Bar News - October 19, 2007
NH Supreme Court Professional Conduct Committee
Daly, John V. advs. John Leggett # 04-041
Public Censure Summary
The New Hampshire Supreme Court Professional Conduct Committee deliberated in the matter of Daly, John V. advs. John Leggett # 04-041, and issued a Public Censure on July 23, 2007. The Committee accepted the Stipulation of Facts, Rules Violated and Sanction proposed by the Respondent and Assistant Disciplinary Counsel.
John H. Leggett hired John V. Daly, Esquire, of Sanders and McDermott, in January, 2000, to assist in the organization and capitalization of IDM Software, Inc. Patricia M. Weathersby, Esquire, an associate also with Sanders and McDermott, was to assist Mr. Daly. Mr. Daly prepared Articles of Incorporation for IDM and filed them with the NH Secretary of State on February 2, 2000. In a memorandum to Mr. Daly dated February 9, 2000, Ms. Weathersby determined that, pursuant to RSA 421-B:17(II)(k), as a newly formed corporation, IDM would qualify for an exemption from certain securities registration requirements, if the initial public offering, among other conditions, limited the number of investors not to exceed ten non-institutional investors, that proceeds were limited to $600,000.00, and sales were completed within 60 days of incorporation. Mr. Daly and Ms. Weathersby did not supply IDM with a copy of the February 9, 2000, memorandum.
On April 3, 2000, IDM completed its initial private offering, with sales to 20 investors (including partial units), for a total of $635,000.00. The subscription agreements executed by investors were delivered to Mr. Dalyís law firm on April 10, 2000. Ms. Weathersby noted that more than the expected amount of money was raised, but neither she nor Mr. Daly recognized that the excess number of subscribers could render the sale invalid and/or subject the client to certain penalties for failing to satisfy the requirements of RSA 421 B.
Mr. Leggett was not informed of this problem. An application for a second stock offering a few months later prompted a request for detailed information on the first offering by the NH Bureau of Securities Regulation. Mr. Daly delayed responding to the Bureauís inquiry, and provided false and misleading information about his work and the status of the second stock offering to his client. Additional facts are listed in their entirety in the Order.
The Committee found by clear and convincing evidence that John V. Daly violated the following Rules of Professional Conduct: 1.3(a): Diligence; 1.4(a) and 1.4(b): Client Communications, and 8.4(c): Candor.
In support of said Rule violations, the Committee found:
- Upon completion of the initial stock offering in April, 2000, Mr. Daly was informed that the offering had been over-subscribed. As of that time, Mr. Daly was aware, or should have been aware, that the initial stock offering may not have been conducted in compliance with state and federal law.
- Mr. Daly owed a duty to his client to respond with reasonable promptness and diligence in addressing the legal issues raised in connection with the initial offering.
- Mr. Daly failed to take prompt, reasonable and appropriate corrective measures.
- Mr. Daly also owed his client a duty of promptness and diligence in connection with obtaining regulatory approval to conduct a second stock offering.
- Mr. Dalyís failure to exercise diligence subjected his client to avoidable harm, including regulatory sanctions in connection with the initial stock offering, and failure, or significant and costly delay, in obtaining approval of the second stock offering.
- Mr. Daly had a duty to keep IDM reasonably informed regarding any legal issues.
- Further, not withstanding numerous contacts and inquiries from his client commencing in November, 2000, regarding efforts to obtain Bureau approval of a second stock offering, Mr. Daly failed to provide IDM with complete and accurate information.
- Mr. Dalyís failure to discuss with his clients the legal and practical aspects of problems associated with IDMís stock offerings and the available alternative courses of action in a timely manner compromised IDMís ability to make informed and timely decisions about the representation.
- Mr. Daly owed IDM a duty of candor in connection with all matters having to do with Mr. Dalyís representation.
- On various occasions from and after November, 2000, Mr. Daly undertook to deceive IDM by providing it will false, misleading, or incomplete information about the status of regulatory matters before the Bureau.
Mr. Daly was issued a Public Censure, and ordered to pay the expenses incurred by the Committee in the investigation and prosecution of this matter, as stipulated to by him. The matter is public record, and available for inspection at the New Hampshire Supreme Court Attorney Discipline Office, 4 Chenell Drive, Suite 102, Concord, New Hampshire 03301.
October 4, 2007