By: Clark Kauffman
For the second time, the Iowa Supreme Court has suspended the license of a Cedar Rapids attorney, stating that it would have leveled a more severe penalty against him in 2017 had it known more about his role in a scheme that deprived investors of $700,000.
Court records indicate that from 2006 to 2014, Cedar Rapids lawyer Bruce Willey was the attorney for a Linn County developer and entrepreneur, David A. Wild. As Wild’s attorney, Willey had created 20 or more business entities for Wild and, according to the commission, had performed somewhere between $20,000 and $100,000 worth of legal work for Wild.
Rather than pay Willey for those services, Wild agreed to give Willey a financial stake in some of those businesses, which would then provide loans to Willey.
Together, Wild and Willey formed Catalyst Resource Group to solicit financing for projects Wild was interested in exploring. Catalyst then entered into an agreement with a company called Ramis Limited, based in London, England. Court records indicate the plan called for Catalyst to give money to Ramis in return for Ramis pledging high-value assets, such as U.S. Treasury bills, to Catalyst, which could then use them as collateral for loans worth millions of dollars.
According to the commission, this method of raising venture capital is prohibited in the United States.
Under the agreement with Ramis, Catalyst claimed it had unrestricted cash in hand and that Wild and Willey were accredited investors. The deal appeared to call for Catalyst to invest up to $700,000 with Ramis, which would then return $100 million to $500 million to Catalyst, the commission stated, calling the arrangement a “high-risk foreign scheme.”
Neither Wild nor Willey “could explain how the planned investment would work in a manner understandable to the members of the panel,” the commission later found. “It was evident that neither of them truly understood what they were doing.”
To raise the necessary money, Willey allegedly contacted Laurus Technologies of Illinois, which agreed to loan Catalyst $500,000, and a client of his, Midwest SN Investors, which agreed to loan Catalyst $200,000. Willey, according to the commission, failed to inform Midwest he owned a one-half interest in Catalyst.
Neither Laurus nor Midwest was repaid any of the money loaned to Catalyst. Court records show Laurus filed suit against Wild and eventually obtained a judgment against him for approximately $700,000 for the principal amount of the loan, interest, and attorney fees. Wild eventually sued Willey, alleging malpractice by conflict of interest, breach of fiduciary duty and fraudulent misrepresentation, although the case was later dismissed.
The commission found that Willey had a conflict of interest in his dealings with Midwest and that he was “not only untruthful” in what he disclosed to the company, he failed to inform Midwest he would receive directly $50,000 of the total money being borrowed by Catalyst. The panel recommended a 30-day license suspension.
In 2017, Willey’s license was suspended for 60 days due to other alleged ethical violations tied to his representation of Wild. In that matter, Willey had allegedly arranged for a client to loan money to another of his clients, Synergy Projects. The client who loaned the money said Willey never told him Synergy and its principal owner, Wild, were clients of his.
After the Iowa Supreme Court Attorney Disciplinary Board examined Willey’s conduct in the Catalyst matter, Willey was accused of using money from investors to pay off credit card debt and failing to inform his clients of conflicts of interest.
Willey argued that if he had violated any ethics rules, the court was limited to ordering, at most, a public reprimand because the conduct at issue had occurred before the 2017 suspension of his license.
The board maintained that had the court been aware in 2017 of Willey’s conduct in the Catalyst matter, it likely would have suspended his license for more than 60 days.
“Willey suggests an attorney cannot receive an enhanced sanction for conduct occurring prior to a previous disciplinary action,” the Iowa Supreme Court stated in its recent review of the Catalyst matter. “Willey’s willingness to engage his clients in questionable investments — without disclosing the essential terms of the transactions to allow his clients to make an informed decision — was apparently not a one-time aberration. Had we known of Willey’s repeated conduct, we likely would have imposed a stricter sanction.”
The court agreed with the commission’s recommendation and suspended Willey’s license for 30 days.
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