Friday, May 5, 2017
It remains possible to get disbarred in New Jersey, as demonstrated by an attorney admitted in 1986 who drew the attention of bar authorities after a couple of trust account overdrafts.
The ensuing demand audit did not go well, as recounted in the report of the Disciplinary Review Board
Respondent admitted all recordkeeping infractions, except the cash withdrawals and the improperly-documented electronic transfers. He asserted two defenses, however.
First, as to the admitted violations, respondent claimed that, prior to the audit, he had no knowledge of the R. 1:21-6 recordkeeping requirements. Rather, respondent maintained his attorney books and records consistent with the longstanding system of poor recordkeeping practices that he had inherited from his father, Andrew V. Clark, Esq., who retired in approximately 2007. Further, respondent. testified that it was Kauffman, his secretary and bookkeeper, who had failed to prepare monthly three-way reconciliations, failed to maintain the journals and a running balance in the trust account checkbook, and maintained either inaccurate and incomplete ledger cards or none at all.
Second, as to the cash withdrawals and electronic transfers, respondent claimed that they were carried out by Kauffman, without his knowledge or consent. Indeed, respondent blamed Kauffman for nearly every act of impropriety.
The firm's bookkeeper had "run the show" for the attorney's father for many years. She retired and was replaced by the aforesaid Kauffman.
Then Dad got sick
When respondent assumed responsibility for the operation of the firm, he made no effort to learn the bookkeeping system that was in place. He neither met with his father to discuss his responsibilities nor consulted the New Jersey Court Rules. Further, he did not employ either a bookkeeper or an accountant during the audit period, that is, September 2011 through August 2012. Rather, Kauffman carried out the firm's bookkeeping responsibilities...
Respondent allowed Kauffman almost total control over the clerical and financial operation of the firm. He testified that Kauffman opened "every piece of mail," including bank statements, and that he "never saw certain bank records." Respondent was, as he claimed during his September 2012 interview, "in the dark. " Thus, the standard by which respondent measured Kauffman's bookkeeping performance appeared to be whether a client ever accused the firm of not disbursing funds that were due. Respondent testified that, because no client ever made such a complaint, he had no notice of any problem with client funds in the trust account. Thus, he believed that Kauffman was doing a good job and was not handling the firm's accounts in an inappropriate manner. Razanica confirmed that, prior to the firm's receipt of the overdraft notices, the firm's accounting records would not have placed respondent on notice that the trust account was out of trust largely because those records were, abominable.
As to intent
In determining whether respondent was a hapless victim or was intentionally ignorant, we considered the following. First, respondent accepted no responsibility for the firm's financial operation. He not only assumed that the bookkeeping system in place was proper and functioning as it should, but also took no interest in monitoring the books or the activities of Kauffman to ensure that to be the case. We note that an attorney• s recordkeeping responsibilities are nondelegable. See In re Barker, 115 N.J. 30, 35-36 (1989).
Moreover, respondent permitted a situation to develop whereby he and Kauffman would lend money to the business account, "casually" monitor the amounts they were owed, and then re-pay themselves when funds became available. Yet, respondent did nothing to determine when funds became available, instead leaving that crucial determination to Kauffman, who decided into which accounts funds should be deposited and out of which accounts funds were to be disbursed. Respondent created the perfect opportunity for Kauffman, if she chose, to use the firm's accounts as an equity line.
Second, most of the offending checks were stamped with respondent's signature. Al though respondent claimed to know nothing of the stamp or Kauffman's use of it, the sheer number of checks that were stamped with respondent's signature demonstrates clearly and convincingly that he knew that the stamp was being used and that he considered its existence another reason to simply look the other way. In particular, we note the number of checks issued in payment of the Zalek settlement. Clearly, respondent, whose firm was responsible for the monthly payments to his former clients, would have ensured that the payments were being made and, thus, would have known that, if he was not signing the trust account checks, then his signature was being affixed with the stamp.
Third, respondent said it best when he remarked that he was "in the dark" when it came to the firm' s books and records. He was so blind to the firm's financial matters that he never even saw the overdraft notices and was unaware of the OAE's investigation until just before the September 2012 demand audit. In our view, respondent adopted a strategy that would put him "in the dark" about his firm's finances to avoid responsibility. His blindness was, in every respect, willful - and the consequences that flowed from that strategy were both material and predictable. To allow respondent to benefit from his own self-imposed blindness would be tantamount to putting blinders on ourselves.
In sum, we find that respondent knowingly misappropriated Thomas Bilgrav• s funds and that he exhibited willful blindless in the cases of Anaya Grant and the unnamed clients whose monies were invaded in respect of the Zalek payments and the Kauffman disbursements.