Bright-Line Disbarment for Felony Theft by Swindle Absent Mitigation

Case: In re Petition for Disciplinary Action against Kristi D. McNeilly, A22-0574

Citation: 18 N.W.3d 774 (Minn. 2025)

Court: Supreme Court of Minnesota

Date: April 2, 2025

Introduction

In this original-jurisdiction attorney discipline proceeding, the Minnesota Supreme Court disbarred attorney Kristi D. McNeilly following her felony conviction for theft by swindle. The central question before the court was the appropriate sanction, given that the criminal conviction was conclusive evidence of the underlying conduct for disciplinary purposes under Rule 19(a) of the Rules on Lawyers Professional Responsibility (RLPR).

The opinion squarely holds: absent any mitigating factors, disbarment is the appropriate discipline for an attorney convicted of felony theft by swindle. The court’s decision reinforces long-standing Minnesota doctrine that felony misconduct within the practice of law and misappropriation of client funds warrant the profession’s most severe sanction unless compelling mitigation is proven.

Parties:

• Petitioner: Office of Lawyers Professional Responsibility (Director Susan M. Humiston; Deputy Director Binh T. Tuong)
• Respondent: Kristi D. McNeilly (pro se)

Summary of the Opinion

• The court adopts the referee’s unchallenged findings and conclusions because McNeilly did not file a brief; the only live issue was sanction.
• Facts found: McNeilly stole $15,000 from a client (M.A.W.) by falsely claiming the funds would be used to bribe law enforcement/prosecutors to avoid charges; she directed the client to label the payment “legal fees,” deposited the funds into her business (not trust) account, and used them for personal expenses.
• Criminal posture: A jury convicted McNeilly of theft by swindle in 2021; the court of appeals affirmed; the Minnesota Supreme Court affirmed in State v. McNeilly, 6 N.W.3d 161 (Minn. 2024).
• Disciplinary law: The conviction is conclusive evidence of the conduct under RLPR 19(a), establishing a violation of Minn. R. Prof. Conduct 8.4(b) (commission of a criminal act reflecting adversely on honesty, trustworthiness, or fitness).
• The referee found no mitigating factors and identified aggravation (lack of remorse, victim was a client, harm to public confidence, prior discipline). The supreme court concluded it need not reach aggravators because disbarment is warranted absent mitigation.
• Sanction: Disbarment, effective immediately; McNeilly must comply with RLPR 26 (notice to clients, opposing counsel, tribunals) and pay $900 costs under RLPR 24(a).
• Doctrinal holding (syllabus rule): Absent mitigating factors, disbarment is the appropriate discipline for an attorney convicted of felony theft by swindle.

Analysis

Procedural Posture and Framework

The Director petitioned under RLPR 19(a) after McNeilly’s criminal conviction became final. A referee was appointed. The parties executed a stipulation of facts, and McNeilly waived an evidentiary hearing and other litigation rights. The referee found a violation of Rule 8.4(b) and recommended disbarment. Because McNeilly filed no brief in the supreme court, the referee’s findings and conclusions were treated as conclusive (see In re Udeani, 945 N.W.2d 389, 396 (Minn. 2020)). The supreme court retained ultimate responsibility for sanction, giving “great weight” to the referee’s recommendation while independently applying Minnesota’s sanction factors (In re Rebeau, 787 N.W.2d 168, 173 (Minn. 2010)).

The court applied its established four-factor test to determine sanction: (1) nature of the misconduct; (2) cumulative weight of the violations; (3) harm to the public; and (4) harm to the legal profession (In re Kleyman, 960 N.W.2d 566, 572 (Minn. 2021)). It also considered the presence or absence of aggravating and mitigating circumstances (In re Capistrant, 905 N.W.2d 617, 620 (Minn. 2018)).

Precedents Cited and How They Shape the Decision

• In re Andrade, 736 N.W.2d 603, 605 (Minn. 2007): Establishes that disbarment is the presumptive discipline for a felony conviction, particularly when the criminal conduct occurs within the practice of law. The court relies on Andrade to frame the default rule for felonies intertwined with law practice—squarely applicable here because McNeilly’s victim was her client, and the misconduct occurred in the attorney-client context.
• In re Strunk, 945 N.W.2d 379, 387 (Minn. 2020): Clarifies that Minnesota does not automatically disbar for any felony; the court considers the circumstances, including the nature of the crime, relation to law practice, and impact on public confidence. The court invokes Strunk to confirm it is taking a fact-intensive approach, even as it reaches a categorical result for this offense absent mitigation.
• In re Ginsberg, 690 N.W.2d 539, 555–56 (Minn. 2004), and In re Daffer, 344 N.W.2d 382, 385 (Minn. 1984): Examples where lesser sanctions were ordered because crimes were not directly related to law practice and significant mitigation existed. These cases stand in contrast to McNeilly, where the conduct was directly related to law practice and mitigation was absent.
• In re Brooks, 696 N.W.2d 84, 88 (Minn. 2005): Defines misappropriation as failing to keep client funds in trust and using them for purposes other than those specified by the client. The court uses Brooks to characterize McNeilly’s handling of the $15,000 as misappropriation.
• In re Rhodes, 740 N.W.2d 574, 579–80 (Minn. 2007), and In re Lee, 3 N.W.3d 278, 284 (Minn. 2024): Reiterate that misappropriation of client funds warrants disbarment absent mitigating factors. These cases are central to the court’s conclusion that disbarment is the appropriate sanction here.
• In re Brost, 850 N.W.2d 699, 705 (Minn. 2014): Notes that attorneys not disbarred for theft, fraud, or embezzlement have offered substantial mitigating factors. The court cites Brost to underscore the dispositive role of mitigation in avoiding disbarment for financial crimes.
• In re Igbanugo, 989 N.W.2d 310, 329–30 (Minn. 2023), and In re Majors, 973 N.W.2d 621, 629 (Minn. 2022): Discuss cumulative weight, distinguishing isolated incidents from patterns over time. The court references this line to explain why the absence of an extended pattern does not overcome the severity of felony misappropriation.
• In re Coleman, 793 N.W.2d 296, 308 (Minn. 2011): Guides the analysis of harm to the public by considering the number and extent of injuries. Here, the court emphasizes the $15,000 loss to the client and broader ripple effects.
• In re Bradley, 7 N.W.3d 604, 609 (Minn. 2024): Recognizes harm to non-clients as relevant; the court notes the Minnetonka detective’s administrative leave as a non-client harm.
• In re Rooney, 709 N.W.2d 263, 270 (Minn. 2006): Misappropriation undermines trust in the profession. The court cites Rooney to mark the reputational harm from converting client funds.
• In re Rebeau, 787 N.W.2d 168, 173 (Minn. 2010): Defines the protective—not punitive—purposes of discipline. This frames why disbarment is necessary to protect the public and courts.
• In re Kleyman, 960 N.W.2d 566, 572 (Minn. 2021) and In re Capistrant, 905 N.W.2d 617, 620 (Minn. 2018): Provide the four-factor sanction framework and the importance of consistency with comparable cases.
• In re Udeani, 945 N.W.2d 389, 396 (Minn. 2020), and RLPR 14(e): Address the conclusive effect of a referee’s findings in the absence of a brief or transcript, bounding the issues for the court’s review.

Legal Reasoning

The court’s reasoning proceeds from well-established disciplinary principles and culminates in a tailored bright-line rule for felony theft by swindle.

1. Nature of the misconduct:
   • Felony conviction for theft by swindle—conduct directly within law practice and victimizing a client—bears heavily against the respondent. Under Andrade, disbarment is presumptively appropriate for felonies in the practice of law.
   • Misappropriation of client funds occurred when McNeilly took $15,000, placed it into a business (not trust) account, and used it for personal expenses. Under Rhodes and Lee, disbarment is the default absent mitigation.
   • The deception went beyond ordinary misappropriation: the false claim of a “back room” arrangement and an ability to bribe authorities poses systemic harm by implying official corruption accessible through a lawyer’s “connections.”
2. Cumulative weight:
   • The conduct spanned about a week and concerns a single client. While not an extended pattern, the seriousness of felony theft/misappropriation offsets the limited temporal scope (Igbanugo; Majors).
3. Harm to the public:
   • Direct financial harm to one client ($15,000), coupled with collateral harm to a non-client (a police detective placed on leave), meets the Coleman and Bradley considerations.
4. Harm to the profession:
   • Misappropriation is a paradigmatic breach of trust (Rooney). The asserted bribery scheme further erodes public confidence in the legal system.
5. Aggravation and mitigation:
   • The referee found multiple aggravators: lack of remorse; victim was a client; reputational harm from implying influence over police/prosecutors; prior discipline (public reprimand with probation in 2015; admonition in 2016).
   • No mitigating factors were proven. Although McNeilly signaled an intent to make a mitigation record, she waived a hearing, submitted no evidence, and filed no brief. As a result, the court concluded it need not consider aggravation because felony plus misappropriation, in the absence of mitigation, compels disbarment (Andrade; In re Perez, 688 N.W.2d 562, 567 (Minn. 2004); Lee).

What This Decision Adds: A Clear Rule for Theft by Swindle

Minnesota already treated felony misconduct within law practice and misappropriation as presumptively disbarable absent mitigation. This opinion crystallizes a specific, syllabus-level rule: for an attorney convicted of felony theft by swindle, disbarment is the appropriate discipline absent mitigating factors. While the court reaffirms that not all felonies automatically yield disbarment (Strunk), it marks theft by swindle as categorically disbarable, unless significant mitigation is proven.

The court’s approach also underscores procedural realities: when a respondent does not brief or build a mitigation record, the path to disbarment for felony theft by swindle is effectively streamlined.

Impact and Forward-Looking Considerations

• Attorney discipline practice:
  • For felony theft by swindle, the default sanction is disbarment; the burden shifts to the respondent to marshal compelling mitigation. Absent such proof, disbarment will follow.
  • Referees and the OLPR can treat this case as strong authority for recommending disbarment where theft by swindle is established, especially when funds were misused and the crime arose from law practice.
• Mitigation strategy:
  • Respondents facing financial-crime convictions must develop robust mitigation (e.g., documented treatment for underlying issues, restitution, cooperation, credible remorse, extraordinary community service). Mere assertions without evidentiary support will not suffice.
  • Waiving evidentiary hearings and failing to brief will leave the referee’s findings conclusive and foreclose meaningful appellate review on mitigation.
• Trust accounting and client funds:
  • The decision reinforces that handling client funds outside a trust account and using them for personal expenses is misappropriation, a disbarment-level offense in Minnesota absent mitigation.
  • Labeling funds “legal fees” on a memo line does not cure the ethical obligation to treat unearned or client-directed funds as trust property under Rule 1.15.
• Systemic integrity:
  • Assertions by a lawyer of “back room” influence or pay-to-play with law enforcement or prosecutors are uniquely corrosive to public confidence. The court’s sanction choice stresses zero tolerance for such claims, whether or not bribery actually occurs.
• Consistency and predictability:
  • This opinion fosters uniformity by aligning theft-by-swindle cases with the broader misappropriation and felony-within-practice line, reducing sanction variance in comparable future cases.

Complex Concepts Simplified

• Theft by swindle (Minn. Stat. § 609.52): A felony involving obtaining property through trickery or deception. Here, the lawyer deceived a client into paying money supposedly for a bribe to avoid charges.
• Misappropriation: Using client funds for purposes other than those directed by the client, or failing to keep those funds in a trust account until earned or properly disbursed (Minn. R. Prof. Conduct 1.15). Depositing client funds into a business account and paying personal bills is misappropriation.
• Rule 8.4(b) and (c):
  • 8.4(b): It is misconduct to commit a criminal act reflecting adversely on a lawyer’s honesty, trustworthiness, or fitness.
  • 8.4(c): It is misconduct to engage in dishonesty, fraud, deceit, or misrepresentation. The petition alleged both, but the referee and court resolved the case on 8.4(b) given the conclusive effect of the criminal conviction.
• RLPR 19(a): In disciplinary proceedings, a lawyer’s criminal conviction is conclusive evidence that the lawyer committed the underlying conduct, streamlining proof for misconduct charges.
• Referee: A judicial officer appointed to make findings, legal conclusions, and sanction recommendations in attorney discipline cases. The supreme court independently determines the final sanction.
• Mitigating vs. aggravating factors:
  • Mitigating factors can reduce the severity of discipline (e.g., restitution, genuine remorse, mental health or chemical dependency treatment with causal linkage, extraordinary cooperation).
  • Aggravating factors can increase sanction severity (e.g., prior discipline, lack of remorse, client victimization, systemic harm). In this case, the referee found aggravation, but the court did not need to reach it because the absence of mitigation already required disbarment.
• Trust account vs. business account: Client funds generally must be deposited in an identifiable interest-bearing trust account until earned or properly disbursed. Business accounts are for the lawyer’s operating funds and should not hold client money.
• Practical purpose of discipline: Sanctions protect the public, courts, and profession, and deter future misconduct; they are not intended to punish (Rebeau).

Conclusion

In re McNeilly establishes a clear and forceful rule: when an attorney is convicted of felony theft by swindle, disbarment is the appropriate sanction absent mitigating factors. Rooted in longstanding Minnesota principles regarding felonies within law practice and misappropriation, the opinion emphasizes public protection, professional integrity, and deterrence. It also delivers practical guidance—mitigation must be timely developed, factually supported, and properly presented. Where, as here, no mitigation is shown, and the misconduct combines felony deception with conversion of client funds and assertions of illicit influence, the only sanction consistent with Minnesota discipline jurisprudence is disbarment.