November 2008
Topic:Disbarment is an appropriate sanction when a lawyer fails to conform his behavior to his large law firm’s culture of ethical practice, notwithstanding attention deficit disorder, sleep apnea and severe personality problems.
For many years, Carl Oosterhouse was a partner at Michigan’s Varnum, Riddering, Schmidt & Howlett LLP (“Varnum”). At Varnum, his annual compensation often exceeded $500,000, and he considered to be a successful rainmaker. In 2006, he left to become a partner at a competing firm, Dickinson Wright.
Oosterhouse has quite the pedigree. He received a BA, magna cum laude, from Calvin College and a JD, cum laude, from the University of Michigan Law School. Considered one of the Midwest’s leading corporate and transactional lawyers, he was involved in a number of highly visible corporate transactions and served as counsel in more than $610 million worth of private placement equity offerings. He also represented numerous educational institutions seeking tax exempt financing, including the Thomas M. Cooley Law School. Oosterhouse was a member of the Tax Law and Business Law sections of the American Bar Association and the Real Estate, Business and Tax sections of the Michigan Bar Association. He was also a member of the National Association of Bond Lawyers. He was listed in the Chambers Directory and in “Best Lawyers in America.” He was considered by peers to be a superstar.
But through much of his professional career, Oosterhouse led a secret life, stealing from the Varnum law firm. In 1986, he incorporated Covesco, Inc., which he characterized as a “shell company”. Covesco was essentially Oosterhouse’s alter ego. Oosterhouse admitted that he transferred to Covesco credits and trust account balances belonging to Varnum and to the Gainey Corporation, a transportation services corporation based in Grand Rapids that happened to be Oosterhouse’s major client. These transfers were estimated to be in the range of $40,000 to $45,000. Oosterhouse admitted that also took money from Varnum through fraudulent or improper expense reimbursement requests estimated to range from $50,000 to $80,000. Oosterhouse also engaged in sophisticated manipulations of client invoices, credits on client fees that were diverted to Covesco, and other devices which hid his activities. One example of such manipulation was that he “carefully orchestrated the transfer of excessive legal fees from flat fee assignments to the Covesco account, and then applied those credits to other lawyers’ time so that they appeared to perform statistically at a better level.”
Allegations of misconduct first emerged after Oosterhouse left Varnum. The Michigan Grievance Administrator investigated those allegations and eventually filed formal disciplinary charges against him. Oosterhouse admitted to wrongdoing, but argued that he should be placed on probation as he was impaired by physical and mental disabilities that caused, or substantially contributed to, the misconduct.
Oosterhouse suffers from depression, attention deficit disorder, sleep apnea, and personality disorders with schizoid, depressive and avoidant features. A number of mental health experts testified at the disciplinary hearing on his behalf about his myriad of problems.
Martha Burkett, Program Administrator for Michigan’s Lawyers and Judges Assistance Program (“LJAP”), testified that Oosterhouse called the hotline and entered a contract with LJAP. She meets with him once a month. Ms. Burkett testified that his “constellation of circumstances” could certainly result in impairment. She testified that she could not definitely state that an impairment caused the misconduct at issue, but that she believed numerous factors, especially the mental health issues, caused Oosterhouse to make the decisions he made. She said that once he left Varnum, his abnormal behavior “evidently” ceased.
One Dr. VanOstenberg, Oosterhouse’s treating psychologist, offered extensive testimony about his patient’s upbringing, where achievement through performance was considered paramount. Exacerbating this situation was Oosterhouse’s personality disorder, a condition that left him unable to either form close relationships or empathize with the performance of others within his firm. According to the doctor, Oosterhouse had both an inability to socialize and an inability to understand ethics and morality. His lack of social skills at the firm resulted in a failure to integrate into Varnum’s culture of ethical practice. He also detailed Oosterhouse’s attention deficit disorder, depression, inability to form intimate relationships, alienation, overriding focus on numeric achievement, loner tendencies, and an overall inability to see his actions in the context of cause and effect within a community. Dr. VanOstenberg testified that Oosterhouse’s mental conditions impaired his ability to practice as a lawyer and substantially contributed to the conduct at issue in the disciplinary proceeding. VanOstenberg noted at the hearing that, “I don’t think Carl ever saw it as stealing money. Carl saw it as an accounting problem.”
But the most fascinating expert testimony was provided by Molly Raaymakers, a neurofeedback specialist and a limited license psychologist, who testified about the effects of sleep deprivation on Oosterhouse’s brain, brought about by his allergies and sleep apnea. She said sleep deprivation affects emotional problem solving and decision making, such that an individual engages in critical and negative thinking. “It's not that they don't have abilities in there, it's just that they have so much baggage in electrical activity, it's kind of like having your fishing waders on and you're stuck in the mud.” Fortunately, the expert reported that Oosterhouse’s current EEG displays “continued gains in stability and resilience over the course of training. He has nicely improved within normal ranges on slow-wave frequency amplitude, as well as emerging balance in amplitude activity within 21hz, high beta (23-38)Hz and Gamma (38-42)Hz.” She testified that as long as Oosterhouse continues to “train” she sees no risk that the behaviors that led to the proceeding will occur.
Oosterhouse was able to practice law at an extremely high-level of functioning at Varnum, notwithstanding any slow-wave frequency amplitudes that existed at the time. Indeed, the attorneys who recruited him to leave Varnum for Dickinson Wright, and who worked with him there, described him as a “super” technical lawyer who made sure the client’s needs were met on paper and opined that he was a “practicing, solid performing lawyer.” There was no evidence that he was anything less than a competent practitioner. After reviewing all of the scientific evidence, the hearing panel concluded that Oosterhouse was ineligible for probation as his professed disabilities were inconsistent with his high level of functioning at the firm.
Oosterhouse appealed, arguing on review that the hearing panel punished him for his illness and erred in not placing him on probation. The Attorney Disciplinary Board sided with the hearing panel and revoked his license, finding that Oosterhouse was not eligible for probation. Theft is not an option for an attorney, and it can and must be rejected by a person who is depressed, fatigued or “beset by the host of problems plaguing this respondent.” The Board did not doubt that Oosterhouse suffered from physical and psychological problems, but ruled that public protection the paramount aim of the attorney discipline process. The Board complimented the exceptional advocacy on the Respondent’s behalf, but rejected the notion that the case tested the outer reaches of the disciplinary system’s ability to deal intelligently and empathetically with mental illness. Rather, the Board held that the case tested the limits of Michigan’s probation rule as it applied to plainly intentional and dishonest conduct. The Panel’s order of revocation was affirmed.
The Board Opinion is Grievance Administrator v. Carl Oosterhouse, No. 07-93-GA (Michigan ADB, November 26, 2008).
In a truly odd turn of events, Oosterhouse is now employed as the Chief Operating Officer of Gainey Corporation, the client that he stole from while employed with the Varnum firm. He was hired after the company filed for Chapter 11 bankruptcy protection.
http://www.mlive.com/news/grand-rapids/index.ssf/2008/12/oosterhouse_loses_appeal_to_ge.html
-RICHARD S. THOMAS, COUNSEL, ILLINOIS ARDC &
-JAMES J. GROGAN, DACC, ILLINOIS ARDC