Thursday, May 21, 2015
A Connecticut attorney has recently been arrested on accusations that he embezzled $1.8 million from the estate of Miriam S. Strong. Peter M. Clark was removed from his position as co-executor of Strong’s estate back in March when $1.8 million in money that was bequeathed to the town of Oxford went missing. Clark is currently facing a Federal mail fraud charge over the incident.
See Attorney Accused of Embezzling $1.8 Million From Woman’s Estate, NBC Connecticut, May 21, 2015.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
Friday, May 8, 2015
Having served as a court appointed guardian, Columbus lawyer Paul Kormanik is now charged with stealing funds from his wards and is relinquishing his law license. Kormanik has pleaded not guilty to 11 felony charges involving engaging in a pattern of corrupt activity, theft from an elderly person, and tampering with records for illegally controlling his wards’ bank accounts and stealing their funds. In addition to these charges, the Columbus Bar Association brought 15 charges of professional misconduct against Kormanik. His attorneys are requesting the probate judge to postpone his trial, which is scheduled to begin June 22.
See Randy Ludlow, Lawyer Accused of Stealing From Wards Gives Up Law License, The Columbus Dispatch, May 7, 2015.
Thursday, April 30, 2015
Jacob L. Todres (St. John’s University School of Law) recently published an article entitled, Bad Tax Shelters—Accountability or the Lack Thereof: Ten Years of Tax Malpractice, St. Johns Legal Studies Research Paper No. 14-005 (2014). Provided below is the abstract from SSRN:
In the 1990’s and early 2000’s the tax landscape in the United States was overrun by an epidemic of tax shelters that was unprecedented. The shelters were designed and sold by seemingly reputable large accounting and law firms. The same shelters were sold to many taxpayers. They became generic, off-the-shelf, products. However, the tax shelters had no business substance. The shelters were eventually found to be invalid by the courts. In light of the invalidity of the shelters, the large fees paid for the shelters and the large damages caused by participating in the invalid shelters, there were predictions that many malpractice suits against the sellers of the shelters would ensue.
For this article I attempted to determine whether the predicted wave of tax malpractice suits occurred and what impact, if any, resulted in the area of tax malpractice litigation.
Much to my surprise, there ended up being very few cases focusing on substance. There were several class actions that were settled but, in light of the settlements, offered no useful insights. Most of the other reported cases dealt with procedural issues such as whether the action must be arbitrated, federal versus state venue, statute of limitations, etc. In the end, there were only a few cases that addressed any issue of substance. The only exception was a huge case in Kentucky, Yung v. Grant Thornton LLP , that was decided in late November, 2013. The case was huge because of its length (over 200 pages) and because it awarded $20 million in compensatory damages and $80 million in punitive damages.
In the article I analyze the few existing generic tax shelter cases and try to fit them into the general principles governing tax malpractice. I then also review the other developments in the tax malpractice area during approximately the last decade.
Monday, April 27, 2015
When Michael Scott Keck removed $55,000 from the trust fund of a client who was in prison in order to repay a debt to another client, the bar suspended him from practice. Now, a State Bar Court judge has recommended that a San Francisco attorney be disbarred. Keck has practiced law since 1986 and had no prior record of misconduct.
At the disciplinary trial, Keck testified that the fund’s previous financial advisor authorized him to borrow the money in the trust. However, that testimony lacked credibility since an attorney should know that the adviser would not have the authority to allow a loan from trust assets. Keck was “dishonest, concealed material facts from [his client] and others, and acted in bad faith,” the judge said in regards to Keck’s case. Despite Keck’s good record in his practice of law, the judge said misappropriating a client’s funds is grounds four disbarment.
See Bob Egelko, State Bar Court Judge Rules to Disbar S.F. Lawyer for Taking Funds, SF Gate, Apr. 24, 2015.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
Wednesday, April 22, 2015
Seventy-year-old Arizona attorney Rodney Matheson was found guilty on charges of theft and fraud for stealing money from his deceased clients’ probate accounts. Maricopa County Superior Court Judge Bruce R. Cohen sentenced Matheson to 2 ½ years in prison and also ordered Matheson repay more than $1 million to an attorney representing the Mayo Clinic. Cohen placed Matheson on probation on a fraudulent schemes conviction for seven years, which will begin once he is released from prison.
According to court documents, Matheson orchestrated an elaborate “shell game” by stealing money from several estates in order to satisfy a court order for payment of $800,000 to the Mayo Clinic, the major beneficiary of a third estate. The fraud was uncovered when the Mayo Clinic filed a civil suit to collect $1.2 million left to the hospital as a beneficiary by the Mary Jane Schalow Trust.
See Disbarred East Valley Attorney Sentenced to Prison in Probate Theft Case, AZ Central, Apr. 21, 2015.
Friday, April 17, 2015
An Ohio lawyer who has been charged with multiple felonies now faces ethics charges as well. Paul Kormanik is accused of misappropriation of funds and incompetent representation from his guardianship of several state appointed wards. Allegedly, he made his clients out to be indigent in order to take taxpayer money and was stealing from a trust for which he was trustee. This case goes to show that courts and the public must carefully scrutinize any attorney that will be granted a fiduciary duty.
See Lucas Sullivan, Lawyer’s Work as Guardian Prompts Ethics-Violation Case, The Columbus Dispatch, Apr. 16, 2015.
Wednesday, April 8, 2015
The Supreme Court of Nevada recently held that the law firm, Woods & Erickson, LLP, was not liable for the fraudulent transfer of assets belonging to a debtor who was dodging a creditor judgment. The court opinion noted that a “majority of jurisdictions do not recognize accessory liability for fraudulent transfers.” The rationale is to protect attorneys who are not parties to the transfer but are instead acting as a “mere scrivener,” which contrasts with someone who knowingly assists with a fraudulent transfer and could be held liable.
Attorneys should follow the principle of KYC (know your client), because litigating these types of cases can be costly and time consuming. Even if not held liable, attorneys cannot recoup attorney fees for fighting these actions and malpractice insurers do not cover these types of cases. Because clients often lie about themselves, attorneys should diligently research a potential client to avoid any problems that could arise.
See Jay Adkisson, Nevada Supreme Court's Fraudulent Transfer Ruling Keeps Innocent Law Firm Out Of The Woods, Forbes, April 02, 2015.
Wednesday, March 25, 2015
In 2013, Christine Clark underwent months of testing so that she could donate her kidney to a longtime friend with end-stage renal disease. On July 2, 2013, almost an hour after doctors removed Clark’s kidney, they put her friend under anesthesia to receive the transplant. Her friend had been under anesthesia for two hours when the hospital canceled the surgery. Clark says doctors stopped the transplant because she had tested positive for hepatitis C.
Clark and her husband subsequently filed a complaint in the Dauphin County Court of the Common Pleas, claiming the failure to perform the correct test in time “caused catastrophic consequences.” The complaint further stated, “had appropriate protocols been established and/or followed, the intended recipient would have received plaintiff’s harvested kidney . . . Instead, they purportedly donated the kidney to a hepatitis C-positive patient at a different facility and obtained financial gain and prestige for said transplant.”
Having never received an explanation from the hospital about the failure of the transplant, Clark says the loss of her kidney has left her with various injuries including low blood pressure, nerve damage, scarring and humiliation. She and her husband are seeking punitive damages from the hospital, Central Pennsylvania Transplant Foundation Inc., and its doctors and nurses for negligence, misrepresentation, and battery.
See Lana Morelli, Kidney Donor Says Surgery Was a Disaster, Courthouse News Service, March 24, 2015.
Thursday, February 19, 2015
A Richmond lawyer is responsible for $603,409.10 after preparing a will that failed to provide the fully intended bequest to the Richmond Society for the Prevention of Cruelty to Animals (RSPCA).
In 2003, Alice L. Cralle Dumville asked James B. Thorsen to prepare a will for her that would keep her estranged husband from receiving any of her estate. In an oral contract, Thorsen agreed to draft the will that would leave all of Dumville’s property to her mother and, if her mother predeceased her, to the RSPCA. Dumville’s mother died in 2007 and Dumville died in 2008. Thorsen subsequently sought to have the will interpreted to leave the entire estate to the RSPCA, but a Chesterfield County judge concluded the will left only tangible personal property to the society.
Thorsen was sued for malpractice and agreed the will did not incorporate Dumville’s intentions regarding the disposition of her property. However, he argued that the RSPCA was not an intended third-party beneficiary of his legal services contract, effectively barring the malpractice claim.
The case was heard in November and the judge adopted the RSPCA’s reasoning that Dumville wanted everything to go to her mother and wanted everything to go to the SPCA in the event her mother predeceased her. Furthermore, the RSPCA met Virginia’s stringent test for a third party to have standing.
Thorsen and his firm have filed a notice of appeal, indicating they will ask the Supreme Court of Virginia to review the lower court’s decision.
See Peter Vieth, Botched Will Cost Lawyer $600,000, Virginia Lawyers Weekly, Feb. 9, 2015.
Special thanks to Ada-Marie Aman (Law Office of Ada-Marie Aman) for bringing this article to my attention.
Tuesday, January 6, 2015
Today an attorney was sentenced to sixteen months in prison for siphoning $262,000 from the estate of a disabled Army veteran.
Cuyahoga County Common Pleas Judge Timothy McCormick sentenced Kevin Purcell, 62, after hearing how the attorney stole the money from the estate of John Kane, who suffered from schizophrenia. “There is a special place in hell waiting for attorneys who steal from the defenseless,” said an assistant Cuyahoga County prosecutor.
Purcell served as a guardian for Kane since 1993 and administrator of his estate after he died in 2012. Last month, he pleaded guilty to aggravated theft and agreed to never practice law again. He also was ordered to pay restitution to Kane’s estate.
See John Caniglia, Lawyer Gets 16 Months in Prison for Fleecing the Estate of a Disabled Army Vet, Cleveland.com, Jan. 6, 2015.