Friday, March 27, 2009

The Wrong Spot

The Vermont Professional Conduct Board recently decided a bar discipline case involving the following facts:

Respondent is a sole practitioner with one non-lawyer employee.  His practice focuses on real estate transactions and personal injury work. Respondent was admitted to the Vermont Bar in 1987. Respondent maintains a pooled interest bearing client trust account which has been at TD Banknorth for all times relevant to this case.

            In February of 2006, Respondent conducted a closing for clients who were purchasing property in Barre.  The clients had been renting the property under a “rent-to-own” plan in which a percentage of the rent they had paid was to be applied as a down payment towards the purchase.  In anticipation of the closing, Respondent used a software program to prepare a HUD settlement statement.  In doing so, Respondent mistakenly entered his clients’ rent payments in the wrong spot.  As a result, the final HUD statement credited the seller with approximately $7300.00 more that he should have received.  No one, not Respondent, seller’s attorney, the realtor nor the parties noticed the mistake.  During the closing, Respondent issued several checks drawn on his trust account.  One of the checks was payable to the seller, and due to the mistake on the HUD statement, was for an amount that exceeded what the seller should have received by approximately $7300.00.  Nearly two years later, Respondent’s bank notified him that his trust account was overdrawn.  On receipt of the notice, Respondent reviewed his trust account records back to the year 2000 and discovered that in several closings he had made the same error that he had made in February of 2006: failing to enter the buyer’s down payment in the proper spot on the HUD settlement statement.  Respondent determined that, over time, his errors caused him to disburse from his trust account approximately $11,000.00 more than should have been disbursed.  Respondent immediately took out a loan and deposited the money into his trust account to ensure that his clients’ interests were protected.

The board rejected a proposed public reprimand and directed that the attorney be admonished. As a result, the identity of the lawyer remains confidential. (Mike Frisch)



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