Wednesday, May 15, 2013

Special Needs

The New York Appellate Division for the First Judicial Department has imposed a public censure of an attorney who had mishandled his escrow account. 

The facts:

In 1981, approximately eight years after graduating from law school, respondent started his own firm, a solo practice focusing on education law. Specifically, respondent, whose firm now employs six attorneys and a 20-person support staff, has specialized in cases where the parents of children with special educational needs seek tuition and/or tuition reimbursement from government entities such as the New York City Department of Education. In June 2008, after the Lawyer's Fund for Client Protection informed the Committee that checks written from respondent's IOLA account, established in 2001, had been dishonored, the Committee commenced a sua sponte investigation.

The Committee's investigation included an audit of respondent's IOLA account for a 10-month month period beginning on September 1, 2007 and ending on June 30, 2008. During the audit period respondent did not keep any records evincing deposits and/or disbursements from his trust account. In fact, respondent admitted that since he opened his law firm in 1981, his accounting system consisted of nothing more than daily calls to his bank to verify the balance in his IOLA account and individual sheets of paper documenting the amounts he received and disbursed to individual clients. The Committee further discovered that during the audit period, respondent routinely disbursed funds from his IOLA account to both himself and his clients in amounts which exceeded that which he and his IOLA account in this manner caused multiple shortfalls in his account, the largest of which was $339,281.49 on April 10, 2008. In order to cover these shortfalls, the Committee learned that during the audit period, respondent would deposit his own personal funds into his IOLA account thereby commingling his personal funds with those within his IOLA account. Lastly, during the audit period, the Committee discovered that respondent would routinely use his IOLA account as a business/personal account, routinely making disbursements therefrom to cover his personal/business expenses. In addition to the foregoing, during the course of its investigation, the Committee learned that since 2001 respondent routinely advanced financial assistance to his clients by providing
them with funds to pay their children's tuition. The funds used for these advances came from respondent's IOLA account, which funds represented legal fees already earned by respondent but which were improperly left within the account.

At the hearing, respondent reiterated the specialized nature of his practice, noting that obtaining the necessary funding from the government to address the special needs of the children whose parents he represents is both complex and frustrating, requiring his advocacy. Respondent testified that his firm handles approximately 1,200 cases per year, 10-15 percent of which are handled pro bono. Respondent attributed the violations of the disciplinary rules charged to ignorance. With regard to misuse of his IOLA account, respondent testified that he had never taken any courses on the proper use of IOLA accounts and was simply employing the accounting practices he had employed since he opened his firm in 1981. With respect to advancing financial assistance to his clients, respondent testified that he was unaware that such practice was proscribed by the disciplinary rules. On this issue respondent stated that he only advanced sums to clients when a decision awarding them tuition had already been issued and would not be appealed. Moreover, respondent testified that he never charged interest to his clients on these advances and only engaged in this practice when his clients would be unable to send their children to school absent his financial assistance. Respondent expressed a great deal of remorse at having violated the disciplinary rules and testified that after being apprised of the charges against him by the Committee he retained ethics counsel and completely overhauled his firm's practices with regard to his IOLA account. Respondent further testified that he also hired an experienced bookkeeper to manage his IOLA account and keep the kinds of records required by the disciplinary rules. Since being apprised that advancing funds to clients is prohibited, respondent has not engaged in such behavior. Lastly, respondent noted that inhis more than 30 years of practicing law, he had never been the subject of any professional discipline nor had his practices ever resulted in an inability to pay his clients all sums awarded to them.

The court concluded that he had acted without venal intent in determining that a suspension was not required:

...we agree with the Panel and find that with regard to the charges alleging that respondent misused his IOLA account, respondent has presented substantial mitigating evidence warranting public censure rather than suspension. Specifically, the record evinces that respondent provides very specialized and scarce legal services for the benefit of children with special needs, that he engages in substantial pro bono work, that he has an unblemished disciplinary record, that he expressed substantial remorse for his misconduct, took corrective measures to ensure that the misconduct does not recur, and that his conduct did not harm any of his clients.

While respondent also admitted liability with respect to the charge alleging that he advanced financial assistance to his clients during the course of the litigation for which he was retained, public censure is nevertheless warranted. The record evinces that respondent's misconduct was precipitated by ignorance and a desire to help his clients fund their children's education rather than a venal intent. Moreover, we find it mitigating that respondent did not profit from the loans he made to his clients.

(Mike Frisch)

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