BEFORE THE HEARING BOARD
FILED
OF THE
... ^ « .
ILLINOIS ATTORNEY REGISTRATION
JAN 1 UZ014
AND
DISCIPLINARY COMMISSION
ATT • R£?AP!§C COMM
CHICAGO
In the Matter of:
ARTHUR GEORGE JAROS JR.,
Commission No. 2013PR00073
Attorney-Respondent,
No. 1327097
ANSWER TO FIRST AMENDED COMPLAINT
Respondent, ARTHUR GEORGE JAROS JR., by his attorney, Stephanie Stewart-Page of
The Gloor Law Group, LLC, hereby answers the First Amended Complaint as follows:
RESPONDENT'S STATEMENT PURSUANT TO COMMISSION RULE 231
A.
Respondent was admitted to the following jurisdiction on or about the dates
indicated:
Federal District Court Northern District of Illinois (1975)
U.S. Tax Court (1981)
Seventh Circuit U.S. Court of Appeals (1989)
U.S. Supreme Court (2008)
Federal District Court Western District of Wisconsin (2009)
B.
Respondent was licensed as a CPA in about 1976 and let the license go inactive in
about 1978.
Background
(Incorporation of Eagle Cove Camp and Conference Center Inc.)
1.
On or about May 15, 2002, Respondent's father, Arthur G. Jaros Sr., established a
charitable trust entitled Arthur G. Jaros Sr. and Dawn L. Jaros Charitable Trust ("Jaros
Charitable Trust"). Respondent and his two younger siblings. Wesley A. Jaros ("Wesley") and
Randall S. Jaros ("Randall"), were named trustees of the Jaros Charitable Trust. The Jaros
Charitable Trust stated that its purpose was to "devote and apply ... for the use of charitable,
religious, and educational purposes and organizations ... with special emphasis on the
dissemination of the Word of God.... purposes be interpreted broadly to include such things as
Christian based camps, youth facilities, family services and other organizations of a Christian
based charitable nature."
ANSWER: Admitted.
2.
After Respondent's father's death, the Jaros Charitable Trust was funded with
approximately 34 acres of land located in Woodboro, Wisconsin, and $5,000,000 in cash. It was
Respondent's idea, and the desire of his father and siblings, that the 34 acres of land be used for
developing a Bible camp. In addition to the 34 acres of land, Respondent, as trustee of the Jaros
Family Trusts, owned an additional 25 acres of land adjacent to the 34 acres, which would be
available to the Bible camp's use.
ANSWER:
3.
Admitted.
On or about December 17, 2004, Respondent drafted and executed a form entitled
"Articles of Incorporation - Nonstock Corporation" to organize a corporation in the State of
Wisconsin. On the form, the name of the corporation was listed as Squash Lake Christian Camp,
Inc. ("SLCC") and the three directors of SLCC were listed as Respondent and his two siblings,
Wesley and Randall. The listed purpose of SLCC was to "operate for religious purposes a
Christian Bible Camp in Oneida County, Wisconsin...." Respondent incorporated SLCC as a not-
for-profit organization exempt from federal income taxes under the Internal Revenue Code 26
U.S.C. 501(c)(3). Later, Respondent amended the name of Squash Lake Christian Camp, Inc.
("SLCC") to Eagle Cove Camp and Conference Center. Inc. ("Eagle Cove Center").
ANSWER: Admitted, except for the last sentence. As to the last sentence, admitted that
the name of the organization was so changed but denied that the amendment to the name
was made by the Respondent.
4.
At all times alleged in this complaint, Respondent was the President and Director
of Eagle Cove Center. Respondent's two brothers were also directors and officers of Eagle Cove
Center. In 2006, the estimated retail cost to develop Eagle Cove Center was $14,650,000.
ANSWER: Admitted. Affirmatively stated that the actual cost of development was
estimated to be substantially less.
5.
The land in Woodboro, Wisconsin where Respondent was seeking to develop
Eagle Cove Center, as described in paragraph two, above, was zoned as a Single Family
Residential and Residential and Farming zones. Due to these zoning restrictions, Respondent was
denied permits from the town of Woodboro and Oneida County to develop Eagle Cove Center.
Respondent spent more than four years unsuccessfully requesting and applying for rezoning and
conditional use permits to allow Respondent and Eagle Cove Center to develop the Christian
Bible camp.
ANSWER:
Denied that Respondent in his individual capacity was denied permits or
requested or applied for permits. Denied that Respondent personally ever sought personal
permission to develop the Christian Bible camp. The remaining allegations are admitted.
Affirmatively stated that the development of the Christian Camp was by unanimous
decision of the co-trustees of the charitable trust and of the directors of the non-stock
corporation.
6.
At various times in or about 2006 to the present, Respondent represented Eagle
Cove Center as its attorney. As a result of Respondent's representation of Eagle Cove center,
respondent had a fiduciary relationship with Eagle Cove Center that required him to exercise the
highest degree of honesty, loyalty, and good faith.
ANSWER: The first sentence is admitted but affirmatively stated that Eagle Cove Camp
and Conference Center, Inc. has been and is represented by other attorneys-at-Iaw and
that the scope of Respondent's representation was and is limited. Respondent neither
admits nor denies the remaining allegations of Paragraph 6, as said allegations are not
factual but state conclusions of law. To the extent an answer is deemed required, the
allegations are denied.
Conflict of Interest
(Respondent's Representation of Jean D. Cooney)
7.
In or about late 1978 or early 1979, Jean D. Cooney ("Mrs. Cooney") and John A.
Cooney ("Mr. Cooney") hired Respondent's law firm, Richter & Jaros, to represent them in
matters related to tax services, estate planning, estate administration, guardianship and litigation
defense services. In or about the Spring of 1980, Respondent began to personally provide legal
services to Mrs. and Mrs. Cooney.
Respondent represented both Mrs. and Mr. Cooney,
providing legal services, such as drafting trust agreements, until Mr. Cooney's death on August
5, 1994. After Mr. Cooney's death, Respondent continued to represent Mrs. Cooney.
ANSWER: As to the first sentence, admitted only that Mr. and Mrs. Cooney hired Robert
I. Richter to provide estate planning services and hired Respondent to provide income tax
services. The remaining allegations of the first sentence are denied.
As to the second sentence, admitted only that until April, 1993, Respondent provided only
federal and Illinois income tax return preparation services. The remaining allegations of
the second sentence are denied. Affirmatively stated that during May, 1993, the
undersigned began providing estate planning services at the request of Mrs. Cooney.
As to the third sentence, admitted that Respondent provided only federal and state tax
services through May, 1993. Denied that Respondent ever drafted a trust agreement for
either Mr. or Mrs. Cooney in that the trust agreements drafted for by them by Attorney
Richter in 1979 were never terminated; admitted that Respondent drafted amendments to
Mr. and Mrs. Cooney's 1979 trust agreements through August 5,1994.
The fourth sentence is admitted.
8.
At no time did Respondent have any familial or close familial relationship with
Mrs. or Mr. Cooney.
ANSWER: Admitted that Respondent was not a member of the Cooney family. Denied
that Respondent did not have a close relationship with the Cooneys.
9.
After Mr. Cooney's death, Respondent continued to represent Mrs. Cooney and
drafted at least 15 Restatements or Amendments to Mrs. Cooneys' Trust Agreements until her
death on October 16,2010.
ANSWER: Paragraph 9 is admitted except as to the implication that any restatements or
amendments were drafted after January, 2010, which implication is denied.
10.
As a result of Respondent's representation of Mrs. Cooney, Respondent had an
attorney-client relationship, which formed a fiduciary relationship obligating Respondent to act
with honesty, loyalty, and good faith in counseling Mrs. Cooney in the disposition of her estate
and trust.
Respondent also had the duty to avoid placing himself in a position where
Respondent's personal interests would conflict with the interests of Mrs. Cooney, to avoid
engaging in transactions that benefited himself at the expense of Mrs. Cooney, her estate, or her
trust, and avoid preparing restatements or amendments to the Jean D. Cooney Trust Agreement
giving Eagle Cove Center $425,000.
ANSWER:
Respondent admits that he had an attorney-client relationship with Mrs.
Cooney but neither admits nor denies the remaining allegations of Paragraph 10, as said
allegations are not factual but state conclusions of law. To the extent an answer is deemed
required, the allegations are denied.
11.
Respondent breached his fiduciary duty by engaging in conduct, including but
not limited to drafting restatements and amendments to Mrs. Cooney's trust agreements naming
Eagle Cove Center as a beneficiary of Mrs. Cooney's trust, failing to communicate or explain
the significance of the matter, failing to obtain consent or waiver, failing to advise Mrs. Cooney
to seek out or procure independent legal advice concerning the designation of Eagle Cove Center
in her trust agreement, and obtaining and distributing money to Eagle Cove Center, as described
in paragraphs 12 through 23 below.
ANSWER:
Respondent neither admits nor denies the allegations of Paragraph 11, as
said allegations are not factual but state conclusions of law. To the extent an answer is
deemed required, the allegations are denied.
12.
In or about October, 2006, Respondent drafted a third restatement of the Jean D.
Cooney Trust Agreement ("Third Restatement") that was executed by Mrs. Cooney on October
27, 2006. In Article Third, Section I of the Third Restatement, Mrs. Cooney designated certain
non-profit organizations as beneficiaries to receive a specific pecuniary amount after her death.
The Third Restatement named six non-profit organizations as beneficiaries to receive a share of
$700,000 after Mrs, Cooney's death. SLCC was one of the six non-profit organizations
designated a beneficiary, in the Third Restatement. The Third Restatement designated SLCC to
receive $300,000.
ANSWER:
13.
Admitted.
At no time before Mrs. Cooney executed her Third Restatement did Respondent
explain to Mrs. Cooney that he had a potential conflict of interest in preparing the trust
agreement designating SLCC as a beneficiary in her trust agreement to receive $300,000, make a
full and frank disclosure of all the relevant information regarding his personal interest in SLCC,
and obtain consent or waiver from Mrs. Cooney regarding any potential conflict of interest.
ANSWER: Admitted that Respondent did not specifically tell Mrs. Cooney that he
had a "potential conflict of interest". The remaining allegations of Paragraph 13 are
denied. In further answering, Mrs. Cooney was aware of Respondent's connection to the
camp prior to naming it as a beneficiary.
14.
At no time before Mrs. Cooney executed her Third Restatement did Respondent
advise Mrs. Cooney to seek out or procure independent legal advice concerning the designation
of SLCC as a beneficiary in her trust agreement.
ANSWER: Admitted.
15.
In or about February 2007, Respondent drafted the fourth restatement of the Jean
D. Cooney Trust Agreement ("Fourth Restatement"), which was executed by Mrs. Cooney on
February 20, 2007. In Article Third, Section I of Mrs. Cooney's Fourth Restatement, ten non
profit organizations were designated as beneficiaries to receive a share of $822,500 after Mrs.
Cooney's death. One of the ten non-profit organizations was Eagle Cove Center and was
designated to receive $425,000 at Mrs. Cooney's death.
ANSWER: Admitted.
16.
At no time before Mrs. Cooney executed her Fourth Restatement did Respondent
explain to Mrs. Cooney that he had a potential conflict of interest in preparing the trust
agreement designating Eagle Cove Center as a beneficiary in her trust agreement to receive
$425,000, make a full and frank disclosure of all the relevant information regarding his personal
interest in Eagle cove Center, and obtain consent or waiver from Mrs. Cooney regarding any
potential conflict of interest.
ANSWER: Admitted that Respondent did not specifically tell Mrs. Cooney that he had a
"potential conflict of interest". The remaining allegations of Paragraph 16 are denied. In
further answering, Mrs. Cooney was aware of Respondent's connection to the camp prior
to naming it as a beneficiary.
17.
At no time before Mrs. Cooney executed her Fourth Restatement did Respondent
advise Mrs. Cooney to seek out or procure independent legal advice concerning the designation
of Eagle Cove Center as a beneficiary in her trust agreement.
ANSWER: Admitted.
18.
In six subsequent Restatements and amendments to Mrs. Cooney's trust
agreement, SLCC or Eagle Cove Camp was named in Article Third, Section 1, to receive a
pecuniary amount of $425,000 after Mrs. Cooney's death.
ANSWER: Admitted.
19.
At no time before Mrs. Cooney executed the six subsequent restatements and
amendments to her trust agreement did Respondent explain to Mrs. Cooney that he had potential
conflict of interest in preparing the trust agreement designating Eagle Cove Center as a
beneficiary in her trust agreement to receive $425,000, make a full and frank disclosure of all the
relevant information regarding his personal interest in Eagle Cove Center, and obtain consent or
waiver from Mrs. Cooney regarding any potential conflict of interest.
ANSWER: Admitted that Respondent did not specifically tell Mrs. Cooney that he had a
"potential conflict of interest". The remaining allegations of Paragraph 19 are denied. In
further answering, Mrs. Cooney was aware of Respondent's connection to the camp prior
to naming the camp as a beneficiary.
20.
At no time before Mrs. Cooney executed her six subsequent restatements and
amendments to her trust agreement did Respondent advise Mrs. Cooney to seek out or procure
independent legal advice concerning the designation of Eagle Cove Center as a beneficiary in her
trust agreement.
ANSWER: Admitted.
21.
In Mrs. Cooney's last trust agreement, before her death on October 16, 2010,
entitled Third Amendment to the Seventh Restatement of the Jean D. Cooney Trust Agreement
("Third Amendment to Seventh Restatement"), which was executed by Mrs. Cooney on January
5, 2010, nine non-profit organizations were named in Article Third, Section I, to receive a share
of $470,000 if Mrs. Cooney died before January 1, 2011. One of the nine non-profit
organizations was Eagle Cove Center, which was designated to receive $425,000 after Mrs.
Cooney's death.
ANSWER: Denied that the Third Amendment to the Seventh Restatement is accurately
referred to as her "last trust agreement" but is instead properly referred to as the last
revision of her 1979 trust agreement; the remainder is admitted.
22.
At no time before Mrs. Cooney executed her Third Amendment to Seventh
Restatement did Respondent explain to Mrs. Cooney that he had a potential conflict of interest in
preparing the trust agreement designating Eagle Cove Center as a beneficiary in her trust
agreement to receive $425,000. make a full and frank disclosure of all the relevant information
regarding his personal interest in Eagle Cove Center, and obtain consent or waiver from Mrs.
Cooney regarding any potential conflict of interest.
ANSWER: Admitted that Respondent did not specifically tell Mrs. Cooney that he had a
"potential conflict of interest". The remaining allegations of Paragraph 22 are denied. In
further answering, Mrs. Cooney was aware of Respondent's connection to the camp prior
to naming the camp as a beneficiary.
23.
At no time before Mrs. Cooney executed her Third Amendment to Seventh
Restatement did Respondent advise Mrs. Cooney to seek out or procure independent legal advice
concerning the designation of Eagle Cove Center as a beneficiary in her trust agreement.
ANSWER: Admitted.
24.
On January 29, 2010, Mrs. Cooney resigned as trustee and as a result, Respondent
became the trustee of Mrs. Cooney's trust agreement.
ANSWER: Admitted.
25.
On October 16, 2010, Mrs. Cooney died.
ANSWER: Admitted.
26.
On or about November 6, 2010, Respondent estimated the Cooney Estate to have
an estimated value of $3,250,000.
ANSWER: Admitted.
27.
In or around 2012, Respondent, as trustee of Mrs. Cooney's trust agreement, made
distributions to the designated beneficiaries, including $425,000 to the Eagle Cove Center.
ANSWER:
Admitted that such distributions were made during 2011 and 2012.
Distributions to the six named residuary beneficiaries continue.
28.
By reason of the conduct described above that occurred before January 1, 2010,
Respondent has engaged in the following misconduct:
a.
representing a client, Mrs. Cooney, when the representation of that client may be
materially limited by his own interests, as the president, co-trustee, and attorney
for Eagle Cove Camp and Conference Center, by conduct including failing to
obtain consent from the client, failing to disclose or communicate information
reasonably sufficient to permit the client to appreciate the significance of the
matter in question, in violation of Rule 1.7(b) of the Illinois Rules of Professional
Conduct (1990); and
b
preparing an instrument for his client, Mrs. Cooney, in which Respondent's non
profit organization Eagle Cove Camp and Conference Center, was designated as a
beneficiary to receive a substantial gift from that client with whom he was not
related to, by conduct including but not limited to exerting undue influence or
failing to advise the client to obtain independent legal advice, in violation of Rule
1.8(c) of the Illinois Rules of Professional Conduct (1990).
ANSWER:
Respondent neither admits nor denies the allegations of Paragraph 25,
subparagraphs a through b, inclusive, as said allegations are not factual but
state conclusions of law. To the extent an answer is deemed required, the
allegations are denied.
26.
By reason of the conduct described above that occurred on or after January 1,
2010, Respondent has engaged in the following misconduct:
a.
representing a client, Mrs. Cooney, when the representation of that client will be
materially limited by his own interest, as president, co-trustee, and attorney for
Eagle Cove Camp and Conference Center, by conduct including failing to obtain
informed consent, in violation of Rule 1.7(a)(2) of the Illinois Rules of
Professional Conduct (2010); and
b.
preparing on behalf of a client, Mrs. Cooney, an instrument giving the
Respondent's non-profit organization, Eagle Cove camp and Conference Center, a
substantial gift, by conduct including exerting undue influence or failing to advise
the client to have the detached advice that another lawyer can provide, and where
Respondent was not related to or did not maintain a close familial relationship
with that client, in violation of Rule 1.8(c) of the Illinois Rules of Professional
Conduct (2010).
ANSWER:
Respondent neither admits nor denies the allegations of Paragraph 26,
subparagraphs a through b, inclusive, as said allegations are not factual but
state conclusions of law. To the extent an answer is deemed required, the
allegations are denied.
WHEREFORE, the Respondent requests that this complaint be dismissed and for all
other relief the Hearing Board deems just.
Respectfully Submitted,
GLOOR LAW GROUP, LLC.
Stephanie Stewart-Page
GLOOR LAW GROUP, LLC.
225 West Wacker Drive
Suite 1800
Chicago, Illinois 60606-1274
312/752-3700
312/752-3701 Fax