the attorney did not alter ongoing financial practices to avoid collection of the judgment and that his financial practices were customary in the industry.

The referee concluded that the attorney did not hide or launder money, and that, “ he did not commit the tort of fraud. He did not make a misrepresentation. He was not deceitful.” The referee clearly distinguished the attorney’s alleged fraudulent transfers from the tort of fraud and deceit which is proscribed by the Bar’s rules.

This case is the first instance when the Florida Bar sought ethical sanctions against an attorney solely related to the attorney’s participation in fraudulent transfers. The finding suggests that attorney’s are not acting unethically advising clients about transfers later found to be fraudulent unless the attorney does not commit acts of common law fraud and deceit.

On April 21, 2016, the Supreme Court of Florida adopted the referee’s report and closed the complaint.

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