Hello everyone and welcome to this Ethics Alert blog which will discuss recent Wisconsin Supreme Court opinion imposing a one year suspension a lawyer who inflated his billable hours to qualify for bonuses from his law firm. The case is: In the Matter of Matthew C. Siderits, Case No. 2011AP259-D (1/4/13). The opinion is online at: http://www.wicourts.gov/sc/opinion/DisplayDocument.html?content=html&seqNo=91260.
According to the disciplinary opinion, the lawyer’s law firm had a compensation system for shareholders which provided for a bonus if a shareholder’s billings exceeded 1,800 hours for the year. The lawyers at the firm typically entered billable hours either by completing daily “time sheets” and having their assistants entered the billable hours into the firm’s computerized billing system or entering their billable time directly into the law firm’s billing system. Toward the end of each calendar year, the shareholders met to review each shareholder’s billable hours as recorded in the firm’s billing system to determine whether the partner was likely to meet the 1,800 hour bonus target.
The firm’s billable time period ended at the end of December and the firm’s partnership then met to determine which partners were entitled to receive a bonus and the bonuses were paid after the beginning of the next year. The disciplined lawyer was the firm’s treasurer and he reviewed each lawyer’s hourly compilation and signed off on the final distributions/bonuses. In addition, as a shareholder, the lawyer participated in the meetings and in bonus distributions for each year. The lawyer was a partner/shareholder from 2004 until he was terminated in 2009.
The lawyer recorded over 1,800 hours in 2007 and 2008 (1,803.3 hours in 2007 and 1806.3 hours in 2008) and he was paid a bonus of $23,451.12 in early 2008 for his 2007 billings and $23,526.92 in early 2009 for his 2008 billings. After the firm paid the lawyer each of the bonuses, but before the bills were sent to the clients, the lawyer reduced, or “wrote-down,” his billable hours for those years. In early 2008, the lawyer wrote-down 29.2 hours of time from his 2007 billings without notifying the firm, and the reductions caused his billable hours to drop 25 hours below the 1,800 level. In early 2009, the lawyer wrote-down 231.9 hours from his 2008 billings, again without notifying the firm, which reduced his 2008 billable hours to below 1,600. In 2009, the firm discovered the lawyer’s 2007 and 2008 billing conduct and terminated him. His interest in the firm’s profit sharing plan was forfeited and he also repaid a total of $60,000 to compensate the firm for the bonuses which he did not earn and for other unspecified damages claimed by the firm.
The lawyer admitted at the disciplinary hearing before the referee that he did not actually bill 1,800 hours in either 2007 or 2008 and that he wrote-down about 29 hours in 2007 and about 230 hours in 2008. He also admitted that he was not entitled to receive the bonuses in question, but claimed he did not know at the time that this would disqualify him from the bonuses. He further admitted that he never told anyone else in the firm that he wrote-down his time for either 2007 or 2008 and that he entered all of the write-downs directly into the system so that neither his assistant nor the bookkeeper was aware of the write-downs.
The referee found that the lawyer violated rules related to all five counts of the alleged misconduct, including engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, and breaching his fiduciary duty to his law firm and his duty of honesty in his professional dealings with it. The referee also found in aggravation, a dishonest or selfish motive, a pattern of misconduct, and a refusal to acknowledge the wrongful nature of the conduct and, in mitigation: absence of a prior disciplinary record, a timely good faith effort to make restitution or to rectify the consequences of misconduct, a cooperative attitude toward the disciplinary proceedings, and good character or reputation. The referee recommended an 18-month suspension, did not comment on costs, and did not recommend restitution, because of the lawyer’s $60,000.00 payment to the firm.
In his report, the referee commented on the lawyer’s claim that he spent 140 hours writing a (17 page) brief: “(i)t is inconceivable to me that an experienced attorney could expect anyone to believe that he spent 140 hours on a relatively straightforward brief; especially since the matter had been fully briefed previously and the new brief was substantially based on the work of an associate. His protestations to the contrary are simply not credible. Furthermore, his time on that brief was entered late in the year, at times one would not normally expect an attorney to be working on the brief, in large quantities, and entered days and weeks after the work was allegedly performed. The same amounts were then routinely deleted following the end of the year, without following the normal procedure of deleting them on the paper pre-bills. (The lawyer) entered the computer system himself, telling no one, and deleted all of the time that he entered. The time he ultimately billed the client was within the realm of reason, and consistent with what two other attorneys testified should be the time for such a brief. He never discussed with his partners any of the massive write downs that he did on Matter “A” (the 17 page brief). The referee also found that this same pattern existed for lawyer’s other write-downs for 2008.
The disciplinary opinion upheld the referee’s findings and imposed a 12 month suspension stating: “(t)his case does not turn on the bare fact that (the lawyer) wrote-down his time; this case is about (the lawyer) abusing his write-down discretion and lying to his law partners in order to collect almost $47,000 in bonuses to which he was not entitled. (The lawyer) cannot seriously contend that firms must have a written policy forbidding stealing and lying before a misconduct charge for one of these actions can be sustained. As to (the lawyer’s) ignorance-of-the-law defense, we emphatically reject it. To allow an ignorance-of-the-law excuse in lawyer ethics cases would encourage and reward indifference to the ethics code and the cases interpreting it, a pernicious outcome.”
“In any event, the injunction against stealing from one’s own law firm is not an abstract one, and this court has stated it clearly and repeatedly…”(h)owever, given the unique circumstances of this case, and acknowledging that the imposition of discipline in attorney disciplinary cases is not an exact science, we believe that the recommended 18-month license suspension is not quite necessary. We conclude that a 12-month license suspension is sufficient to advance the objectives of lawyer discipline. This is so due to the number of mitigating factors that appear in the record. (The lawyer) has no previous disciplinary history. He lost his job with the Firm. He paid $60,000 to the Firm to compensate for the bonuses to which he was not entitled and for other unspecified damages claimed by the Firm. He forfeited his interest in the Firm’s profit sharing plan. As explained below, these disciplinary proceedings have been costly to (the lawyer). We are persuaded that, given these particular circumstances, (the lawyer) understands the seriousness with which this court views his conduct, and he will not likely repeat it.”
Bottom line: This opinion makes it quite clear that a lawyer (at least in Wisconsin) will be subject to discipline for falsifying billable time to obtain a firm bonus, even if not clients are ultimately harmed and it doesn’t help if the lawyer makes apparently false statements to support his billings, including that he spent 140 hours on a 17 page brief…
…be careful out there!
Disclaimer: this e-mail does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
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