The Minnesota Supreme Court has disbarred an attorney for engaging in a self-dealing scheme that funneled funds from a client’s trust into five start-up businesses that never made any money.
Barry L. Blomquist, of Eden Prairie, was disbarred by order of the court on Wednesday. He was admitted to the Minnesota bar in October 1980, but was already involuntarily restricted by previous court order, for non-payment of fees.
According to the court’s per curiam order, Blomquist n 2003 was assigned trustee over the estate of a client identified as “R.N.,” with whom he had “developed a close personal relationship.”
When R.N. died later that year, she left an estate valued at about $2 million. R.N.’s daughter, identified as “D.H.,” and R.N.’s two sons were beneficiaries. The estate was divided into three trusts.
Under terms of the will and trust, D.H. was entitled to collect portions of her trust at intervals, one-third of which was to be paid in 2006. But when she tried to collect that year, she got only $100,000—less than one-third of the principle to which she was entitled.
Her next scheduled distribution was late, and the sum was less than D.H. thought it should be. After seeking an accounting of the funds, in 2011 she finally received a trustee summary report.
“This report indicated Blomquist had invested significant sums of money from the trust principal in five recently created, startup, green-energy companies, which were all partially owned by Blomquist,” the court’s order says.
Throughout 2009 and 2010, unbeknownst to D.H., the order says, Blomquist signed seven promissory notes on behalf of his startups to obtain loans from R.N.’s trust. The notes totaled $799,000.
The company never made any payments back to the trust, the order says. Eventually all of the companies dissolved without generating any revenue. By that time, D.H.’s trust has dwindled to $20,000, the order said.
In 2011, D.H. filed a petition in Hennepin County Probate Court. The court issued summary judgment in March 2012, finding that he had breached his fiduciary duties and engaged in self-dealing.
That court found that D.H. would have been entitled to $400,000 had Blomquist not breached his duties. It ordered him to pay that amount to her. The lawyer did not appeal the ruling.
In the end, according to the per curiam order, Blomquist paid D.H. just $100,000 of the $400,000 judgment against him—and she got that much only because her attorney located some of his assets and sold them at auction.
D.H. filed a complaint with the Office of Lawyer’s Professional Responsibility in 2018. Over the following year, he failed to respond to the director’s requests for information and provided evasive answers to her queries, according to the Supreme Court order.
On June 14, Director Susan Humiston filed charges of unprofessional conduct against him. That September, she petitioned for discipline and the Supreme Court appointed a referee.
The referee concluded that Blomquist violated the state’s Rules Professional Conduct by “willingly and knowingly” failing to comply with three different court orders.
The referee also found that Blomquist misappropriated or used trust assets in bad faith, engaged in dishonest conduct by converting them for personal use while failing to account for the funds, and that he failed to cooperate with the director’s investigation.
The referee recommended disbarment and Humiston’s office agreed.
Blomquist tried to resign from the bar before the court decided the case, but the Supreme Court refused to allow it. In the end, the justices found that his conduct caused injury to D.H., the public and the legal profession meriting severe discipline.
“His behavior was selfish, he acknowledges no wrongdoing and he was previously disciplined for dishonest conduct,” their order says. “Based on this behavior and our precedent, we conclude that the appropriate discipline is disbarment.”
Blomquist’s prior disciplinary admonition occurred in 2012 for falsely notarizing a mortgage deed, conveying property from a seller to an entity that he co-owned.
The disbarment order was effective from the date of the opinion, May 5. Associate Justice Margaret Chutich took no part in the decision.
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