In re Murphy

Opinion

THE COURT. This is a proceeding to review a recommendation of the Disciplinary Board of the State Bar (board) that petitioner be suspended from the practice of law for three years on conditions of probation, including actual suspension for one year. Petitioner was admitted to practice in December 1953 and has no prior record of discipline.

On February 7, 1972, petitioner was convicted, under section 25540 of the Corporations Code, of five counts charging him with offering and selling securities in violation of the conditions of a stock permit issued by the Commissioner of Corporations. Thereafter this court referred the matter to the State Bar for hearing and recommendation on the question whether the facts and circumstances surrounding petitioner’s commission of the crime of which he was convicted involved moral turpitude and, if so, the nature and extent of discipline to be imposed. The board determined that moral turpitude was involved and recommended suspension as hereinabove- indicated.1 Petitioner’s conviction was affirmed in People v. Murphy, 35 Cal.App.3d 905 [111 Cal.Rptr. 295].

[536]The record shows that petitioner was employed in September 1968 by a group of doctors to form a corporation to enter the medical malpractice insurance field. He incorporated California Caduceus Company, Inc. (CCC) and acted as its attorney, secretary, and a director from November 1968 to February 28, 1969. On the latter date, during a proxy fight, petitioner (who had obtained proxies for about 72 percent of the snares of CCC) was elected chairman of the board of directors. He served as such until December 29, 1969.

In November 1968 the directors decided to purchase an 88½ percent interest in Casualty Insurance Company of California (Casualty) for $946,000, payable in installments over a period of approximately 13½ months.2 To raise the required capital, it was contemplated that stock in CCC, of the par value of $1,000 per share, would be sold.

On November 6, 1968, the Commissioner of Corporations granted a permit to CCC to sell a total of 459 shares of its stock to 42 named individuals. Effective January 2, 1969, the commissioner issued an amended permit authorizing the sale of 2,541 additional shares of CCC stock to medical doctors, dentists, and pharmacists having a net worth of $50,000 exclusive of home, car, and furnishings and to attorneys and requiring that the proceeds be deposited in a depositary at the Newport National Bank at Newport Beach. Although he knew of the limitations of the permit, petitioner participated in the sale of CCC stock to persons other than those belonging to the class designated in the amended permit.3 Furthermore, because there was real danger that the installment deadlines would not be met if the proceeds from the sale of the stock were deposited in the depositary, petitioner agreed that the depositary would not be used. In addition, although under the terms of the permit the shares could be issued only for cash, petitioner twice had 25 shares