OGDEN — A judge determined Monday that an Ogden attorney violated professional ethics rules by pocketing and spending a client’s lawsuit settlement and lying about it after he was caught.
At the close of a 2 ½-day bench trial in 2nd District Court, Judge Noel Hyde ruled Richard H. Reeve was guilty of dishonesty, failing to safeguard the funds of three clients and improperly giving a paralegal a cut of a settlement.
Hyde also faulted statements made by Reeve during the trial, saying there was “no evidence” to support some claims by Reeve, “even under oath during this proceeding in his testimony.”
The judge said Reeve “stopped short of any intentional perjury, but there certainly was shading and artful answering of questions.”
Hyde set a Feb. 25 status conference, giving Reeve and Barbara Townsend, an attorney representing the Office of Professional Conduct at the Utah State Bar, time to prepare for the trial’s penalty phase.
Possible penalties range from an admonition to disbarment.
The OPC filed the case in 2017, accusing Reeve for his handling of a $380,000 settlement awarded to Jean Tonioli in 2015 in a wrongful-death suit against a drug maker. The Roy woman’s husband, Bob, died in New York City as the couple was returning from a Baltic vacation in 2011.
Earlier Monday, Townsend questioned Reeve about two withdrawals he made in August and September 2015 from the personal credit union account where he had deposited Tonioli’s share, about $254,000, in February.
Reeve testified he withdrew $22,110 on Aug. 1 to pay an auto dealer for a vehicle and $16,000 on Sept. 9 to pay a woman who later became is wife.
Townsend said those withdrawals occurred at a time “after he testified there were problems” in his being able to pay Tonioli because much of her money had been spent by then.
Last week, Reeve blamed at least two large withdrawals earlier in the year on his previous wife, who he said still had access to the account as they were divorcing.
In her closing argument, Townsend said even if his former wife spent some of Tonioli’s money, “He is the attorney in charge of the settlement money. It doesn’t matter what (the first wife) did.”
“Over the course of seven months, not only did he spend $99,000, which was his (share of the settlement), he spent $167,000 of Tonioli’s money,” Townsend said.
Last week, Townsend detailed other spending, such as trips to Las Vegas, San Antonio and Jackson Hole, Wyoming, plus marriage chapel and wedding ring purchases.
Reeve, who represented himself in the ethics trial, admitted in his closing argument that he compromised his integrity, put his law partners in a difficult position and violated Tonioli’s trust.
“I deeply regret the conduct I demonstrated,” he said, adding that he “attempted to immediately take the steps to correct the problems.”
Townsend argued the evidence was overwhelming that Reeve violated the ethics rule that bars an attorney from engaging in “dishonesty, fraud, deceit or misconduct.”
According to testimony, Reeve ordered his paralegal to to have the settlement check go to him, not into the law firm trust account, the customary procedure.
That was in February 2015. The paralegal eventually went to executives at an Ogden law firm where she and Reeve worked about his failure to pay Tonioli and his stonewalling of the client when she asked about the money.
Confronted about it in September 2015, Reeve said the money was in a trust account and Tonioli knew about it. After the firm investigated, Reeve changed his story, saying the settlement remained in progress in federal court, which also was false.
The firm fired Reeve on Sept. 16 and he met with Tonioli and her son the next day to pay the money she had coming.
But the OPC presented as evidence a document Reeve prepared for that meeting that Townsend said covered up the truth of what had happened to the money.
“He made up that document” to depict for the Toniolis “that everything was in there the whole time,” Townsend said. “Don’t be fooled with what Mr. Reeve said.”
Hyde ruled that various arguments Reeve made in his defense were “not credible,” including his description of that Sept. 17 document.
The document, a screenshot of what was presented as a credit union bank record, “in and of itself is a misrepresentation, and Mr. Reeve knew at the time he prepared it,” Hyde said.
Hyde said he found it “very troubling” that Reeve “would go to substantial length is this proceeding to attempt to create the appearance of justification for that document.”
Last week, Reeve had testified that he sold part of his share in a limited liability company to his brother so he could come up with enough money to pay Tonioli what she was owed.
But Hyde said Reeve’s details of those moves “strain credulity” because there’s no record of such a transaction and no evidence of the source of the $167,000 Reeve deposited to make up what he had spent.
The judge found Reeve violated rules requiring the safekeeping of clients’ funds in the Tonioli matter and two other cases where Reeve had instructed the paralegal to send settlements to him, not put them in trusts.
Hyde also upheld an allegation that Reeve violated restrictions on attorney independence by seeing that the paralegal was paid about $3,000 out of his share of the lawsuit winnings.