An Elaborate Fraud But Nonetheless Disbarment

Falling victim to a fraudulent scheme was an attorney's explanation of serious escrow account deficiencies.

The New York Appellate Division for the Second Judicial Department did not accept that explanation and ordered disbarment.

The fraud

The hearing record provides additional information from the respondent concerning this fraudulent scheme. In June 2019, the respondent received a telephone call from someone purportedly from Microsoft, who claimed that their division was going out of business and stating that they would return $300 to the respondent if he provided his bank account information. The respondent agreed to do so, even though he did not have an account with Microsoft and was not paying fees. The caller called again to inform the respondent that $6,300 inadvertently had been wired to the respondent’s bank account instead, and asked the respondent to return $6,000 to a person named Amber Brothenson by wire transfer to her TD Bank account. The respondent avered that he checked his operating account and “the funds seemed to be there,” so he wired the funds to Brothenson at TD Bank. Thereafter, the respondent was informed that “they” detected malware on the respondent’s bank account and that additional funds were being deposited into his operating account. “They” instructed the respondent to transfer those funds back to them as well. According to the respondent’s affidavit, “they” took control of his operating and escrow accounts and transferred funds from his escrow account into his operating account, causing a depletion of $100,000 from IOLA account 1896. The respondent stated that his online banking showed that IOLA [account - the word is misspelled in the original ] 1896 had a balance of $184,000, when the balance was only $84,000. The respondent further stated that in July 2019, he went to the bank in person, discovered the true balance of the IOLA account 1896, and realized that he was a victim of “an elaborate fraud.” These events occurred between June 25, 2019, and July 11, 2019. The respondent immediately closed IOLA account 1896 and notified the police. Chase Bank recovered approximately $80,000 for the respondent, but was unable to recover $20,000 sent to TD Bank. On or about March 2020, the respondent sued TD Bank and settled the matter for $7,000. At the time of his second EUO, the respondent still had at least a $13,000 shortfall in his IOLA account.

That fraud failed to explain at least some of the charged conduct

According to the bank statements, the multiple wire transfers from IOLA account 1896 to the respondent’s operating account that are charged in the petition predate the period when the respondent was defrauded. The transactions that are the subject of the petition occurred between November 2018 and April 2019. During that six-month period, the respondent made 35 transfers totaling $80,552 from IOLA account 1896 to his operating account. The fraudulent transactions did not occur until June 25, 2019. Upon discovering that he was a victim of fraud, the respondent purportedly closed IOLA account 1896 and opened IOLA account 7076. The bank statements show that between October 2019 and February 2020, after the fraud had occurred and the respondent already was under a grievance investigation, he wired funds totaling $59,348 in 39 transactions from IOLA account 7076 to his personal accounts ending in 5036 and 8955, without keeping proper records.

Character letters

In three of the five character reference letters that the respondent submitted in mitigation, the authors wrote of the respondent’s active involvement in the Glen Cove Rotary Club (hereinafter the rotary club). According to the respondent’s bank statements, a check in the sum of $5,000 from the rotary club, dated April 25, 2019, was deposited into IOLA account 1896. However, approximately one month later, a check in the sum of $5,100 was issued by the respondent back to the rotary club, which the respondent denoted as a “reimbursement.” At his EUO, the respondent was asked about this transaction and the client matter to which it related. The respondent testified, “I cannot say.”

The court

The respondent contends that he is 77 years old, and because he is not computer savvy, he failed to maintain proper bookkeeping records. The respondent argues, in essence, that he did not have the records sought by the Grievance Committee and did not intentionally fail to cooperate with its investigation. We find the respondent’s explanation for his failure to cooperate with the Grievance Committee and to maintain proper bookkeeping records without merit. For example, by letter dated January 7, 2020, counsel for the respondent informed the Grievance Committee that the respondent had “note[d] client funds transactions within the individual client files,” but then refused to produce those files. The Grievance Committee asked the respondent to produce bank statements, which should be readily available, and he failed to do so. In the midst of an investigation by the Grievance Committee and after he discovered that he was a victim of fraud, the respondent opened IOLA account 7076 and continued his failure to uphold his fiduciary duty to properly maintain bookkeeping records for this escrow account and to preserve client and/or third-party funds. In further aggravation, the respondent’s disciplinary history consists of two Admonitions and one Letter of Advisement. The respondent’s failure to cooperate with the Grievance Committee’s investigation and his failure to appear at his hearing also demonstrate his disregard of the disciplinary process and his ethical duties, which we find egregious.

Under the totality of the circumstances, we find that disbarment is warranted.

(Mike Frisch)