(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued June 16, 1998 -- Decided July 17, 1998
PER CURIAM
This is an attorney disciplinary case.
Respondent, Randee Pomerantz, was admitted to practice law in New Jersey in 1986. She first came
to the attention of the Office of Attorney Ethics (OAE) as a result of two trust account overdraft
notifications from First Fidelity, the bank in which she maintained her attorney trust account. When the
OAE was not satisfied with the explanation she provided for the overdrafts, it scheduled a demand audit of
her books and records.
As a result of its audit of her records, in 1995, the OAE filed a formal complaint charging
Pomerantz with five counts of knowing misappropriation of client trust funds; failure to make prompt
payment of funds; two counts of commingling personal funds with attorney trust account funds;
misrepresentation and fraud; and failing to keep the records required by Rule 1:21-6. The matter was heard
by a special master.
Pomerantz was charged with knowing misappropriation in several separate matters. In the Zall
matter, Pomerantz delayed disbursement of over $22,000 to her client in a divorce matter for eighteen days
following the entry of the final judgment of divorce. During that period, the balance in her trust account fell
below that amount required to be on deposit for the Zall matter alone. In fact, when the client presented
Pomerantz's trust account for payment, there were insufficient funds in that account to cover the check,
prompting one of the overdraft notices from First Fidelity. According to the OAE, the trust account
shortages during that period were caused by Pomerantz's use of trust funds to make payments unrelated to
the Zall matter, most of which were for her personal purposes. Although Pomerantz did not dispute that
she was out-of-trust, she blamed the problem on poor accounting practices and, in particular, on her
bookkeeper's failure to maintain the proper records. Thus, she maintained that her use of client funds was
inadvertent.
In the Schneeberg matter, Pomerantz deposited into her trust account sums she received as sole
beneficiary of her father's estate. She then withdrew from the account sums in excess of those received
from the estate and used those funds for personal purposes. Thus, she invaded the funds of other clients on
nine occasions between the date of the first deposit of estate funds to the date of the last entry on the estate
ledger card. Again, Pomerantz maintained that the invasion of client funds was inadvertent and the result of
poor record keeping for which she blamed her bookkeeper. The bookkeeper, however, maintained that she
kept Pomerantz advised of the balance of the estate funds on a daily basis, that Pomerantz knew she was
invading client funds, and that many of the entries on the estate ledger card were made by Pomerantz
herself, indicating that she was aware of the estate balance.
In the D'Esposito matter, Pomerantz issued a trust account check to her client in the amount of
$1,460 when there were no corresponding funds on deposit in that account to cover that check. The check
was intended by Pomerantz as a refund of an unused retainer, the original $3,000 having been deposited into
her business account. Although Pomerantz claimed that the disbursement from her trust account was
inadvertent, at the time Pomerantz issued her trust account check to her client, there were insufficient funds
in her business account to cover the check. Therefore, the OAE maintained that Pomerantz knowingly
misappropriated the funds of other clients as she knew that the balance in her business account was
insufficient to cover the check to D'Esposito.
In the Danmor matter, respondent took it upon herself to pay from her trust account the rent and
other obligations of her husband's radiology practice. The disbursements frequently exceeded the amounts
on deposit for Danmor and included disbursements for expenses such as payment of Pomerantz's
housekeeper, Angel Bretney. Furthermore, during the OAE's audit, when questioned about the identity of
Danmor and Bretney, Pomerantz told the OAE auditor that Danmor was a “very good client,” without
disclosing her husband's interest in Danmor, and that Bretney was a creditor of Danmor, claiming that she
knew nothing more of her.
In addition to the individual matters, the OAE's audit disclosed that Pomerantz was out-of-trust on
twenty-eight occasions from June 1991 to August 1992, that is, there was not enough on deposit in her trust
account to equal the funds she should have been holding for her clients. The shortages during that period
ranged between $987.60 and $12,046.38, resulting in the invasion of trust funds held in behalf of fifteen
different clients.
The OAE's audit also disclosed that Pomerantz's records were seriously deficient and included
such violations as failure to reconcile her records on a quarterly basis and failure to maintain receipts and
disbursements journals. Pomerantz claimed that her bookkeeper had stolen the relevant records, however,
the OAE's investigation disclosed that the records never existed.
Finally, just prior to the first scheduled hearing before the special master, Pomerantz signed a
certification stating that Cromlish, her bookkeeper, had forged her signature on certain checks and had
stolen funds from her. She referred the matter to the Monmouth County Prosecutor's Office, which
empaneled a grand jury. The grand jury subsequently returned a no bill on Pomerantz's criminal complaint.
Although Pomerantz filed criminal charges against Cromlish, she had previously advised the OAE auditor
that she had determined that no funds were stolen. She therefore filed charges she knew to be untrue.
Following the hearings, the special master concluded that Pomerantz was guilty of negligent, as
opposed to knowing misappropriation, that she was guilty of commingling personal funds with trust funds,
that she committed record keeping violations, and that she was guilty of conduct involving dishonesty, fraud,
deceit, or misrepresentation. The special master recommended that Pomerantz be suspended for three years
for her misconduct.
On de novo review, a seven-member majority of the Disciplinary Review Board (DRB) determined
that Pomerantz was guilty of knowing misappropriation of client funds and recommended that she be
disbarred.
The matter is before the Supreme Court for its review pursuant to Rule 1:20-16.
HELD: The evidence clearly and convincingly establishes that Pomerantz knowingly misappropriated client
funds, in clear violation of Wilson for which she is disbarred.
1. Pomerantz knowingly used her clients' funds for her own purposes without authorization. Her juggling of
funds between her personal, business, and trust accounts belies her claimed lack of knowledge that she was
out-of-trust and her conduct violated the public trust. (pp. 18-19)
2. That Pomerantz may not have intended to permanently deprive Zall of her money and that she intended
to replace the funds is irrelevant, as it is the mere act of taking the client's money knowing that there was no
authority to do so that requires disbarment. (pp. 19-20)
3. The Court has consistently failed to attach much, if any, importance to restitution because that may
depend more on the financial ability or other favoring circumstances than repentance or reformation. (p. 20)
4. Even if one accepts Pomerantz's contentions that she was unaware that she was out-of-trust, her willful
blindness satisfies the Court that she knowingly misappropriated client funds. (pp. 20-21)
5. Lawyers may not absolve themselves of the misappropriation of client funds by delegating to employees
the authority to complete signed checks and then failing to supervise the employees. (pp. 21-22)
6. Pomerantz's failure to disclose the true nature of her relationship with Danmor and Angel Bretney
support an inference that she was aware of the misappropriation. (p. 22)
7. When an attorney attempts to frame an innocent person in a criminal act, that attorney has demonstrated
contempt for the administration of justice and has poisoned the well of justice. (pp. 22-23)
Pomerantz is DISBARRED and is ordered to reimburse the Disciplinary Oversight Committee for
administrative costs.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI,
STEIN, and COLEMAN join in the Court's opinion.
SUPREME COURT OF NEW JERSEY
D-
183 September Term 1997
IN THE MATTER OF
RANDEE POMERANTZ,
An Attorney at Law.
Argued June 16, 1998 -- Decided July 17, 1998
On an Order to show cause why respondent
should not be disbarred or otherwise
disciplined.
Brian D. Gillet, Deputy Ethics Counsel,
argued the cause on behalf of the Office of
Attorney Ethics.
Andrew B. Schultz, a member of the New York
bar, argued the cause for respondent(Michael
S. Kimm, attorney).
PER CURIAM
Respondent was admitted to the bar of New Jersey in 1986.
In 1995, the District XIV Ethics Committee (DEC) charged
respondent with five counts of knowing misappropriation of client
trust funds, R.P.C. 1.15, 8.4(c), failure to make prompt payment
of funds, R.P.C. 1.15(b), two counts of commingling personal
funds with attorney trust account funds, R. 1:21-6,
misrepresentation and fraud, R.P.C. 1.15(a), 8.4(c), and failing
to keep the records required by Rule 1:21-6(b) and (c), R.P.C.
1.15(d). The matter was referred to a Special Master.
The Special Master found that respondent failed to keep
required records in violation of R.P.C. 1.15(d), commingled funds
in violation of R.P.C. 1.15(a), and violated R.P.C. 8.4(c)
defining as professional misconduct "conduct involving
dishonesty, fraud, deceit or misrepresentation." The Special
Master concluded, however, that respondent's misappropriation of
funds was negligent, not knowing, and therefore recommended a
three-year suspension rather than disbarment. The Disciplinary
Review Board (DRB), on the other hand, determined that respondent
committed knowing misappropriation of client funds and
consequently recommended disbarment by a vote of seven to two.
We agree that the record clearly and convincingly establishes
that, among other violations, respondent knowingly
misappropriated client funds. Therefore, we adopt the
recommendation of the DRB and order that respondent be disbarred.
On May 21, 1992, the OAE contacted respondent, requesting that within ten business days respondent provide a written, documented explanation including copies of particular documents. In a letter dated July 7, 1992, respondent explained:
We represent a client who has been in good standing with us for several years. In order to help them [sic] with a debt consolidation, we were paying debts for them [sic] through our Attorney Trust Account. Our client would first deposit the necessary monies into our account and we would draw the necessary checks. One local creditor of our client went directly to the bank, in spite of a dated check.
Unfortunately, our client's check deposit
bounced causing the overdraft.
The OAE was not satisfied with this explanation and requested
additional documentation on July 13, 1992. Respondent's
accountant, Patrick M. Walsh, sent copies of some of the
requested documents to the OAE. The OAE was still unsatisfied
and scheduled a demand audit of respondent's books and records,
explaining to her that "[i]t appears from the records submitted
that you were out of trust." The September 30, 1992 audit
disclosed many problems with respondent's trust account.
After conducting a de novo examination of the record, we
adopt the factual findings made by the DRB:
The Zall Matter
This count of the complaint charged
respondent with knowing misappropriation of
client funds [RPC 1.15(a) and RPC 8.4(c)] and
with failure to make prompt payment of funds
[RPC 1.15(b)].
Barbara Zall retained respondent to
represent her in a divorce proceeding. At a
hearing on February 10, 1992, the parties
placed on the record the terms of a
settlement agreement. The final judgment of
divorce, entered on March 19, 1992, required
respondent to disburse from her trust account
$22,547.49 to Zall and $10,000 to the
attorney for the husband. On February 20,
1992, ten days after the final hearing and
about one month before the entry of the final
judgment of divorce, respondent sent the
husband's attorney a proposed form of
judgment, as well as a trust account check
for $10,000 for the husband's share of
equitable distribution. Respondent did not
disburse the $22,000 to Zall until April 6,
1992, eighteen days after the date of the
final judgment of divorce, thereby raising a
suspicion that, in the interim, the Zall
funds had not been kept intact in her trust
account. The circumstances surrounding the
payment to Zall were hotly contested at the
ethics hearing.
According to Patty Wooster, respondent's
former paralegal assistant, and Catherine
Cromlish (a/k/a Catherine Tzounkas),
respondent's former bookkeeper, Zall called
the office almost every day asking for her
funds. Cromlish testified that in March
1992, when respondent was in Florida,
respondent told Cromlish that Zall would be
paid when respondent returned to New Jersey.
According to Cromlish, she discovered that
respondent's trust account had insufficient
funds to pay Zall and so informed respondent
during at least two telephone conversations.
Cromlish testified that one of these
conversations took place when respondent was
in Florida. Cromlish testified further that
respondent told her not to worry about the
account, assuring her that enough funds would
be available to pay Zall.
On March 26, 1992 respondent wrote a check to
Zall. As noted earlier, she did not send the
check to Zall, however, until April 6, 1992,
eighteen days after the date of the final judgment
of divorce. It was this check that triggered one
of the overdrafts in respondent's trust account,
prompting her bank, First Fidelity, to write to
the OAE.
Respondent did not dispute that she was out-of-trust. She blamed the problem on poor
accounting practices and, in particular, on her
bookkeeper's failure to maintain proper records.
In essence, thus, respondent contended that the
use of other clients funds had been inadvertent.
As to the delay in the distribution to Zall,
respondent testified that the reason for such
delay was twofold. First, respondent explained,
it was her practice not to distribute funds in
divorce cases until she had received the final
judgment of divorce with a "raised seal;" she
added that she was waiting to receive that
document to send the funds to Zall. Respondent
acknowledged that she deviated from this practice
when she distributed the $10,000 funds to the
attorney for Zall's husband. She claimed,
however, that she and the attorney had agreed that
the payment would be made before the execution of
the divorce documents. The second reason for the
delay, respondent asserted, was that she wanted to
wait until her return from Florida to send a check
to Zall. When pressed by the presenter for
documentary proof of her trip to Florida, such as
an airline ticket, respondent was unable to
produce any.
Respondent testified that she still
represents Zall, who has never complained about
her services.
The OAE presenter, in turn, charged that
respondent deliberately delayed the disbursement
to Zall because respondent knew that, due to her
personal expenditures, her trust account did not
have sufficient funds to pay Zall. In fact, the
OAE charged, on April 10, 1992, four days before
the check was dishonored, respondent already knew
that her trust account was overdrawn. And she
knew it, the OAE argued, because on April 10, 1992
she deposited $3,500 of her own funds into the
trust account to cover a shortage in another
matter, Danmor. According to the OAE, this
deposit proved that respondent actually knew much
more about her trust account balances than she
admitted knowing.
The OAE investigative auditor, Barbara
Galati, testified that, on twenty separate
occasions between October 23, 1991 and April 14,
1992, when the Zall check was presented for
payment, respondent's trust account contained less
than the amount required to be on deposit for the
Zall matter alone. Moreover, according to Galati,
from the date the check was written, March 26,
1992, until it was presented for payment, April
14, 1992, there were not enough funds on deposit
in respondent's trust account to cover the
disbursement to Zall. Galati testified that the
trust account shortages were caused by
respondent's use of trust funds to make payments
unrelated to the Zall matter. Among the payees
were: another client, Ronnie D'Esposito;
respondent's minor daughters' bank accounts;
contractors performing work on respondent's house;
respondent's housekeeper; the owner of the
building where respondent's husband conducted his
business; respondent's husband's business;
Freehold Mitsubishi, from whom respondent bought a
car; and respondent herself.
The OAE presenter also took the position
that, despite respondent's and Cromlish's
testimony, respondent was not in Florida during
March 1992. The presenter relied on the absence
of any documentary proof of that trip. The
presenter also pointed to numerous checks signed
by respondent during the month of March. The
presenter charged that such checks showed one of
two things: either respondent was in New Jersey
in March or she improperly signed the checks in
blank.
The Schneeberg Matter
This count of the complaint charged
respondent with knowing misappropriation of client
funds, in violation of RPC 1.15(a) and RPC 8.4(c),
and with commingling of personal funds and trust
funds, in violation of R. 1:21-6.
In November 1991 respondent's father, Sidney
Schneeberg, passed away, leaving respondent as the
sole beneficiary and executrix of his estate.
From time to time, respondent would receive
installment distributions from the estate.
Instead of opening a separate bank account for the
estate, she would deposit the funds in her trust
account. Respondent told OAE auditor Galati that
she used her trust account because it was easier
to keep track of the payments and deposits in
connection with the estate. The total periodic
distributions for the estate amounted to $370,000.
It is undisputed that respondent was entitled to
such funds. The alleged ethics impropriety
consisted of respondent's commingling the estate
funds and trust funds and withdrawing funds in
excess of those deposited for the estate.
According to OAE auditor Galati, on nine occasions
between November 18, 1991, the date of the deposit
of the first estate distribution, and September
1992, the date of the last entry on the estate
ledger card, respondent withdrew more than the
funds on deposit for the estate, thereby invading
client trust funds.
Respondent did not deny that she was out-of-trust. In fact, the account reconciliations
prepared by respondent's accountant after the OAE
notice of the demand audit, showed that respondent
had invaded client funds. Respondent claimed,
however, that such invasion had been inadvertent,
due to poor recordkeeping. Respondent attempted
to shift the blame to her bookkeeper, Catherine
Cromlish, contending that she had entrusted
Cromlish with the responsibility of maintaining
the estate account. Cromlish, in turn, testified
that respondent knew at all times the exact
balance of the estate account and that she,
Cromlish, always followed respondent's directions
on how much to withdraw from the account.
According to Cromlish, respondent asked her
constantly, sometimes daily, about the balance in
the estate account. Cromlish pointed out that the
Schneeberg ledger card contained entries made by
respondent herself. Hence, Cromlish suggested,
respondent had to be aware of the status of the
account and, therefore, that the withdrawals
exceeded the amount of funds on deposit. In fact,
Cromlish testified, respondent was aware that at
times the estate account had a negative balance.
Cromlish also testified that, whenever she brought
this problem to respondent's attention, respondent
appeared unconcerned and assured her that there
would be additional distributions from the estate.
The OAE's position was that respondent
knew the precise balance of the estate
account and that she, therefore, knowingly
invaded client funds. For example, the OAE
pointed out, on January 2, 1992 respondent
made the largest deposit of funds toward the
Schneeberg account, $171,823.59. On that
same day, respondent wrote seventeen checks
against her trust account, totaling
$171,823.48, or eleven cents less than the
funds on deposit for the estate. The OAE
urged a finding that respondent could not
have written a large number of checks
(seventeen) and have come within only a few
cents of its balance without knowing the
exact balance of the account.
Toward the end of the ethics hearing, the OAE
presenter introduced a new theory as to why
respondent had deposited the estate funds in her
trust account. The OAE presented evidence that
several judgments had been entered against
respondent and her husband, following their
default on loans for medical equipment for the
husband's business. According to OAE, respondent
deposited the $370,000 inheritance in her trust
account to shelter the funds from judgment-creditors.
The D'Esposito Matter
This count charged respondent with knowing
misappropriation of client funds, in violation of
RPC 1.15(a) and RPC 8.4(c).
During the demand audit, the OAE auditor
noticed that a client ledger card for Ronnie
D'Esposito showed only one transaction, a $1,460
disbursement to the client on October 30, 1991.
The OAE then asked respondent for a prior ledger
card, on which a $1,460 deposit should have been
recorded. In response to the OAE's inquiry,
respondent sent a reconstructed ledger card
showing the receipt of a $1,500 partial retainer
on June 24, 1991, a payment of $135 on July 3,
1991 to the Superior Court of New Jersey and the
$1,460 payment to D'Esposito on October 30,
1991.See footnote 1 As additional explanation for the
D'Esposito disbursement, on May 8, 1996
respondent's counsel sent certain documents and a
letter to the OAE, which in part stated as
follows:
Based on these documents, I am advised by
Randee that her intention was to refund the
sum of $1,460.33 to her client Ronnie
D'Esposito, as an unused portion of the
previously-paid retainer from Ms. D'Esposito.
According to Ms. Pomerantz, the $1,460 check
should have been paid from the regular
[business] account on October 31, 1991, but
was inadvertently and negligently instead
paid from the trust account. It may be noted
that Randee's father died on November 1, 1991
after being in and out of a comatose
condition for several days.
Neither respondent nor her counsel offered
any further explanation for respondent's alleged
inadvertence. Included with the above letter were
copies of a $2,000 check dated June 24, 1991 from
D'Esposito to respondent, a $1,500 check dated
June 28, 1991 from D'Esposito to respondent and
respondent's business account bank statement for
October 1991.
At the hearing before the special master, the
OAE auditor testified that, although counsel's
letter to the OAE indicated that the $1,460 refund
to D'Esposito on October 30, 1991 had been
mistakenly made from the trust account instead of
the business account, on the day of the refund,
October 30, 1991, the business account had only
$1,216.66 on deposit, or $243.34 less than $1,460.
The OAE auditor further testified that, although
the D'Esposito ledger card contained a deposit
entry of $1,500 on June 24, 1991, there was no
source document, such as a deposit slip, showing
that the $1,500 had been deposited in respondent's
trust account. Accordingly, the OAE auditor
concluded, because respondent had made the
D'Esposito disbursement from the trust account
without corresponding funds on deposit, other
client trust funds had necessarily been invaded.
According to the OAE, such misappropriation was
knowing, as respondent knew that she had
insufficient funds in her business account to
issue a refund check to D'Esposito.
For her part, respondent testified that she
had deposited the $3,500 retainer received from
D'Esposito in her business account. Respondent
could not explain why she had issued the refund
check from the trust account instead of the
business account. To refute the OAE's contention
that her motive for issuing a trust account check
was a low balance in her business account,
respondent contended that the business account
bank statement for October 1991 showed a deposit
of several thousand dollars on October 31, 1991,
one day after the $1,460 check was issued.
Therefore, respondent argued, had she written the
refund check against the business account, there
would have been sufficient funds to cover the
amount of the check at the time of its
presentation for payment.
The "Out-of-Trust" Matter
This count charged respondent with knowing
misappropriation of client funds, in violation of
RPC 1.15(a) and RPC 8.4(c).
OAE auditor Galati testified that, on twenty-eight occasions from June 13, 1991 to August 14,
1992, respondent's trust account was out-of-trust,
that is, there was not enough on deposit to equal
the funds that respondent should have been holding
for her clients. Galati prepared a chart showing
each out-of-trust instance and the client's funds
that were invaded. Before preparing the chart,
Galati obtained information from client ledger
cards, as reconstructed by a trust analyzer
software program, using source documents such as
canceled checks, deposit slips, checkbook stubs
and the end-of month reconciliation statements
prepared by respondent's accountant. According to
the chart, during this fourteen-month audit
period, the shortages in respondent's trust
account ranged from $987.60 to $12,046.38,
resulting in the invasion of trust funds held in
behalf of fifteen different clients.
Respondent denied that she knowingly
misappropriated client funds, attributing the
invasion of those funds to negligent
recordkeeping.
The Danmor Matter
In this count, too, respondent was charged
with knowing misappropriation of client funds, in
violation of RPC 1.15(a) and RPC 8.4(c).
Respondent's husband, Allen Pomerantz, is a
physician who operated a radiology practice known
as Danmor, Inc. Because his rental payment checks
were often returned for insufficient funds,
Pomerantz's landlord, Bruce Frankel, required him
to pay the $1,108 weekly rent by cash or certified
check. In March 1992, after Pomerantz continued
to make untimely rent payments, respondent
announced to Frankel that she was assuming
responsibility for Danmor's financial affairs.
Respondent declared that she would pay Danmor's
rent from her trust account, which she described
as being "good as gold."
During March and April 1992 respondent wrote
trust account checks for Danmor's rent, in the
amount of $1,108 each. She also wrote weekly
checks in the amount of $245 against the Danmor
account. These checks were made payable to cash
and contained the reference "Angel" in the memo
column. Angel Bretney was respondent's
housekeeper. Respondent had an arrangement with
her husband whereby Danmor would give respondent a
check for $1,353 every week, which respondent
would deposit in her trust account to pay the
landlord and Angel.
On April 20, 1992 respondent's trust account
check number 1609, payable to the landlord, was
dishonored. After Danmor's check to respondent
was returned for insufficient funds, First
Fidelity Bank contacted the OAE. In response to
the OAE's inquiry, respondent offered the
explanation discussed above, that is, that she had
been helping a client with a "debt consolidation"
and that, "in spite of a dated check," a creditor
had gone directly to a bank, causing the client's
check to "bounce." Respondent did not disclose
that the client was her husband. OAE auditor
Galati testified that, at the demand audit, she
had asked respondent who Danmor was. According to
Galati, respondent replied that Danmor was a very
good client, never offering that Danmor was owned
by her husband. Respondent, in turn, countered
that she would have disclosed her husband's
interest in Danmor if the OAE had asked her about
Danmor.
Respondent admitted her arrangement with
Danmor. In her answer, she acknowledged that she
was negligent in agreeing to this procedure,
rather than suggesting that Danmor pay rent with
its own certified funds. Respondent further
conceded that, because Danmor's checks to her were
returned for insufficient funds, a "temporary
shortfall" occurred in her trust account, which
she then remedied by depositing personal funds in
the account. Indeed, on April 10, 1992 respondent
deposited into her trust account $500 from her
business account and $3,000 from her personal
account, followed by another $1,500 from her
personal account on April 24, 1992. The [first
two] deposit[s] bore the notation "loan to trust
Danmor" [and the latter bore the notation
"loans"].
Galati testified that, at the demand audit,
she had asked respondent who Angel was. According
to Galati, respondent had identified the person as
Angel Bretney, a creditor of Danmor, claiming to
know no more than that or the reason why Angel was
paid in cash. At the ethics hearing, respondent
denied having been specifically asked about Angel
and asserted that she would have given more
information if asked.
Respondent's alleged misrepresentations on
the identity of Danmor and Angel were the subject
of a charge of a violation of RPC 8.4(c).
Recordkeeping Violations
The complaint charged respondent with the
following fourteen recordkeeping violations: a
cash receipts journal was not maintained for the
trust account or for the business account; a cash
disbursements journal was not maintained for the
attorney trust account; a running cash balance was
not maintained in the computerized attorney
business account cash disbursements journals
reconstructed by respondent's accountant; seventy-four attorney trust account checks from November
20, 1991 to July 30, 1992 did not have client
references; a client ledger card was not
maintained for bank charges of $234.82 from
December 13, 1991 to June 3, 1992; twenty-one
deposit slips from November 20, 1991 to July 30,
1992 did not have client references; small client
balances were carried on client ledger cards for
excessive periods of time; no quarterly or monthly
reconciliations were prepared; from November 21,
1991 through July 30, 1992 eighteen trust account
checks, totaling $13,655.97, were made payable to
cash; not all attorney fees were deposited in
respondent's attorney business account; personal
funds and trust funds were commingled;
transactions for one client were incorrectly
entered on the client ledger card of other
clients; client ledger cards did not accurately
reflect the transactions as they occurred; and
trust account checks were post-dated, as admitted
by respondent in her July 7, 1992 letter to the
OAE.
Respondent told the OAE that she thought her
bookkeeper, Catherine Cromlish, had prepared the
trust account reconciliations, although respondent
admitted that she had never requested them or seen
them. Respondent also accused Cromlish of
stealing the cash disbursements and cash receipts
journals. Galati and Cromlish testified, however,
that those journals never existed.
Of particular note to the OAE was a check for
attorney fees that respondent deposited in her
trust account instead of her business account. On
March 16, 1992 respondent deposited into her trust
account $20,300 from Temi Frank, a client.
Respondent then disbursed those funds to herself
the next day. Respondent's records showed that
the $20,300 deposit was recorded on two client
ledger cards: the Schneeberg estate card, and a
"reconstructed" ledger card for Temi Frank. The
Frank card had been reconstructed because there
was no original client ledger card. The OAE urged
a finding that respondent's deposit of the Frank
funds into the trust account was intended to cover
the trust account check to Barbara Zall, as
respondent was aware of the shortage in her trust
account. Obviously, the crediting of one deposit
on two different client ledger cards was improper.
The record is replete with numerous other
questionable office practices by respondent.
Respondent admitted that she went to her office
only about once a week. On other days, she did
not go inside, but sat in her car in the office
parking lot, while her staff brought her checks
and paperwork to sign. Respondent's frequent
absences from the office also led to her
authorizing her staff to sign her name on trust
account and business account checks. Cromlish,
Patty Wooster (a former paralegal assistant) and
Kathleen Kurpiel (a former paralegal) testified
that respondent had permitted Cromlish to sign
respondent's name on numerous checks. In fact,
respondent's method of paying her staff every week
was to have Cromlish prepare, sign, endorse and
cash the checks at the bank, returning with cash
for each employees' salary plus respondent's own
draw.
Respondent, in turn, vigorously denied
authorizing Cromlish or any other person to sign
trust account checks. She was equivocal about
whether she had authorized Cromlish to sign
business account checks, except for a period of
one week and then only to pay office bills.
At the ethics hearing, when respondent was
shown checks that she clearly had not signed,
instead of conceding that they had been signed by
another person, respondent attributed the
difference to a "movement" in the check.
Respondent admitted, though, that she signed
trust account checks in blank:
Q: Did you sign checks in blank?
A: It looks like I must have.
Mr. Barger: As a practice did you?
A: I shouldn't have. I really don't
remember going now - I don't now [sic].
Mr. Barger: Not whether you should have,
or even as a general practice,
did you at times sign the
checks in blank?
A: I would have to say looking at the mess
I did I could have.
Mr. Barger: And might this have been one
of them?
A: Yes, it could have. It is a terrible
thing to say, but I could have.
Mr. Barger: So you did sign trust account
checks in blank?
A: It is very possible. I wish I could go
back. I can't.
A troubling event took place just before the first scheduled ethics hearing date. The hearing was scheduled for Monday, May 13, 1996. On Friday, May 10, 1996, respondent signed a certification alleging that Cromlish had forged her signature on checks and had stolen funds from her. Respondent referred the matter to the Monmouth County Prosecutor's Office. A grand jury proceeding ensued. At its conclusion, a protective order on the transcripts of the proceedings was entered. The parties advised the Board that the grand jury returned a no bill on respondent's criminal complaint.
At the ethics hearing, Galati testified
that respondent "actually told us on the day
of the audit, that she found out subsequently
that no funds were stolen."
Another unsettling revelation was Cromlish
and Wooster's testimony that they had left
respondent's employ because respondent had
directed them to "backdate" papers to be filed in
court, which they had refused to do.
At the ethics hearing, a lot of attention was
focused on several checks from respondent's trust
and business accounts. Specifically, Cromlish
testified that respondent had asked her to travel
to Florida to remove items from the condominium
owned by respondent's father. Cromlish agreed.
She drove to Florida in a car rented by
respondent. According to Cromlish, although
respondent had agreed to reimburse her for
expenses, they had a dispute about the
reimbursement. Cromlish testified that
ultimately, on March 11, 1992, respondent gave her
a reimbursement check for $385.97, issued against
the trust account. Cromlish used the proceeds
from that check to purchase three money orders to
pay personal expenses.
Respondent, however, accused Cromlish of
forging the March 11, 1992 check for $385.97 and
improperly retaining the proceeds for her personal
use. According to respondent, on February 7, 1992
she reimbursed Cromlish with business account
check number 2112 for $412.32, payable to cash.
Respondent, however, claimed that it was unlikely
that Cromlish's three bills plus the bank service
charges for issuing the three money orders would
have equaled the exact amount of Cromlish's
requested reimbursement of $385.97. On the other
hand, the presenter pointed out that on February
6, 1992 respondent issued business account check
number 2062 to Jaguar of Westfield in the amount
of $412.32, the exact amount of the business
account check number 2112 issued eight days later,
payable to cash. After the presenter suggested
that respondent had paid Jaguar of Westfield out
of the business account and then issued another
check in the same amount to reimburse herself for
that expense, respondent insisted that check
number 2112 had been paid to Cromlish as
reimbursement for the Florida trip. Cromlish could
not recall whether she had received those funds.
By way of explanation for her trust account
improprieties, respondent testified that she had
experienced the loss of several family members in
a short period of time. Respondent stated that
she lost her mother in January 1990, her brother
in February 1991, her father in November 1991 and
her mother-in-law in December 1991. In addition,
respondent testified, she had been injured in an
automobile accident in April 1991. Respondent
also blamed others for her ethics infractions,
particularly her recordkeeping violations.
Respondent claimed that it was Cromlish's
responsibility to maintain the necessary books and
records in order to reconcile the accounts.
Respondent faulted her accountant as well,
asserting that it was his responsibility to take
care of her books. Respondent admitted, however,
that she never discussed her financial affairs or
the requirements of R. 1:21-6 with the accountant.
Respondent also remarked that, when she was
admitted to the bar in 1986, there was no
requirement that she complete an accounting
course.
We have carefully canvassed the record, mindful of our duty
to make de novo findings of fact based on clear and convincing
evidence, and are in complete agreement with the findings of the
DRB. The findings recited above we adopt as our own.
This Court has held that ordinarily, when an attorney uses
his or her clients' money as if it were the attorney's own, that
attorney will be disbarred. In re Wilson, 81 N.J. 451, 453
(1979). The Court has further stated: "We foresee no
significant exceptions to this rule and expect the result to be
almost invariable." Ibid.
Respondent knowingly used her client's funds for her own
purposes without authorization. Her juggling of funds between
her personal, business, and trust accounts belies her claimed
lack of knowledge that she was out-of-trust. Respondent's
behavior demonstrates that she was aware of shortfalls in her
accounts. For example, respondent paid D'Esposito from the trust
account rather than the business account when the business
account did not contain enough money to cover the amount due
D'Esposito. We have previously observed that when an attorney
makes a loan to a deficient trust account, it indicates that the
attorney may be "personally aware on that date that his handling
of the trust account had produced the deficit result." In re
Skevin,
104 N.J. 476, 486 (1986), cert. denied,
481 U.S. 1028,
107 S. Ct. 1954,
95 L. Ed.2d 526 (1987). Similarly,
respondent's so-called loans to the trust account evince her
knowledge that she was out-of-trust.
The Wilson automatic disbarment rule is largely based on the
trust a client must have in an attorney handling client funds.
The Court explained:
It is a trust built on centuries of honesty and
faithfulness. Sometimes it is reinforced by personal
knowledge of a particular lawyer's integrity or a firm's
reputation. The underlying faith, however, is in the legal
profession, the bar as an institution. No other explanation
can account for clients' customary willingness to entrust
their funds to relative strangers simply because they are
lawyers.
Although respondent may have intended to replace the funds she took from the trust account, she placed funds in jeopardy when she allowed her account to become out-of-trust. She delayed payment to Barbara Zall because respondent had not returned funds to the trust account at the time Zall was entitled to payment. That respondent may not have intended to permanently deprive Zall of her money and that respondent intended to replace the funds are irrelevant. See In re Irizarry, 141 N.J. 189, 192 (1995) (stating "'a lawyer's subjective intent, whether it be to 'borrow' or to steal, is irrelevant to the determination of the appropriate discipline in a misappropriation case'" (quoting In re Warhaftig, 106 N.J. 529, 533 (1987))); In re Noonan, 102 N.J. 157, 160 (1986) (stating "[i]t makes no difference whether . . . the lawyer intended to return the money when he took it, . . . . it is the mere act of taking your client's money knowing that you have no authority to do so that requires disbarment").
We have consistently failed to attach much, if any, importance to restitution "'because that may depend more upon financial ability or other favoring circumstances than repentance or reformation.'" Wilson, supra, 81 N.J. at 457 (quoting In re Harris, 88 N.J.L. 18, 22-23 (Sup. Ct. 1915)). Furthermore,
"borrowing" client funds from a trust account puts those funds and other client funds at great risk: misappropriation may occur with the intent to repay, but then "[a]nticipated money for repayment fails to materialize. Other clients' trust funds are then used for 'restitution,' and the initial embezzlement spawns many more." Id. at 458-59.
In Skevin, supra, the respondent asserted that he deposited his own funds in his trust account to cover personal withdrawals. There, the respondent admitted assuming there was enough money in the trust account and not maintaining an accounting or running balance of his own funds in the trust account. Skevin, supra, 104 N.J. at 485. We observed that "it follows that each [] advance [the attorney gave himself] posed an at least realistic likelihood of invading the accounts of another client since respondent had no way of knowing what the balances were." Ibid.
In addition to the Zall matter, respondent's withdrawal from the Schneeberg funds, even though she was personally entitled to those funds, placed other trust funds in jeopardy because respondent was not aware of the precise balance of the Schneeberg funds at all times. Indeed, she did invade client funds as the balance in her account was often lower than the amount she should have been holding in trust for her clients. Her use of the trust account to hold the Schneeberg funds not only constituted improper commingling, but it caused client funds to be invaded.
In Skevin, we also noted that where an attorney "knew the invasion [of client funds] was a likely result of his conduct, a state of mind consistent with the definition of knowledge in our statute law" results. Id. at 486. Therefore, even if we accept respondent's contentions that she was unaware that she was out-of-trust, her "willful blindness" satisfies us that she knowingly misappropriated client funds. Ibid. "[A] knowing misappropriation may be established by 'evidence [that] clearly and convincingly demonstrates that [respondent] knew the invasion was a likely result of [her] conduct.'" Irizarry, supra, 141 N.J. at 194 (quoting Skevin, supra, 104 N.J. at 486). Based on the Irizarry and Skevin principles, respondent knowingly misappropriated client funds.
Respondent blames her bookkeeper and accountant for being out-of-trust. The fact that respondent may have permitted her bookkeeper to sign checks drawn on the trust account does not mitigate the seriousness of her breach of professional responsibility. "Lawyers may not absolve themselves of the misappropriation of client funds by delegating to employees the authority to complete signed checks and then failing to supervise these employees." Irizarry, supra, 141 N.J. at 193. Respondent's duty to protect her client's funds was nondelegable. Ibid. As we observed in another case, "[w]e are not confronted here with an isolated or even an occasional bookkeeping mistake
. . . . Lawyers have a duty to assure that their accounting practices are sufficient to prevent misappropriation of trust funds." In re Fleischer, 102 N.J. 440, 447 (1986).
Respondent's payment of Danmor's rent and her housekeeper from the trust account was completely inappropriate and constitutes other knowing misappropriations of client funds for personal use. Moreover, respondent's failure to disclose the true nature of her relationship with Danmor and Angel Bretney support an inference that she was aware of the misappropriation. In addition, her failure to inform the OAE constitutes a violation of R.P.C. 8.4(c) as "conduct involving dishonesty, fraud, deceit or misrepresentation."
Finally, we are greatly troubled by respondent's allegations of theft and forgery against her bookkeeper, Cromlish. In that connection, the DRB observed:
Respondent went so far as denouncing Cromlish's conduct to the prosecutor's office, who presented the matter to a grand jury that did not indict Cromlish. In fact, respondent herself confessed to the OAE at the demand audit that she had been mistaken: no funds had been stolen. Respondent's groundless accusations, obviously intended to exonerate her of any responsibility and to impugn the good character and integrity of a party whom she knew to be innocent, evokes shades of a troubling case recently decided by the Court, where the attorney received a three-year suspension for grievous misconduct, which included false accusations against a young woman, her babysitter. Two members of the Court dissented, voting for disbarment. In re Kornreich, 149 N.J. 346 (1997). As in Kornreich, respondent's malicious denigration of an innocent party's good name should not be tolerated.
Presenting a false claim to a grand jury is not only
alarming, but represents an attempt to obstruct justice in that
respondent intended to let an innocent person take the fall for
her misdeeds. This was but another instance of respondent's
repeated dishonesty. Presenting a false or phony claim to a
grand jury is a perversion of the justice system. When an
attorney attempts to frame an innocent person in a criminal act,
that attorney has demonstrated contempt for the administration of
justice and has poisoned the well of justice. In re Verdiramo,
96 N.J. 183, 186 (1984).
We conclude based on clear and convincing evidence that
respondent has flagrantly disregarded the rules of professional
conduct and "the honor and integrity demanded of a member of the
bar in the practice of law." In re Pennica,
36 N.J. 401, 423
(1962). That evidence also clearly and convincingly establishes
that respondent knowingly misappropriated client funds, a clear
violation of the Wilson rule. We are therefore convinced that
respondent is no longer worthy of the Court's endorsement as
being fit to practice law in this State and should be disbarred.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, STEIN, and COLEMAN join in this opinion.
NO. D-183 SEPTEMBER TERM 1997
Application for
Disposition Disbar
Decided July 17, 1998
Order returnable
Opinion by PER CURIAM
Footnote: 1Although the disbursements exceeded the $1,500 partial retainer by $95, that is not the focus of the OAE's charge of knowing misappropriation. The disbursement of the $1,460 is the essence of that charge.