Free Statement - District Court of Arizona - Arizona

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RICHARD J. MCDANIEL, P.C. ATTORNEY AT LAW 11811 N. TATUM BLVD., SUITE 1051 PHOENIX, ARIZONA 85028 Telephone (602) 953-8721 FAX (602) 953-8731 Richard J. McDaniel #013329 Attorney for Defendants Woodcock IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Case No. CIV 04-78-FJM SHIMKO & PISCITELLI, Plaintiff, ' v. DEFENDANT WOODCOCKS' STATEMENT OF FACTS IN SUPPORT OF MOTION TO DISMISS CLAIMS AND MOTION FOR SUMMARY JUDGMENT

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PAUL and BOBBI WOODCOCK, et. , al. Defendants'.

Defendant Paul and Bobbi Woodcock state as facts the following: 1. In December 2000 some of the individual defendants asked Shimko, who they knew ! from a previous representation, to come to Phoenix to review a new ',comprehensive outpatient rehabilitation facility (CORF) consulting business they were starting. (Ex. A; Ex. C S&P invoice for December

2000, [Ex. 2 to Shimko depo.]) 2. Shimko & Piscitelli billed CORE almost $8,000 in fees for the visit, but never issued a report or opinion on the

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business.

(Ex. A; Ex. C)

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3. Shimko & Piscitelli never sent a letter to their clients explaining that they had little knowledge of business formation, Medicare, and regulatory law and were thus not able to render an opinion. Shimko and Piscitelli did nothing. They did not call their clients. Shimko did not speak to any of the clients until almost one year later, when they called him. (Ex. A; Ex. C) 4. Shimko admitted at his deposition that he and his partner, Frank Piscitelli, knew almost nothing about Medicare or other laws and regulations concerning comprehensive outpatient rehab facilities. (Deposition of Timothy Shimko 3/24/08, relevant excerpts attached as Ex. A. [when transcript available]) 5. Shimko further admitted that he and Piscitelli had almost no experience representing defendants, particularly multiple defendants, at the time in November 2001, when they undertook the CORF related representations, including representing limited partners Woodcock, Ross, Goldfarb, and Guenther; employees and officers, including Ritchie and Brill; and CORP Management Services, L.P., and CORE Licensing Services, L.P. 6. Almost all of Shimko's previous work had been plaintiffs' contingency fee cases. (Ex. A)

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7. Shimko testified that he never explained to his clients, as the dangers and risks involved in his representing multiple clients. (Ex. A) 8. Shimko stated that he did not even perceive the potential conflicts inherent in simultaneously representing the business entities, officers and employees, and limited and general partners. (Ex. A)

9. Since Shimko did not inform his clients of the conflict, he never received Paul and Bobbi Woodcock's consent to waive them. (Ex. A; Affidavit of Paul Woodcock 3/28/08,

attached as Ex. B, T3, 7) 10. Shimko also admitted at his deposition that, although he had significant business dealings with the CORF entities (lending $250,000 and taking an ownership interest in another business), he did not disclose the details of the transactions to the Woodcocks; did not advise them to seek review by outside counsel; and did not get the Woodcocks' consent. (Ex. A) 11. Shimko testified that he had advised Ross, Goldfarb, Woodcock and Guenther to discontinue participating in seminars promoting the CORE consulting services. (Ex. A) 12. Shimko said that Woodcock followed his advice; however, not everyone did. Shimko testified that he said that Goldfarb's continuing activities would be the death of them all. (Ex. A)

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13. However, Shimko never advised the Woodcocks of the risks and potential conflict involved in his representation of multiple clients with different levels of involvement and potential culpability. (Ex. B, T3-7)

14. Shimko testified that he had dinner with the lead attorney prosecuting the underlying fraud lawsuits against the CORE entities and individuals. The attorney was offering to drop lawsuits against Brill and Richie, CORE employees and officers, in return for their testimony. (Ex. A)

15. Shimko testified that he could not make a deal offering the testimony of Woodcock, Ross, Guenther, or Goldfarb because since he represented them all, "they would all sink or swim together." (Ex. A) 16. Shimko never explained to the individual defendants that he could not make a settlement on behalf of one of them, for example Woodcock, by offering Woodcock's testimony against the others because doing so would conflict with his duty of loyalty to his other clients. (Ex. B, T5) 17. Shimko asked Woodcock and the other individual defendants to pledge their homes as collateral for his fees without explaining to his clients this would deny them the homestead protection or warning them to seek advice of independent counsel. (Ex. A; Ex. B, T14)

18. Shimko admitted that he charged excessive fees for his unlicensed law clerk, David Welling, who should have been

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billed at $125 per hour instead of $350; however, Shimko never corrected his bill to remove the gross overcharge. (Ex. A; Ex. D) 19. Shimko has already received approximately $130,000 or more in legal fees in this matter. The exact amount is unclear because Shimko did not keep accounts received ledgers or other standard bookkeeping records. (Ex. A)

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20. Shimko testified that he lent approximately $200,000 to $250,000 to the CORF business entities. (Ex. A)

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21. Shimko testified that he did not even inform Paul Woodcock that he had made the loan until after the fact. Shimko did not prepare a promissory note or disclose details of the transaction to the Woodcocks. Shimko did not advise Woodcock to have independent counsel review the loan transaction. (Ex. A; Ex. B T8-10)

22. Shimko never explained to any of his clients how he would allocate monies he received from CORE between his legal bills and loan repayment. (Ex. A; Ex. B, T10)

23. On August 19, 2002, Shimko entered into another business transaction with some of his clients, acquiring an ownership interest in a tissue bank business, Aztec Medical Group Partners, LLC, with Guenther, Woodcock, Ross, Goldfarb at the same time that he was representing them in the CORE litigations. Shimko agreed to provide legal services to the business in exchange for an

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interest. (Ex. A; Ex. B, T11-13; Ex. E, Operating Agreement Aztec Medical and Table of Membership Interests, which were Ex. 9 to Shimko's 3/24/08 deposition) 24. When it became apparent that the CORE entities were headed toward insolvency, Shimko demanded that Paul and Bobbi Woodcock and the other individual defendants pledge their homes as collateral. Shimko did not warn his clients that if they knowingly and willingly pledged their homes they would be potentially waiving their homestead exemption. (Ex. A; Ex. B, 9[14) 25. Shimko did not explain to the Woodcocks the potential risks and conflicts of his business transactions with the CORE entities and individuals. He never obtained their consent to waive the conflicts. (Ex. B, 18-13)

26. Shimko testified that he has been paid approximately $130,000 in legal fees and is owed approximately $365,000 more, for total charges of $495,000. (Ex. A)

27. Shimko acknowledges, though he has never corrected his bills, that David Welling, an unlicensed law clerk at the time, should have been billed at $125 per hour instead of $350 Shimko charged. (Ex. A)

28. Welling billed a total of approximately 310 hours. (Ex. D, Shimko & Piscitelli billing records, which were Ex. 1 to Shimko 3/24/08 deposition.) 29. Piscitelli billed more than $100,000 in charges. (Ex. D)

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30. Shimko knew that the primary concern of the individual defendants was their exposure to personal judgment. Nevertheless, he failed to inquire about their assets and how they were held or to determine whether there might be

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conflicts of interests among the individual defendants. (Ex. A; Ex. B, T16) Dated this 31st day of March 2008. RICHARD J. MCDANIEL ATTORNEY AT LAW By /s/ Rich McDaniel Richard J. McDaniel 11811 N. Tatum, #1051 Phoenix, AZ 85028 Attorney for Defendants Woodcock Original electronically filed and copy sent electronically this 31st day of March 2008 to: David Welling Timothy Shimko & Associates 2010 Huntington Building 925 Euclid Avenue Cleveland, Ohio 44115 Roger Cohen JABURG & WILK 3200 N. Central, 20 th Floor Phoenix, AZ 85012-2440 Attorney for Ross Copy mailed to:

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David and Rhona Goldfarb 11437 N. 53 rd Place Scottsdale, AZ 85254 Pro Per /s/ Rich McDaniel

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