Judge recommends Alioto
by NANCY McCARTHY
Former San Francisco
Alioto's attorney said he would appeal. Bar court recommendations are not final until approved by the California Supreme Court.
The prominent antitrust practitioner, beset by professional problems and family squabbles in recent years, faced numerous allegations of misconduct arising from his violations of a receivership order in Marin County and what amounted to a fee dispute with a client in an antitrust case.
The hearing judge, noting that the 80-year-old Alioto could be disbarred for his actions, found that he committed 10 acts of wrongdoing, including hiding funds from creditors in a client trust account, misappropriating $150,000 from a client (which he later returned), failing to account for or return client funds, commingling funds and violating court orders. The court rejected several other charges made by the bar.
Alioto's attorney, Thomas Fahner, said the former mayor would appeal the decision to the bar court's review department. "We have vigorously litigated this and will continue to vigorously litigate," Fahner said.
A request for review will stay the decision. State Bar Court recommendations do not become final until acted upon by the California Supreme Court.
Earlier case dismissed
Alioto tangled with the bar once before, when he was accused in 1987 of fee-gouging for taking $5.1 million of a $9 million settlement in a price-fixing case. The matter was dismissed after a five-year battle.
In the current matter, hearing Judge Nancy Roberts Lonsdale recommended that Alioto be suspended for five years, stayed, and placed on probation for five years with conditions including an actual two-year suspension, payment of outstanding sanctions totaling $512,000, and restitution to his former client for interest on the $150,000 he already repaid. He also must prove his rehabilitation to the State Bar, attend ethics school and a client trust accounting seminar, pass the Multistate Professional Responsibility Examination and comply with rule 955 of the California Rules of Court.
"If there was any discernible risk that [Alioto] would repeat the type of conduct which he engaged in in this matter, disbarment would be the only option," wrote Lonsdale in a 90-page decision. ". . . Nevertheless, when viewed in the context of [his] exemplary career of more than five decades, his actions may fairly be viewed as aberrational."
The former mayor's troubles, which also involved some family members and his law firm, began in the 1980s with litigation resulting from the failure of Pacific Far East Lines, a shipping firm he and his family owned. Alioto personally paid more than $3 million as part of a settlement.
The plaintiff, Alioto Fish Company, sought additional attorney's fees in 1991 and won an order for $141,341 against Alioto, members of his family and the Alioto & Alioto law firm. A few months earlier, Alioto also was hit with $2.7 million in back taxes, interest and penalties as a result of his failure to pay full taxes over a 15-year period. The IRS filed a lien against him in San Francisco.
When Alioto did not pay any of the fee order in the fish company case, a receiver was appointed by the Marin County Superior Court, where the action had been filed. Alioto and his law firm were ordered to provide the receiver access to all bank and credit card accounts and other related financial information, and to turn over all income, including earned fees, to the receiver. All funds, except for entrusted funds, were to be placed in an account opened by the receiver.
Family dispute blamed
According to Lonsdale's decision, Alioto told the receiver he thought he could meet the fee order with an anticipated contingent fee, but the money was impounded as part of a family dispute. He then told the receiver he could not comply with the order, but never filed an appeal and the order remained in effect.
Over the next three years, the receiver returned to court four times in efforts to force Alioto to pay the fee order. Sanctions were issued each time and ultimately totaled $529,000. In 1992 alone, Alioto received more than $450,000 in fees and loans which he did not turn over to the receiver.
In January 1993, Alioto paid the receiver $447,500, but all the money either was owed to his associates or was claimed by the IRS as part of its lien. At the same time, various employees of his law firm quit because they feared they would not be paid. A federal court determined that Alioto & Alioto ceased to exist.
Alioto contended to the bar court that the receiver order was invalid, but Lonsdale agreed with a 1994 Court of Appeal decision rejecting his arguments. The bar court also rejected his contention that his 1993 payment would have met the order had it not been seized by the IRS.
"That ultimately the receivership largely destroyed the law practice which it purportedly sought to preserve to aid in satisfying the judgment is nothing short of tragic," wrote Lonsdale. "However, it does not follow that the order was invalid." She found that in violating the order, Alioto committed acts involving moral turpitude.
She also determined that Alioto used his client trust account for business purposes and to conceal funds from the receiver. "He engaged in a planned course of conduct designed to evade his legal obligations and defeat the legal purposes of the receiver order," Lonsdale wrote. "Such conduct by an attorney sworn to uphold the law is reprehensible and inexcusable."
The fee dispute stemmed from a vague agreement between Alioto and a woman who was considering an antitrust action. She paid him $250,000, which he believed was his fee. She sought return of $150,000 as "costs money." Alioto removed the $150,000 from his client trust account and appropriated it for his own use.
After the client complained to the bar, he returned the money to her.
Lonsdale ruled that Alioto did not have the right to withdraw the entrusted costs fund money from his trust account, and he therefore misappropriated it.
Fully one-third of Lonsdale's decision is devoted to testimony from 20 character witnesses called by Alioto in a 14-day trial last winter. They presented extensive evidence of his reputation for integrity, professionalism and honesty throughout a distinguished 56-year legal career.
Exemplary public servant
The judge noted that Alioto has never been disciplined, was an exemplary public servant during his eight years as mayor of San Francisco, and was under great financial hardship at the time of his misconduct.
"Unfortunately," she wrote, "the dilemma [he] found himself in was largely of his own making and the 'juggling' of funds and obligations which he undertook violated many of the most important duties of an attorney."