Wednesday, August 8, 2018

Misuse Of Stepfather's Funds Draws Suspension

The Minnesota Supreme Court has ordered a six-month suspension for an attorney's misuse of her stepfather's funds.

The attorney had her mother's power-of-attorney after a 2013 cancer scare

Trombley did not exercise the power of attorney until her mother fell seriously ill in early April 2014. Until that time, [mother] L.S. had handled the finances for herself and her elderly husband, Trombley’s stepfather C.S., who was unable to manage his finances because of his own illness. Trombley then became more involved in the lives of her mother and stepfather. By June 9, 2014, she had added her name to their joint checking and savings accounts, changed the address for these accounts to her address, and taken the couple’s checkbook. On that date, she also began transferring funds from the joint savings account into the joint checking account.

Trombley made nine transfers from the joint savings to the joint checking account, totaling $114,495.09, during a 7-week period that spanned the time before and after her mother’s death. As these transfers were made, and in the week before her mother’s death, Trombley wrote three checks to herself, totaling $95,000, from the joint checking account and deposited the funds into her personal accounts. She signed these checks using her mother’s name and did not indicate that she was doing so as attorney-in-fact. The day after she wrote the last check to herself, her mother died.

After L.S. died, Trombley retained in her personal accounts the $95,000 that she had withdrawn from the joint checking account. She used $1,023.651 to pay for funeral and other expenses related to C.S. and L.S. She also transferred the remaining money from the joint savings account to the joint checking account and then closed the joint savings account.

Around the same time, Trombley found a copy of a will that L.S. had executed in 2003. The will bequeathed to Trombley (1) half the proceeds from the sale of the house owned by C.S. and L.S. and (2) the funds in L.S.’s retirement account. But L.S. and C.S. had sold the home after the will was executed and had deposited the sale proceeds into the same joint savings account that Trombley had closed after transferring its contents into the joint checking account. As to the retirement account, L.S. had listed C.S., not Trombley, as the account beneficiary. The will also bequeathed to C.S. “the entire residue of [L.S.’s] estate.” Trombley did not seek legal advice at that time regarding the will. She claimed that she believed her mother intended for her to inherit approximately $95,000, and thus, she ignored C.S.’s rights and interests in the funds previously contained in L.S. and C.S.’s joint accounts.

After L.S. died, Trombley spent some of the funds that she had transferred to herself for her own benefit. The referee found that, approximately 2 weeks after her mother died, the balance in Trombley’s bank accounts “was less than the aggregate balance of funds that [Trombley] had transferred from the two joint accounts,” that this “shortage remained until June 2015,” and that the “shortage reached a maximum of over $58,000 in January 2015.” Trombley used some of this money to buy a car and some jewelry and to pay her “substantial financial obligations.”

While L.S.’s health was failing, Trombley and her husband were dissolving their marriage. As part of the dissolution proceedings, the district court determined that Trombley and her former husband owed more than $300,000 in joint business debts and an additional $130,000 in joint personal obligations. Trombley and her former husband agreed that he would assume and “hold [her] harmless” from the business debts, and in a later proceeding, the district court concluded that Trombley would assume approximately $70,000 of the personal debts. Trombley’s former husband refused to pay the business debts or otherwise indemnify Trombley as agreed, resulting in financial distress and substantial marriage dissolution litigation for Trombley.

After the death of L.S., Trombley paid some of her credit card debt that was part of the joint personal debts of Trombley and her former husband. A creditor brought an action against her to collect an additional $24,386 in credit card debt. A district court ultimately concluded that both of these obligations were the responsibility of her former husband.

Meanwhile, C.S. had growing concerns about his finances because he did not know what had happened to his money. He was worried about how he would pay his monthly rent and medical expenses. He also was unable to access funds in the one remaining account with his name, the joint checking account, because Trombley kept the checkbook for this account.

A licensed social worker then reported possible elder abuse, which led to a investigation

After the investigation began, but before the Ramsey County Community Human Services Department made its determination, Trombley returned $93,976.35 to C.S. This amount represented the funds Trombley had transferred into her personal accounts, minus  a few uncontested expenses related to L.S.’s death. She made a partial payment in March 2015 and refunded the full amount by June 2015, a month before C.S. died.

The referee had recommended an admonition. The Office of Lawyer Regulation sought more severe discipline.

The court rejected certain findings

Because Trombley’s actions did not exceed the scope of the authority granted to her by the power of attorney while L.S. was alive, and the power of attorney terminated after L.S. died, the referee’s finding that Trombley breached her fiduciary duties as her mother’s attorney-in-fact is clearly erroneous.

But sustained others

the record establishes that Trombley retained $93,976.35 in funds that belonged to C.S. and spent more than $58,000 of those funds for her personal benefit. Trombley did this despite having no legal basis for retaining the funds. Because Trombley’s post hoc justification for retaining the funds is implausible, it supports the reasonable inference that Trombley knew the funds were C.S.’s and that she acted dishonestly by keeping them.

...we conclude that Trombley engaged in intentional dishonesty regarding her retention of her stepfather’s funds.

Sanction

We conclude that the referee did not err by failing to find mitigating factors relating to harm suffered by C.S. or Trombley’s relative inexperience in practicing law. We  conclude that the vulnerability of the victim, Trombley’s selfish motive, and her lack of recognition and remorse aggravate her misconduct, and the extreme stress she was experiencing at the time of these events mitigates her misconduct...

Trombley’s misconduct, although not identical to any specific decision of our court, has similarities to other discipline decisions. Trombley’s misconduct involves improperly retaining a substantial sum of money belonging to another, which she spent on herself and did not return until she was investigated. Her misconduct also includes violating an assumed duty and retaining and using the funds of an adult who was incapable of handling his own finances. Finally, her misconduct involves dishonesty. Her misconduct is certainly distinguishable from—and not as severe as—the cases where we have disbarred attorneys for misappropriation. Having considered the aggravating and mitigating factors present here, and recognizing that our precedent does not include misconduct identical to Trombley’s actions, we hold that the appropriate sanction for Trombley’s misconduct is a 6-month suspension. 

Before the court, the attorney had sought dismissal of the charges. (Mike Frisch)

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