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Sawyer bar hearing gives both sides chance to bristle Final arguments slated Thursday By ALBERTO ENRIQUEZ The Oregon State Bar disciplinary hearing against Medford attorney Sandra Sawyer for unethical behavior is headed for a third day with final arguments scheduled for Thursday afternoon. Tuesday's testimony in the Jackson County Courthouse saw occasionally testy exchanges between the defense and prosecuting attorneys and strong statements from Sawyer, testifying on her own behalf, and Medford broker Bill Smith. Sawyer is accused by the bar of acting unethically when she suggested in a 1996 letter to Janet Hill, a client of former stockbroker Lew Aytes, that Hill hold Aytes harmless for his part in an investment scheme. Trial panels may impose a range of sanctions against attorneys, from admonitions to suspensions to disbarment. Sawyer defended her legal representation of Aytes and others embroiled in the dispute about alleged improprieties while at the Smith Barney brokerage house: Smith Barney's legal claims against Aytes were a spiteful "vendetta" against a successful broker, who left the firm and brought in a powerful competitor, Merrill Lynch, she said. And Aytes' allegedly illegal use of client funds to buy securities at a lower price, then resell them at a profit, was in keeping with Smith Barney practices, and approved by management, she said. Bill Smith, Medford manager of Smith Barney, bristled at any suggestion that he approved any impropriety by Aytes. The firm discovered the transactions after Aytes' departure and has since paid out thousands of dollars in compensating his former clients. Smith described a complicated scheme whereby Aytes and another broker went to great lengths to convert clients' money to their own accounts -- swapping brokerage account checks for customer's cashier's checks -- and thus conceal their actions from management. "Why did he not put these checks in his own name?" Smith said, his voice rising. "He knew damn well those checks would not be approved. That was conversion of clients' funds to a broker's own account, and you don't need to pass a Series 7 (broker's) exam to know that." Smith's testimony dovetailed with earlier testimony by Catherine May Jones, formerly Aytes' secretary at Smith Barney. Jones said she was unaware of any attempts by Aytes to "park" money outside the firm, and that the paperwork she submitted to Smith's would not have differed from other trades. However, bar counsel Jeffrey Kilmer said the procedure that Jones followed under Aytes' direction eliminated a key Smith Barney checkpoint -- outside trades were not approved by the firm's head office in New York. The trial panel, composed of of two attorneys and one lay member, did not hear from Aytes. He declined to testify, citing the threat of possible enforcement action against him by the Internal Revenue Service. They did, however, hear from Sawyer's husband, retired Judge Loren Sawyer. He said he and his wife were clients and good friends of Aytes well before she undertook his defense. Sawyer also asserted his wife's integrity, but said that he was troubled when he saw the 1996 letter she had written about the dispute. "I told her that really wasn't very smart," he said. Sandra Sawyer denied that her letter urged the woman to defraud Smith Barney. The letter, in part, reads: "I have been thinking about the best way for you to receive the money Smith Barney is offering you and still protect Lew. I am enclosing a Release of Claims and Covenant Not to Sue. If you will execute this Release to Lew and return it to me, then go to Smith Barney and execute the document they ask you to sign and accept their check, you will have the money, and they will have a release of your claims against them, but nothing against Lew, for you will already have given him a release. They, however, will not know that they have no claim against Lew." Following is the letter sent from attorney Sandra Sawyer to Janet Hill, regarding a refund due Hill from the Smith Barney brokerage firm. Hill, concerned about the letter, told acquaintances about it who told her to seek a lawyer. She did, and that lawyer filed a complaint with the Oregon State Bar against Sawyer. A bar panel is now holding disciplinary proceedings against Sawyer. March 27, 1996 Re: Smith Barney/Aytes Dear Ms. Hill I have looked over the papers which you forwarded to me. It appears that Smith Barney is deliberately misleading you. You can see from the papers which I forwarded to you that your units were purchased in two groups, the first for 50 units, the second for 13 units. Together, these totaled $25,884.81. You then received a rebate for all 63 of these units. The rebate, likewise, came in two sets, one for $450 for the 50 units, and the other for $117 for the 13 units. I believe the rest of Lew Aytes' letter to me is self-explanatory. Enclosed is a copy of a form similar to which Smith Barney will ask you to sign before they give you a check. Please note the area marked in yellow. This is what they are really after. It releases them from all liability, and gives them any claims which they believe you might have against Lew Aytes. This document will support their pending lawsuit against Lew and make it appear that Lew did something wrong for which they had to pay. The facts don't support what they say, but the appearance is bad. I have been thinking about the best way for you to receive the money Smith Barney is offering you and still protect Lew. I am enclosing a Release of Claims and Covenant Not to Sue. If you will execute this Release to Lew and return it to me, then go to Smith Barney and execute the document they ask you to sign and accept their check, you will have the money, and they will have a release of your claims against them, but nothing against Lew, for you will already have given him a release. They, however, will not know that they have no claim against Lew. By using this procedure, it is not necessary to modify their document at all. Please study these documents and call me if you have any questions. If I do not hear from you, I will expect the Release by mail. Please let me know when you get your check. Sincerely, Sandra Sawyer Mail Tribune Copyright � The Mail Tribune 1999, Medford, Oregon USA