Tuesday, September 28, 2010
The New York Appellate Division for the First Judicial Department imposed a public censure on an attorney for a series of improper business transactions with his client. The facts:
The undisputed facts as found by the Referee and the Hearing Panel may be briefly summarized. In 1993, respondent formed the IAA [Independent Artists of America] on behalf of the dancers of the American Ballet Theatre, whom he had represented since 1979. He continued as counsel to the IAA based on a monthly retainer fee, which was $2,500 until 2005, when it was increased to $3,500. Respondent was given possession of the IAA's checkbook for its non-interest-bearing business checking account, on which he was a signatory.
In July 1997, respondent, who was facing personal financial difficulties, asked the IAA's vice president, Lori Wekselblatt, for permission to borrow funds from the union's checking account. Shortly thereafter, Ms. Wekselblatt informed respondent by telephone that he could borrow funds from the checking account. In these conversations, respondent did not specify the amount or terms of the anticipated loan, nor did he advise Ms. Wekselblatt or any IAA officer that his interest differed from that of the union, that he could not give the union advice concerning the loan due to the conflict of interest, or that they should consult with independent counsel concerning the transaction. Respondent also failed to prepare any writing to document the loan or its terms.
From July 1997 until April 2005, respondent drew 47 checks payable to himself on the IAA's business checking account, withdrawing a total of $368,570.61. Although the loan agreement was not reduced to writing, the loans were disclosed in the IAA's annual tax returns and Labor Department filings. Those documents stated that the respondent would repay the loans by foregoing his monthly retainer, which he last drew in September 1998.
In November 2006, after another attorney alerted him to the requirements of DR 5-104(A), respondent sent Ms. Wekselblatt a loan agreement and promissory note for her signature, which stated that he then owed the IAA $145,348.53, together with five percent annual compound interest on unpaid balances. Ms. Wekselblatt did not sign the documents, telling respondent that she did not agree that he owed interest. As at the inception of the loans, respondent failed in proffering the after-the-fact loan documentation (which also included a payment schedule and a confession of judgment) to advise the IAA that a conflict of interest existed and that the union should consult independent counsel.
In May 2007 (about two years after the last loan was taken), the IAA formally discharged respondent as its counsel. At the request of the Hearing Panel in these proceedings, respondent executed a loan agreement and promissory note, dated May 11, 2009, committing himself to repay the principal amount of $67,500, with interest thereon of $47,277.53. Although the IAA has declined to sign this document, the Hearing Panel deemed it to constitute "an undertaking by [r]espondent to repay the amounts due according to the schedule provided and subject to the penalties offered.
The case is linked here. (Mike Frisch)