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In the Matter of M Ark A G Alloway

January 11, 2013

IN THE MATTER OF M ARK A G ALLOWAY, RESPONDENT.


Per curiam.

ORIGINAL PROCEEDING IN DISCIPLINE

Original proceeding in discipline.

Two-year suspension.

This is an original proceeding in discipline filed by the office of the Disciplinary Administrator against the respondent, Mark A. Galloway, of Hayesville, an attorney admitted to the practice of law in Kansas in 2003.

On March 7, 2012, the office of the Disciplinary Administrator filed a formal complaint against the respondent alleging violations of the Kansas Rules of Professional Conduct (KRPC). The respondent's motion for additional time to answer was granted, and he filed an answer on April 4, 2012. A hearing was held on the complaint before a panel of the Kansas Board for Discipline of Attorneys on May 2, 2012, where the respondent was personally present and was represented by counsel. The hearing panel determined that respondent violated KRPC 1.2(d) (2011 Kan. Ct. R. Annot. 428) (scope of representation); 1.7(a)(2) (2011 Kan. Ct. R. Annot. 484) (conflict of interest); 4.1(a) (2011 Kan. Ct. R. Annot. 581) (truthfulness in statements to others); and 8.4(c) (2011 Kan. Ct. R. Annot. 618) (engaging in conduct involving misrepresentation).

Upon conclusion of the hearing, the panel made findings of fact and conclusions of law, together with its recommendation to this court, the relevant portions of which follow:

"FINDINGS OF FACT

"7. The Respondent conducts his law practice as Advanced Legal Planning, LLC. The Respondent is, and at all times has been, the only attorney and full time employee of Advanced Legal Planning.

"8. Joe Cox, an insurance agent, formed EPIC Insurance Group (EPIC), an organization of insurance agents in the Wichita, Kansas, area.

"9. In 2009, the Respondent agreed to make himself available to assist Mr. Cox and other agents with EPIC, as they marketed life insurance to friends and family. Mr. Cox informed the Respondent that through another entity he owned, Legacy Life Capital, LLC ('Legacy Life'), he had secured short term financing for the premium of the first year of these policies.

"10. The agents marketed the use of trusts as owners of the life insurance policies being offered to the insured. With the Respondent's consent, the agents designated the Respondent as trustee when the insured did not designate a trustee. Mr. Cox paid the Respondent a fee to serve as trustee.

"11. The Respondent drafted four form trust documents for the agents. The four form trust documents were for a married male, a single male, a married female and a single female. The Respondent anticipated that the trust documents would be modified on an as needed basis by the agents.

"12. In late 2009 and 2010, Mr. Cox and the other agents marketed life insurance policies to family and friends, at no cost to the insured through Mutual of Omaha and Minnesota Life. During the first year, the life insurance policies would each have a value of a minimum of $1 million. Following the first year, the policies would each have a value of $10,000.

"13. Mr. Cox secured short term loans for the premium for the first year. The life insurance policies were to be offered as collateral for the short term loan. After one year, the insurance companies would pay the agents the commission for the policy. A portion of the commission would be used to pay off the short term loan.

"14. The agents began marketing the policies in the Wichita, Kansas, area. The agents prepared applications for life insurance policies and provided the applications to the insureds. The applications for life insurance included a statement that the insured did not intend to finance the premium. Additionally, the agents provided the insureds with a trust document, drafted by the Respondent, creating an irrevocable trust.

"15. The Respondent and/or Advanced Legal Planning was designated as trustee in approximately 40 trusts created in 2010 by Mr. Cox and other agents.

"16. After the insured signed the application for life insurance, Mr. Cox or another agent delivered the trust document to the Respondent for signature as trustee. The Respondent knew that the applications for life insurance included a statement that the insured did not intend to finance the premium. Additionally, the Respondent knew that the premiums for the life insurance policies were being financed through Legacy Life.

"17. Further, the Respondent executed an application for life insurance for himself through Mr. Cox which contained a statement that the Respondent did not intend to finance premium payments due under the policy. However, the Respondent knew that Legacy Life was financing the premium payment for his own life insurance policy.

"18. As trustee of the life insurance trusts, the Respondent executed promissory notes offering the life insurance policies as collateral for the short term loans obtained by Legacy Life. The Respondent had no contact with the proposed insured or their beneficiaries regarding the financial transaction.

"19. The Respondent believed that Mr. Cox and the other agents were his clients. The Respondent believed that he could market other estate planning products to the insureds as they would, by virtue of the trust, become his clients, also.

"20. Between May 2010, and October 2010, the Respondent received, by electronic deposit, just under $3 million from Legacy Life. The funds were received into an account of Advanced Legal Planning. The account was not designated as an attorney trust account.

"21. According to the Respondent's bank records, a number of the electronic transfer of funds made from Legacy Life to Advanced Legal Planning, were made to the attention of Linette Talbott.

"22. Between May 2010, and October 2010, electronic payments were made from the Advanced Legal Planning account to insurance companies to satisfy the initial annual premium for life insurance policies held in trust.

"23. In November 2009, Mark Hauser approached Patricia Adams about obtaining a life insurance policy at no cost to her. Ms. Adams understood that the life insurance policy would have a value of $10,000.

"24. Mr. Hauser provided Ms. Adams with documents necessary to complete the transaction. Ms. Adams signed the necessary applications, as well as other items provided by Mr. ...


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