In Re Petition for DISCIPLINARY ACTION AGAINST Brian James ENGEL, a Minnesota Attorney, Registration No. 299790

OFFICE OF
APPELLATE COURTS
FEB 24 2015
STATE OF MINNESOTA
IN SUPREME COURT D
A13-1497
In re Petition for Disciplinary Action against
Brian James Engel, a Minnesota Attorney,
Registration No. 299790.
0 R D E R
The Director of the Office of Lawyers Professional Responsibility filed a petition
for disciplinary action alleging that respondent Brian James Engel committed
professional misconduct warranting public discipline. The allegations of professional
misconduct relate to respondent’s knowing involvement as an escrow agent in the
fraudulent schemes of his clients and improper use of his client trust account in
furtherance of those schemes, in violation of Minn. R. Prof. Conduct 1.2(d), 1.15(c)(4),
and 8.4(c). Respondent admitted the allegations of the petition for purposes of this
disciplinary proceeding and admitted he violated the Minnesota Rules of Professional
Conduct as set forth in the petition, waived his procedural rights under Rule 14, Rules on
Lawyers Professional Responsibility (RLPR), and entered into a stipulation with the
Director in which the parties jointly recommended that the appropriate discipline is an
indefinite suspension with no right to petition for reinstatement for 2 years. Respondent
acknowledged, however, that the court “may impose any of the sanctions set forth in Rule
15(a)(1)-(9), RLPR, including making any disposition it deems appropriate.”
Following submission of the stipulation, we ordered the parties to show cause why
respondent should not be disbarred in light of the professional misconduct to which he
admitted. The Director and respondent flled responsive memoranda. We heard oral
argument on the appropriate discipline to be imposed in this case.
Respondent’s misconduct was a serious breach of the standards of professional
conduct required of an attorney licensed in Minnesota. Respondent admits that he
knowingly assisted his clients in three fraudulent schemes that resulted in the
misappropriation of $4.7 million of investors’ funds by acting as an escrow agent in these
schemes. Respondent further admits he made a misrepresentation to one of the investors
in these schemes. Respondent’s status as an attorney and his use of an attorney escrow
account gave the fraudulent schemes an air of legitimacy and perpetuated the damage
caused by enabling his clients to continue the schemes. Moreover, respondent admits
that he continued to act as escrow agent for his clients on the third fraudulent scheme
even though the investors of one of the earlier fraudulent schemes had filed an ethics
complaint against him.
Despite the serious nature of the misconduct involved, the unique circumstances of
this case support the recommended disposition of an indefinite suspension with no right
to petition for reinstatement for 2 years. Specifically, respondent’s role was limited to
that of an escrow agent and there is no evidence that respondent received any personal
financial gain as a result of the fraud. In addition, the Director agreed to the
recommended discipline, in part, because of concerns involving problems of proof. We
give deference to the Director’s evaluation of the risk of litigation and decision to enter
into a stipulation. In re Brost, 763 N.W.2d 637, 638 (Minn. 2009) (order); see also In re
Clark, 848 N.W.2d 236, 236 (Minn. 2014) (order) (highlighting that “[t]he Director has
explained that the recommended discipline was agreed to because of concerns involving
problems of proof” when approving discipline recommended in a stipulation for
discipline); In re Kalk, 829 N.W.2d 366, 367 (Minn. 2013) (order) (same).
The purpose of discipline for professional misconduct is not to punish the attorney
but rather to protect the public, to protect the judicial system, and to deter future
misconduct by the disciplined attorney as well as by other attorneys. In re Rebeau, 787
N.W.2d 168, 173 (Minn. 2010). In light of the unique circumstances of this case, we
conclude that a 2-year suspension coupled with the requirement to petition for
reinstatement will adequately protect the public and the judicial system and deter future
professional misconduct by respondent and others. This order, however, is predicated
upon the information presented to us regarding respondent’s involvement in the
fraudulent misconduct of his clients. We reserve the right to reopen this matter in the
event that other material evidence is made available to the court.
Based upon all the files, records, and proceedings herein,
IT IS HEREBY ORDERED that:
1. Respondent Brian James Engel is indefinitely suspended from the practice
of law, effective from the date of the filing of this order, with no right to petition for
reinstatement for a minimum of 2 years from the date of the filing of this order.
2. Respondent may petition for reinstatement pursuant to Rule 18(a)—(d),
RLPR. Reinstatement is conditioned on successful completion of the professional
responsibility portion of the state bar examination and satisfaction of the continuing legal
educations requirements pursuant to Rule 18(e), RLPR.
3. Respondent shall comply with Rule 26, RLPR (requiring notice of
suspension to clients, opposing counsel, and tribunals), and shall pay $900 in costs
pursuant to Rule 24, RLPR.
Dated: February 24, 2015
BY THE COURT:
5/
Alan C. Page
Associate Justi e
D I S S E N T
LILLEHAUG, Justice (dissenting).
I respectfully dissent because, based on his admitted conduct, respondent should
never again practice law in the State of Minnesota.
Respondent admits that he was both the attorney and the secretary of a
corporation, JC Funding Solutions, Inc., headquartered in respondent’s office, that
engaged in at least three fraudulent investment schemes. The three frauds were
accomplished by wire transfers into and out of respondent’s attorney trust account.1
Respondent admits that he used his trust account as the vehicle for transfers of $2.515
million on the first scheme, $1 million on the second scheme, and $1.2 million on the
third scheme, for a total of $4.7 l 5 million.
Respondent admits that he participated in and assisted in the first two fraudulent
schemes and thereby violated Rules 1.2(d) and 8.4(c) of the Minnesota Rules of
Professional Conduct. What is particularly serious is that, even after he had notice that
the first and second schemes were fraudulent, and even after victims of the second
scheme filed an ethics complaint against him, respondent continued to participate in and
assist JC Funding Solutions. According to the facts admitted, respondent used his trust
account to facilitate the third scheme. He also made a misrepresentation to the investor
I Respondent’s Wells Fargo account was entitled “BJE, Inc. Attorney Escrow
Account.” According to public records of the Secretary of State, respondent was the
chief executive officer and registered agent of BJE, Inc., a corporation created by
respondent pursuant to Minnesota Statutes Chapter 302A. Minnesota does not allow the
corporate practice of law except through professional firms organized under Chapter
3198. See Minn. Stat. § 481.02, subd. 2 (2014). Therefore, a professional firm may not
use “Inc.” in its name. See Minn. Stat. § 319B.05 (2014).
D-l
and disbursed funds contrary to escrow instructions. He acknowledges that he thereby
violated Minn. R. Prof. Conduct 1.15(c)(4) and 8.4(c).
Taking into account his acts participating in and assisting the three fraudulent
schemes, and considering his status as secretary and attorney for the corporation
orchestrating the seven-figure frauds, cases considering acts of similar gravity suggest
that respondent should be disbarred. See In re Oberhauser, 679 N.W.2d 153, 156, 160
(Minn. 2004) (disbarring attorney for using trust account in $11 million fraud scheme);2
In re Clasen, 443 N.W.2d 190, 191 (Minn. 1989) (order) (disbarring attorney who
engaged in a series of deceptive financial transactions with unsophisticated investors
totaling approximately $97,000); In re Larson, 324 N.W.2d 656, 658-59 (Minn. 1982)
(disbarring attorney for, among other things, making misrepresentations to investors,
failing to file income tax returns, and failing to cooperate with the Director). At the very
least, respondent qualifies for a suspension considerably longer than 2 years.3
To protect the public and to deter the use of attorney trust accounts as vehicles for
fraud, respondent should be disbarred or, at a minimum, indefinitely suspended for at
2 The investment scheme in Oberhauser was based on the idea that $100 million in
treasury bonds could be “leased” and then traded for an enormous profit. 679 N.W.2d at
155. One of the three investment frauds which respondent assisted and participated in
was based on the same idea.
3 See In re Crosby, 577 N.W.2d 711, 711 (Minn. 1998) (order) (suspending for
5 years an attorney convicted of theft by swindle); In re Perry, 494 N.W.2d 290, 292, 295
(Minn. 1992) (suspending an attorney for 5 years for misappropriating over $430,000
from his mother’s trust); In re Daffer, 344 N.W.2d 382, 383 (Minn. 1984) (suspending an
attorney for 5 years for misappropriating over $172,000 mistakenly credited to him, using
funds to engage in a fraudulent scheme); In re Scallen, 269 N.W.2d 834, 835-37 (Minn.
1978) (suspending an attorney for 5 years for participation in fraud that resulted in
misappropriation of over $3 million).
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least 5 years. It is true, as both the Director and respondent note, that respondent has not
been charged with criminal fraud or swindle. Typically, sizable interstate investment
frauds centered in Minnesota are investigated by federal authorities (such as the FBI and
the IRS) and prosecuted by the United States Attorney. Nothing in the record of this case
tells us whether federal or state authorities have investigated the three fraudulent
transactions totaling at least $4.7 million, which were orchestrated out of respondent’s
office by an entity for which respondent served as officer and attorney. But the
possibility that these three frauds may not yet have appeared on law enforcement’s radar
screen—and that applicable statutes of limitation may be near expiration—should not
save respondent from disbarment.
D-3