John V. Daly (2007)

matter by Stephen L. Tober, Esquire, Tober Law Offices of Portsmouth, New Hampshire. Atwood, L.L.P., of Portsmouth, New Hampshire. Mr. Daly is being represented in this New Hampshire. Mr. Daly was most recently employed by the law firm of Pierce practicing law as an attorney in the firm of Sanders & McDermott, P.L.L.C., in Hampton, admitted to practice in 1980. At all times material to this proceeding, Mr. Daly was 2. Mr. Daly is an attorney licensed to practice law in New Hampshire. Mr. Daly was

letter dated September 13,2004. ("Mr. Daly"). Mr. Leggett submitted additional information regarding the complaint in a asserted allegations of professional misconduct against the Respondent, John V. Daly IDM Software, Inc., of Portsmouth, New Hampshire, (hereinafter referred to as"IDM") 1. In a sworn letter of complaint dated February 13,2004, John H. Leggett, President of

Findings of Fact by clear and convincing evidence: The Professional Conduct Committee has determined that the record supports the following

Hamel. Ellen L. Arnold and James R. Martin were absent. Alan J. Cronheim, David N. Cole, Gerald A. Daly, Richard H. Darling and Gretchen Rule Pizzimenti, Vice Chair, Toni M. Gray, Vice Chair, Thomas P. Connair, Reporter, David N. Page, Rules Violated and Sanction. Members present were Margaret H. Nelson, Chair, Benette Professional Conduct Committee voted to accept the proposed Stipulation of Facts, Disciplinary Kruse, Assistant Disciplinary Counsel. On May 15,2007, following deliberations, the John V. Daly, Esquire, Stephen L. Tober, Esquire, counsel for the Respondent, and James L. captioned matter on a Stipulation of Facts, Disciplinary Rules Violated and Sanction proposed by On March 20,2007, the Professional Conduct Committee heard oral arguments in the above­

Alan J. Cronheim Holly B. Fazzino, Admin. Coordinator Thomas P. Connair * non attorney member David N. Cole David N. Page* Ellen L. Arnold James R. Martin Toni M. Gray,* Vice Chair 603-224-5828. Fax 228-9511 Gretchen Rule Hamel Benette Pizzimenti, Vice Chair Concord, New Hampshire 03301 Richard H. Darling* Margaret H. Nelson, Chair 4 Chenell Drive, Suite 102 Gerald A. Daley*

IDM on March 30, p. 2 2000. prospective investors. These materials, with instructions from counsel, were forwarded to (occasionally referred to collectively as"offering documents") for distribution to IDM's prepared the necessary Subscription Agreement and Private Offering Memorandum 9. In order to satisfy provisions ofRSA 421-B:17(II)(k), Mr. Daly and Ms. Weathersby

that the firm would not handle a public offering without associating with outside counsel. regulatory requirements. IDM had been advised earlier by Mr. Daly or Ms. Weathersby investors, and relied on counsel's expertise to ensure compliance with applicable conduct an initial private stock offering to raise $600,000 from an anticipated six or seven qualify for an exemption under securities regulation. IDM proceeded with plans to February 9, p. 2 2000, memorandum, but IDM was advised that its planned offering would 8. Mr. Daly and Ms. Weathersby did not supply IDM with a copy of Ms. Weathersby's

reflect that the RSA 4 p. 2 21-B:17(II)(k) exemption was being utilized. days of incorporation. An addendum to the Articles of Incorporation was also required to anticipated by IDM for this first round of financing, and sales were completed within 60 not exceed ten non-institutional investors, proceeds were limited to the $600,000 if, among other conditions, the sale was not advertised, the total number of investors did $1,000,000 in sales. Accordingly, IDM's initial offering would qualify for an exemption federal government limited the"simpler" exemptions to an offering involving up to from certain securities registration requirements. She also found that most states and the 421-B: 17(II)(k), as a newly formed corporation, IDM would qualify for an exemption particular regard to New Hampshire, Ms. Weathersby determined that, pursuant to RSA limited initial offering, to be followed later by more substantial financing efforts. With 7. In the aforementioned memorandum to Mr. Daly, Ms. Weathersby recommended a

federal law. requirements (and exemptions there from) in each of those states and under applicable York, Massachusetts, and Rhode Island, Ms. Weathersby analyzed securities registration capital. Anticipating that prospective investors would come from New Hampshire, New securities registration issues associated with IDM's plan to raise a large amount of 6. In a memorandum to Mr. Daly dated February 9, p. 2 2000, Ms. Weathersby outlined the

the New Hampshire Secretary of State on February p. 2 2, 2000. 5. Mr. Daly and his law firm prepared Articles ofIncorporation for IDM and filed them with

the head of his firm's corporate department at the time. securities law, was to assist Mr. Daly in the legal work performed for IDM. Mr. Daly was Weathersby, Esquire, then an associate with Mr. Daly's law firm who had experience in in the organization and capitalization ofIDM, to include securities offerings. Patricia M. 4. In January p. 2 2000, Mr. Daly and the law firm of Sanders & McDermott were hired to assist

p. 3 3. Mr. Daly responded to the subject complaint in his letter dated August p. 2 23,2004. 3

the new certificates. alphabetical order and the last few investors will have to wait for certificates promptly, otherwise, we'll just prepare them in there are certain shareholders that you would definitely like to get already prepared certificates for the principals. . .. Let us know if stock certificates. They come in books of twenty and we have raising money from ten investors?), we need to order additional 4. Because there are so many investors (I thought you were

issued to each investor. us know how you are handling this, as it will affect the shares to be . .. No matter what you do, IDM has to return $ p. 3 35,000. Please let is $634,000 [sic] which is $35,000 more than the offering allowed . 1. As I calculate the dollars raised by the initial subscription, the total

follows: 14. In her e-mail toIDMdatedAprill0.2000.Ms.Weathersbynotedinpertinentpart.as

initial private offering. that excess funds had been raised and that a total of 20 investors had subscribed to the mail to Messrs. Leggett and Sheppard with her observations. The documents confirmed firm on April 10, 2000. Ms. Weathersby promptly reviewed the documents and sent an e­ 1 p. 3 3. The subscription agreements executed by the investors were delivered to Mr. Daly's law

would allow IDM to increase the number of"units" sold. documents. Mr. Daly raised the question whether the Private Offering Memorandum and problems associated with representations and limitations contained in the offering expected. Mr. Daly and Ms. Weathersby conferred bye-mail about the over-subscription Vice President ofIDM, notified counsel that the company had raised more money than (including partial units), for a total of $6 p. 3 35,000. On April 5, 2000, Stuart J. Sheppard, 12. On April 3, 2000, IDM completed its initial private offering, with sales to 20 investors

only one investor from New York. Bureau, Ms. Weathersby confirmed IDM's intent to limit its offering, and that it expected Securities Bureau ("N.Y. Bureau"). In her letter of February 10,2000, to the N.Y. Request Letter" with the New York State Department of Law, Investor Protection and 11. Regulatory requirements in the State of New York were addressed by filing a"No Action

offering maximum of $600,000 (the'Offering')." Company (the 'Shares'), at a price of $60,000 per unit (or $1.00 per share) for a total "offering 10 Units (the 'Units') each consisting of60,000 shares of common stock of the Under the terms of the Private Offering Memorandum, IDM represented that it was stock provided that no more than $600,000 in cash would be raised by the offering. 10. The Subscription Agreement that was presented to each subscriber for the sale of the p. 4 4

the proposed second stock offering. In order to minimize regulatory requirements records was reviewed by Mr. Daly, Ms. Weathersby addressed several issues relating to 23. In a letter to IDM dated June 6,2000, which, according to Mr. Daly's time and billing

some preliminary research of applicable state regulatory requirements. interested in raising additional funds through a second offering. Ms. Weathersby did 22. Shortly after the initial offering, Mr. Sheppard advised Ms. Weathersby that IDM was

from each state. from the initial offering, including a tally of the number of investors that had participated 21. After completing the initial offering, Ms. Weathersby reviewed and made notes of data

firm's office and sent to IDM. certificates for each of the investors in the initial offering were prepared in Mr. Daly's 20. According to Mr. Daly's firm's time and billing records, on May 10-11,2000, stock

change in the projected participation of a single investor from New York. 20 investors had participated instead of the fewer than 10 expected. There had been no N.Y. Bureau. She disclosed that the sale had raised more money than anticipated and that 19. On April 18, 2000, Ms. Weathersby filed a revised"No Action Request Letter" with the

$635,000 in sales. that 20 accredited investors had participated in the initial offering, generating a total of be filed with the U.S. Securities and Exchange Commission. IDM disclosed in the form 18. On April 1 p. 4 4, 2000, Ms. Weathersby prepared a"Form D Notice of Sale of Securities" to

number of units sold. increased dollar amount of money raised and to exercise IDM's option to increase the 17. Mr. Daly and Ms. Weathersby amended the offering documents to provide for the

RSA p. 4 427-B: 17(II)(k) exemption. about whether, with sales to 20 investors, the offering might no longer qualify for the 16. Ms. Weathersby's memorandum of April 11, 2000, makes no reference to a conversation

York. discussing the need to file a revised"No Action Request Letter" with the State of New raised, returning some of the funds, or doing nothing. Ms. Weathersby also reported subscription agreement (with subscriber assent) to reflect the actual amount of money April 11, 2000. She refers to a discussion of options, including amending the Weathersby described the substance of the conversation in her memorandum of with Messrs. Sheppard and Leggett about the excess funds raised in the offering. Ms. 15. On the following day, April 11, 2000, Mr. Daly and Ms. Weathersby spoke via telephone

still qualified for the exemption under RSA p. 4 421-B:17(II)(k). Ms. Weathersby did not make any reference to the question whether the initial offering p. 5 5 federal and state laws, earlier this year the Company issued 635,000 common shares to also included the following statement:"Pursuant to exemptions available to it under He asked the Bureau to review and approve the filings as soon as practicable. Mr. Daly documents associated with registration ofIDM stock and the proposed second offering. 27. On October 20,2000, Mr. Daly wrote to the Bureau, enclosing various forms and second stock offering. supervised the preparation of documents required for registering and conducting the 26. During the period from September 18, 2000, to October 19,2000, Mr. Daly prepared and leaving Mr. Daly to complete work on the second stock offering. 25. As planned, Ms. Weathersby went on maternity leave in the last week of June 2000,

until October. Therefore, please work with John Daly directly on this matter. I will be out on maternity leave commencing June 2 p. 5 5th and will not be returning

getting started. and one to raise the funds. Accordingly, you should contact us by late June about revise the subscription agreement and to meet New Hampshire's requirements, allow three (or more) months to prepare. We should allow at least two months to If this offering needs to be completed by October 1, 2000, we suggest that you letter, as follows: 24. With respect to scheduling, Ms. Weathersby further advised IDM in her June 6, 2000,

issues its approvals. 7. No solicitations under the stock offering are allowed until the Bureau additional forms and approximately $ p. 5 500 in fees are required; and 6. IDM must also register as an"issuer-dealer" of its securities, for which 5. Total fees will be approximately $920; last for one to three months; 4. The approval process could take as little as two weeks, but it could also requires additional provisions or information; 3. The Bureau will review the material and advise IDM whether the State referred to as the"Bureau"); filed with the New Hampshire Bureau of Securities Regulation (hereinafter 2. An offering memorandum and several uniform disclosure forms must be requirements; 1. IDM's second stock offering will not be exempt from registration

Weathersby informed IDM of the following: $3 p. 6 64,000 in the second offering. With particular regard to New Hampshire, Ms. triggered when private financing exceeds $1,000,000, IDM could not raise any more than 6

plan a course of action. We have not yet discussed with IDM. happened, or take some other course. JVD-any thoughts? We should discuss and can call the securities director and ask, we can visit with him and explain what determine if the number of persons to whom sales can be made has increased. We bureau (Securities Division of the Attorney General's Office). Therefore, I cannot provide some relief, we do not have in-house access to the rules of the securities within the limits of this exemption. While the last (highlighted) sentence may Because IDM sold shares to more than ten investors, its offering no longer fits 33. In her memorandum of November 10, 2000, Ms. Weathersby stated as follows: to limit the number of investors to ten." offering memo stated that only $ p. 6 600,000 would be raised, we did not catch that we were initial offering, Ms. Weathersby noted that,"while we were alerted to the fact that the memorandum on Mr. Daly's and Ms. Weathersby's response to the results ofIDM's individuals w/in 60 days of the date of incorporation." Further, reflecting in her qualify for the aforementioned exemption, IDM could sell"shares to 10 or fewer documentation in the file confirming the client's understanding that, in order to the 32. In her memorandum of November 10, 2000, Ms. Weathersby reported finding no possible errors made in this regard. on the issue of compliance with exemption requirements under RSA 421 B: 17(II)(k) and preparation of offering documents, and the results of the sale. Ms. Weathersby focused summarizing the legal analysis undertaken in connection with the initial offering, Daly's instructions, Ms. Weathersby prepared a memorandum dated November 10,2000, problem with the initial offering. She notified Mr. Daly immediately. Pursuant to Mr. 31. Upon review of the IDM file, Ms. Weathersby promptly recognized that there was a legal

at Mr. Hildreth's letter. from maternity leave, to get involved in preparing the second offering and to take a look 30. On or about Wednesday, November 8, 2000, Mr. Daly asked Ms. Weathersby, just back

that time, send a copy of Mr. Hildreth's letter to IDM. offering when Mr. Daly received Mr. Hildreth's November 3,2000, letter; nor did he, at 29. Mr. Daly did not apprise IDM ofMr. Hildreth's request for information about the first the proposed registration required a notarized signature. Criminal Records Release Authorization Form supplied by Mr. Daly in connection with amount and exemption claimed for these sales." Mr. Hildreth further indicated that a Hildreth asked Mr. Daly to"please give details as to New Hampshire sales including Daly's filing. Regarding Mr. Daly's comment about the initial stock offering, Mr. 28. By letter dated November 3, 2000, Bureau Director Peter C. Hildreth responded to Mr. (at $1.00 per share) to some of those same investors." The Company proposes to issue an additional 3 p. 6 60,000 common shares in units of 30,000 accredited investors in New Hampshire, Massachusetts, Rhode Island, and New York. p. 7 7 counsel to determine how to address and solve the legal issues raised in connection with offering. At no time did Mr. Daly refer this matter to, or seek the assistance of, outside including his plan for advising the client and dealing with the legal flaw in the initial Weathersby periodically checked in with Mr. Daly to ask about the status of the case, 40. After preparing her November 10,2000, memorandum and giving it to Mr. Daly, Ms.

described in Ms. Weathersby'S November 10,2000, memorandum. Mr. Daly or Ms. Weathersby told IDM about the problem with the initial offering Mr. Daly or Ms. Weathersby documenting a meeting or telephone conference in which 39. There are no time and billing records, notes, or other record generated or maintained by

mistake was made in the initial securities offering. problem with the initial offering, but he has no specific memory of telling IDM that a 38. Mr. Daly has a vague recollection of a conversation at some point with IDM about the

to the Bureau. explain the problem to the state regulators until sending a letter dated January 16,2001, described in Ms. Weathersby'S November 10,2000, memorandum. Mr. Daly did not 3 p. 7 7. Mr. Daly did not meet with the state regulators to fashion a solution to the problem

2000, memorandum. present IDM with a solution to the problem described in Ms. Weathersby'S November 10, memorandum to IDM until he could present a solution. Mr. Daly was never able to reading the memorandum. Mr. Daly did not want to disclose the problem described in the memorandum. Nor did Mr. Daly tell IDM about the problem or mistake right after 36. Mr. Daly did not send IDM a copy of Ms. Weathersby'S November 10,2000,

problem. Nor did he authorize her to contact the Bureau or IDM to disclose and/or discuss the requirements or otherwise direct her to do more work on the issues confronting them. obtain the legal resources she said she needed to conduct further research of regulatory memorandum from Ms. Weathersby. He did not thereafter authorize Ms. Weathersby to 35. On or before Monday, November l3, 2000, Mr. Daly reviewed the aforesaid

jeopardizing of 2 offering. nd It looks like IDM could be subject to $2500. fine (for each sale?) and possible ReIDM JVD­ memorandum, Ms Weathersby stated as follows: 34. In a handwritten note to Mr. Daly appearing at the top of the November 10,2000 p. 8 8 promptly reported back to Mr. Sheppard as follows:"No problems to speak of. They've Securities people occurred on or about November 29,2000. Nevertheless, Mr. Daly 48. Mr. Daly's time and billing records do not reflect that any meeting or contact with State

Thanks for leaving me the message yesterday." today in Concord with the State Securities people. Please shoot me a quick update. pertinent part:"Thanks for the voice mail .... I'm interested in hearing how you made out 47. On Wednesday, November 29,2000, Mr. Sheppard sent Mr. Daly an e-mail, stating in behind in the scheduling of the offering. about completing the approval process. He was also concerned about slipping further frustration with the State for accepting IDM's filing fees without offering any assurances 46. On Tuesday, November 21,2000, Mr. Sheppard sent an e-mail to Mr. Daly expressing follows:"I'm trying to get an answer for you. Please be patient." Daly's time and billing record of November 16,2000, Mr. Daly advised Mr. Sheppard as 45. On Friday, November 17,2000, following a telephone call to the Bureau reflected in Mr. concern about losing credibility with IDM's shareholders. the State could indicate a time frame for completing the process and expressing some 44. Mr. Sheppard sent another e-mail to Mr. Daly on Tuesday, November 14, 2000, asking if

as of now you can't take any money. Sorry." have a firm timetable from them. I'll let you know as soon as I know something more but innocuous questions about the first offering, which we have answered, but I still do not an answer from the regulators. They have acknowledged our filing and asked a couple of 43. Mr. Daly responded two days later on November p. 8 8, 2000, stating,"I'm still trying to get

week." status of the second offering approval, indicating he would like to"take in funds this 42. On Monday, November 6,2000, Mr. Sheppard sent Mr. Daly an e-mail asking about the

Weathersby. recently that neither Mr. Sanders nor Mr. Belliveau recall such a discussion with Ms. that Mr. Daly was not addressing effectively with his client. Mr. Daly has been advised 2000, she advised either Mr. Belliveau or Mr. Sanders that there was a problem with IDM 41. Additionally, Ms. Weathersby recalls that on one or possibly two occasions in November

recently advised that Mr. Beliveau does not recall this conversation. discussion of what the client (IDM) then knew or did not know. Mr. Daly has been ethical matters that are the subject matter here. Mr. Daly does not recall any specific Daly's recollection, dealt only with a potential malpractice complaint and not with the firm would be responsible. It was not a lengthy conversation, and to the best of Mr. managing partner, that a serious error was made in the IDM representation for which the December of 2000, he reported to Attorney Mark Beliveau, the Sanders & McDermott issues surrounding the initial offering. Specifically, Mr. Daly recalls that in November or the initial offering. However, other partners in Mr. Daly's firm were made aware of the p. 9 9

to clarify why Ms. Stone feels nothing will get done in regards to our paperwork until she voice mail messageoftheprecedingday.Mr. Sheppard asked if Mr. Daly had"been able 54. On Wednesday, December 27,2000, Mr. Sheppard sent Mr. Daly an e-mail, referring to a

first offering, as suggested by Ms. Weathersby. January 4,2001, do not indicate that IDM had been made aware of the problem with the counsel. E-mails exchanged between Mr. Sheppard and Mr. Daly, at least through alone, and that it occurred in January 2001, when he asked her to transfer the file to new problem with the number of investors in the first offering was with Ms. Weathersby, offering. Mr. Leggett recalls that his only conversation with Mr. Daly's firm about the has no specific memory of telling IDM that a mistake was made in the initial securities recollection of such a call, but he does not remember when it occurred, and in any event, that such a conference might have occurred in January 2001. Mr. Daly has a vague with the first offering and the need to find a solution. In prior testimony she has indicated the IDM principals (John Leggett and Stuart Sheppard) and advised IDM of the problem December 13,2001, e-mail, she and Mr. Daly had a conference call with either or both of 53. Ms. Weathersby has testified most recently that, prior to the aforementioned

that week. that Mr. Daly and Ms. Weathersby were invited to IDM's holiday party at the end of 52. On Wednesday, December 13,2000, Mr. Sheppard sent Mr. Daly an e-mail indicating

before doing so." Mr. Daly did not respond. the bridge loan paperwork tonight ... but want to give some type of repayment guidance follows:"Have we heard anything back from these guys? ... I am trying to overnight 51. On Tuesday, December 12,2000, Mr. Sheppard sent Mr. Daly another e-mail stating as no such call. Daly responded with the assurance,"will do." Mr. Daly's time and billing records reflect friend. Mr. Sheppard asked Mr. Daly to"put in a call and press them for an answer." Mr. time frame on the State approval process in order to make assurances of repayment to the Sheppard and a friend planned to bridge IDM's funding privately, but that he needed a 50. On Friday, December 8, 2000, Mr. Sheppard sent Mr. Daly an e-mail indicating that Mr.

his meeting. status ofIDM's filing at the Bureau. Mr. Daly suggested that Mr. Sheppard postpone he hoped to have the appropriate"paperwork," Mr. Sheppard inquired again as to the 4 p. 9 9. On December 5, 2000, and in anticipation of a meeting with prospective investors where

regarding the IDM matter. He has no further recollection of actually doing so. business on November 2 p. 9 9th and had the intention to stop by the Securities Office developments." To Mr. Daly's best recollection, he was going to be in Concord on other think we should have answers within the next couple of days. I'll let you know of any acknowledgment on it. They asked about and we're looking at the initial issue now. I asked some questions and we had to re-submit a document that did not have an p. 10 10

communications with Mr. Hildreth during November or December, 2000. N.H. Department of Securities Regulation," Mr. Daly's time and billing records reflect no problems at the time of this communication. Other than a"telephone conference with problems associated with the initial offering, in spite of Mr. Daly's awareness of such message of January 4,2001, to Mr. Sheppard, Mr. Daly made no reference to the legal Sheppard about the issues having been fully and timely dealt with was not true. In his 59. Mr. Daly acknowledges that his statement in the January 4,2001, message to Mr.

concerned about and were going to spring it on us." were processing it. In fact, I was getting worried that they had some issue that they were making headway. Until Becky told you that the file was on her desk, I believed that they Further,"whenever I spoke with him [Mr. Hildreth], I came away thinking that we were it's been my experience that you shouldn't piss off the bureaucrats ifit can be avoided." should have been more aggressive when dealing with Mr. Hildreth of the Bureau,"but that it did not have the raised notarial seal on it. Mr. Daly conceded that perhaps he he had sent the requested criminal release and authorization form to the Bureau twice, but "certainly believed that these issues had been fully and timely dealt with." He stated that 58. Mr. Daly responded to Mr. Sheppard on January 4,2001. Mr. Daly indicated that he

information. Mr. Sheppard requested an explanation. Daly had apparently failed to respond to the Bureau's November 3, 2000, request for and expressing concern that, in spite of the need for timely approval ofIDM's filing, Mr. acknowledging receipt of a copy ofMr. Daly's December 27,2000, letter to Ms. Stone 57. On Wednesday, January 3, 2001, Mr. Sheppard sent an e-mail to Mr. Daly

did not send his client a copy of this memorandum. no reference to the fact that the offering attracted 20 investors instead often. Mr. Daly Daly also provided general information about the qualifications of the investors, but made subscribed and that IDM accepted subscriptions for $635,000 instead of $600,000. Mr. offering held under RSA 421-B:17(II)(k). Mr. Daly disclosed that the offering was over­ part by Ms. Weathersby, with detailed information about IDM and the initial stock 56. On Thursday, December 28, 2000, Mr. Daly sent Ms. Stone a memorandum, prepared in

to IDM. detailed information about the initial stock offering. Mr. Daly sent a copy of this letter include a response to the second request in the Bureau's letter of November 3, 2000: Authorization Form executed by Mr. Sheppard and duly notarized." The letter did not accordance with your request, I am enclosing the original Criminal Release and 55. On Wednesday, December 27, 2000, Mr. Daly sent Ms. Stone a letter indicating that,"in

approval process was being held up in error. speak to Ms. Stone directly or set up a conference call right away to determine if the receives verification of the documents she is missing." Mr. Sheppard asked that Mr. Daly p. 11 11

business in May, 2001. regulatory issues encountered in connection with the initial offering. IDM went out of second stock offering, provided the offering documents included a disclosure of the order to satisfY state and federal securities law. IDM was allowed to proceed with a to pay a $3,000.00 fine; and it pledged to take additional corrective action necessary in things, to obtain the requisite issuer-dealer license to conduct the initial offering; it agreed a Consent Decree dated February 21,2001. IDM acknowledged its failure, among other Regulatory issues associated with IDM's initial offering were resolved upon execution of

Manchester, N.H., to represent its interests before the Bureau. 66. IDM retained Thomas P. Manson, Esquire, of Cook, Little, Rosenblatt & Manson of

new counsel. relationship with Mr. Daly and his law firm and instructed Mr. Daly to transfer the file to 65. Shortly after Mr. Daly sent his January 16,2001, letter to Mr. Spill, IDM terminated its

further delay in the offering approval. the company might soon have to make some significant operational changes if there was 64. On January 17,2001, Mr. Sheppard requested a further update, expressing concern that

underway apply retroactively to the prior sales. be increased to allow for the over-subscription or that the registration now the number of persons to whom sales may be made under this exemption shareholder maximum permitted under RSA 421-B:17(II)(k). If so, we ask became oversubscribed, it inadvertently may have exceeded the It has come to our attention that when IDM Software Inc.'s initial offering information requested by Mr. Spill. Mr. Daly also made the following representation: 63. On January 16,2001, Mr. Daly wrote to the Bureau. With his letter, he delivered

information to the Bureau. recent correspondence and request, and promising to hand-deliver a package of Daly responded bye-mail on the following day, informing Mr. Sheppard ofMr. Spill's 62. On Thursday, January p. 11 11,2001, Mr. Sheppard asked Mr. Daly for a status report. Mr.

for all shareholders and securities issued to date. shareholders list, including the name, address, date of transaction, and number of shares, subscription agreements executed for all shares outstanding and a copy of the corporation Mr. Daly and requested a corrected Form U-2. He also requested a copy of the 61. By letter dated January 5, 2001, Bureau Staff Attorney Jeffrey D. Spill, Esquire, wrote to

observation that"one day I will learn patience with State agencies ...." 60. Mr. Sheppard responded to Mr. Daly's explanation with words of appreciation and the p. 12 12

violation of N.H. R. Prof. Conduct 1.3(a). 75. Mr. Daly's failures as set forth herein constitute clear and convincing evidence of a

stock offering. offering, and failure, or significant and costly delay, in obtaining approval of the second avoidable harm, including regulatory sanctions in connection with the initial stock 74. Mr. Daly's failure to exercise diligence as set forth herein subjected his client to

IDM's initial stock offering. and completely to the Bureau's request of November 3,2000, for information relating to information in a timely fashion. This included Mr. Daly's failure to respond promptly second stock offering by failing to provide the Bureau with complete and accurate 73. Mr. Daly failed to exercise diligence in pursuing regulatory approval of the aforesaid

approval ofIDM as an"issuer-dealer" of securities under New Hampshire law. obtaining regulatory approval to conduct a second stock offering, including obtaining 72. Mr. Daly also owed his client a duty of promptness and diligence in connection with

otherwise to protect his client's interests. effort to render the subject initial offering in compliance with state and federal law and 71. Mr. Daly failed to take prompt, reasonable and appropriate corrective measures in an

in addressing the legal issues raised in connection with the initial offering. 70. Mr. Daly owed a duty to his client to respond with reasonable promptness and diligence

compliance with state and federal law. have been aware, that the initial stock offering may not have been conducted in the offering had been over-subscribed. As of that time, Mr. Daly was aware, or should 69. Upon completion of the initial stock offering in April, 2000, Mr. Daly was informed that

68. Allegations set forth above are incorporated by reference.

8.4(c): Candor. 67. N.H. R. Prof. Conduct 1.3(a): Diligence; 1.4(a-b): Client Communications; and

violations by clear and convincing evidence: The Professional Conduct Committee has determined that the record supports the following Rule

about the initial offering. 86. Mr. Daly withheld from IDM the Bureau's November 3,2000, request for information

course. it was led to believe that state approval of a second stock offering was proceeding on stock offering was probably not conducted in compliance with state and federal law, and 85. As a consequence of Mr. Daly's conduct in this regard, IDM was unaware that the initial

regulatory matters before the Bureau. IDM by providing it with false, misleading, or incomplete information about the status of 84. On various occasions from and after November, 2000, Mr. Daly undertook to deceive

Mr. Daly's representation. 83. Mr. Daly owed IDM a duty of candor in connection with all matters having to do with

82. Allegations set forth above are incorporated by reference.

violation of N.H. R. Prof. Conduct 1.4(a)-(b). 81. Mr. Daly's failures as set forth herein constitute clear and convincing evidence of a

the representation. timely manner, compromised IDM's ability to make informed and timely decisions about associated with IDM's stock offerings and the available alternative courses of action in a 80.'Mr. Daly's failure to discuss with his clients the legal and practical aspects of problems

Mr. Daly failed to provide IDM with complete and accurate information. November, 2000, regarding efforts to obtain Bureau approval of a second stock offering, 79. Further, notwithstanding numerous contacts and inquiries from his client commencing in

and legal issues arising there from. state and federal law, Mr. Daly failed to inform IDM of the material facts and practical 78. Upon learning that the initial offering may not have been conducted in conformity with

make informed decisions regarding the representation. pertaining to both matters, as well as alternative courses of action, so as to permit IDM to the second stock offering. He also had a duty to explain the legal and practical aspects associated with the initial stock offering and the status of the Bureau approval process for 77. Mr. Daly had a duty to keep IDM reasonably informed regarding any legal issues

76. Allegations set forth above are incorporated by reference.

information. Mr. Daly offered a further mischaracterization of events and his had failed to respond in a timely fashion to the Bureau's November 3, 2000, request for 94. On January 4,2001, Mr. Daly responded to IDM's message expressing concern that he

made no reference to the number of investors involved. B: 17(II)(k). While acknowledging that the offering generated excess funds, his account to supply material facts pertaining to the initial offering held in compliance with RSA 421 93. In his December 28, 2000, memorandum to Ms. Stone of the Bureau, Mr. Daly purported

being processed. Sheppard contacted the Bureau on his own and found out that IDM's filing was not 92. Mr. Daly did not respond to the Bureau's November 3,2000, inquiry until after Mr.

Mr. Daly had no credible basis for offering such reassurance to IDM. offering, the Bureau was not yet in a position to identify any"problems." Accordingly, Daly had not yet supplied the Bureau with information it requested regarding the initial meeting or conversation occurred, Mr. Daly misrepresented the results. Because Mr. problems to speak of." There is no record of the alleged meeting. Moreover, if, indeed, a results of a meeting with the Bureau personnel, assuring IDM that there were"no 91. In his e-mail to Mr. SheppardofNovember29,2000, Mr. Daly appeared to report on the

information it sought in its November 3, 2000, letter. firm's failure to act would be exposed once Mr. Daly provided the Bureau with the firm's failure to address the issue. Mr. Daly also knew that the legal problem and the November 10, 2000, which clearly identified the legal flaw in the initial offering and the made after conferring with Ms. Weathersby and after reviewing her memorandum of 90. All of Mr. Daly's subsequent responses to IDM's inquiries, as described herein, were

been"answered." "innocuous." Further, Mr. Daly acknowledges that the Bureau's"questions," had not offering known to Mr. Daly, the Bureau's question was not fairly characterized as information about the initial offering. Considering the circumstances of the initial Daly. Further, in addition to a notarized form, the Bureau asked for substantive response to its letter of November 3,2000, requesting information not yet supplied by Mr. known that the Bureau probably would not proceed with the approval process without a questions about the first offering, which we have answered ...." Mr. Daly should have trying to get an answer from the regulators. They have asked a couple of innocuous 89. In his e-mail to Mr. Sheppard of November 8,2000, Mr. Daly reported that"I'm still

inquiries from IDM regarding the status of pending regulatory matters. 88. Mr. Daly repeatedly breached his duty of candor to the client when responding to

appeared in April, 2000. acknowledging the law firm's failure to deal with the exemption issue when it first 87. Mr. Daly also withheld from IDM Ms. Weathersby's November 10,2000, memorandum, p. 15 15

fourth and final step in the analysis: the existence of any aggravating or mitigating factors and appropriate sanction"). Once the baseline sanction is determined, the Court then looks to the applying these factors, the first step is to categorize the respondent's misconduct and identify the determining a baseline sanction. See Wolterbeek's Case, p. 15 152 N.H. 710, 714 (2005) ("In The first three steps create the framework for characterizing the misconduct and

Standards § 3.0; Coffey's Case, p. 15 152 N.H. at 513. caused by the lawyer's misconduct; and (d) the existence of aggravating or mitigating factors." sanctions:"(a) the duty violated; (b) the lawyer's mental state; (c) the potential or actual injury 152 N.H. at 513. The Standards set forth a four part analysis for courts to consider in imposing Although the Court has not adopted the Standards, it looks to them for guidance. Coffey's Case, marks omitted)."The sanction must take into account the severity of the misconduct." Id. similar conduct in the future." E.g., Coffey's Case, 152 N.H. 503, 513 (2005) (internal quotation maintain public confidence in the bar, preserve the integrity of the legal profession, and prevent publicly censured. The purpose of the Court's disciplinary power"is to protect the public, Imposing Lawyer Sanctions (1992) ("Standards") support the conclusion that Mr. Daly should be Both case law in New Hampshire and the American Bar Association's Standards for

sanction will serve the purposes of attorney discipline. a Public Censure as the appropriate sanction in this matter. The Committee believes that this during that ensuing period. Assistant Disciplinary Counsel and Mr. Daly also jointly recommend seven years ago and that no professional conduct complaints have been filed against Mr. Daly The Committee gave substantial weight in its decision to the fact that the misconduct occurred deliberations by the Committee regarding the appropriate sanction for this serious misconduct. concludes that the appropriate discipline in this matter is a Public Censure. There were extensive Having made the above findings and rulings, the Professional Conduct Committee

conduct involving misrepresentation in violation of N.H. R. Prof. Conduct 8.4( c). 96. Mr. Daly's conduct as set forth herein constitutes clear and convincing evidence of

between Messrs. Daly and Sheppard during the November/December time frame. reason, that"he was sort of frozen." Ms. Weathersby did not see any of the e-mails Weathersby came to observe that Mr. Daly was not dealing with this matter for whatever problem. After submitting the memo and discussing the problem with Mr. Daly, Ms. written memo to him so that they could look into what could be done to correct the some error. Mr. Daly told Attorney Weathersby to put everything about the problem in a too many investors; it was her impression that Mr. Daly was not trying to cover up or hide 95. Ms. Weathersby testified that from the time she first informed Mr. Daly that there were

he was led to believe that"we were making headway." mishandling, while falsely claiming that he had been in touch with Mr. Hildreth and that performance by attributing the delay in processing the approvals to bureaucratic p. 16 16

b. Absence of a selfish motive;

a. Absence of a prior disciplinary record;

There are numerous mitigating factors in this case including the following:

and/or mitigating factors that affect the baseline sanction. The final step in the sanction analysis is to determine whether there are any aggravating

suspenSIOn. In light ofthe foregoing, the baseline sanction for Mr. Daly's misconduct is some form of

potential injury to a client." Standards § 4.62. recommends suspension where"a lawyer knowingly deceives a client, and causes injury or client and causes injury or potential injury to a client." Standards § 4.12. Section 4.62 indicates that suspension is appropriate where a lawyer"knowingly fails to perform services for a Section 4.4 of the Standards deals with a lawyer's lack of diligence. Section 4.12

offerings. In short, the injury is this matter was significant. a consent decree and was required to disclose the existence of such consent decree in any future assessed a penalty and approval of a second offering was delayed. The client also had to execute with further stock offerings. As a consequence of Mr. Daly's conduct, the client, in fact, was penalties for violations of securities regulations and of being denied authority to proceed timely With respect to injury, Mr. Daly's conduct placed his client at risk of being assessed

least knowingly. to Mr. Daly's mental state, the evidence is clear on each ofMr. Daly's violations that he acted at Daly's state of mind and the injury and potential injury caused by his misconduct. With respect To determine the baseline sanction, the Standards next require analysis of both Mr.

existence of, and work being done to resolve, such regulatory issues. misrepresentations to the client over a period of approximately two months regarding the upon Mr. Daly's counsel; and (b) lack of candor with his client, by engaging in a series of regulatory issues raised in connection with a stock offering conducted by the client in reliance (a) a lack of diligence in undertaking to perform services necessary to address significant Under the first prong of the analysis, Mr. Daly's misconduct can be fairly categorized as

considers the effect of any aggravating or mitigating factors on the ultimate sanction."). whether they affect the baseline sanction. See id. ("After determining the sanction, [the Court] p. 17 17

and the Court's disposition in Welts' Case is instructive. Attorney Welts deceived his clients by The fact pattern in Welts' Case is similar that which confronts the Committee in this case

a Public Censure. See Welt's Case, 136 N.H. 588 (1993). deceit does not involve self-dealing and compelling mitigators are present, the Court has imposed harsher sanction is generally warranted. See Wolterbeek's Case, supra. Where, as here, the the deceit, and (b) the quality of any mitigating factors. Where the deceit involves self-dealing, a to disbarment. The severity ofthe sanction depends primarily on two factors: (a) the nature of involving attorney deceit reveals that there is a broad spectrum of sanctions from public censure Case law dealing with the question of how to determine the appropriate sanction in a case

the practice oflaw. See Standards § 9.2. There is only one aggravating factor in this matter: Mr. Daly's substantial experience in See Standards § 9.32. Welts' Case, 136 N.H. 588 (1993).

k. Remorse.

f. Good character and reputation;

File Stephen L. Tober, Esquire James L. Kruse, Assistant Disciplinary Counsel Distribution:

July 23,2007

John V. Daly for violating N.H. Prof. Conduct Rules 1.3(a); 1.4(a-b); and S.4(c). For the above reasons, the Professional Conduct Committee issues a Public Censure to

Committee in the investigation and prosecution of this matter, as stipulated to by him. The Professional Conduct Committee orders Mr. Daly to pay the expenses incurred by the

N.H. 157, 159 (2003). sanction in this matter is Public Censure. See Welts' Case, supra. See also O'Meara's Case, 150 Standards, as well as the purposes of attorney discipline in New Hampshire, the appropriate In sum, taking into consideration both the four-part analysis recommended by the

equally as compelling as Mr. Welts'. or episode. Further, Mr. Daly's deceit did not involve self-dealing and his mitigating factors are issues at hand. As in Welts' Case, the misconduct can be viewed as involving an isolated event two-month period, was directed at putting off the client until Mr. Daly could deal with the legal Mr. Daly's conduct, involving misleading or false communications with his client over a

expression of remorse for the misconduct. Id. at 592-93. adjustment disorder; he was cooperative in the disciplinary process; and he was sincere is his through difficult personal and emotional issues; he had been diagnosed with depression and event and gave great weight to the fact that, at the time of the misconduct, the attorney was going the potential injury to the clients was substantial, the Court viewed the misconduct as an isolated and then failing to correct the misrepresentation for a period of six months. Id. at 590. Although manufacturing a false scenario of events and lying about his efforts to file suit on their behalf,