Money laundering scheme leads to disbarment

Southern California attorney JACK ROBERT RECH [#62476], 52, of Covina was disbarred March 23, 1996, after the review department of the State Bar Court rejected a hearing judge's recommendation for a more lenient level of discipline. The Supreme Court denied Rech's petition for writ of review. Rech was involved in a money laundering scheme which permitted his client to shield drug proceeds through investments in two real estate ventures.

He was arrested in April 1988 and pleaded guilty to charges of conspiracy to impair the collection of income taxes from a business partner and others, in violation of U.S. Code Title 18, 371.

Rech was sentenced to prison for five years, with four-and-a-half years suspended, placed on five years probation, fined $100,000 and ordered to perform 2,000 hours of community service. He spent six months in a halfway house and was discharged from criminal probation in March 1991.

A bar court hearing judge originally recommended a five-year stayed suspension with five years probation and an actual suspension of three years.

The review department, however, concluded that Rech committed acts of moral turpitude and gave little weight to several of the mitigating factors presented.

Rech cooperated with the bar, presented a wide range of favorable character references and has a significant record of pro bono activities.

However, little weight also was given to his expression of remorse and preceding nine years of discipline-free practice. The review department also disagreed with the hearing judge's finding that his conduct was aberrational since the misconduct took place over a period of four years.

Rech's misconduct stemmed from his relationship with Arturo Arocha, who Rech met in the early 1980s when he defended him against charges of possession of cocaine for sale.

Rech successfully had the charges reduced to accessory after the fact and Arocha avoided imprisonment by pleading guilty.

According to the opinion written by Lise Pearlman, former judge of the bar court's review department, Rech later financed Arocha's purchase of a home, but held title to the property and gave Arocha an unrecorded deed to the property in case anything happened to him.

He kept a file on the property, but decided not to put information about his arrangement with Arocha in the file because he feared federal authorities might seize the file.

In August 1983, Rech formed a partnership with a former police officer to build and sell a home. In November, he brought in Arocha to provide additional funds for the venture, but did not tell his partner that he previously defended Arocha in a drug case.

The partner became suspicious when Arocha began making cash payments of $8,000-$10,000 to subcontractors and refused to participate in any more projects with him when he learned about Arocha's background from another source.

Arocha told Rech that the cash came from the sale of properties belonging to his mother-in-law, but evidence presented in the bar's disciplinary proceedings showed that Rech knew the funds came from illegal drug sales.

"[Rech] could have bought out Arocha's interest in the Rancho California venture," Pearlman wrote, "but [he] did not sever ties with Arocha despite [his] knowledge of the illegal source of Arocha's contributions to the venture."

About four times during the construction of the house, Rech hid approximately $10,000 in his own home for Arocha. In one instance, Rech's wife discovered a bag containing $75,000-$200,000 and asked her husband to remove it.

In November 1984, Arocha allegedly threatened to kill the former police officer and his family if he interfered with Arocha's drug sales. Although Rech encouraged the partner to remain in California and complete work on a new real estate venture, the man moved with his family to Montana.

Rech refused to represent Arocha in July 1985 when he was arrested on drug charges, but lent him $10,000 to retain an attorney.

Arocha was offered leniency for working as an undercover agent for federal authorities.

A short time later, Rech contacted his partner in Montana and told him Arocha wanted to get his money out of the Rancho California property.

He also told the former police officer that he was concerned about his own safety and admitted that he falsely told Arocha the partner was preventing the sale of the property.

Rech eventually agreed to become involved in Arocha's drug business and loaned him $30,000 to satisfy another drug investor.