Lawyers get requests for powers of attorney all the time, and they're easy to churn out and then forget. But beware. Powers of attorney also are very easily abused. So easily, in fact, that the Illinois docket where we practice is flooded with sad tales of elderly women who were taken advantage of. Don't add your clients to that list, for their sake -- or yours.
Instead, keep in mind poor old Corrine Rice and her lawyer, Peter Deforest Winthrop, who's now suspended from the practice of law for two years. And make sure you never do anything that remotely resembles Winthrop's actions.
Rice, 92, was never married; she had no children or siblings. Living alone, she came to trust Farouq Nobani, a neighbor in her condominium complex. Nobani helped Rice in 2001 by finding her a lawyer to prepare her will. This turned out to be Winthrop, who'd helped Nobani a year earlier with some traffic matters.
When Winthrop, a sole practitioner, met with his new client, Rice told him she also wanted Nobani to have unfettered discretion over all of her financial affairs while she was alive.
It would seem a power of attorney was in order. So Winthrop recommended one, then duly prepared and executed it.
Instead, he should have taken note of two major red flags: Lawyers should be very cautious when they're initially contacted not by the principal but by the individual who ultimately will act as agent under a power of attorney. Also, be wary when that principal is elderly or infirm and therefore susceptible to influence. Take the time to find out what's really going on and, if a client lacks capacity or is susceptible, think about seeking a guardianship.
After Winthrop contacted Nobani to inform him of the power of attorney designation, Nobani refused to act unless the attorney added a provision protecting Nobani from liability. Winthrop would later testify at his hearing before the Illinois Attorney Registration and Disciplinary Committee (ARDC) that he did not find such language problematic because it accomplished Rice's goal of designating Nobani as her agent. But clearly this was another red flag.
At this point, the story of Rice and her lawyer takes a turn for the worse, so much so that Winthrop's subsequent behavior is questionable, at best. "Ill-advised," is how Illinois Supreme Court Judge Thomas R. Fitzgerald actually put it -- repeatedly.
To get the will and power of attorney notarized, Winthrop met Rice and Nobani at a local bank that had assisted Rice with financial transactions in the past. The banker they dealt with later testified that she was "uncomfortable" with the circumstances under which the documents were signed because of Rice's unusual behavior: The old woman came to the bank at night when she'd always previously come early in the morning. She seemed to be dressed, the banker said, in clothing "belonging to someone else." And she seemed far less independent than in the past.
The banker also was concerned that Nobani wanted to immediately withdraw funds from Rice's account for the payment of "personal fees" that he and the attorney had incurred. The banker would not honor the request. Her stated reason was that she could not disburse funds because Rice did not bring her passbook; but she later testified that she did this so that she could discuss the situation with her supervisor.
Nobani and the attorney returned the next day, and the bank supervisor said that she would not honor the power of attorney because it was not the Illinois statutory form.
Nobani and the attorney went to another bank in which Rice held funds, and Nobani used the power of attorney to close a certificate of deposit that was not yet mature (thus incurring penalties) and to obtain a cashier's check for the balance of funds in Rice's account -- a total of $87,000.
Clearly, Winthrop had an obligation to protect the interests of Rice, his client. Later, he would claim that, even though he was in the banker's cubicle with Nobani, he wasn't paying attention to Nobani's transactions.
Nobani used the funds to open an account at a third bank in his name, naming his wife as beneficiary. And he began to use the funds for his own benefit.
Eventually, an Illinois social services agency became involved (another neighbor went to the supervisor at the bank, and the supervisor called the police and the social services agency). Rice's accounts were frozen, at which point the balance of Rice's funds left in Nobani's accounts was $2,313.60. Agency representatives testified that Winthrop told them that he represented Nobani and denied that any funds had been withdrawn from Rice's accounts using the power of attorney. Winthrop denied these statements.
Ultimately, a guardian was appointed for Rice. Nobani was criminally charged, but not convicted. And the ARDC brought disciplinary charges against Winthrop.
The first ARDC hearing board to hear Winthrop's case found that the charges against him should be dismissed because there was insufficient evidence to show that he knew of, or was, as the board put it "compliant" with Nobani's misconduct. But the ARDC Review Board reversed this decision and recommended a two-year suspension.
The case went to the Illinois Supreme Court. That court found Winthrop didn't breach his fiduciary duties to Rice by adding a clause supposedly relieving Nobani of liability. In fact, the court said, that "inartfully drafted clause" neither negated Nobani's obligation under the statute to exercise due care nor relieved him of liability for negligence; the only thing it accomplished was to "assuage Nobani's anxiety."
Winthrop also did not breach his fiduciary duty in failing to draft a power of attorney containing additional protections in light of Rice's advanced age and life circumstances. The court distinguished the case at bar from cases in which attorneys were made aware of his client's mental deficiencies by circumstances or reports of medical professionals. Winthrop, the court found, was "not required to make an assessment of his client's competence, only to be punished later when his assessment was incorrect."
The court did say it was "compelled" to comment on the attorney's conduct in accompanying Nobani to the second bank where he withdrew significant funds from Rice's account. The court found highly suspicious Winthrop's alleged obliviousness to Nobani's actions as well as his contention that he believed Nobani was going to use the withdrawn funds to pay Rice's bills. Nevertheless, Nobani had acted within the boundaries of the power of attorney that clearly permitted him to withdraw Rice's funds and handle Rice's finances as he saw fit. So, while the attorney didn't act appropriately, his behavior was not sanctionable, the court said.
The court also concluded that there was no conflict of interest in Winthrop representing Rice, because Rice selected Nobani as her agent, and there was no evidence suggesting that the attorney influenced Rice's decision or that he assisted Nobani in influencing Rice. Moreover, Winthrop stated that he was not representing Nobani at the time he began working for Rice, and the evidence was insufficient to show otherwise. But again, the court felt compelled to comment that the attorney's actions with respect to Rice and Nobani were suspicious and, at the very least, demonstrated poor judgment. But the evidence did not demonstrate that the attorney was representing Nobani when he agreed to represent Rice or that he placed Nobani's interests ahead of Rice.
Lest you think there is absolutely no justice, though, a probate court order in the guardianship proceedings did force Nobani to return all of Rice's funds.
Also, the Illinois Supreme Court upheld Winthrop's two-year suspension. On what basis? Because he made material misrepresentations to a third party, a social worker. Winthrop had been present when Nobani withdrew Rice's funds, yet he told the social worker that no funds had been withdrawn. And so the court found that the attorney violated Illinois Rule of Professional Conduct 4.1(a) (regarding truthfulness in statements to others) and Rule 8.4(a)(4) (forbidding attorneys from engaging in conduct involving dishonesty, fraud, deceit or misrepresentation).
Powers of attorney are tricky things. Many reputable estate-planning attorneys refuse to draft them because of the potential for messes like the one in In re Winthrop, 848 N.E.2d 961 (Ill. March 23, 2006).
Some attorneys shy away from them simply because so many clients become embroiled in disputes even over legitimate use of the powers. Usually, the fights are sparked by some benefit accruing to the agent in the form of a gift from the principal. Due to the fiduciary relationship between principal and agent, a presumption of fraud arises against the agent even when acts are undertaken in good faith.
But a more moderate stance can be taken: Draft those powers of attorney where appropriate. Just be careful about who asks for them -- and be sure to ascertain the principal's capacity and freedom from undue influence before proceeding.
To subscribe, click here.
