United States v. Gellene

182 F.3d 578 (1999)

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Nature of the Case

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Facts

Bucyrus filed Chapter 11 and submitted an application requesting that Milbank be appointed to represent it in the bankruptcy. Pursuant to Bankruptcy Rule 2014, the application included the required sworn declaration disclosing 'any connection' that Milbank had with 'the Debtors, their creditors, or any other party in interest.' D, Milbank's lead attorney in the Bucyrus bankruptcy, under oath, disclosed that his firm had previously represented Goldman Sachs and JNL in 'unrelated' matters and would continue to represent Goldman Sachs in non-Bucyrus proceedings. D did not disclose any of Milbank's representations of South Street, Greycliff Partners or Salovaara, all of whom were creditors of Bucyrus. The United States Trustee and JNL filed objections to the declaration and questioned whether there was a sufficient conflict of interest to bar Milbank's retention as counsel for the debtor. The court requested a second declaration containing more detail about possible conflicts of interest. D signed a second sworn 2014 statement and again did not disclose any representation by Milbank of South Street, Greycliff Partners or Salovaara. At the time of both declarations, Milbank was doing their legal work. A Milbank partner recognized the possibility of conflict but was internally dismissed by D claiming that Salovaara was not a creditor of Bucyrus and that all disclosure obligations had been satisfied. Eventually, all the parties to the Bucyrus bankruptcy agreed to the new plan of reorganization. Milbank motioned for more than $2 million in legal fees and expenses. The United States Trustee and JNL both opposed the application. Milbank partner David Gelfand was the attorney who put on D's testimony. D testified that the supplemental Rule 2014 declaration had disclosed Milbank's relationship with Goldman Sachs and thus that the court had been fully aware of that relationship. D did not testify that his firm had represented and was continuing to represent South Street and Greycliff. The United States Trustee did not learn of that representation until the late fall of 1996. The court ultimately awarded Milbank approximately $1.8 million in fees and expenses. JNL discovered that Milbank had represented Salovaara. It sought disgorgement of Milbank's fees. D lied to partners about the answer's due date. D filed a third declaration with the bankruptcy court. In it, he explained that he had made an error in legal judgment by omitting Milbank's representations of South Street and Salovaara and took 'full personal responsibility for failing to disclose these matters to the court.' D was charged with fraud and perjury. D was convicted and appealed.