Friday, September 14, 2012

A Classic Case Of Misappropriation

In a case that should be required reading for any attorney that handles entrusted funds, the New Jersey Supreme Court adopted the recommendation of the Disciplinary Review Board and disbarred an attorney for knowing misappropriation of client funds.

The DRB report (which precedes the order of disbarment) describes a course of conduct that involves about every type of mishandling funds one can imagine. The attorney robbed Peter to pay Paul (we call this "lapping" in disciplinary parlance) in several instances, deposited fees into his trust account to avoid the IRS and made claims of authority to use the money he had taken that barely pass the discipline laugh test.

In one instance, he claimed that he could use a deposit he held for a real estate sale because it was "nonrefundable." He took the funds that he was obligated by contract to hold and used it for, among other things, payment of his son's tuition at Villanova University.

One notable aspect of the case is that the rejection of the attorney's claim of sloppy bookkeeping as an excuse/explanation. The claim was defeated by the fact that he was a careful keeper of records who would zero out his escrow account as he kept afloat with other people's money.

His mitgation --of the usual sort --was that he was depressed and drinking because his father had died and his wife was divorcing him.

The DRB rejected the mitigation: "Although Respondent's medical condition is compelling, it is largely anecdotal."

The oldest bar discipline joke: What do you call it when an attorney uses entrusted funds because he's in a pickle? A Vlasic case of misappropriation. (Mike Frisch)

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