S054585, Opinion — In re Schenck

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Argued and submitted March 6, accused suspended from practice of law for period
of one year, commencing 60 days from date of filing of decision October 9, 2008,
reconsideration allowed by opinion January 29, 2009
See 345 Or 652, 202 P3d 165 (2009)

In re Complaint as to the Conduct of
RONALD D. SCHENCK,
Accused.
(OSB 05-127, 05-128; SC S054585)
194 P3d 804

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CJS, Attorney and Client § 78.

# En Banc

On review from a decision of a trial panel of the
Disciplinary Board.

Ronald D. Schenck, Wallowa, argued the cause and filed
the briefs in propria persona.

Mary Cooper, Assistant Disciplinary Counsel, Lake
Oswego, argued the cause and filed the brief for the Oregon
State Bar.

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## PER CURIAM

The accused is suspended from the practice of law for a
period of one year, commencing 60 days from the date of filing
of this decision.

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## PER CURIAM

The Oregon State Bar (Bar) charged Ronald D.
Schenck (the accused) with violating Code of Professional
Responsibility Disciplinary Rules (DR) 1-102(A)(3) (prohibit-
ing conduct involving dishonesty, fraud, deceit, or misrepre-
sentation); DR 5-101(A)(1) (prohibiting conflict of lawyer's
self-interest); DR 5-101(B) (barring preparation of instru-
ment giving lawyer or person related to lawyer any substan-
tial gift from unrelated client); DR 5-104(A) (limiting busi-
ness relations with client); DR 5-105(E) (prohibiting multiple
current client conflict of interest); and Oregon Rules of
Professional Conduct (RPC) 8.1(a)(2) (requiring response to
lawful demand for information from disciplinary authority).1

A trial panel of the Disciplinary Board determined
that the accused's conduct violated DR 5-101(A)(1), DR
5-101(B), DR 5-104(A), DR 5-105(E), and RPC 8.1(a)(2), but
not DR1-102(A)(3). The trial panel suspended the accused
from the practice of law for one year. The accused sought
review by this court. ORS 9.536(2); Bar Rule of Procedure
(BR) 10.1. We review de novo. ORS 9.536(3); BR 10.6.

On review, the accused asserts that the Bar did not
present sufficient evidence to prove that his conduct violated
the disciplinary rules as charged.2 For the reasons discussed
below, however, we disagree. The record establishes, by clear
and convincing evidence, that the accused violated the rules
identified by the trial panel. We also agree with the trial

1 The Oregon Rules of Professional Conduct became effective January 1, 2005,
and replaced the Code of Professional Responsibility. The charges relating to the
accused's representation of and conflict of interest with his client occurred before
that date. Therefore, the Disciplinary Rules that were part of the Code of
Professional Responsibility apply to those charges. However, because the Bar's
investigation and the subsequent Bar proceeding occurred after January 1, 2005,
the Rules of Professional Conduct apply to the charge that the accused failed to
cooperate with the Bar's investigation.

? The accused also raises a facial challenge as to the constitutionality of two
terms used to define lawyer conduct that would subject a lawyer to discipline.
According to the accused, the terms "substantial gift" found in DR 5-101(B) and
"lawful demand" found in RPC 8.1(a)(2) are unconstitutionally vague and give the
Bar arbitrary and unlimited discretion to pursue disciplinary cases in violation of
the state and federal constitutions. The accused's facial challenge to the constitu-
tionality of the terms "substantial gift" and "lawful demand" are without merit,
and we do not discuss them further.

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panel's conclusion that the accused should be suspended for
one year.

## I. FACTS

### A. The Holec Matters

The accused was admitted to the Oregon Bar in 1979
and established a private practice in Wallowa, Oregon.
Shortly after moving to Oregon, the accused and his wife
were introduced socially to the Holec sisters, Stephanie and
Rose. At that time, both sisters were in their sixties, were
unmarried, and shared a home. Soon after meeting the
accused, Stephanie hired him to represent her in a legal mat-
ter involving real property. The accused also drafted a will for
Stephanie in December 1982.

Fifteen years later, in January 1997, the accused
approached Stephanie-then almost 80 years old-for a loan
to remodel the home that he and his wife owned. Stephanie
agreed and loaned the accused and his wife $15,000 at 10 per-
cent interest, secured by a trust deed on their home. Four
months later, in May 1997, the accused refinanced the home
and paid Stephanie a part of the debt that he owed her; he did
not, however, pay the loan in full. Instead of satisfying the
note as originally contemplated, the accused paid Stephanie
$6,7003 in cash and signed a new note at 10 percent interest
for $10,000, the principal balance due. That renegotiated
note was unsecured. The record does not establish the matur-
ity date of the unsecured note.

Over the next six years, the accused made sporadic
payments on the unsecured note. Either shortly before or on
May 16, 2003, the accused discussed his debt with Stephanie.
At the time of that discussion, the note was either past due or
soon to become due, and the balance on the note was $8,500.
The accused and Stephanie-by then at least 85 years old-
entered into another agreement to renew the loan. That
agreement was again memorialized by an unsecured note,

3 The cash payment of $6,700 represented a $5,000 principal payment and a
$1,700 interest payment. Simple interest at 10 percent on a $15,000 balance for
four months would have resulted in $500 interest. Thus, the $1,700 interest pay-
ment reflected an interest rate higher than the parties had agreed to in the original
loan.

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this time in a principal amount of $8,500, signed by the
accused and his wife. That new note, dated May 16, 2003,
stated a modified interest rate of eight percent, and extended
the maturity date to May 1, 2005.4

On May 16, 2003-the same date as the date on the
renegotiated note-the accused discussed a legal matter with
Stephanie. Specifically, she asked the accused to collect a
debt for her and her sister Rose. The accused's handwritten
notes, also dated May 16, 2003, document that meeting.
Those notes set forth the address and phone number for a
person named "French" and reflect calculations that show an
amount due of $12,606.30.

Three days later, on May 19, 2003, the accused
mailed a letter to David and Fairy French (the Frenches), on
behalf of Stephanie and Rose Holec (the sisters), demanding
that the Frenches repay the sisters $12,606.30. That letter
was prepared on stationary with "Ronald D. Schenck,
Attorney at Law" letterhead. It stated that the accused
"represent[ed] Stephanie and Rose Holec." It further stated
that, if the Frenches did not pay the amount owed, in full, by
June 1, 2003, "suit [would] be filed to obtain a judgment."

The Frenches responded directly to the accused.
They asked the accused to remind the sisters that the sisters
had told the Frenches earlier not to worry about the money
because the sisters were counting on the accused to repay his
$10,000 debt to them. The accused thereafter advised the sis-
ters to accept a new note from the Frenches for the remaining
balance at an annual rate of five percent interest and to
secure that debt with a trust deed on property owned by the
Frenches. The accused "strongly recommend[ed]" that, if the
Frenches refused those terms, then the sisters should
authorize him to file an action against them. Ultimately, the
Frenches and the sisters agreed to a new note in the amount
of $8,736 at six percent interest, secured by a trust deed on
the Frenches' home.

4 As we discuss later, the accused and the Bar dispute whether the note was
renegotiated during the same meeting in which Stephanie sought the accused's
legal help in collecting a debt. The accused maintains that he renegotiated the note
during a meeting with Stephanie on an earlier date, despite the date of the note
itself. Our analysis does not require resolution of that factual dispute.

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In addition to advising the sisters in collecting the
Frenches' debt, the accused drafted wills for each sister in
April 2003. At that time, while the sisters were living
together, Stephanie contacted the accused about a disagree-
ment that she had had with Rose over their wills, which,
according to Stephanie, left their respective estates to each
other. Stephanie had decided that she no longer wanted Rose
to receive her estate at her death. Stephanie asked the
accused to draft a will that "cut Rose out." The accused con-
sidered Stephanie's request to cut Rose out of her will
"stupid," and he knew that she would change her mind.
Therefore, the accused drafted wills for both sisters leaving
their respective estates to each other. The accused did so
even though leaving Stephanie's estate to Rose was contrary
to Stephanie's stated desire and even though, as he admitted,
he "never talked to or communicated with Rose about her
estate or any other legal matter." Rather, he prepared Rose's
will based only on his discussions with Stephanie, who was a
substantial beneficiary under its terms.

The accused delivered those wills to the sisters along
with a cover letter addressed to them both. On "Ronald D.
Schenck, Attorney at Law" letterhead, the accused wrote:

"Dear Stephanie and Rose,

"Here is a draft of a proposed Will [for] each of you for
your consideration.

"You can write a note or a memo and set forth what per-
sonal property you want to leave to Pat [the accused's wife]
or anyone else. You can give them a copy.

"I am sending a similar draft for Rose in hopes you two
can discuss the problem and use this suggested method to
resolve it. Rose, Stephanie did not ask me to do this draft for
you. It is my idea after becoming aware of the disagreement
you are having.

"Let's talk about it.

"We can put the home in Stephanie's name and Rose's
CD's [sic] or whatever in her name and they will pass
through these Wills as you both wish.

"Sincerely,

"RONALD D. SCHENCK"

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Stephanie's draft will, enclosed with the cover letter,
contained several blank spaces. The accused had inserted the
blank spaces because "Stephanie never told [him] who she
wanted to get her estate, only where she did not want it to go
\- to the hated niece." The accused left those spaces blank so
that, among other things, Stephanie could fill in the recipient
of the residual of her estate, if Rose should predecease her.

Rose's will did not have similar blank spaces, but
instead provided that, should Stephanie predecease Rose,
Rose's residual estate would be given to Rose's niece, Ramona
Lode, whom Stephanie had told the accused she hated. The
accused explained that he wrote that disposition into Rose's
will, instead of leaving blanks, because that was "exactly the
disposition [the a]ccused understood from Stephanie that
Rose wanted." According to the accused, his intent in prepar-
ing the wills as he did was to "mediate the dispute" between
the sisters. That is, he was suggesting a "legal vehicle" that
would accomplish Rose and Stephanie's desires as he under-
stood them to be.

As a part of that "legal vehicle," the accused drafted
a provision that would create a reciprocal family trust on the
death of one sister and the survival of the other. The residual
estate of the deceased sister would flow to "The Holec Family
Trust" for the benefit of the surviving sister. In other words,
as long as the sisters did not die at the same time, "The Holec
Family Trust" would have been created under the wills pre-
pared by the accused. Both wills named the accused as trus-
tee of the trust, if it came into existence. As trustee, the
accused would have had the responsibility to distribute the
income and principal of the trust as the accused "deem[ed]
advisable" for the support of the surviving sister. The distri-
butions would have been made "in such proportions,
amounts, and intervals, as the Trustee determin[ed]." On the
death of the beneficiary of the trust-i.e., the surviving
sister-the trust would terminate, and all remaining assets
of the trust would be distributed "free and clear."

Under Rose's will, if Stephanie was the surviving
sister and the "The Holec Family Trust" was created for her
benefit, then the remaining assets of the trust, at her death,
were to be distributed to Lode "free and clear." Under

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Stephanie's will, if Rose was the surviving sister and the
"The Holec Family Trust" was created for her benefit, the
remaining assets of the trust, at her death, were to be distrib-
uted to whomever Stephanie designated. Stephanie's will
had two blank spaces that pertained to the "Gift of Residue"
distribution on her death: (1) a space for the recipient of
Stephanie's residual estate, should Rose predecease her; and
(2) a space for the recipient of the remaining assets of
"The Holec Family Trust" on Rose's death, should Stephanie
predecease Rose.

Around late September or early October 2003,
Stephanie and Rose had a serious falling out, and Rose
moved out of their shared home. Sometime later, the two sis-
ters divided the debts that were owed to them. Rose took the
debt owed by the Frenches; Stephanie took other debts,
including the debt owed by the accused and his wife.

The accused asserts that, in October 2003,
Stephanie "unilateral[ly] release[d the] accused of his obli-
gation to her under the renewal note of May [16], 2003."5 No
satisfaction of that note was documented in the record. The
accused stated that, despite Stephanie's "unilateral" decision
to declare the debt satisfied, he "expected to pay the loan off
before [she] passed on." Nonetheless, the accused did not
make any further payments to Stephanie after October 2003.
Stephanie's friend, Margi Wyatt, testified that the debt had
not been satisfied and that Stephanie relied on payments
from the accused, and others, to "live off of."

In November 2003, Stephanie again consulted the
accused on a legal matter. Stephanie asked the accused to
prepare the documents for the sale of her home to Harry
Beckenhauer, and the accused did so. The record is unclear
whether the transaction was completed using those docu-
ments, because the majority of the documents that the
accused prepared are unsigned.

In July 2004, Stephanie again contacted the accused
to prepare a will for her. In her initial telephone call to the

5 The accused asserts that Stephanie told the accused that his note had been
satisfied in October 2003, at a time when he was not representing Stephanie in any
matter.

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accused, Stephanie informed him of several developments:
that she was unhappy with Beckenhauer; that she wanted a
new will; that she was arguing with Rose about money and to
whom they were going to leave their estate; and that she was
having trouble collecting from the people who owed her
money. Shortly after that conversation, the accused met with
Stephanie in her home and quickly concluded that she had
significant problems with her "mental ability." Nevertheless,
the accused proceeded to discuss with Stephanie the revision
of her will. In that discussion, according to the accused,
Stephanie said that she wanted to leave her antiques and
furniture and one half of the residue of her estate to the
accused's wife, Pat. The accused indicated to Stephanie that
he would prepare the will, including those gifts to his wife,
but insisted "that we go to your doctor, Dr. Boyd, and have
him write a letter as to whether or not you're now presently
competent to make a will, to know what you're doing, and I
want it witnessed by two witnesses, and notarized as far as
the witnesses [are] concerned."

The accused thereafter prepared a will for Stephanie
that included a gift of antiques and furniture and one half of
the residue of Stephanie's estate to his wife, Pat. The other
half of the residue was to go to Rose. However, according to
the will's terms, if Rose were to predecease Stephanie, the
entire residue would go to the accused's wife.

Stephanie was hospitalized shortly after the July
2004 meeting, as well as on several other occasions in fall
2004. When she returned home from the hospital after one of
those occasions, the accused visited her and presented the
new will.

Testimony at the hearing established that the
antiques and furniture bequeathed to the accused's wife,
under the terms of the new will, were worth at least $1,000,
which the accused does not dispute. When questioned
whether the gifts to his wife were "substantial," the accused
testified that Stephanie had no substantial assets at the time
that he prepared the will. The accused also testified that
Stephanie had substantial assets at the time that she had
told him that his loan was forgiven, just 10 months earlier.

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The accused explained that seeming contradiction by assert-
ing that Stephanie's financial condition had deteriorated
quickly, over a course of only a few months. Nonetheless, the
accused acknowledged that, under the will that he had pre-
pared, in addition to the gift of antiques and furniture worth
at least $1,000, his wife would receive the entire residue of
Stephanie's estate if Rose were to predecease his wife.6

### B. Response to the Bar's Inquiry into the Holec Matters

The Bar received a complaint from the Wallowa
County District Attorney concerning the accused's conduct
regarding the Holec sisters. The Bar notified the accused of
that complaint, by letter, and asked the accused to respond to
the allegations. The accused did so. The accused's response,
however, raised additional concerns relating to the accused's
representation of the sisters. Accordingly, the Bar sent a let-
ter to the accused requesting additional information.

In that letter, the Bar requested that the accused
respond to three specific concerns: (1) the circumstances of
the 1997 loan and its terms, and whether that loan had been
repaid; (2) the circumstances of the May 2003 note, its rela-
tion to the 1997 loan, and its execution in conformance with
full disclosure as required by DR 10-101(B), and whether
that loan had been repaid; and (3) the legal authority for the
accused's assertion that he was required to comply with DR
10-101(B) only when Stephanie "moved forward with the exe-
cution of the will" and not when he prepared the will that left
a testamentary gift to his wife.7

6 The record is not clear as to the potential value of the residue of Stephanie's
estate at the time that the accused prepared Stephanie's will. Stephanie's estate
may have included the debt owed by the accused in the amount of approximately
$8,500, other debts supported by promissory notes payable to Stephanie, and any-
thing that she might inherit or accumulate up until her death, including Rose's
residual estate if Rose were to predecease Stephanie. Testimony at the hearing
established the possibility of other unpaid debts due Stephanie from debtors
besides the accused. The accused also asserted in his reply brief that Stephanie
"loaned money, in significant amounts, to a number of different people over the
years."

7 In its letter, the Bar implied that a lawyer may prepare a will that gives the
lawyer or a person related to the lawyer a substantial gift, if the lawyer obtains the
client's full disclosure under DR 10-101(B). That suggestion misapprehends what
the rule requires. DR 5-101(B) provides:

"A lawyer shall not prepare an instrument giving the lawyer or a person
related to the lawyer as parent, child, sibling, or spouse any substantial gift

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The accused refused to provide the information that
the Bar requested regarding his debt to Stephanie. He
asserted that the Bar lacked jurisdiction because "this loan
did not involve [his] law practice in any manner[.]" That was
so, the accused maintained, because Stephanie was not a cli-
ent at the time of the loan.

The accused did provide a response to the Bar's
request regarding the preparation of the will containing a gift
to his wife. That response, however, was limited. The accused
essentially restated that, according to his understanding of
the rule, full disclosure and consent was not required before
preparing and presenting the will to Stephanie.

The Bar wrote yet a third letter to the accused to
obtain information and documents regarding the accused's
debt to Stephanie. Specifically, the Bar explained its author-
ity to inquire and reasserted its request that the accused
explain his debt transactions with Stephanie. The accused
wrote the Bar stating that he would provide nothing further
on the complaint against him. In that same letter, he added
that the Bar's investigation into the complaint was "turning
into pure harassment." One week later, "in calmer reflec-
tion," the accused responded further. The accused acknowl-
edged that he "gave Stephanie legal advice, pro bono,
re[garding] the [Frenches'] collection, her will, and the sale of
her house in 2003." However, he did not respond to the spe-
cific questions posed by the Bar, i.e., the circumstances of and
relationship between the 1997 and 2003 loans.

The Bar filed a formal complaint against the accused
in December 2005. In his response to that complaint, the
accused provided his first substantive explanation of the debt
that he and his wife owed to Stephanie. Specifically, the
accused explained that the new note was a renewal note for
the balance remaining on the original note from 1997. He
emphasized that it was not a "new" loan because Stephanie
did not advance any money to the accused in May 2003. He

from a client, including a testamentary gift, except where the client is related
to the donee."

The rule, by its terms, does not permit such an instrument to be prepared simply
because the lawyer makes a full disclosure. The only exception to the prohibition
stated in the rule is for a client who is related to the donee.

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represented that Stephanie was "happy with the loan and
[that] the interest she was receiving [ ] was generous under
the economic circumstances at the time." The accused
asserted that DR 5-101(A) and DR 5-104(A) could not apply
to "renewal notes" because, if they did, the rules were uncon-
stitutionally vague and failed to give notice sufficient to sat-
isfy the state and federal constitutions. Additionally, the
accused testified at the hearing that he had been unwilling to
provide the Bar with information about the debt to Stephanie
out of pure "Dutch stubbornness." Finally, he also testified
that he had documents relating to multiple renewal notes
between 1997 and 2003, but chose not to provide them to the
Bar.

## II. DISCUSSION

### A. Violation of DR 5-101(A)(1)

The Bar alleges that the accused violated DR
5-101(A) when he undertook to assist Stephanie in collecting
the Frenches' debt while contemporaneously renegotiating
his own debt with Stephanie. DR 5-101(A)(1) provided, in
part, that, except with the consent of the lawyer's client after
full disclosure,

"a lawyer shall not accept or continue employment if the
exercise of the lawyer's professional judgment on behalf of
the lawyer's client will be or reasonably may be affected by
the lawyer's own financial, business, property, or personal
interests."

"Full disclosure" was defined in DR 10-101(B), which pro-
vided, in part:

"(1) 'Full disclosure' means an explanation sufficient
to apprise the recipient of the potential adverse impact on
the recipient, of the matter to which the recipient is asked
to consent.

"(2) As used in DR 5-101, DR 5-104, DR 5-105
'full disclosure' shall also include a recommendation that
the recipient seek independent legal advice to determine if
consent should be given and shall be contemporaneously
confirmed in writing."

The accused does not dispute that he and Stephanie
entered into a new loan agreement, dated May 16, 2003, for

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the debt that he owed to her. Neither does the accused dis-
pute that he met with Stephanie on that day to discuss the
collection of the Frenches' debt. The accused does dispute,
however, that Stephanie was his client at that time, for
essentially two reasons. First, he relies on the facts that his
conversations with Stephanie took place in his, or her, living
room, not in his office, and that he did not bill Stephanie for
his time. Second, he explains that the execution of the new
note regarding his debt preceded his conversation with
Stephanie as to the Frenches' debt collection matter, and,
therefore, the lawyer-client relationship had not yet begun.

Neither argument has merit. The accused sent col-
lection letters to the Frenches on his professional letterhead
and threatened legal action if the debt was not paid. Accord-
ing to his demand letters, the accused "represented" both
Stephanie and Rose. In doing so, the accused provided legal
services to Stephanie. The fact that the accused may have
discussed the Frenches' matter with her in a living room,
instead of in his office, and the fact that he did not bill her for
his time, are inconsequential to that conclusion.

Neither does it matter if, as the accused asserts, he
had resolved his debt with Stephanie before they began to
discuss the Frenches' debt. "The relationship between lawyer
and client is one of trust and confidence[,]" and does not
abruptly start and stop-at least not necessarily-with the
opening and closing of case matters. In re Drake, 292 Or 704,
713, 642 P2d 296 (1982). Drake illustrates that principle in
application. There, the accused lawyer, Drake, borrowed
money from his client, Gallagher. Drake had handled legal
matters for Gallagher over a 10-year period and asserted that
they had become friends. Drake had concluded a case matter
with Gallagher in May 1976 and later solicited and obtained
a loan from Gallagher in June 1976. Id. at 711. That solicita-
tion took place while Gallagher was in Drake's office, "check-
ing on some business." Id. at 708. Drake asserted that
Gallagher was not a client at that time. Later, in August
1976, Drake assisted Gallagher in another legal matter. Id.
at 709. Despite the fact that the loan was made between May
and August, at a time when Drake did not have an open case
with Gallagher, this court concluded that Gallagher was
Drake's client at the time of the loan transaction in June. Id.

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at 711. The court reasoned that, if the "simple termination of
a case creates an opportunity or period in which an attorney
is freed from the rules governing attorney-client relation-
ships[,]" then, during that period, "the attorney would be free
to use the rapport and confidence he had developed with his
former client to persuade the former client to do things that
would otherwise be prohibited by [the rules]." Id. at 713
(internal citations omitted).

Likewise, here, Stephanie was a client of the accused
before May 16, 2003, when he and Stephanie executed the
new loan note. In April 2003, Stephanie had asked the
accused to redraft her will and her sister's will. The accused,
in response to Stephanie's request, drafted wills for both sis-
ters and, according to the date of his cover letter, delivered
them on April 8, 2003. Sometime in May, Stephanie con-
tacted the accused to discuss yet another legal matter-the
Frenches' debt-and, according to the accused's handwritten
notes, they discussed that matter on May 16, 2003. The
accused asserts that he renegotiated his own personal debt
with Stephanie at some point during that 37-day period, at
which time he was not advising Stephanie on any legal mat-
ter. Under this court's reasoning in Drake, however, that
break in his legal activities on Stephanie's behalf did not cre-
ate a period in which the accused was free from the rules gov-
erning attorney-client relationships. Id. We therefore con-
clude that Stephanie was a client of the accused when the
May 16, 2003, note was executed.

Whether the accused violated DR 5-101(A)(1), there-
fore, turns on whether his personal financial interest did or
"reasonably may have affected" his professional judgment
with regard to collecting the debts that were due to
Stephanie. The Bar argues that the accused's professional
judgment was affected by his status as Stephanie's debtor.
More specifically, it argues that "[a] disinterested lawyer in
the position of advising Stephanie and Rose about collecting
unpaid debts likely would have addressed the [a]ccused's
debt." The Bar urges that the accused did not advise his cli-
ents about collecting from him, but, instead, encouraged
them to proceed against the Frenches. According to the Bar,
the ultimate resolution of the two debts-i.e., both the
Frenches and the accused received reduced interest rates and

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extended loan terms, but only the Frenches were required to
secure their debt with a trust deed-provides clear and con-
vincing evidence that the accused's professional judgment
was, in fact, affected. We agree with the Bar's arguments
that the accused's personal financial interest reasonably may
have affected his professional judgment. The accused there-
fore was required to obtain Stephanie's written consent to
representation under DR 10-101(B), which included recom-
mending to Stephanie that she seek independent legal advice
in that regard. He did not do so. The accused violated DR
5-101(A)(1).

### B. Violation of DR 5-104(A)

We turn next to the Bar's allegation that the accused
violated DR 5-104(A) when he entered into a loan agreement
with Stephanie on May 16, 2003, without first obtaining her
consent in writing. DR 5-104(A) provided:

"A lawyer shall not enter into a business transaction
with a client if they have differing interests therein and if
the client expects the lawyer to exercise the lawyer's profes-
sional judgment therein for the protection of the client,
unless the client has consented after full disclosure."

Again, full disclosure was defined in DR 10-101(B).

As already discussed, Stephanie was a client when
she and the accused entered into the new loan agreement.
The accused's and Stephanie's interests in that transaction
differed-the accused was a debtor, and Stephanie was the
person to whom he owed the debt. The accused asserts that
his status as Stephanie's debtor is insufficient to prove a vio-
lation of DR 5-104(A). Rather, he argues, the Bar must prove
that Stephanie expected the accused to exercise his profes-
sional judgment for her protection. In that regard, the
accused urges that Stephanie-at age 85-did not expect him
to exercise his professional judgment for her protection. The
accused contends that Stephanie acted decisively, "dictating"
the reduced interest rate, and that she had a history of ignor-
ing much of the legal advice that he provided. Therefore, she
did not expect him to protect her interests when she entered
into the new loan agreement with him on May 16, 2003. The
accused also contends that, had he attempted to persuade

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Stephanie to seek advice from independent counsel with
regard to that transaction, his attempt would have been
futile. Therefore, he asserts, Stephanie did not expect the
accused to exercise his professional judgment for her
protection.

We disagree that the Bar must prove that Stephanie
had that expectation. In In re Montgomery, 292 Or 796, 804,
643 P2d 338 (1982), this court wrote:

"[W]hen a lawyer seeks to borrow money from a non-lawyer
client who is not the in business of lending money, the law-
yer must assume, in the absence of contrary expression by
the client, that the client is relying on the lawyer for profes-
sional judgment to the same extent that the client would
rely on the lawyer for advice had the client consulted the
lawyer concerning such a loan to a third person."

(Internal citations omitted.) In the absence of evidence that
Stephanie did not rely on the accused in his professional
capacity, she is deemed to have done so.

At most, the evidence on which the accused relies is
that Stephanie was a strong-willed 85 year old, with a mind
of her own. Her character in that regard does not provide evi-
dence of the needed "contrary expression" that she was not
relying on the accused for his professional judgment. That is
especially true in this context, where Stephanie had con-
sulted with the accused and relied on his professional judg-
ment in her financial dealings with others, such as the
Frenches. The accused has not persuaded us, on de novo
review, that he has overcome the presumption that
Stephanie relied on his professional judgment in negotiating
and renegotiating her loans to him. Therefore, before the
accused entered into that business transaction with
Stephanie-i.e., the new note that included new terms that
reduced his interest rate and extended his due date-he was
required to obtain her consent in writing after "full disclo-
sure," which had to include a recommendation that she seek
independent legal advice. DR 10-101(B)(2). The accused did
not do so. We conclude that the accused violated DR 5-104(A).

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### C. Violation of DR 5-105(E)

Next we consider the alleged violation of DR
5-105(E), which provided:

"Except as provided in DR 5-105(F), a lawyer shall not
represent multiple current clients in any matters when
such representation would result in actual or likely
conflict."

The exception in DR 5-105(F) provided:

"A lawyer may represent multiple current clients in
instances otherwise prohibited by DR 5-105(E) when such
representation would not result in an actual conflict and
when each client consents to the multiple representation
after full disclosure."

Again, full disclosure was defined in DR 10-101(B).

As noted above, the accused prepared wills for both
Stephanie and Rose, knowing that they had an actual conflict
as to how they would each dispose of their estates, which the
accused does not deny. Nevertheless, the accused contends
that he drafted the wills as a "friend" and that drafting wills,
in general, does not require legal expertise; it follows, in the
accused's view, that he was not required to comply with the
rule. That argument is wholly without merit. The accused
violated DR 5-105(E) when he prepared wills for both
Stephanie and Rose, knowing that the sisters had an actual
conflict.

### D. Violation of DR 5-101(B)

We next consider the alleged violation of DR
5-101(B), which provided:

"A lawyer shall not prepare an instrument giving the
lawyer or a person related to the lawyer as parent, child,
sibling, or spouse any substantial gift from a client, includ-
ing a testamentary gift, except where the client is related to
the donee."

The Bar alleged that the accused violated that rule by pre-
paring a will for Stephanie that included a gift of "antiques
and furniture" to his wife and that provided that his wife
would receive one-half of Stephanie's residual estate. The
will also provided that, if Rose predeceased the accused's

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wife, his wife would receive the entire residue of Stephanie's
estate. The accused asserts that the gift to his wife was not
"substantial" because the value of the antiques and furniture
was only $1,000 or so, and because Stephanie's estate was
otherwise valueless. We conclude that, regardless of the
potential value of Stephanie's estate, the gift of $1,000 was a
substantial gift within the meaning of rule. Accordingly, we
conclude that the accused violated DR 5-101(B) by preparing
a will for his client, Stephanie, that included a substantial
gift to his wife.

### E. Violation of RPC 8.1(a)(2)

The Bar alleges that the accused violated RPC
8.1(a)(2) when he failed to respond to the Bar's request for
information regarding the debt that he owed to Stephanie.
RPC 8.1(a)(2) provides, in part, that a lawyer, in connection
with a disciplinary matter, shall not "knowingly fail to
respond to a lawful demand for information from a[ ] * * *
disciplinary authority[.]"

The accused asserts that the Bar did not make a
"lawful demand" for the information because Stephanie was
his friend, and not his client, when the debt originated in
1997, and, therefore, he did not violate the rule. The lawful-
ness of the Bar's request for information does not depend on
the Bar being correct that there was a violation (which it was
in this case). The Bar has authority to investigate when it has
been presented with factual allegations that raise "an argu-
able complaint of misconduct." See ORS 9.542 (Board of
Governors of the Bar authorized, subject to Supreme Court
approval, to adopt rules governing investigations of conduct
of attorneys); BR 2.5(b)(1) (if written complaint against attor-
ney raises an "arguable complaint of misconduct," discipli-
nary counsel may require attorney to respond). We conclude
that the accused violated RPC 8.1(a)(2) by refusing the Bar's
demand for information about his debt to Stephanie.

## III. SANCTION

Having concluded that the accused violated DR
5-101(A)(1), DR 5-101(B), DR 5-104(A), DR 5-105(E), and
RPC 8.1(a)(2), we must now, consistently with this court's
well-established methodology, determine the appropriate

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sanction. In re Kluge, 335 Or 326, 348, 66 P3d 492 (2003) (set-
ting out methodology). In deciding the appropriate sanction,
we are guided by the American Bar Association's Standards
for Imposing Lawyer Sanctions (1991) (amended 1992) (ABA
Standards). In re Sousa, 323 Or 137, 145, 915 P2d 408 (1996).
We are also guided by the recognition that the purpose of a
sanction is not to penalize the accused, but is, rather, to pro-
tect the public and the integrity of the legal profession. In re
Glass, 308 Or 297, 304, 779 P2d 612 (1989).

The trial panel imposed a one-year suspension. That
sanction was based on the trial panel's findings that (1) the
accused violated ABA Standards 4.3 (failure to avoid conflicts
of interest) and 7.0 (violation of duties owed to the profes-
sion); (2) the accused acted knowingly or intentionally with
regard to the violations concerning the sisters, and intention-
ally with regard to his refusal to provide the Bar with infor-
mation about the debt to Stephanie; (3) the accused caused
actual or potential harm to Stephanie and Rose, and caused
actual harm to the legal profession and the public when he
delayed the investigation and the resolution of the complaint
against him; (4) no mitigating circumstances applied, but
many aggravating circumstances existed to qualitatively and
quantitatively increase the sanction-i.e., a substantial rec-
ord of prior discipline, a dishonest or selfish motive, a pattern
of misconduct, multiple offenses, refusal to acknowledge
wrongful nature of conduct, vulnerability of the accused's cli-
ents, substantial experience in the practice of law, and the
accused's bad faith obstruction of the investigation and the
formal proceedings; and (5) Oregon case law indicates that a
lengthy suspension is warranted for the accused's conduct.

The accused disagrees with the trial panel's sanction
as to its findings with regard to his mental state, the injury to
the Holec sisters, and two of the aggravating factors-vulner-
ability of the victims and his prior disciplinary record. The
crux of the accused's argument regarding his mental state is
that, if he did not subjectively know that he was violating the
rules, the Bar cannot prove an intentional or knowing state of
mind. For example, the accused argues that he did not con-
sider Stephanie to be a client when he executed the loan note
on May 16, 2003, and, therefore, the "[a]ccused did not enter
into the renewal note in May 2003 * * * knowing Stephanie

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was a 'client.'" Likewise, the accused argues that he "did not
intentionally * * * prepare a will for Stephanie providing that
[the a]ccused's wife would receive a 'substantial [gift' from]
Stephanie's estate" because he did not know that the gift
might be considered substantial. If we understand the
accused's argument, it is that he knew that negotiating a loan
with a client without full disclosure was prohibited, but
that, in these circumstances, he did not understand that
Stephanie was a client. Likewise, the accused seems to argue
that he knew that writing a client's will to include a substan-
tial gift to his wife was prohibited, but that he was not aware
that Stephanie, in this instance, was a client; neither was he
aware that the gift to his wife was, in fact, "substantial"
within the meaning of DR 5-101(B).

We reject the accused's argument that, to be a know-
ing violation, an accused must be aware that his conduct vio-
lates a disciplinary rule. A violation is knowing if the accused
acts with "conscious awareness of the nature or attendant
circumstances of the conduct but without the conscious objec-
tive or purpose to accomplish a particular result." ABA
Standards at 17. In other words, the accused must know the
essential facts that give rise to the violation. Here, the
accused was consciously aware of all essential facts on which
his attorney-client relationship with Stephanie depended.
The fact that he did not subjectively come to the conclusion
that she was his client is beside the point. The same is true
with regard to the substantiality of the gift to his wife that he
wrote into Stephanie's will. The accused knew that his wife
would receive Stephanie's antiques and furniture; he knew
that they were valuable; and he did not dispute that they in
fact were worth at least $1,000. He did not have to conclude
subjectively that such a gift is "substantial" within the mean-
ing of DR 5-101(B).

With regard to the potential harm to the Holec sis-
ters, the accused fails to understand that "an injury need not
be actual, but only potential, in order to support the imposi-
tion of a sanction." In re Williams, 314 Or 530, 547, 840 P2d
1280 (1992). Potential injury is harm that was reasonably
foreseeable at the time of the violation but that ultimately
did not occur. ABA Standards at 17. The accused asserts that
the preparation of the wills for both Rose and Stephanie did

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not cause Rose any harm, actual or potential, because she
was not "involved in any manner." Likewise, according to the
accused, Stephanie did not suffer injury, because she did not
execute that will. As to the will for Stephanie that included
the gift to his wife, the accused asserts that no harm came to
Stephanie because "she rejected it." He adds that, even if she
had executed that will, a gift to his wife could not have
harmed Stephanie because it would be delivered "after her
death" and, therefore, could not affect Stephanie in any way.

Those arguments are not well taken. Preparation of
the wills by the accused created a reasonably foreseeable
injury to both Rose and Stephanie. The fact that they were
delivered but never executed establishes that the injury was
potential only, rather than actual. But potential injury, as
this court explained in Williams, is sufficient to support a
sanction. 314 Or at 547. The accused's arguments with
regard to the improper application of aggravating factors-
i.e., the vulnerability of the victim and his disciplinary rec-
ord-are meritless.

In determining the appropriate sanction, we take
into consideration an accused's disciplinary record, which in
this case is extensive. In 1991, the accused was reprimanded
for violating DR 5-101(E) (prohibiting current client conflict
of interest). In re Schenck, 5 DB Rptr 85 (1991). In 1994, the
accused was reprimanded for violating DR 7-104(A)(1) (pro-
hibiting communication with a represented party) and DR
7-110(B) (prohibiting ex parte contact with officials). In re
Schenck, 320 Or 94, 879 P2d 863 (1994). In 2004, the accused
was reprimanded for violating DR 7-101(A)(3) (intentionally
prejudicing or damaging a client). In re Schenck, 18 DB Rptr
309 (2004). The existence of several prior disciplinary
offenses is a consideration that justifies increasing the degree
of discipline imposed. ABA Standard 9.22(a) (aggravating
factor-prior disciplinary offenses); see also In re Jones,
326 Or 195, 200, 951 P2d 149 (1997) (setting out criteria for
evaluating prior disciplinary offenses).

We also consider Oregon case law in determining
whether a lengthy suspension is warranted. Kluge, 335 Or at
348. The trial panel imposed a suspension for a period of one
year. In urging that a one-year suspension is in accord with

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past cases, the Bar principally relies on, among other cases,
In re Altstatt, 321 Or 324, 897 P2d 1164 (1995), and In re
Gildea, 325 Or 281, 936 P2d 975 (1997).

In Altstatt, the accused borrowed money for several
years from a client, Cummins. Shortly before Cummins's
death, the loans were consolidated into a single note. After
Cummins died, Altstatt, who had drafted Cummins's will,
represented the personal representatives of Cummins's
estate without disclosing the potential for his conflict of inter-
est as a debtor to affect his professional judgment. In advis-
ing the personal representatives, Altstatt convinced them to
let him forgo payment of his debt until the estate closed.
Altstatt's conduct was found to have violated DR 5-101(A)
(prohibiting conflict of lawyer's self-interest ). Altstatt, who
also accepted payment of his fees without prior court
approval in violation of DR 1-102(A)(4) (conduct prejudicial
to the administration of justice) and DR 2-106(A) (collecting
an illegal fee), was suspended for one year, despite his lack of
prior disciplinary history. See also In re Moore, 299 Or 496,
508, 703 P2d 961 (1985) (one-year suspension for loan trans-
actions in conjunction with multiple conflicts); In re Boyer,
295 Or 624, 669 P2d 326 (1983) (seven-month suspension for
negotiating a loan transaction between two clients).

In Gildea, the accused, a long-time friend and legal
counsel to an elderly woman, was found to have violated,
among other rules, DR 5-101(A)(1) (prohibiting conflict of
lawyer's self-interest) and DR 5-104(A) (limiting business
relations with client). Gildea, 325 Or at 283. Gildea obtained
a general power of attorney from his elderly client without
advising her of a potential conflict and then used the power of
attorney to assign himself a trust deed on the client's real
property in order to ensure that income from that property
could be used for the client's care at an assisted living facility.
Although this court noted that Gildea had acted in good faith,
and always in his client's best interest, it nevertheless
imposed a lengthy suspension of 120 days. Id. at 300.

Altstatt and Gildea support a one-year suspension in
this case. The accused's conduct is analogous to that involved
in those cases. Unlike either of the accused lawyers in those
cases, however, the accused has an extensive disciplinary

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record. Also, the accused in this case refused to cooperate in
the investigation, which resulted in a violation of RPC
8.1(a)(2) (requiring response to lawful demand for informa-
tion from disciplinary authority). Such a violation, even in
the absence of other substantive disciplinary violations, is a
basis for a stiff sanction. See In re Miles, 324 Or 218, 223, 923
P2d 1219 (1996) (120-day suspension for failure to cooperate,
noting that, "[i]n most cases, either a single, significant fail-
ure to cooperate with a disciplinary investigation or lesser,
multiple failures to cooperate warrant a lengthy suspension
from the practice of law"); In re Schaffner, 323 Or 472, 481,
918 P2d 803 (1996) (60 days of 120-day suspension attributed
to failure to cooperate). The accused's refusal to cooperate in
the investigation of this matter-out of "Dutch stubbornness"
and after two written requests-is a strong aggravating fac-
tor that, under Oregon case law, also supports a lengthy sus-
pension from the practice of law.

In sum, we conclude that the accused violated sev-
eral disciplinary rules, which is a basis for a lengthy suspen-
sion. The seriousness of those violations are compounded in
this case by the accused's mental state, his prior disciplinary
record, and his refusal to cooperate in the investigation of the
matter. We therefore agree with, and adopt, the sanction
imposed by the trial panel. See BR 10.6 (court may adopt the
decision of the trial panel, in whole or in part).

The accused is suspended from the practice of law for
a period of one year, commencing 60 days from the date of fil-
ing of this decision.