Case Number(s): 06-O-11095-RAH
In the Matter of: John Yaheng Tu, Bar # 146945, A Member of the State Bar of California, (Respondent).
Counsel For The State Bar: Jean Cha, Bar # 228137,
Counsel for Respondent: Michael E. Wine, Bar # 58657,
Submitted to: Assigned Judge - State Bar Court Clerk’s Office Los Angeles.
<<not>> checked. PREVIOUS STIPULATION REJECTED
Note: All information required by this form and any additional information which cannot be provided in the space provided, must be set forth in an attachment to this stipulation under specific headings, e.g., "Facts," "Dismissals," "Conclusions of Law," "Supporting Authority," etc.
1. Respondent is a member of the State Bar of California, admitted June 11, 1990.
2. The parties agree to be bound by the factual stipulations contained herein even if conclusions of law or disposition are rejected or changed by the Supreme Court.
3. All investigations or proceedings listed by case number in the caption of this stipulation are entirely resolved by this stipulation and are deemed consolidated. Dismissed charge(s)/count(s) are listed under "Dismissals." The stipulation consists of 15 pages, not including the order.
4. A statement of acts or omissions acknowledged by Respondent as cause or causes for discipline is included under "Facts."
5. Conclusions of law, drawn from and specifically referring to the facts are also included under "Conclusions of Law".
6. The parties must include supporting authority for the recommended level of discipline under the heading "Supporting Authority."
7. No more than 30 days prior to the filing of this stipulation, Respondent has been advised in writing of any pending investigation/proceeding not resolved by this stipulation, except for criminal investigations.
8. Payment of Disciplinary Costs-Respondent acknowledges the provisions of Bus. & Prof. Code §§6086.10 & 6140.7. (Check one option only):
<<not>> checked. Until costs are paid in full, Respondent will remain actually suspended from the practice of law unless relief is obtained per rule 5.130, Rules of Procedure.
checked. Costs are to be paid in equal amounts prior to February 1 for the following membership years: Two billing cycles following the effective date of the Supreme Court order. (Hardship, special circumstances or other good cause per rule 5.132, Rules of Procedure.) If Respondent fails to pay any installment as described above, or as may be modified by the State Bar Court, the remaining balance is due and payable immediately.
<<not>> checked. Costs are waived in part as set forth in a separate attachment entitled "Partial Waiver of Costs".
<<not>> checked. Costs are entirely waived.
IN THE MATTER OF: John Yaheng Tu, State Bar No. 146945
STATE BAR COURT CASE NUMBER: 06-O-11095-RAH
Respondent admits the facts set forth in the stipulation are true and that he is culpable of violations of the specified statutes and Rules of Professional Conduct.
FACTS
1. Ping Li ("Mr. Li") is a business person from Chengdu City, Sichuan Province of China. Mr. Li and his family desired and intended to apply for permanent residence in the United States of America.
2. En Wei Zhang ("Mr. Zhang"), a friend of Mr. Li, resides in Los Angeles, California. Mr. Zhang referred Mr. Li to Respondent.
3. In May 2003, Mr. Li employed Respondent to obtain permanent residency status in the U.S. for him and for his family. Respondent proposed to Mr. Li that Mr. Li invest in a furniture business that would qualify Mr. Li for residency in the U.S. pursuant to an Employer Based Fifth Preference under the Immigration and Naturalization Act of 1990 (sometimes referred to as "the EB-5 program"), essentially an immigration program for applicants who could show their financial ability to start and maintain a business in the U.S. and employ citizens. Respondent told Mr. Li that he would need to invest $500,000.00 to start a business in the U.S. to qualify for the immigration program. Mr. Li agreed. It was understood that Mr. Li would be the owner of the business and that Respondent would be responsible for managing the business investment fund.
4. Respondent agreed to manage the funds in anticipation of potential future representation of Mr. Li and Mr. Li’s business ventures.
5. Respondent formed a business on behalf of Mr. Li called Amwest Furniture Plus in connection with Mr. Li’s immigration matter. On June 23, 2003, the initial incorporation documents were filed with the California Secretary of State for a business named Amwest Furniture Plus.
6. On July 3, 2003, Respondent, as the business manager of Amwest Furniture Plus, opened a business checking account at Bank of America, account number ending in 03002, in the name of Amwest Furniture Plus (the "Bank of America bank account"). Respondent was an authorized signatory on the account.
7. The Bank of America bank account was a business operating account and was not a client trust account. Respondent represented to Mr. Li that the Bank of America bank account had been opened in the name of Amwest Furniture Plus on behalf of Mr. Li. At all times, Respondent had complete control of the Bank of America bank account. At all times, the monthly account statements were sent to Respondent’s law office address and he received the statements.
8. On July 14, 2003, Mr. Li wire transferred $502,000.00 (the investment fund) from his bank account in Hong Kong into the Bank of America bank account for Amwest Furniture Plus.
9. Respondent believed per their conversations and past dealings beginning in 2001, that he would have complete control of the investment fund for the benefit of the furniture business. Respondent did not, however, reduce the transaction to writing, nor did he advise Mr. Li to seek advice of independent counsel.
10. Separately, on July 15, 2003, Mr. Li paid Respondent $30,000.00 in advanced legal fees for the immigration matter.
11. Mr. Li authorized Respondent to manage the business on his behalf. From September 10, 2003 through July 22, 2004, Respondent wrote 24 checks drawn on the investment fund totaling $230,433.47 for purposes unrelated to the business or the immigration matter. Although Respondent enjoyed unfettered management power over the investment fund, it was to have been for the sole benefit of the furniture business. Respondent misunderstood whether Mr. Li had agreed to Respondent’s use of the funds for purposes unrelated to the business. However, at no time did Mr. Li share Respondent’s understanding.
12. Thereafter, all remaining monies in the investment fund ($502,000, less $230,433.37) were spent on behalf of Amwest Furniture Plus.
13. At the end of 2004, Mr. Li decided to withdraw the investment fund and requested the return of the remaining fund, if any still remained, from the furniture business. As of the date Mr. Li requested his business be dissolved and his investment fund be returned, Respondent had not yet reimbursed the investment fund for the funds he had previously advanced to himself as a loan.
14. In January 2005, after Amwest Furniture Plus was dissolved, Mr. Li was entitled to a refund of the entire portion of the $502,000 investment that had not been used for the benefit of Amwest Furniture Plus.
15. On March 7, 2005, Respondent executed a promissory note, written in Chinese, in which Respondent promised to repay and guarantee a refund of the $500,000 investment fund less the cost of operating the furniture business to Mr. Li by May 17, 2005. At the time, Respondent represented to Mr. Li that he would be able to make the refund to Mr. Li based on receivables he expected to obtain in unrelated business matters.
16. Respondent failed to refund any money to Mr. Li by May 17, 2005.
17. In November 2005, Mr. Li came to the U.S. for the first time to meet with Respondent in person and demand a refund. Mr. Zhang was also present. On November 28, 2005, Respondent refunded $120,000.00 of the balance owed from the investment fund to Mr. Li.
18. On November 29, 2005, Respondent and Mr. Li entered into a second written promissory agreement by which Respondent promised to refund to Mr. Li $435,000.00, representing sums from the investment fund, plus interest, on or before February 15, 2006 by way of installment payments.
19. Respondent failed to make any additional payments to Mr. Li by February 15, 2006.
20. Mr. Li terminated Respondent’s employment in January 2006 and hired attorney Minzhi Zhou ("Mr. Zhou") to contact Respondent and attempt to obtain the outstanding balance of the investment fund.
21. Mr. Zhou contacted Respondent by mail and subsequently met with Respondent twice; on January 26, 2006 and February 2, 2006. Throughout 2006, Mr. Zhou continued collection efforts.
22. On February 1, 2007, after a complaint was filed with the State Bar, Respondent paid Mr. Li through Mr. Zhang, a check for $50,000. On February 12, 2007, Respondent paid Mr. Li through Mr. Zhang, a check for $250,000.
23. On March 16, 2007, Mr. Li verified his receipt of payments totaling $420,000.
24. On March 20, 2007, Respondent and Mr. Li entered into a written agreement acknowledging that $80,000 remained outstanding from the balance of the investment fund, but that such sums would be held in trust by Respondent, who would continue to represent Mr. Li and his family in the immigration matter on a basis other than the EB-5 petition. Mr. Li’s immigration matter is still pending.
CONCLUSIONS OF LAW
25. By entering into a business transaction with a client (here, a series of loans), knowingly acquiring a pecuniary interest adverse to a client without complying with these requirements: that the transaction or acquisition and its terms were fair and reasonable to the client; that the transaction or acquisition and its terms were fully disclosed and transmitted in writing to the client in a manner which should reasonably have been understood by the client; that the client was advised in writing that the client may seek the advice of an independent lawyer of the client’s choice; that the client was given a reasonable opportunity to seek that advice; and that the client thereafter consented in writing to the terms of the transaction or acquisition, Respondent wilfully violated Rules of Professional Conduct, rule 3-300.
26. By unilaterally authorizing a series of loans from the investment fund that was intended for the sole benefit of Amwest Furniture Plus, Respondent entered into transactions with his client that were not fair and reasonable, transactions that were self-dealing and overreaching. By not advising his client of the risks of such loans or of a real or potential conflict of interest, Respondent breached his fiduciary duties owed to a client. By entering into transactions that were not fair and reasonable, by self dealing and overreaching, and by failing to advise his client of real or potential conflicts, Respondent committed an act or acts involving moral turpitude, dishonesty or corruption, in willful violation of Business and Professions Code, section 6106.
WAIVER OF VARIANCE BETWEEN NOTICE OF DISCIPLINARY CHARGES AND STIPULATED FACTS AND CULPABILITY.
The parties waive any variance between the Notice of Disciplinary Charges filed on November 14, 2008 and the facts and/or conclusions of law contained in this stipulation. Additionally, the parties waive the issuance of an amended Notice of Disciplinary Charges. The parties further waive the right to the filing of a notice of Disciplinary Charges and to a formal hearing on any charge not included in the pending Notice of Disciplinary Charges.
MITIGATION.
Respondent cooperated during the pendency of the instant proceedings by stipulating. He also recognized his wrongdoing and admitted culpability. His candor and cooperation are mitigating factors. (Std. 1.2(e)(v).) Respondent recognizes that he made an error in judgment in the instant matter and has made amends to his client in March 2007.
Evidence of pro bono work and community service is a factor in mitigation. (Rose v. State Bar (1989) 49 Cal.3d 646, 667; In the Matter of Spaith (Review Dept. 1996) 3 Cal. State Bar Ct. Rptr. 511, 521 .) Respondent has spent hundreds of hours assisting church members with their legal matters on a weekly basis at the Great Commission Church in Hacienda Heights for about six years. Respondent volunteers his English-Mandarin Chinese speaking skills to people in his community.
Respondent has fully repaid the loan plus interest and acknowledges his fiduciary obligations to his client which supports Respondent’s rehabilitation. (In the Matter of Taggart (Review Dept. 2001) 4 Cal. State Bar Ct. Rptr. 302, 312.)
AGGRAVATION.
Respondent’s prior record is an aggravating factor. (Std. 1.2(b)(i).) Respondent’s prior misconduct occurred during the same timeframe and is slightly diminished as an aggravating factor for this reason. (Lew& v. State Bar (1973) 9 Cal.3d 704, 715; In the Matter of Bach (Review Dept. 1991) 1 Cal. State Bar Ct. Rptr. 631,646; In the Matter of Sklar (Review Dept. 1993) 2 Cal. State Bar Ct. Rptr. 602; In the Matter of Miller (Review Dept. 1990) 1 Cal. State Bar Ct. Rptr. 131, 136 [prior discipline diminished because it occurred during same time period as present misconduct and thus did not provide respondent with an opportunity to "heed the import of that discipline"]; Shapiro v. State Bar (1990) 51 Cal.3d 251. 259; In the Matter of Burckhardt (Review Dept. 1991) 1 Cal. State Bar Ct. Rptr. 343,350-351.)
AUTHORITIES.
The purpose of State Bar disciplinary proceedings is not to punish the attorney, but to protect the public, to preserve public confidence in the profession, and to maintain the highest possible professional standards for attorneys. (Chadwick v. State Bar (1989) 49 Cal.3d 103, 111; Cooper v. State Bar (1987)43 Cal.3d 1016, 1025; Std. 1.3.)
Standard 2.8 of the Standards for Attorney Sanctions for Professional Misconduct, Rules Proc. Of State Bar, Title IV, provides that a violation of rule 3-300 shall result in suspension if harm to the client is not minimal. Standard 2.3 provides that a violation of moral turpitude shall result in suspension or disbarment. Here, disbarment is not necessary to serve the purposes of attorney discipline.
In In the Matter of Peavey (Review Dept. 2002) 4 Cal. State Bar Ct. Rptr. 483, the attorney received three-years stayed suspension, three-years probation, and two years of actual suspension where the attorney was found culpable of violating rule 3-300, 6106 and 6068(o)(2) in two client matters. Peavey refused to pay restitution in two separate client matters, forced the clients to seek a civil judgment and then by the time of trial had still not paid anything toward the judgments. The attorney in Peavey had no prior record of misconduct in 21 years of practice but his misconduct was more egregious than that in the present case. Respondent’s circumstances though involving more money are less egregious because he did ultimately make restitution, and managed to salvage what was left of the attorney-client relationship by making amends with Mr. Li and agreeing to represent Mr. Li in his immigration matter by filing a petition on a different basis. Respondent did not make the kinds of misrepresentations that the attorney in Peavey made to placate the clients for many years. Furthermore, Respondent’s misconduct involved an isolated case whereas the attorney in Peavey was not an isolated incident.
Thus, 18-months actual suspension is sufficient to serve the purposes of attorney discipline.
DISMISSALS.
The parties respectfully request the Court dismiss six alleged violations in the interest of justice:
Case No.:
Count:
Alleged Violation:
Case No.: 06-O-11095, Count: Two, Alleged Violation: Rule 4-100(A), Rules of Professional Conduct
Case No.: 06-0-11095, Count: Three, Alleged Violation: Rule 4-100(B)(3), Rules of Professional Conduct
Case No.: 06-O-11095, Count: Four, Alleged Violation: Rule 3-110(A), Rules of Professional Conduct
Case No.: 06-O-11095, Count: Five, Alleged Violation: Rule 4-100(A), Rules of Professional Conduct
Case No.: 06-O-11095, Count: Six, Alleged Violation: Rule 3-700(D)(2), Rules of Professional Conduct
Case No.: 06-O-11095, Count: Seven, Alleged Violation: Section 6068(m), Business and Professions Code
PENDING PROCEEDINGS.
The disclosure date referred to, on page one, paragraph A.(7), was November 30, 2009.
COSTS OF DISCIPLINARY PROCEEDINGS.
Respondent acknowledges that the Office of the Chief Trial Counsel has informed Respondent that as of November 30, 2009, the estimated prosecution costs in this matter are approximately $4,920.00. Respondent acknowledges that this figure is an estimate only and that it might not include State Bar Court costs that will be included in any final cost assessment (see Bus. & Prof. Code section 6068.10(c)) or taxable costs (see C.C.P. section 1033.5(a)), which will be included in any final cost assessment. Respondent further acknowledges that should this stipulation be rejected or should relief from the stipulation be granted, the costs in this matter may increase due to the cost of further proceedings. It is also noted that if Respondent fails to pay any installment of disciplinary costs within the time provided herein or as may be modified by the State Bar Court pursuant to section 6086.10, subdivision(c), the remaining balance of the costs is due and payable immediately unless relief has been granted under the Rules of Procedure of the State Bar of California (Rules Proc. of State Bar, rule 286). The payment of costs is enforceable both as provided in Business and Professions Code section 6140.7 and as a money judgment.
STATE BAR ETHICS SCHOOL.
Because Respondent has agreed to attend State Bar Ethics School as part of this stipulation, Respondent will receive Minimum Continuing Legal Education credit upon the satisfactory completion of State Bar Ethics School.
Case Number(s): 06-O-11095
In the Matter of: John Yaheng Tu
<<not>> checked. a. Within days/ months/ years of the effective date of the discipline herein, Respondent must develop a law office management/organization plan, which must be approved by the Office of Probation. This plan must include procedures to (1) send periodic reports to clients; (2) document telephone messages received and sent; (3) maintain files; (4) meet deadlines; (5) withdraw as attorney, whether of record or not, when clients cannot be contacted or located; (6) train and supervise support personnel; and (7) address any subject area or deficiency that caused or contributed to Respondent’s misconduct in the current proceeding.
checked. b. Within 0 days/ 12 months/ 0 years of the effective date of the discipline herein, Respondent must submit to the Office of Probation satisfactory evidence of completion of no less than 12 hours of Minimum Continuing Legal Education (MCLE) approved courses in law office management, attorney client relations and/or general legal ethics. This requirement is separate from any MCLE requirement, and Respondent will not receive MCLE credit for attending these courses (Rule 3201, Rules of Procedure of the State Bar.)
<<not>> checked. c. Within 30 days of the effective date of the discipline, Respondent must join the Law Practice Management and Technology Section of the State Bar of California and pay the dues and costs of enrollment for year(s). Respondent must furnish satisfactory evidence of membership in the section to the Office of Probation of the State Bar of California in the first report required.
Other:
SIGNATURE OF THE PARTIES
Case Number(s): 06-O-11095
In the Matter of: John Yaheng Tu
By their signatures below, the parties and their counsel, as applicable, signify their agreement with each of the recitation and each of the terms and conditions of this Stipulation Re Facts, Conclusions of Law and Disposition.
Signed by:
Respondent: John Yaheng Tu
Date: December 11, 2009
Respondent’s Counsel: Date: Michael E. Wine
Date: December 11, 2009
Deputy Trial Counsel: Jean Cha
Date: December 14, 2009
Case Number(s): 06-O-11095
In the Matter of: John Yaheng Tu
Finding the stipulation to be fair to the parties and that it adequately protects the public, IT IS ORDERED that the requested dismissal of counts/charges, if any is GRANTED without prejudice, and:
checked. The stipulated facts and disposition are APPROVED and the DISCIPLINE RECOMMENDED to the Supreme Court.
<<not>> checked. The stipulated facts and disposition are APPROVED AS MODIFIED as set forth below, and the DISCIPLINE IS RECOMMENDED to the Supreme Court.
<<not>> checked. All Hearing dates are vacated.
The parties are bound by the stipulation as approved unless: 1) a motion to withdraw or modify the stipulation, filed within 15 days after service of this order, is granted; or 2) this court modifies or further modifies the approved stipulation. (See rule 135(b), Rules of Procedure.) The effective date of this disposition is the effective date of the Supreme Court order herein, normally 30 days after the file date. (See rule 9.18(a), California Rules of Court.)
Signed by:
Judge of the State Bar Court: Richard A. Honn
Date: December 16, 2009
[Rules Proc. of State Bar; Rule 5.27(B); Code Civ. Proc., § 1013a(4)]
I am a Case Administrator of the State Bar Court of California. I am over the age of eighteen and not a party to the within proceeding. Pursuant to standard court practice, in the City and
County of Los Angeles, on December 17, 2009, I deposited a true copy of the following document(s):
STIPULATION RE FACTS, CONCLUSIONS OF LAW AND DISPOSITION AND ORDER APPROVING
in a sealed envelope for collection and mailing on that date as follows:
checked. by first-class mail, with postage thereon fully prepaid, through the United States Postal Service at Los Angeles, California, addressed as follows:
MICHAEL E. WINE
301 N LAKE AVE STE 800
PASADENA, CA 91101-5113
<<not>> checked. by certified mail, No. , with return receipt requested, through the United States Postal Service at , California, addressed as follows:
<<not>> checked. by overnight mail at , California, addressed as follows:
<<not>> checked. by fax transmission, at fax number . No error was reported by the fax machine that I used.
<<not>> checked. By personal service by leaving the documents in a sealed envelope or package clearly labeled to identify the attorney being served with a receptionist or a person having charge of the attorney’s office, addressed as follows:
checked. by interoffice mail through a facility regularly maintained by the State Bar of California addressed as follows:
Jean Hee Cha, Enforcement, Los Angeles
I hereby certify that the foregoing is true and correct. Executed in Los Angeles, California, on December 17, 2009.
Signed by:
Cristina Potter
Case Administrator
State Bar Court