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Adding UPL to Indiana RICO statute

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An Indiana Supreme Court case involving an estate planning “trust mill” has led to a policy discussion about whether certain types of unauthorized practice of law should rise above a misdemeanor crime and involve a racketeering component.

The Indiana General Assembly will likely be asked to consider a proposal during its next session, following an interim Probate Code Study Commission recommendation for changes to state statute about how the state targets those individuals or businesses that illegally practice law. Specifically, lawmakers could address whether a pattern of UPL should be added to the list of three dozen crimes covered by the Racketeer Influenced and Corrupt Organizations statute.

foley-ralph-mug.jpg Foley

“This is a phenomenon we’ve tried to address in the past,” said Rep. Ralph Foley, R-Martinsville, an attorney who practices probate law and chairs the study committee. “The problem is that these are charlatans trying to deceive people. They aren’t lawyers and are nothing but a bad way to separate people from their money.”

The case against Indianapolis-based United Financial Systems Corp. initiated this policy discussion. The Indiana Supreme Court determined United Financial was illegally practicing law when preparing and selling estate planning documents and services to people. The Indiana State Bar Association filed a “trust mill” suit three years ago, and in April 2010 the justices determined United Financial should have known what it was doing was UPL and ordered the disgorgement of fees the company received from its UPL. All of the Indiana estate plan customers going back to 1995 were to be notified of the decision, but the company refused to pay those refunds immediately, and the justices in December 2010 ordered United Financial to notify those customers and return the fees as previously ordered.

An exact monetary figure of refunds or claims isn’t outlined in the order or in court filings. But in the court’s ruling, it provided context for the potential amount: from October 2006 through May 2009, the company’s Indiana business included 1,306 estate plans grossing more than $2.7 million. Nationally, 18.8 percent of United Financial’s total income was reported to have come from estate planning services in this state.

The Indiana Supreme Court in June said it wouldn’t reconsider its 2010 ruling, and now former Monroe Circuit Judge Viola Taliaferro is acting as commissioner and deciding what resolution is best for the case.

Earlier in the year, she determined that United Financial had failed without good cause to pay refunds to 346 customers, and she’s now determining whether contempt sanctions should be imposed. At a hearing in late October, the commissioner heard evidence about the company’s information on past customers, tax returns and financial documentation, and both sides have submitted proposed findings for Taliaferro to consider. The proposals call for repaying the restitution amount over the course of seven years, according to attorneys in the case.

Separate from the restitution action before Taliaferro, two lawsuits against United Financial are pending in Marion and Fulton counties as a result of the Supreme Court’s decision about the company’s prior activity.

The lawsuits and judicial action sparked legislative discussion about strengthening state criminal and probate code to address what some consider racketeering.

At the probate commission meeting Oct. 12, members voted 11-2 in support of recommending law changes to the General Assembly.

The changes would add UPL, currently a Class B misdemeanor outlined in Indiana Code 33-43-2, to the list of crimes covered under the RICO statute in IC 35-45-6. By definition, a pattern of racketeering activity occurs when a business or person engages in two or more incidents that had the same or similar intent, result, method of commission or was otherwise interrelated by distinguishing characteristics to other incidents. The current statute lists 36 crimes or activities including murder, arson, theft, child solicitation, promoting professional gambling and money laundering.

Proposed legislation would take effect July 1, 2012. It would allow for enhanced penalties under the racketeering statute, such as giving prosecutors the discretion to make UPL a Class C felony.

Vincennes attorney Jeff Kolb, who chaired the ISBA’s UPL section during the initial United Financial investigation, said he agrees this UPL activity fits into the racketeering definition and that a law change would strengthen the ability to collect restitution or even obtain attorneys fees from the prosecution of these actions.

Foley said that he and former Rep. Trent Van Haaften, D-Mount Vernon, had previously tried unsuccessfully to add UPL to the list of racketeering activities and that now is the time to move forward.

“They’ve developed a scheme and are taking advantage of people and stealing from them,” Foley said about those engaging in UPL similar to the United Financial activity. “Pure and simple, I think it’s a scheme that is racketeering.”

blakey-robert-mug.jpg Blakey

Not everyone on the probate panel agrees. Sen. Susan Glick, R-LaGrange, a former county prosecutor, said she didn’t believe UPL fit with the other listed crimes such as arson and child solicitation. Two non-attorney committee members – Tom Hardin and David Pendergast – voted against the proposal.

“I just wonder if there’s a need here, and if we’re not using a sledge hammer to hit at this when a misdemeanor should be used,” Hardin said.

University of Notre Dame law professor G. Robert Blakey, who helped craft the federal RICO Act in 1970, and is considered one of the nation’s foremost experts on RICO law, said he thinks the kind of UPL activity at issue in this discussion should be covered by the state racketeering statute.

The predicate may not be the same as other offenses, such as murder or drug trafficking, but Blakey says RICO was designed to target illegal businesses operating as an enterprise.

“Organized crime is not limited to the mob, and white-collar crime equals RICO,” he said. “This sounds like white-collar crime to me and it (the proposed statute revisions) makes a lot of sense to me.”•

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  1. CCHP's real accomplishment is the 2015 law signed by Gov Pence that basically outlaws any annexation that is forced where a 65% majority of landowners in the affected area disagree. Regardless of whether HP wins or loses, the citizens of Indiana will not have another fiasco like this. The law Gov Pence signed is a direct result of this malgovernance.

  2. I gave tempparry guardship to a friend of my granddaughter in 2012. I went to prison. I had custody. My daughter went to prison to. We are out. My daughter gave me custody but can get her back. She was not order to give me custody . but now we want granddaughter back from friend. She's 14 now. What rights do we have

  3. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

  4. I have a case presently pending cert review before the SCOTUS that reveals just how Indiana regulates the bar. I have been denied licensure for life for holding the wrong views and questioning the grand inquisitors as to their duties as to state and federal constitutional due process. True story: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS Shorter, Amici brief serving to frame issue as misuse of govt licensure: https://www.scribd.com/doc/312841269/Thomas-More-Society-Amicus-Brown-v-Ind-Bd-of-Law-Examiners

  5. Here's an idea...how about we MORE heavily regulate the law schools to reduce the surplus of graduates, driving starting salaries up for those new grads, so that we can all pay our insane amount of student loans off in a reasonable amount of time and then be able to afford to do pro bono & low-fee work? I've got friends in other industries, radiology for example, and their schools accept a very limited number of students so there will never be a glut of new grads and everyone's pay stays high. For example, my radiologist friend's school accepted just six new students per year.

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