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In re Sears

Decided: September 30, 1976.

IN THE MATTER OF HARRY L. SEARS, AN ATTORNEY AT LAW


For suspension for three years -- Chief Justice Hughes, Justices Pashman and Schreiber and Judge Conford. For disbarment -- Justice Sullivan. The opinion of the court was delivered by Pashman, J. Sullivan, J. (concurring and dissenting).

Pashman

[71 NJ Page 176] This disciplinary matter concerns the conduct and alleged ethical violations of an attorney whose former prominence in State legal and public activities makes

his involvement in the charges against him particularly unfortunate.

Respondent Harry L. Sears was originally named in a 23-count Statement of Charges preferred by the Morris County Ethics Committee. After a hearing, the Committee filed a presentment with this Court finding that the respondent had committed ethical infractions as to ten of the original 23 charges. Of these ten charges, seven are of a similar nature. Essentially, these charges allege that respondent violated three disciplinary rules of this State:*fn1 DR 7-102(A)(7), (8) which generally prohibits an attorney from assisting a client "in conduct that the lawyers know to be illegal or fraudulent"; DR 9-101(C) which enjoins a lawyer from stating or implying "that he is able to influence improperly . . . any tribunal, legislative body, or public official"; and DR 1-102(A)(3), (4), (5) and (6) which generally proscribe conduct by an attorney which reflects adversely upon the profession and the attorney himself.

An evaluation of these charges and appropriate judicial response thereto require us first to examine the facts upon which they are based and then to consider the charges on their merits and the existence of mitigating or extenuating circumstances.

I

Facts

The offenses attributed to respondent primarily arise from his alleged involvement in three distinct, though closely related,

series of events: an attempt to influence improperly or limit an investigation by the Federal Securities and Exchange Commission; the delivery of an illegal campaign contribution; and the giving of false testimony during investigations into the underlying conduct. Respondent's participation in these events can be placed in perspective only by recalling the prominent position which he once occupied in this State.

The legal and public careers of Harry L. Sears bespeak a reputation for professional competence, personal integrity and distinguished public service which cast an anomalous light on the present disciplinary matter. Respondent was admitted to the practice of law in 1947 and, with several other attorneys, conducted a successful legal practice in Boonton. He was elected to several local political positions and then to the New Jersey General Assembly where he served as its Speaker for four years. Thereafter, he was elected to the New Jersey Senate. Because of his ability and effectiveness as a legislator, Sears was chosen as Majority Leader of the Senate. His meritorious service in this capacity and on numerous commissions earned him statewide recognition. Particularly outstanding was his chairmanship of the State Tax Policy Commission which issued a highly acclaimed report in 1970 recommending fundamental revision of the State's tax structure. However, an unsuccessful venture for the Republican nomination for Governor left respondent with sizeable campaign debts and a desire to leave public life. By means of donations, bank loans and his own assiduous efforts, respondent was able to satisfy all his campaign debts. His efforts in this regard were assisted by a testimonial dinner given on his behalf at which then-Attorney General John Mitchell appeared as the guest of honor. Sears had become acquainted with Mitchell during their mutual efforts on behalf of the 1968 Republican presidential campaign. Shortly thereafter, respondent, despite offers of judicial and administrative positions,

retired from public life and resumed his private law practice.

A. The S.E.C. Investigation

Several months before he retired from the State Senate, Sears was approached by Robert Vesco, a local financier, concerning respondent's possible employment as legal counsel for a Vesco-controlled corporation, International Controls Corporation (I.C.C.). Although they had had only a passing acquaintanceship prior to respondent's candidacy for the Republican gubernatorial nomination, Vesco had made a generous contribution to Sears' campaign and had arranged a much-needed bank loan for Sears. After respondent retired from the Senate and resumed his private law practice, Vesco renewed his offer of professional employment.

The corporation on whose behalf Vesco sought Sears' services was under investigation by the Securities and Exchange Commission (S.E.C.). This investigation concerned an alleged 1970 takeover by I.C.C. of another corporation whose activities and principal, Bernard Cornfeld, had already attracted S.E.C. attention. At the time of the alleged takeover, the "target" corporation, Investors Overseas Services (I.O.S.), was subject to a 1967 consent judgment which prohibited the sale of corporate securities in the United States. Although the transaction in question, in which Vesco purchased controlling shares of I.O.S. from Cornfeld, supposedly occurred in Switzerland, the S.E.C. was concerned with whether the spirit, if not the letter, of the consent judgment had been violated. This transaction was especially significant to the S.E.C. because the purchase gave I.C.C. a controlling position in certain "off shore" (foreign) banking institutions and investment funds. Vesco denied both his controlling ownership of I.O.S. and any violation of the consent judgment. Although he retained a Washington D.C. law firm, persistent friction between the firm and the S.E.C., and his belief that the S.E.C. was systematically

harassing I.C.C., induced him to seek the services of respondent as well.

On March 18, 1971, the S.E.C. formally commenced its investigation into the financial operations of I.C.C. Although Sears was still a member of the State Senate, he apparently agreed to assist Vesco in his efforts to limit S.E.C. discovery. Among these efforts was a suit instituted by I.C.C. in Federal District Court to specifically restrict the scope of discovery by S.E.C. The nature of this suit greatly concerned Vesco who was sensitive to the suspicions which the action might arouse. He, therefore, asked respondent to approach the federal judge to whom the case had been assigned and allay any such suspicions. Although respondent advised Vesco against this course of action, he nevertheless later sent a message to an I.C.C. associate that he had effected the desired communication to the judge. After the S.E.C. investigation had intensified, Vesco requested respondent on several occasions to speak to John Mitchell in order to persuade him to take a personal interest in the inquiry. In particular, Vesco hoped that Mitchell, as a leading figure in the Administration, could induce S.E.C. Chairman William Casey personally to monitor and limit the investigation. Vesco's requests were conveyed by Sears in two letters and during three meetings with Mitchell. Respondent's efforts, however, proved largely fruitless. A meeting between representatives of I.C.C. and S.E.C. on January 19, 1972, reflected the continued tension between the two sides, and was, as Vesco described it, a "disaster."

After he retired from the State Senate, Sears agreed to become an associate counsel for I.C.C. Although his duties were never clearly delineated, he continued to represent I.C.C. with respect to the S.E.C. investigation.

B. The Political Contribution

After his retirement from the State Senate, respondent retained an active interest in political matters. His influence within the State Republican Party was so great that on

several occasions he represented a former governor on matters of State and national importance. As a result of these activities, respondent was eventually asked to direct and coordinate President Nixon's 1972 re-election campaign in New Jersey.

Shortly after the January 19, 1972 I.C.C.-S.E.C. "disaster" meeting, Vesco spoke with respondent in his capacity both as counsel for I.C.C. and re-election campaign director. Vesco mentioned that he had received a mail request from the Republican Party for a political contribution, and as a major contributor in previous campaigns, indicated his desire to contribute half a million dollars to the 1972 campaign. Sears expressed reservations about so large a contribution. In particular, he noted that the recently enacted Federal Election Campaign Act of 1971, 2 U.S.C.A. ยง 431 et seq., required the disclosure of the sources and amounts of contributions in excess of $50,000, and would become effective on April 7, 1972. He also noted that disclosures of so large a contribution, especially in light of the ongoing S.E.C. investigation, would appear very suspicious. Accordingly, respondent recommended that a smaller amount be contributed.

The subject of this contribution was raised at a meeting on February 11, 1972 between Sears and Mitchell which was held at the urging of Vesco. During the meeting, Sears again requested Mitchell to induce S.E.C. Chairman Casey to oversee the I.C.C. investigation. Respondent also mentioned that Vesco intended to make a substantial contribution of an undetermined amount of money up to $500,000, and expressed his concern about the concurrence of such a large contribution and the S.E.C. investigation. Mitchell replied that he would discuss the matter with Maurice Stans, Finance Chairman of the Committee to Re-elect the President.

Subsequent meetings between Vesco and national campaign officials concerning the campaign contribution were held in February and March 1972. On March 11, 1972,

Vesco informed respondent that he had pledged $250,000 to Stans who desired the contribution to be in the form of currency. No explanation was provided for this request. Sears met with Stans on April 3, 1972 to finalize arrangements. It was decided that Vesco would publicly contribute $50,000 through the New Jersey Finance Committee with the remainder to be transferred by means of a secret cash contribution. Sears offered to deliver the secret contribution prior to April 7 to avoid the effective date and disclosure requirements of the federal campaign law. However, Stans stated that this was unnecessary because the actual date of delivery was unimportant. Placing implicit trust in Stans, respondent arranged to deliver the money personally on April 10.

On that date, respondent and the president of I.C.C., Larry Richardson, flew to Washington, D.C. to meet with Stans. Richardson brought $200,000 which he gave to Stans upon arrival at his office. In the ensuing conversation, Richardson told Stans that Vesco wanted some help with regard to the S.E.C. investigation. Respondent, however, reproved Richardson, objecting to any connection between the campaign contribution and Vesco's corporate difficulties, and further indicated that there was no quid pro quo involved in or intended by the contribution. Soon after the meeting, Sears told Richardson that he should not have discussed the S.E.C. investigation. In response, Richardson said that Vesco had wanted them to convey an even stronger message. Richardson then returned to New Jersey while respondent remained in Washington.

At 2 P.M. on that same day, respondent met with John Mitchell. At their meeting, Sears told the then-Chairman of the Committee to Re-elect the President about the $200,000 cash contribution which he had delivered earlier that day. He also reminded Mitchell of the ongoing S.E.C. investigation and his continued requests for a meeting with S.E.C. Chairman Casey. While Sears was at his office, Mitchell telephoned Casey and arranged a meeting between Sears and

Casey for later in the day. At that subsequent meeting Sears received personal assurances from the chairman that I.C.C. would be afforded an opportunity to respond to the findings of the S.E.C. investigation and that Casey would personally review I.C.C. allegations of S.E.C. harassment.

C. Subsequent Investigations

In August 1972, the S.E.C. obtained reliable information concerning corporate looting and other fraudulent activities of Vesco and I.C.C. As the scope of the S.E.C. investigation widened, the activities of the Vesco-controlled corporation were increasingly scrutinized. By October, the S.E.C. had traced funds representing Vesco's $200,000 secret campaign contribution to the I.C.C. treasury. Subpoenas were then issued by the S.E.C. to various officers of I.C.C., including its president, Mr. Richardson. At this point, Vesco again asked respondent to enlist the support of Mitchell. Although Mitchell was no longer either Attorney-General or campaign manager, he still exercised considerable influence. While the exact motivation for contacting Mitchell is unclear, at the very least, Vesco and respondent desired that the scope of the S.E.C. subpoenas be limited to negate inferences of looting and to de-emphasize the political nature of the contribution. While some testimony suggests that respondent merely wished to postpone the subpoenas until after the November election when the "optics" of the situation would not be so detrimental, other evidence shows that Sears desired that the subpoenas be completely withdrawn. In any event, during their October 1972 meeting Mitchell expressed the belief that the S.E.C. was concerned only with the source of the funds; and that therefore the destination of the funds as a campaign contribution was beyond the scope of the S.E.C. investigation and that the subpoenas would ultimately be withdrawn. Mitchell's conjecture proved incorrect since subsequent subpoenas were issued by the S.E.C. to obtain information concerning the use of I.C.C. funds.

On November 21, 1972, respondent again met with Mitchell. At this meeting, Sears gave Mitchell a file which contained information compiled by Vesco's Washington counsel concerning the on-going S.E.C. investigation. This information presented conclusions concerning the damaging implications of that investigation, and was accompanied by a memorandum from Vesco intended for Donald Nixon, brother of President Nixon, and ultimately for the President himself. Sears and Mitchell discussed the material and whether its contents should be divulged to others. On the basis of their discussion, respondent got the impression that Mitchell was familiar with at least some of the documents contained in the file. Because of the problematical nature of these documents, Mitchell and Sears agreed that respondent should return the material to Vesco. Though he took the file with him when he left Mitchell's office, respondent apparently placed it on a closet shelf in his home and forgot about it.

In early 1973, after completing its investigations, the S.E.C. filed a civil action in federal court against Vesco and I.C.C. with regard to a series of financial transactions in which they had been engaged. In conjunction with this action, respondent gave depositions on February 20 and 21, 1973 concerning his role in the delivery of the $200,000 secret cash contribution.

On March 6, 1973, respondent made the first of ten appearances before a federal Grand Jury investigating the activities of Mitchell and Stans. Sears was unrepresented by counsel during at least three of his Grand Jury appearances. He later retained a New Jersey attorney, William F. Tompkins, to represent him at subsequent hearings. As the result of his Grand Jury testimony and information already gathered by the United States Attorney, Sears was indicted on May 11, 1973 on a series of charges.

After the indictment, Tompkins and the United States attorneys entered into plea negotiations. Although the federal attorneys were interested in obtaining a guilty plea from

respondent on lesser charges, their offers were resisted. After further discussion, respondent finally accepted an offer of transactional immunity. The agreement included an explicit understanding that Sears would not be prosecuted for the events about which he testified.

The United States attorneys spent the next several months preparing respondent to testify for the prosecution at the Mitchell-Stans trial. The prosecutors were particularly concerned with anticipated attacks on respondent's credibility based on discrepancies in his testimony before the Grand Jury and the S.E.C. The federal attorneys were also interested in obtaining an admission of criminal guilt from respondent. They felt that an admission would avoid potential embarrassment on cross-examination by the defense, and would bolster respondent's credibility before a jury. After extensive discussions about such an admission, Sears finally gave an inculpatory oral statement to the federal attorneys which Tompkins, after learning about it, ordered retracted. Tompkins, reiterated respondent's contention that he was not involved in any criminal activity.

Shortly before the Mitchell-Stans trial, respondent was asked to review his S.E.C. depositions and Grand Jury testimony to isolate discrepancies. Specifically, he was asked to place a single paper clip beside those statements which were factually inaccurate and a double paper clip beside those which were deliberately false. Sears complied with this request without the knowledge of his counsel because he regarded the paper clipping as mere preparation for trial which would not later be considered at the trial itself. This assessment, however, proved false and at the Mitchell-Stans trial, Sears was specifically questioned about the portions of his prior testimony which he had clipped. On redirect examination, Sears stated that he had given deliberately false testimony before ...


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