In the Matter of Linda S. Dickens, Respondent.
ORIGINAL PROCEEDING IN DISCIPLINE
Kimberly Knoll, Deputy Disciplinary Administrator, argued the
cause, and Stanton A. Hazlett, Disciplinary Administrator,
was with her on the brief for the petitioner.
A. Hamill, of Martin, Pringle, Oliver, Wallace & Bauer,
L.L.P., of Overland Park, argued the cause and was on the
briefs for the respondent, and Linda S. Dickens, respondent,
argued the cause pro se.
an original proceeding in discipline filed by the office of
the Disciplinary Administrator against the respondent, Linda
S. Dickens, of Overland Park, an attorney admitted to the
practice of law in Kansas in 2011.
February 13, 2017, the office of the Disciplinary
Administrator filed a formal complaint against the respondent
alleging violations of the Kansas Rules of Professional
Conduct (KRPC). After two orders by the hearing panel granted
her extensions to file an answer, the respondent timely filed
an answer to the complaint on April 10, 2017, and an amended
answer to the complaint on August 7, 2017. A hearing was held
on the complaint before a panel of the Kansas Board for
Discipline of Attorneys on September 19-20, 2018, where the
respondent was personally present and was represented by
counsel. The hearing panel determined the respondent violated
KRPC 1.1 (2018 Kan. S.Ct. R. 289) (competence); 1.3 (2018
Kan. S.Ct. R. 292) (diligence); 1.4(a) (2018 Kan. S.Ct. R.
293) (communication); 1.5(d) (2018 Kan. S.Ct. R. 294) (fees);
1.8(e) (2018 Kan. S.Ct. R. 309) (providing financial
assistance to client); 1.16 (2018 Kan. S.Ct. R. 333)
(termination of representation); 3.2 (2018 Kan. S.Ct. R. 343)
(expediting litigation); 5.1 (2018 Kan. S.Ct. R. 358)
(responsibilities of partners, managers, and supervisory
lawyers); 8.3(a) (2018 Kan. S.Ct. R. 380) (reporting
professional misconduct); 8.4(a) (2018 Kan. S.Ct. R. 381)
(misconduct); 8.4(c) (engaging in conduct involving
dishonesty, fraud, deceit, or misrepresentation); 8.4(d)
(engaging in conduct prejudicial to the administration of
justice); and 8.4(g) (engaging in conduct adversely
reflecting on lawyer's fitness to practice law).
conclusion of the hearing, the panel made the following
findings of fact and conclusions of law, together with its
recommendation to this court:
"Findings of Fact
"14. On October 14, 2015, the respondent entered into
the Kansas attorney diversion program. In the diversion
agreement, the respondent stipulated to the following:
'8. The Disciplinary Administrator and the Respondent
stipulate to the following facts:
a. Respondent represented [G.C.] in an employment case.
b. During the case, [G.C.] was offered a settlement of
approximately $40, 000.00.
c. [G.C.] rejected the offer.
d. Later, [G.C.] advised Respondent that he was running short
of money because of medical and other expenses.
e. Respondent reviewed the Kansas Rules of Professional
Conduct and decided that giving [G.C.] a loan would not
violate the KRPC if the loan was an "arm's
length" transaction. She did not read the Comments to
f. Respondent loaned [G.C.] $20, 000.00 at 8.99% interest
with payments of $900.00 due each month with the balance
payable upon the settlement of the employment litigation or
and [sic] of his pending worker's compensation
g. Shortly after she provided the loan, Respondent was
approached by a bank owner who indicated that the bank would
like to support the litigation.
h. Respondent advised that [G.C.] could use a loan that he
could use to pay off the loan she made to him, plus provide
him other needed funds.
i. [G.C.] was given a loan. The loan principal was paid off,
however there was interest that was owing and still accruing.
15. As part of the diversion agreement, the respondent agreed
to complete a total of sixteen hours of continuing legal
education, including a total of six j. Prior to the interview
with Respondent, the Attorney Investigator suggested
Respondent review both the Missouri and Kansas Rules of
k. After reviewing both, Respondent acknowledged her conduct
violated the Rules in both states.
l. Respondent contended that the KRPC was not implicated
because her actions were under her Missouri license.
m. Respondent acknowledges that KRPC 8.5 provides: "A
lawyer admitted to practice in this jurisdiction is subject
to the disciplinary authority of this jurisdiction although
engaged in the practice of law elsewhere."
n. Respondent reported the misconduct to the
Missouri Office of Chief Disciplinary Counsel.
'9. The Disciplinary Administrator and the Respondent
agree that the Respondent violated KRPC 1.8(e)[.]'
As part of the diversion agreement, the respondent agreed to
complete a total of sixteen hours of continuing legal
education, including a total of six
Prior to the interview with Respondent, the Attorney
Investigator suggested Respondent review both the Missouri
and Kansas Rules of Professional Conduct. hours of hours of
ethics. The respondent agreed to complete the hours within
one year. The respondent failed to complete the required
continuing legal education hours.
The diversion agreement also contained the following
'The Respondent shall not violate the terms of the
diversion agreement or the provisions of the Kansas Rules of
Professional Conduct or Kansas Supreme Court Rules. If a new
complaint is received during the diversionary period, or if
within 90 days after the expiration of the agreement a new
complaint is received alleging violations of the KRPC during
the diversionary period, these acts shall constitute grounds
for a request to the Review Committee that the diversion be
revoked. The Review Committee has the authority to order
revocation of the diversion and order the matter be set for a
public hearing, without any other proceedings. In the event
that the Respondent violates any of the terms of diversion or
any of the provisions of the Kansas Rules of Professional
Conduct or Kansas Supreme Court Rules, including registration
requirements, at any time during the diversionary period, the
Respondent shall immediately report such violation to the
Disciplinary Administrator. The Respondent shall cooperate
with the Disciplinary Administrator in providing information
regarding any investigations relating to her conduct, as
required by Kansas Supreme Court Rule 207. Failure to do so,
may constitute a violation of KRPC 8.4.'
While the respondent remained on diversion, two new
complaints were docketed for investigation against the
respondent, see DA12475 and DA12526 below. The
Review Committee of the Kansas Board for Discipline of
Attorneys found probable cause to believe that the respondent
violated the Kansas Rules of Professional Conduct in DA12475
The respondent was given an opportunity to present
information to the Review Committee as to whether the
diversion agreement in DA12309 should be revoked. The
respondent declined to comment or otherwise provide
information to the Review Committee. Thereafter, on January
6, 2017, the Review Committee revoked the respondent's
diversion in DA12309.
According to Rule 203(d)(vii):
'Failure to Complete the Attorney Diversion Program. If
the Respondent fails to complete the agreed tasks in a timely
manner at any point in the diversion process, he or she may
be terminated from the program. If such a termination occurs,
traditional formal disciplinary procedures will resume. When
the complaint is returned to the formal disciplinary process,
the Respondent's termination from the Attorney Diversion
Program may be cited as an additional aggravating factor in
recommending discipline and as a violation of Supreme Court
Rule 207 and KRPC 8.1.'
In 2012, the respondent began representing G.N. and D.N. In
order to understand the facts involved in the present
disciplinary case, it is necessary to include extensive
During 1992 and 1993, G.N. and D.N. engaged Ken Liebelt, a
licensed independent life insurance agent and licensed
securities broker, as their investment adviser. Liebelt was
trained to determine the client's insurance objectives,
research the client's existing products, run an analysis
of the proposed products, and compare the benefits of the
existing products to any new products proposed.
At the time, G.N. and D.N. each had a term life insurance
policy, however the policies had outlived their purpose of
insuring against the untimely death of D.N., the primary
breadwinner of the household. G.N. told Liebelt that she
wanted to reduce the amount of tax that she and D.N. paid on
investments, if possible, through changes in their financial
portfolio. Accordingly, Liebelt's goal in 1993 was to see
what tax-advantaged products were available in the
marketplace to assist G.N. and D.N. in accomplishing this
That same year, Dave Knudson, Liebelt's supervising
general manager, called Liebelt and told him of a tax
advantaged product that he might want to hear about for his
clients. In March, 1993, both Liebelt and Knudson attended a
conference for the purpose of learning about 'universal
life insurance.' During this conference, they both
learned the generalities of a strategy for borrowing out the
cash values in a universal life policy, all for retirement
portfolio enhancement. Although Liebelt did not learn the
specifics of how to operate the borrowing strategy (balanced
funding option), Liebelt believed Knudson was very
knowledgeable about the strategy.
Liebelt and Knudson each believed that the life insurance
policies would lower G.N. and D.N.'s taxes. As such, they
agreed to work together to sell the life insurance policies
to G.N. and D.N. Liebelt and Knudson were not partners and
there was no written contract between them, rather, it was
understood that they would each make a commission if the
policies were sold.
G.N. and D.N. relied on the collective advice from Liebelt
and Knudson by terminating their existing life insurance
policies and applying for universal life insurance policies
with Bankers United Life Assurance Company (hereinafter
'Bankers'). Knudson was the managing agent on the
policy and Liebelt was the writing agent. Although an
insurance professional should assess whether the
administrative expenses of a proposed policy are excessively
high, Liebelt did not attempt to assess G.N. and D.N.'s
existing investments, made no comparison of whether the
proposed policies had advantages over their existing
policies, and did not research any other life insurance or
investment products; he merely ascertained whether they had
cash flow to pay the high life insurance premiums necessary
for the Bankers' policies.
After determining how much G.N. and D.N. could pay in
premiums, Liebelt told Knudson that they 'needed to run
the proposal on Knudson's computer software program.'
Liebelt did not have the software knowledge to run any
proposals. He went to Knudson's downtown office for this
purpose. The new policies were based on the maximum amount of
premiums G.N. and D.N. could afford to pay. This raised
D.N.'s coverage from $150, 000 to $442, 626 and
G.N.'s coverage from $25, 000 to $271, 000. At the time
G.N. and D.N. completed the insurance policy application,
they were advised to seek the counsel of a tax professional
regarding the potential tax issues of the policy. Later, in
1993, when the policies were issued, G.N. and D.N. were
advised of the maximum interest that would be charged on any
loans taken from the cash value in the policies.
From 1993 to 2000, G.N. and D.N. built the cash value in the
life insurance policies by paying a total of $225, 000 in
premiums on the two policies. In August, 2000, G.N. and D.N.
received notice from Bankers that their insurance policies
were the subject of a class action lawsuit involving
allegations against the company regarding how the policies
were sold and how they performed. Both G.N. and D.N. signed
documents agreeing to a settlement with the company regarding
In 2001, Knudson called Liebelt and advised him that G.N. and
D.N. could start using the balanced funding option. Liebelt
agreed that G.N. and D.N. should move forward with this
option. Prior to making arrangements for G.N. and D.N. to
start borrowing against the policies, Liebelt failed to run
any underlying calculations or make any analysis of whether
the interest rate charged on the loans against the policies
of 13.9% was reasonable under the market conditions existing
at that time. Liebelt also failed to run any data to
determine whether G.N. and D.N. were breaking even on the
life insurance policy. Finally, Liebelt failed to check to
see whether there had been any changes in tax laws that might
have rendered the balanced funding option no longer
appropriate or advantageous.
Knudson and Liebelt met with G.N. and D.N. to explain the
details of the balanced funding option. Later, G.N. called
Liebelt and advised him that they wanted to go forward with
the balanced funding option.
Knudson and Liebelt met with G.N. and D.N. a second time.
During this meeting, they instructed G.N. on the
documentation she would need for tax purposes with the
balanced funding option. Liebelt told G.N. that the balanced
funding option would work for her if she followed the
specific instructions of Knudson.
After the second meeting, Liebelt advised G.N. that he would
open a tax-efficient fund in order to maximize G.N. and
D.N.'s tax benefits from the balanced funding option. He
opened a separate investment account that would be used
strictly to house the interest and deposits for the balanced
funding option. Liebelt instructed G.N. to refrain from using
the account for any other purpose.
In 2001 and 2002, G.N. took out loans from the cash value in
their Bankers' policies, as directed by Knudson. G.N.
gave half the loan proceeds to Liebelt to invest in the
account he opened for use in conjunction with the balanced
funding option. Liebelt invested in mutual funds. G.N. gave
Knudson and the other half of the loan proceeds, $73, 500, to
invest. Knudson put them into LLCs which he had formed.
Knudson did not tell G.N. that the LLCs were companies he
owned nor did he tell her that the LLCs were illegal,
unregistered companies. He simply told G.N. that her money
was going into offshore currency exchanges, the silver
market, and real estate investments in Las Vegas.
As part of the balanced funding option in the life insurance
policy which was designed for tax advantages, G.N. and D.N.
were to make annual interest payments on the policy loans
which could, in turn, offset capital gains tax according to
the balanced funding option plan. G.N. and D.N. had been
advised when the loans were taken of the details of operating
the balanced funding option, their responsibilities under the
plan, and the importance of making the annual loan interest
payments, including the maximum interest that would
accumulate on the borrowed principal under each policy. G.N.
and D.N. paid the interest payments due annually on the loans
in 2000 and 2001.
In 2003, G.N. contacted Knudson and suggested she did not
have enough capital gains to offset and thus had no reason to
pay the interest due on the policy loans. Knudson agreed she
could postpone the interest payment at that time. Liebelt
provided no advice or information on this issue. G.N. and
D.N. never again paid the annual interest charges on the
By the end of October, 2003, G.N. knew that the money
invested with Knudson was completely lost.
In 2005, Liebelt called G.N. to find out why they were not
paying the interest due on the loans. When G.N. responded
that they were following the advice of Knudson, Liebelt did
not instruct her to start paying interest due and did not run
any calculations. Relying on Knudson, Liebelt never learned
what G.N. and D.N. were required to do to utilize the
benefits of the fixed rate loan policy provision.
Knudson was forced out of the securities business in the
G.N. met with a new investment adviser, David Cox, with the
intention of moving their investments from Liebelt. G.N.
informed Cox that she held a Bankers' policy and was
satisfied with it. She also advised Cox she was uncomfortable
with the level of risk and dissatisfied with the performance
of funds placed for investment with Liebelt. On June 10,
2010, G.N. hired Cox to manage their investments. Liebelt
remained as G.N. and D.N.'s insurance agent.
In 2012, G.N. and D.N. received notices from Transamerica,
the successor in interest to Bankers, advising them that they
needed to terminate their policies because the compounding
interest and escalating loan balances consumed the cash
values of both policies. G.N. and D.N. had been informed of
the compounding interest and escalating loan balances on an
annual basis from 2003 to 2012 by virtue of the annual
statements. G.N. and D.N. ultimately surrendered the policies
After G.N. and D.N. surrendered the policies, Transamerica
conveyed approximately $29, 000 as the cash surrender value
for G.N. and D.N.'s insurance policies. Transamerica
informed them that it would report to the IRS that the policy
surrenders had generated $551, 000 of taxable income for G.N.
and D.N. According to the respondent, G.N. and D.N.'s tax
liability would have been $198, 000 on the $551, 000 of
taxable income declared by Transamerica.
Each year beginning in 1993, Liebelt had received a copy of
the annual statement of values on G.N. and D.N.'s
policies. Liebelt did not look at the statements closely. Had
he done so, he would have seen that the policies would
eventually have a negative value.
Cox referred G.N. and D.N. to the respondent for assistance
with the tax issues. At the time G.N. and D.N. retained the
respondent, they were approximately 77 and 80 years old,
G.N. and D.N. met with the respondent, provided her with
documentation, and discussed the details of the life
insurance policies. The respondent met with G.N. on many
occasions. During those meetings, G.N. told the respondent
that she learned that the investments they made with Knudson
were a total loss between 2006 and 2009.
The respondent researched the tax issue for G.N. and D.N. In
August, 2012, the respondent was able to resolve the tax
issue by contact with the IRS criminal division. The
respondent also told G.N. and D.N. that she believed they had
a viable cause of action against Knudson and Liebelt. D.N.
asked respondent what he owed her for the assistance with the
tax issue. The respondent told G.N. and D.N. that rather than
pay her hourly for her work, she would agree to be
compensated through a contingent fee lawsuit against Knudson
On approximately August 8, 2012, G.N. and D.N. entered into a
contingent fee agreement with the respondent. While the
respondent contends that the contingent fee agreement was
reduced to writing and that she and G.N. signed it, she was
unable to produce a copy of the agreement. D.N. testified
that he did not sign a written contingency fee agreement, the
terms of the fee agreement were discussed by the respondent
and D.N. many times during the representation, and D.N. asked
the respondent for a fee agreement on a number of occasions.
The respondent never provided D.N. with a written fee
On February 11, 2013, the respondent filed suit against
Liebelt and Knudson on behalf of G.N. and D.N. The respondent
aggressively pursued G.N. and D.N.'s case. According to
the respondent, she spent hundreds of hours working on the
case and incurred over $19, 000 in expenses on the case. The
respondent learned that Knudson was judgment-proof.
During discovery, G.N.'s deposition was taken. During her
deposition, conducted on January 20, 2014, G.N. testified
that she learned from Knudson that he lost all of the funds
he invested on behalf of G.N. and D.N. in 2003. This was
different than what she told the respondent in preparation
for filing the case. Following G.N.'s deposition, the
respondent did not ask G.N. about the discrepancy between
what G.N. told her in their meetings and what G.N. testified
to in her deposition. Additionally, the respondent did not
explain to G.N. and D.N. that G.N.'s deposition testimony
On July 1, 2014, Liebelt filed a motion for summary judgment.
In his motion, Liebelt argued that the allegations of
negligence were time barred because the time for those claims
began running a variety of years for different claims, from
1993 through 2010. Liebelt argued that he could not be held
liable for the loss of the $73, 500 provided to Knudson
because G.N. was aware of the loss by 2003. Finally, Liebelt
argued that he and Knudson did not enter a joint venture so
Liebelt could not be held liable for Knudson's
Regarding the claims of negligence, the respondent argued in
her response that G.N. and D.N. did not know they had
suffered material losses from the loans until 2012 when the
policies were forfeited, the cash values were lost, and the
tax liability of $551, 000 was declared by Transamerica. The
respondent argued that G.N. and D.N. did not know they had
been defrauded of the $73, 500 until the respondent
discovered the fraud in 2012.
On October 1, 2014, in a one-page journal entry of judgment,
the court granted the motion for summary judgment based on
the statute of limitations:
'Defendant Kenneth Liebelt's Motion for Summary
Judgment came on for hearing on October 1, 2014. Based on the
briefs submitted and oral arguments of counsel, the Court
GRANTED Defendant Liebelt's Motion for Summary Judgment.
'Thus, Defendant Liebelt's Motion for Summary
Judgment is granted as to Counts I, II, and V, as
Plaintiff's action is untimely based on the statute of
limitations. The Court further finds that Plaintiff cannot
establish a joint venture as a matter of law, and grants
summary judgment in favor of Defendant Liebelt based on
Plaintiffs' joint venture claim.
'Further, the Court finds that in this case involving
multiple defendants, there is no just reason for delay in
entering this Summary Judgment on behalf of Defendant Kenneth
Liebelt only, in accordance with K.S.A. 60-254(b).
'WHEREFORE, the Court finds that Summary Judgment is
GRANTED in favor of Defendant Kenneth Liebelt on all causes
of action against him by Plaintiff herein.'
After the court entered summary judgment on behalf of
Liebelt, on October 17, 2014, the respondent sent G.N. an
email message. In that message, the respondent informed G.N.
for the first time that G.N. created a statute of limitations
problem by her deposition testimony. G.N. responded:
'This is the first time you have mentioned that there was
a problem with my deposition so I am surprised to hear it
now. I did the best I could to be honest and accurate. Memory
constraints and a multitude of facts to recall have perhaps
created these problems.'
On October 29, 2014, the respondent filed a motion for
reconsideration. In her motion, the respondent argued that
the negligence and fraud claims against Liebelt should be
reinstated because 'there is a question of fact as to
whether Liebelt breached duties to [G.N. and D.N.] by failing
to warn them of impending disaster while he remained the
Agent on their policies after February 11, 2011.' The
parties argued the motion on December 12, 2014. The court
took the matter under advisement.
On December 29, 2014, the respondent met with G.N. and D.N.
Initially, the respondent was cordial. The respondent
explained to G.N. and D.N. how she had lost a great deal of
money representing them in their suit against Liebelt and
Knudson. The respondent asked G.N. and D.N. if they could
think of a way to make it right. When G.N. and D.N. did not
volunteer to pay the respondent money, her approach changed.
The respondent became aggressive and clearly stated that she
would not suffer this financial loss. The respondent
indicated that she would be seeking to recover fees from them
because G.N. misrepresented a key fact.
On December 30, 2014, the respondent followed up their
meeting with an email message. In the message, the respondent
argued that she could sue G.N. and D.N. for negligent
misrepresentation of a material fact, unjust enrichment, and
fraudulent misrepresentation. In addition to threatening to
sue G.N. and D.N., the respondent threatened to contact their
accountant (who works for a financial firm owned by the
respondent and the respondent's husband) and the IRS and
retract the statements that the $551, 000 reported by
Transamerica should be considered phantom income.
'I want you also to be aware of two more significant
things: First, if you get audited, you will need me and my
files to prove to the IRS that the income Transamerica
declared to you was phantom, and caused by a Ponzi scheme. If
I have to sue you, I won't be available for that effort
until and unless I get paid for my work. And, because you
haven't paid me, you don't own my files-I do.
'Second, given that [G.N.] misrepresented this material
fact to me, it makes me nervous that perhaps I have rendered
legal opinions on the Ponzi scheme based on other
misrepresented facts by [G.N.]. I am concerned I may need to
reexamine the opinions I furnished to your accountant
regarding what I thought was a Ponzi scheme, and on which the
accountant relied in completing the tax return that saved you
from $198, 000 in taxes. I will have to withdraw all opinions
that I no longer find substantiated, which will force the
accountant to notify the IRS that the facts on which she
relied in drafting your return no longer exists. I suspect
this would trigger an audit.
'If you demonstrate that you are acting in good faith
rather than squeezing enormous benefit out of me for nothing,
I will feel that [G.N.] was acting in good faith when she
told me her story, and I won't believe it necessary to
reexamine my opinions.
'I conferred substantial efforts and benefit on you,
relying on [G.N.]'s representation to me that she
discovered the losses in 2006 to 2009. That she actually
discovered them in 2003 gutted the lawsuit through which I
was to be compensated for my work on your behalf. I will file
suit against you both next week unless I am paid by Friday.
'I strongly recommend you write your check and deliver it
tomorrow so you are in the best position to deduct the legal
fees as expenses off of this year's income. I am not a
tax attorney, but this will likely allow you to deduct the
legal fees as "expenses to preserve in investment."
If I am paid, I will do all in my power to assist you in
getting that deduction.'
On December 31, 2014, D.N. responded to the respondent's
email message from the day before. In the email message, D.N.
stated that he believed the respondent was acting unethically
by threatening to file a lawsuit and 'precipitating tax
woes.' It is clear that following the December 29, 2014,
meeting, the attorney-client relationship had been
On January 2, 2015, because G.N. and D.N. were losing sleep
over this matter, D.N. offered the respondent $40, 000 to
settle the dispute. The respondent had previously agreed to
settle the dispute for $80, 000.
On January 3, 2015, respondent sent G.N. and D.N. an email
message and detailed her next steps if they were unable to