(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 February 28, 1995 -- Decided June 16, 1995
PER CURIAM
Following an investigative audit conducted in May 1991, the Office of Attorney Ethics (OAE) filed a
seven-count complaint with the District XIV Ethics Committee against Walter L. Roth, Jr. Roth was
charged with four counts of knowing misappropriation of client trust-account funds in four different
transactions: the McCracken matter, the Four Seasons matter, the Hillcrest matter, and the $10,000 Loan
matter. Roth was also charged with one count of commingling of funds, one count of gross neglect of a
client matter, and one count of misrepresentation to the OAE. Roth admitted to both commingling client
funds in his trust account and failing to pursue a client matter with diligence, but denied that he had
knowingly misappropriated client funds or that he had misrepresented facts to the OAE.
In the McCracken matter, Roth deposited in his trust account, on July 30, 1990, $1,300 paid by his
clients that were to be sent in settlement of certain debts owed by the McCrackens. Roth did not send the
money to opposing counsel who then filed a grievance with the OAE. The OAE conducted an audit of
Roth's books and records and found certain deficiencies. On October 11, 1991, Roth forwarded the $1,300
to the opposing attorney. However, in the interim, the $1,300 was not kept inviolate. Those funds were
invaded on two occasions, August 14, 1990 and August 17, 1990 as a result of Roth's issuance of trust
account checks in excess of the available balance.
In the $10,000 Loan matter, Roth deposited a $10,000 personal loan from his father into his trust
account. On two separate occasions, Roth withdrew money totalling $11,000. The first withdrawal was for
$3,000 and the second withdrawal was for $8,000. Because his trust account was overdrawn by $1,000, Roth
invaded client funds. Roth claimed that when he made the second withdrawal he did not recall, nor could he
determine, how much money he had previously withdrawn from his trust account.
In the Four Seasons matter, Roth deposited in his trust account an $8,000 check from a client.
Before waiting for that check to clear, Roth wrote himself a $4,000 check, representing his fee. Thereafter,
the $8,000 check bounced. He therefore invaded client trust funds. When notified of the bounced check,
Roth told the OAE investigator that he could not replace the $4,000 because he had spent it to pay personal
expenses. Roth replenished the invaded funds nine months later.
In the Hillcrest matter, Roth wrote a $7,500 check on his trust account on behalf of Prudential-Hillcrest Homes Realty (Hillcrest), a real-estate agency owned by his father. At the time, which was about
four weeks after the tragic death of Roth's mother, there were no corresponding funds on deposit standing in
the credit of Hillcrest. Because his father was in "bad shape," Roth wrote the check, intending to thereafter
seek reimbursement from his father. Roth failed to follow-up with his father. Because there were
insufficient funds to cover the check, client funds were invaded. It took Roth three months to replenish the
trust account.
In his defense, Roth stated that the invasion of clients' trust funds was negligent, not knowing. He argued that he had extremely poor record-keeping procedures. He also contended that his ability to maintain client trust records had been adversely affected by his depressive condition and ongoing familial difficulties, including the tragic death of his mother and the break-up of a lengthy marriage. Roth was under
psychiatric care and was prescribed drugs to address his problems that his doctor believed affected his ability
to function properly.
The Special Ethics Master concluded that the OAE had failed to demonstrate by clear-and-convincing evidence that Roth had knowingly misappropriated client funds, or that his conduct had amounted
to dishonesty or fraud. The Special Master recommended that Roth be suspended for six months and that
he be subject to monitoring to ensure proper trust accounting in the future.
The Disciplinary Review Board (DRB) divided five-to-three on the issue of knowing
misappropriation and partly rejected the finding of the Special Master. The majority of the DRB found that
record clearly and convincingly established that Roth's misappropriation of client funds in the McCracken
matter, the Hillcrest matter, and the Four seasons matter was knowing. Thus, the majority of the DRB
recommended disbarment. Three members of the DRB found that the proofs did not support the
determination that Roth knowingly misappropriated client funds. Those members would have recommended
a six-month suspension.
HELD: Walter L. Roth is disbarred for the knowing misappropriation of clients' funds.
1. Misappropriation includes the temporary, unauthorized use of client funds, whether or not the attorney
derives any personal gain or benefit therefrom. The lawyer's motive is irrelevant in determining the
appropriate discipline for knowing misappropriation. The principal reason for attorney discipline is to
preserve the confidence of the public in the integrity and trustworthiness of lawyers. Nothing less than
disbarment for knowing misappropriation will preserve public confidence in the profession. (pp. 20-220
2. The totality of the circumstances demonstrates clearly and convincingly that Roth knowingly
misappropriated clients' funds. Circumstantial evidence includes repeated invasions of client funds that were
required to be held inviolate. The testimony adduced convincingly suggests that Roth knew or had to know
that he was invading client funds. (pp. 22-25)
3. Roth contends that his "shoddy bookkeeping," his depression, and simple forgetfulness combined to
obscure his knowledge that his client trust account had been invaded on several occasions. The court rejects
those defenses, finding that the cumulative effect of Roth's multiple invasions of clients' trust-account funds
diminishes the persuasiveness of any of the proffered explanations or justifications. The record clearly and
convincingly demonstrates that Roth believed that he could treat clients' funds as if they were his own. (pp.
25-26)
4. The testimony of Roth's psychiatrist in respect of Roth's depressive condition and treatment does not
demonstrate a loss of comprehension sufficient to explain or excuse his knowing acts of misappropriation.
Therefore, the appropriate discipline is disbarment.
So Ordered.
JUSTICE O'HERN, dissenting, is of the view that the proofs did not clearly and convincingly
establish that there had been a knowing misappropriation of clients' funds within the meaning of In re
Wilson. According to Justice O'Hern, the confluence of human events--the death of a mother, the grief of a
father, the depression of Roth--should be taken into account, especially considering that no client suffered
any loss because of Roth's conduct.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and
COLEMAN join in this per curiam opinion. JUSTICE O'HERN has filed a separate dissenting opinion.
SUPREME COURT OF NEW JERSEY
D-
104 September Term 1994
IN THE MATTER OF
WALTER L. ROTH, JR.,
An Attorney at Law.
Argued February 28, 1995 -- Decided June 16, 1995
On an Order to show cause why respondent
should not be disbarred or otherwise
disciplined.
Walton W. Kingsbery, III, Deputy Ethics
Counsel, argued the cause on behalf of Office
of Attorney Ethics.
Charles J. Sprigman, Jr., argued the cause
for respondent.
PER CURIAM
Following an investigative audit conducted in May 1991, the
Office of Attorney Ethics (OAE) filed a seven-count complaint
with the District XIV Ethics Committee against respondent, Walter
L. Roth, Jr. Respondent was charged with four counts of knowing
misappropriation of client trust-account funds involving four
separate transactions: the McCracken matter, the Four Seasons
matter, the Hillcrest matter, and the $10,000 Loan matter.
Respondent was additionally charged with one count of commingling
of funds, one count of gross neglect of a client matter, and one
count of misrepresentation to the OAE. Respondent admitted that
he had commingled personal and client funds in his trust account,
and that he had failed to pursue a client matter with diligence,
but disputed that he had knowingly misappropriated client funds,
or that he had misrepresented facts to the OAE.
The report of the Special Ethics Master characterized the
essential issue as whether "the misappropriations[] were done
knowingly, as OAE contends, or negligently, as Respondent
contends," and concluded that the OAE had failed to demonstrate
by clear-and-convincing evidence that respondent had knowingly
misappropriated client funds, or that the conduct of respondent
had amounted to dishonesty or fraud. The Special Master
recommended that respondent be suspended for six months and be
subject to monitoring to ensure proper trust accounting in the
future. The Disciplinary Review Board (DRB) divided five-to-three on the issue of knowing misappropriation and partly
rejected the finding of the Special Master. The majority of the
DRB found that "the record clearly and convincingly establishes
that respondent's misappropriation of client funds in [the
McCracken matter, the Four Seasons matter, and the Hillcrest
matter] was knowing," and concluded that disbarment was the only
appropriate sanction. Three members of the DRB found that the
proofs did not support the determination that respondent
knowingly misappropriated client funds and would have imposed a
six-month suspension.
Respondent is charged with four counts of knowing
misappropriation arising from four transactions. In its Decision
and Recommendation, the DRB summarized the relevant evidence from
each of the four matters.
The DRB first detailed the factual background of the
McCracken matter:
Respondent represented Horace and Carol
McCracken in negotiating a settlement of
their outstanding debts owed to Debt
Consultants, Inc. On or about July 27, 1990,
respondent and Daniel C. Hoffman (the
grievant in the McCracken matter), counsel
for Debt Consultants, settled the matter for
$1,300. By letter to respondent dated July
27, 1990, Hoffman confirmed the terms of the
settlement and enclosed a stipulation of
settlement to be executed by respondent's
clients. Respondent received this letter a
day or two later.
On July 30, 1990, the McCrackens gave
respondent a check in the amount of $1,300,
payable to "Walter L. Roth, Jr." Respondent
deposited that check in his trust account on
that same day.
On August 27, 1990, respondent wrote to Hoffman, enclosing an executed consent order and assuring him that the McCrackens' check would follow within seven days. On October 2, 1990, the court signed the stipulation of settlement. Although respondent acknowledged having received the signed stipulation in October or November 1990, he did not send
Hoffman the $1,300 payment. Respondent had
no explanation for his failure to send the
payment after the receipt of the signed
stipulation. His testimony was that "I just
didn't do it * * * . I felt that basically
everything was coming down around me."
Respondent was alluding to several personal
problems that beset him at the time, detailed
below.
By letter dated October 9, 1990, Hoffman
complained to respondent that payment had not
been made. Hoffman also informed respondent
that he would be seeking the entry of a
judgment in the amount of $2,771.30. Indeed,
on January 28, 1991, the court entered a
judgment against the McCrackens in the amount
of $2,331.16, together with pre-judgment
interest in the amount of $349.67, for a
total of $2,680.83 plus costs and counsel
fees.
During a telephone conversation with
Hoffman, in March 1991, respondent claimed
that his secretary had mistakenly deposited
the $1,300 check in the wrong account, a fact
of which he had become aware only after the
receipt of Hoffman's letters complaining
about the non-payment. Hoffman then agreed
to accept the $1,300, if paid immediately.
Once again, respondent did not send the
payment to Hoffman. That fact caused Hoffman
to write respondent a letter, on April 1,
1991, questioning respondent's earlier
explanation of the misdeposit and also
informing respondent that he would be
notifying the disciplinary authorities of
respondent's conduct, within seven days from
the date of the letter.
On May 6, 1991, upon receipt of the Hoffman grievance, the OAE conducted a second audit of respondent's books and records. When respondent failed to produce all the requested records, the audit was continued until May 20, 1991, at respondent's office. Several future visits to respondent's office were necessary. Prior to the May 20, 1991 audit, by letter dated May 16, 1991, the OAE instructed respondent to submit a
reconstruction of his trust account records,
along with quarterly reconciliations as of
certain specific dates. Respondent then
engaged an accountant, Earl J. Kelly, to
prepare the appropriate trust records and the
quarterly trust account reconciliations.
According to respondent, his accountant
worked in conjunction with the OAE during the
entire summer of 1991, in order to
reconstruct his attorney records. After
certain deficiencies were identified,
respondent replenished the trust account by
depositing $9,168.47 into his trust account
on September 24, 1991. After a thorough
review of the reconstructed records, the OAE
determined that they were in compliance with
R. 1:21-6.
On October 11, 1991, respondent finally
sent the $1,300 settlement to Hoffman.
According to respondent, he delayed sending
the funds to Hoffman until his accountant had
completed his trust account reconciliations.
In the interim, however, the $1,300 was
not kept inviolate in respondent's trust
account. Approximately two weeks after the
July 30, 1990 deposit of the $1,300 check in
his trust account, respondent invaded those
funds. He did so by issuing trust account
checks in excess of its available balance.
Specifically, on August 13, 1990,
respondent's trust account balance was
$2,523.54, including the $1,300 McCracken
funds and $1,223.54 in other funds. On that
date, two trust account checks totalling
$2,620 were presented for payment: check No.
4337, in the amount of $120, payable to
"Clerk-U.S. Bankruptcy Court," and check No.
4339, in the amount of $2,500, payable to
"Prudential Hillcrest Homes" ("Hillcrest").
On that date, August 13, 1990, there were no
funds on deposit standing to the credit of
Hillcrest. Respondent personally issued both
checks, which were unrelated to the McCracken
matter. After those checks were cashed, the
trust account became overdrawn by $121.46 and
the $1,300 McCracken funds were invaded.
By letter dated August 14, 1990, the
bank in which respondent kept his trust
account notified the OAE of the $121.46
overdraft. The bottom of that letter
indicated that a copy had been sent to
respondent. Although respondent acknowledged
having received a copy of the bank's notice,
the record is not clear as to the exact date
on which he received it.
On August 14 and 17, 1990, respondent
deposited $2,500 and $3,047 in his trust
account, respectively. On August 17, 1990,
the trust account balance was $5,425.54,
including the replenished $1,300 McCracken
funds and $4,125.54 in other funds. On that
same date, however, respondent issued three
checks totalling $4,500, which were unrelated
to the McCracken matter: check No. 4340, in
the amount of $500, payable to "W. Lundgraf;"
check No. 4341, in the amount of $3,500,
payable to "Fred and Marsha Johnson;" and
check No. 4342 in the amount of $500, payable
to "W.L. Roth, Esq." After the payment of
those checks on August 17, 1990, the balance
in the trust account dropped to $925.54.
Once again, the $1,300 McCracken funds were
invaded.
Respondent testified that he had no knowledge regarding the
trust account balances on either August 13 or August 17, 1990.
Q. What was your balance in your trust
account right before you wrote [check no.
4337 and check no. 4339]?
A. I don't know.
Q. When was the last time before you wrote
these two checks that you checked on what
your balance was in your trust account?
A. I haven't the faintest idea, could have
been up to a year.
Q. When you wrote these two checks what did
you think was the balance in your trust
account?
A. I have no idea.
Q. [T]hree days after you had bounced a
check on your trust account and you had made
certain deposits in the three days there and
then you wrote out checks totalling [$]4500,
do you have any idea what you thought your
trust account balance was on the 17th when
you wrote this check, when you wrote this
series of checks?
A. No.
Respondent asserted that the misappropriation of the
McCracken funds was negligent and attributable to respondent's
failure to keep client ledger cards adequately and to reconcile
the trust account with bank statements. Respondent testified
that "[n]obody" had kept the ledger cards up-to-date and that he
had attempted no "monthly, weekly or quarterly reconciliations of
trust accounts versus trust balances," despite having received a
letter in 1988 from the OAE indicating record-keeping
deficiencies. Donna McClintock, who served as respondent's
paralegal and legal secretary before she had left his employ in
January 1990, described the state of respondent's business
records as "a mess" because "[t]hey hadn't been kept current for
one thing, we were so far behind." Jeanine Verdel, an
investigative auditor for the OAE, testified that on May 20,
1991, she had discovered respondent's trust records to be "[i]n
disarray" and had verified that at one meeting with respondent,
she had "actually opened some trust account bank records that had
sat around and hadn't been opened for several months."
Respondent offered evidence to suggest that his ability to
perform routine legal duties, such as the maintenance of client
trust records, had been adversely affected by his mental
condition and ongoing familial difficulties, including the tragic
death of his mother and the break-up of a lengthy marriage.
Respondent presented the testimony of psychiatrist Dr.
Houseknecht, who initially had treated respondent on June 27,
1989, and was continuing to treat respondent for "major
depression" at the time of both the misappropriations and the
hearing before the Special Master in January 1994. Dr.
Houseknecht was asked: "Would you find it unusual, Doctor, that
[respondent] would have problems keeping track, under his
circumstances, of deposits and withdrawals of monies into certain
bank accounts?" He responded: "No." Dr. Houseknecht further
testified:
Q. Would it be consistent with
[respondent's] treatment and his diagnosis
that [respondent] would make a deposit,
forget that he made a deposit several days
later?
A. It would be consistent.
Q. Would it be consistent with your
knowledge of his condition and your treatment
of him that [respondent] would make a deposit
and forget to make a withdrawal?
A. It would be.
Q. And what if the reverse were true, that
he would make a withdrawal and forget to make
a deposit?
A. Yes.
Dr. Houseknecht characterized respondent's volitional "capacity
to act on what he knows" as the "major defect in [respondent's]
illness" insofar as respondent "knew what he should do and he
knew he wasn't doing it but his ability to control that was
impacted or impaired by his depression." In the course of
treating respondent, Dr. Houseknecht prescribed Norpramin, an
antidepressant, Prozac, an antidepressant, and Trilafon, a "major
tranquilizer." Dr. Houseknecht, in a treatment note dated August
2, 1990, described respondent as "pretty heavily slugged,"
meaning sedated and lacking alertness due to the dosage of
Trilafon. In early 1991, respondent sought Dr. Houseknecht's
assistance in continuing outstanding trial matters, and Dr.
Houseknecht provided letters to the court requesting that
respondent be granted medical leave "to allow sufficient recovery
from his depressive illness."
As noted above, after reconstruction of his trust records
and identification of certain deficiencies, respondent
replenished the trust account by depositing $9,168.47 into the
account on September 24, 1991. After reviewing respondent's
records, the OAE determined respondent to be in compliance with
Rule 1:21-6. Respondent's prognosis concerning his depressive
illness is considered "good," although periods of relapse have
occurred.
Summarizing the Four Seasons matter, the DRB found the
following facts:
On November 9, 1990, respondent received
an $8,000 check from his client, Four
Seasons. On that same day, respondent
deposited the check into his trust account.
Also on that day, without first waiting for
the $8,000 check to clear, respondent issued
a $4,000 check to himself, representing his
fee in the Four Seasons matter. After this
$4,000 withdrawal, the Four Seasons balance
was reduced to $4,000, assuming of course
that the $8,000 check would eventually clear.
On November 13, 1990, respondent deposited
$8,159.56 of his own monies in his trust
account in behalf of Four Seasons. That
deposit was a personal loan from respondent
to Four Seasons. According to respondent,
Chris Williams, a principal of Four Seasons,
had asked respondent for a loan, to which he
had agreed. The proceeds of that loan had
come from an IRA that respondent had
previously cashed and deposited into his
trust account, instead of in his business
account, in order to avoid an IRS lien. (The
IRS had, on prior occasions, asserted a lien
on respondent's business account as a result
of outstanding payroll taxes.) Assuming
again that the initial $8,000 check from Four
Seasons would clear, after that $8,159.56
deposit the Four Seasons balance was
increased to $12,159.56. On November 15,
1990, respondent wrote a check for $6,159.56
to Chris Williams, thereby reducing the Four
Seasons balance to $6,000. However, on the
next day, November 16, 1990, the $8,000 check
given to respondent by Four Seasons bounced.
Accordingly, instead of having a $6,000
positive balance, the Four Seasons account
was actually overdrawn by $2,000.
The record is not entirely clear as to the precise date on which respondent learned of the return of the $8,000 check for
insufficient funds. Respondent was not sure
whether he had opened the envelope containing
the bank's notice of the overdraft on the
same day he had received it or "weeks later."
He assumed, however, that he had opened the
mail on the same day he had received it,
which would have been "several days" after
November 16, 1990, the day the check was
returned.
Respondent did not redeposit the $4,000
fee in the trust account, upon being notified
of the overdraft. According to the OAE
investigator, Jeanine Verdel, respondent told
her that he was unable to return the $4,000
fee paid to himself on November 9, 1990,
because he had used it to pay personal
expenses.
Respondent testified to a different explanation why he had
not reimbursed the overdrawn trust account with the $4,000 he had
previously taken as a fee:
Q. When the check of [$]8,000 came back did
you ever reimburse the $4,000 you took as a
fee?
A. No, because -- the answer is no.
Q. And why didn't you do that at that time?
A. Well, first off, I wasn't sure exactly
how much it was because I had put my money in
there and I still had a couple thousand of my
money left so I wasn't quite sure how much I
was out because I wasn't -- I didn't have the
records.
Q. What was the status of the trust records
at that point in time?
A. Most -- not most, a good portion of bank
statements were unopened, hadn't been
reconciled in a couple years, there basically
had been no records kept since Donna
[McClintock] had left.
Respondent candidly acknowledged that he eventually had
become aware that the client trust account had been overdrawn.
However, he testified that his depressive illness had frustrated
his ability to volitionally undertake steps to replenish the
trust account.
Q. Did you know at some point in time at
that point that the trust account was then
running short of funds, that you had
overdrafted the trust account?
A. Yeah.
Q. What steps did you take at that point?
A. I didn't really take any steps.
Q. Why?
A. I couldn't do it.
Q. Why couldn't --
A. All I had to do -- I could have had it
fixed in ten seconds, all I had to do was
pickup the phone and call my father.
Q. Why didn't you do that?
A. I don't know.
Q. Were you on medication at that point in
time?
A. Yes.
Q. What impact was the medication having on
you, if any?
A. I don't remember too much of that time.
The medication -- I was feeling pretty beat
up, the medication wasn't great.
Q. At any time during the periods that have
been set forth in the complaint were you
aware that you were invading trust funds of
clients?
A. The only time I could truly say that I
would have been aware of it would have been
on the [Four Seasons] matter.
Q. What action did you then take to correct
that?
A. I didn't take any action.
Q. During this period of time were you
under the treatment of Dr. Houseknecht?
A. Yes.
Q. How would you characterize your day-to-day operation of your business affairs?
A. I didn't operate, I just sat back and
let it sort of operate itself, and not very
well.
Although it remains unclear from the record, respondent was aware presumably of the invasion of client funds in November 1990 when the Four Seasons check had bounced. No action was taken by respondent until May 1991 when the OAE instructed respondent to submit a reconstruction of his trust records. Respondent testified that "[a]fter ethics got done we got the account totally reconstructed and then I was told it's short X, I put it in." On August 30, 1991, apparently after his accountant had completed the mandated reconciliation of his trust records,
respondent replenished the invaded client trust funds by
depositing $1,967.28 in his trust account.
Prudential-Hillcrest Homes Realty (Hillcrest), a real-estate
agency, was owned by respondent's father, who had purchased the
business at the suggestion of respondent. However, respondent's
mother obtained her broker's license and took an active interest
in the business, such that the business "really became hers." A
review of the record does not indicate if respondent was the
attorney for the business. The DRB summarized the relevant facts
of the Hillcrest matter:
It is clear, however, that, on May 25, 1990,
respondent issued trust account check No.
4318 to Hillcrest, in the amount of $7,500.
At that time, which was approximately four
weeks after the death of respondent's mother,
there were no corresponding funds on deposit
standing to the credit of Hillcrest. As of
May 25, 1990, respondent's trust account
balance was $9,278.83, an amount that was
$124.47 short of the funds respondent should
have had on deposit for the benefit of
nineteen other clients. On May 29, 1990,
when the $7,500 check was cashed, those
client funds were substantially invaded.
On questioning by the Special Master, respondent recalled
the circumstances surrounding the writing of the check:
It's in the middle of the day, the broker
from Hillcrest comes over and says[,] I'm
going to have to pay bills tomorrow; now,
I've got a choice, my dad is in bad shape, I
can pickup the phone * * * and say[,] dad,
hop in your truck and get a check up here for
[$]7500 or I can hand the check over, go home
that night, pick the proper moment to tell
him, he'll write it, bring it up, put it in
the bank and the money is never out of the
account, for whatever reason, I did not do
that.
Respondent acknowledged that when he had written the check for Hillcrest, he had "probably believed that there was nothing there" to support the disbursement for that client. However, respondent testified that "it was my intention that the check was not to be presented until I had placed my father's check in the account and I, for whatever reason, did not follow through." Respondent stated, "If I had carried through and done what was available and what should have been done when the check was presented to my bank, the funds would have been there, collected." Respondent did not recall how the check had been transmitted to Hillcrest, stating he was unsure about whether he had "delivered it or [] put it in an envelope for somebody to pickup," but he testified that the check had been cashed "[b]ecause I didn't tell him not to, I just forgot about it." Respondent stated that "months later, the [$]7500, months later it just hit me and * * * I said I wrote that check and I went to my father, I said I have to put [$]7500 in that I gave Hillcrest, he gave me it immediately, I put it in." Respondent's father had loaned respondent substantial sums of money in the past, and testified that he had possessed the financial capacity to provide his son sums of monies in excess of $7,500. On August 24, 1990,
approximately three months after respondent had issued to
Hillcrest the $7,500 trust-account check, he replenished the
trust account.
The final allegation of a knowing misappropriation of client
funds concerns the $10,000 Loan matter. The DRB summarized the
essential facts:
On January 7, 1991, respondent deposited
$10,000 in his trust account, which he
identified as a loan from his father.
According to respondent, he did not deposit
the $10,000 loan in his business account
because he feared that the IRS would assert a
lien against it.
On February 15, 1991, respondent issued
trust account check No. 4427, in the amount
of $8,000, against the $10,000 deposit.
Eleven days later, on February 26, 1991, he
issued trust account check No. 4428, in the
amount of $3,000, also against the $10,000
deposit. Both checks were made payable to
cash. The checks were then deposited in
respondent's business account to cover
overdrafts that occurred on February 14 and
February 25, 1991. Because, at the time that
respondent issued those two checks, he had no
fees or other monies in the trust account to
which he was entitled, client funds were
invaded to the extent of $1,000.
Respondent testified that "[w]hen I issued the second check I didn't recall what I had issued the first check for" and therefore exceeded by $1,000 the $10,000 deposited in the trust account. Respondent explained that he had written "the checks
against it of the money * * * that was loaned to me and for
whatever reason I didn't have any records of it, I didn't have
any sheet for it, that sheet was made up later and I
miscalculated. I don't know if I didn't remember what the first
one I wrote was or how much was put in * * * ." Respondent
corrected the shortage and replenished the trust account on the
reconstruction of his trust-account records.
With respect to the McCracken matter, the DRB concluded that "[t]here is no question that the McCracken funds were invaded on August 13, 1990, when, after the $120 and the $2,500 checks were cashed, respondent's trust account became overdrawn." The DRB noted respondent's assertion that the invasion of client funds had been unintentional, as respondent allegedly had been unaware of the trust-account balance on August 13, 1990, because his attorney-trust-account records had not been reconciled since his secretary had left his office in January 1990. However, the DRB reasoned that "even if one believes respondent's contention that the first invasion of the McCracken funds, on August 13, 1990, was not knowing because he had 'no idea' what his trust account balance was on that date," respondent nevertheless "had to know, on August 17, 1990, when he issued three checks for $4,500, that his trust account balance was insufficient to cover those checks
and, at the same time, keep the $1,300 McCracken funds
inviolate." The DRB concluded that respondent knowingly had
misappropriated client funds, and therefore must be disbarred:
Respondent had to know that because, on
August 14, 1990, he received the bank's
notice of the $121.46 overdraft of August 13,
1990, deposited $2,500 and $3,047 in the
account on August 14 and August 17, 1990,
respectively, and then wrote three checks for
$4,500 against a $5,425.54 balance that
should have included the $1,300 McCracken
funds. As noted above, after the $4,500
checks were cashed, the trust account balance
dropped below $1,300 (to $925.54). The
conclusion is, thus, inescapable that
respondent knew that he was invading the
$1,300 McCracken funds when he issued the
$4,500 checks on August 17, 1990.
In the Four Seasons matter, the DRB noted that no allegation existed that respondent had continued to write checks against the Four Seasons account after November 16, 1990, despite his knowledge of the return of the $8,000 check, but rather it found it to be "respondent's failure to replenish the account within a reasonable period of time" that constituted the knowing misappropriation. Respondent did not replenish the trust account until August 30, 1991, nine months after the misappropriation. The DRB rejected respondent's explanation that he had failed to replace promptly the missing fees because he had been unaware of the amount of the negative balance, stating, "There is no justification for his failure to deposit a sum sufficient to cover the trust account shortage. In fact, a deposit of $8,000, the amount of the dishonored check given by his client, would
have shown a good faith effort on his part." The DRB concluded
"that respondent's failure to return trust funds to his trust
account for a period of nine months constituted knowing
misappropriation," and therefore mandated disbarment.
The DRB characterized the Hillcrest matter as
"[r]espondent's most glaring act of knowing misappropriation"
warranting disbarment. Respondent drew a check for $7,500 from
his trust account to pay for Hillcrest's business expenses
despite knowing "that there were no corresponding funds standing
to the credit of Hillcrest." The DRB recognized that respondent
had testified that he had intended that the check "not be
presented to the bank until he talked to his father and asked for
a check to be deposited into his trust account," but likewise
noted that "for whatever reason" respondent had failed to fulfill
that intent. Moreover, respondent did not replenish this
invasion for three months. The DRB found the evidence to be
"clear and convincing that respondent knew that he was invading
other client funds when he drew the $7,500 check."
The DRB concurred in the judgment of the Special Master that
the evidence did not clearly and convincingly demonstrate that
respondent knowingly had misappropriated client funds in the
$10,000 Loan matter. The DRB found respondent's testimony
"plausible," in that he "did not recall the amount of the loan
from his father or the amount of the first check, when he issued
the second check." Finally, the DRB concluded that clear and
convincing evidence to support a finding that respondent
misrepresented facts to the OAE was lacking.
Three members of the DRB recommended that respondent be
suspended for six months. Those members believed that the
evidence did not clearly and convincingly establish that
respondent knew he had invaded client funds in the McCracken
matter because of "his sloppy recordkeeping practices." Those
members further believed that a nine-month delay in replenishing
the funds in the Four Seasons matter was not unreasonable in
light of evidence suggesting that respondent had been awaiting
the completion of the reconciliation of his trust records to
determine the amount of the missing funds. Finally, those
members asserted that respondent's conduct in the Hillcrest
matter was not consistent with the state of mind associated with
a knowing misappropriation of client funds.
Knowing misappropriation "consists simply of a lawyer taking a client's money entrusted to him, knowing that it is the client's money and knowing that the client has not authorized the taking." In re Noonan, 102 N.J. 157, 160 (1986). Misappropriation includes "not only stealing, but also unauthorized temporary use for the lawyer's own purpose, whether or not he derives any personal gain or benefit therefrom." In re
Wilson,
81 N.J. 451, 455 n.1 (1979). The motive of the lawyer is
irrelevant in determining the appropriate discipline for knowing
misappropriation. In re Warhaftig,
106 N.J. 529, 533 (1987).
This Court consistently has held that the "principal reason
for [attorney] discipline is to preserve the confidence of the
public in the integrity and trustworthiness of lawyers," In re
Wilson, supra, 81 N.J. at 456, and "[i]n pursuit of this goal, we
have felt compelled to impose strict sanctions for the
intentional misuse of clients' trust accounts." In re Orlando,
104 N.J. 344, 350 (1986). Almost invariably, when an attorney
knowingly misappropriates funds of a client, that attorney is
disbarred. See, e.g., In re Barlow, ___ N.J. ___, ___ (1995)
(slip op. at 6); In re Davis,
127 N.J. 118, 127 (1992); In re
Rogers,
126 N.J. 345, 355 (1991); In re Noonan, supra, 102 N.J.
at 159-60. Since this Court announced the bright-line Wilson
rule in 1979, "we have not retreated one bit from the principle
that knowing misappropriation . . . will warrant the Wilson
sanction of disbarment," In re Konopka,
126 N.J. 225, 228 (1991),
and have repeatedly rejected opportunities "to create exceptions
to the Wilson rule, even where the misappropriation was the
product of severe personal and financial hardship." In re
Warhaftig, supra, 106 N.J. at 535. We continue to remain
"convinced that nothing less will be consistent with our view of
the devastating effect of misappropriation on the public's
confidence in the bar and in this Court." In re Hahm,
120 N.J. 691, 697 (1990).
However, because of the rigid inflexibility of the Wilson
rule and our recognition of the permanency of disbarment, we have
demanded clear-and-convincing evidence that the attorney
misappropriated the client's funds knowingly. See In re LaRosee,
122 N.J. 298, 310 (1991); In re Librizzi,
117 N.J. 481, 490
(1990); In re Gallo,
117 N.J. 365, 372 (1989); In re Perez,
104 N.J. 316, 324 (1986). "This high standard emphasizes the
reluctance which should characterize a decision to impose a
disciplinary sanction and the serious consequences which attend
such a decision." In re Sears,
71 N.J. 175, 197-98 (1976).
Based on our independent review of the record, we conclude
that the totality of the circumstances demonstrates clearly and
convincingly that respondent knowingly misappropriated his
clients' funds. The line between knowing misappropriation and
negligent misappropriation is a thin one. "Proving a state of
mind--here, knowledge--poses difficulties in the absence of an
outright admission." In re Johnson,
105 N.J. 249, 258 (1987).
However, this Court has noted that "an inculpatory statement is
not an indispensable ingredient of proof of knowledge, and that
circumstantial evidence can add up to the conclusion that a
lawyer 'knew' or 'had to know' that clients' funds were being
invaded." Ibid. In this case, that circumstantial evidence
includes repeated invasions of client funds that were required to
be held inviolate. The testimony adduced convincingly suggests
that respondent "knew," or "had to know" that he was invading
client funds.
In the Hillcrest matter, respondent admitted that he had
"probably believed that there was nothing there" to support the
disbursement of $7,500. Nevertheless, he wrote the check.
Respondent contends, however, that he had intended to recover the
funds before the check had been presented for payment, but had
failed to follow through. Regardless of the questionable nature
of that practice, respondent had to know that unless he were to
cover that check, clients' funds would be substantially invaded.
The failure of respondent to deposit funds sufficient to cover
the check inevitably resulted in the invasion of the trust
account and constituted knowing misappropriation. Respondent's
explanation that he failed to ask his father for the money on the
day he wrote the check because his father was in "bad shape"
might be plausible, but it cannot possibly justify respondent's
failure to replace the funds for approximately three months.
Respondent likewise knew that he had invaded clients funds
in the Four Seasons matter. Respondent fully admitted that on
return of the client's check for insufficient funds on November
16, 1990, he had been aware that he had invaded trust account
funds by issuing himself a check for payment of fees on November
9, 1990. Nevertheless, respondent claims that he took no action
to replenish the deficit for a period of nine months because he
"wasn't sure exactly how much it was," apparently because he was
awaiting the reconciliation of his trust account. However,
although the invasion had occurred in November 1990, respondent
was not ordered by the OAE to undertake a reconciliation until
May 1991. In the interim, respondent did nothing. Despite an
admitted knowledge that his trust account was in disarray,
respondent consistently failed to adhere to acceptable trust-account management practices and failed to implement procedures
to guard sufficiently against future invasions. "As fiduciaries,
lawyers are obliged to know whether their trust accounts are in
balance." In re Bell,
126 N.J. 261, 266 (1991). Respondent knew
that his trust account procedures were lacking, but did not
rectify them. "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 knew that he had violated that duty, was aware that
his trust account had been invaded, and was aware that the
disorder of his trust account records did not provide a guarantee
against future invasions, but knowingly failed to undertake any
corrective action.
Finally, the McCracken matter provides strong circumstantial
evidence that respondent knew that he was invading client trust
funds. Respondent, by issuing a check for $2,500 to a client,
Prudential Hillcrest Homes, who had no funds standing to its
credit, invaded his trust account on August 13, 1990. The bank
notified respondent that the trust account was overdrawn on
November 14, 1990, and respondent deposited a check for $2,500 on
the same day. Respondent claims that he did not realize that the
$2,500 check he had recently issued "was the cause of the
overdraft," and insisted that no connection existed between the
issued check and the subsequent deposit for the same amount.
Three days later, respondent invaded the trust account again.
The chronology clearly suggests that the deposited check on
November 14, 1990, had been intended to replenish the overdrawn
trust account and was not mere coincidence. Respondent must have
known three days later that he was invading the trust account
again.
Respondent has offered the defenses that his "shoddy
bookkeeping," his depressive state of mind, and simple
forgetfulness, combined to obscure his knowledge that his client
trust account had been invaded on several occasions. Regarding
the McCracken matter, respondent testified that he had not known
the balance in his trust account on August 13, 1990, before
issuing two checks that had invaded the trust funds of clients.
Moreover, despite strong evidence that respondent subsequently
received notification that his trust account had become
overdrawn, and after apparently replenishing that deficit by
depositing a check, respondent invaded the trust account again
days later. Respondent testified that although he had been aware
that he had invaded client funds in the Four Seasons matter, he
had been incapable of rectifying the overdraft, both because of
his mental state and because of his inability to identify the
amount of the shortage. Finally, respondent admits that he knew
that adequate funds to support the disbursement in the Hillcrest
matter were lacking, but that he intended to receive money from
his father to cover the check and "for whatever reason, did not
follow through." In rejecting respondent's defenses, we
acknowledge that the cumulative effect of respondent's multiple
invasions of clients' trust-account funds diminishes the
persuasiveness of any of respondent's proffered explanations or
justifications. The record clearly and convincingly demonstrates
that respondent believed that he could treat clients' funds as if
they were his own.
Finally, we have reviewed the psychiatric testimony offered
by respondent. Although the expert testimony suggests that
respondent lacked the volitional capacity to fulfill effectively
his duties as an attorney, the testimony does not suggest that
"respondent suffered a loss of competency, comprehension or will
of a magnitude that could excuse egregious misconduct that was
clearly knowing." In re Jacob,
95 N.J. 132, 137 (1984).
Respondent was suffering from depression resulting from the
break-up of his marriage and the tragic death of his mother.
However, no indication exists that "respondent could not
distinguish between right and wrong or that he did not understand
the nature and quality of his acts." In re Baker,
120 N.J. 496,
504 (1990). Respondent's defense does not go far enough.
"Respondent candidly admitted that he understood the situation.
He fully knew and understood that when he invaded his trust
accounts, the funds he was taking were not his." Id. at 505.
Even if we were to acknowledge that the testimony of respondent's
psychiatrist might diminish the impact of respondent's failure
properly to manage his trust account, respondent's
misappropriation in the Hillcrest matter could not be explained
on the basis of trust-account mismanagement. That invasion of
trust funds was intentional when it occurred, and respondent's
contention that he simply forgot to replace the funds is not
credible.
We are mindful of the adversity respondent has endured and
the difficulties he continues to struggle to overcome. However,
the testimony does not demonstrate a loss of comprehension
sufficient to explain or excuse his knowing acts of
misappropriation.
We conclude that the appropriate discipline is disbarment.
Respondent is directed to reimburse the Ethics Financial
Committee for appropriate administrative costs.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK,
GARIBALDI, STEIN and COLEMAN join in this per curiam opinion.
JUSTICE O'HERN has filed a separate dissenting opinion.
SUPREME COURT OF NEW JERSEY
D-
104 September Term l994
IN THE MATTER OF
WALTER L. ROTH, JR.,
An Attorney at Law.
O'HERN, J., dissenting.
Three members of the Disciplinary Review Board (DRB) voted
for a six-month suspension of respondent, rather than disbarment.
Those members believed that the proofs did not clearly and
convincingly establish that there had been a knowing
misappropriation of clients' funds within the meaning of In re
Wilson,
81 N.J. 451 (1979). I agree with the dissenting members
of the DRB and do not vote to disbar the respondent.
The crucial issue is the claimed misappropriation of the
Hillcrest funds. Respondent testified that in May 1990 he drew a
$7,500 check from his trust account to cover expenses of his
father's real estate business. He intended to obtain the funds
from his father that same evening before the check was presented
for payment. Respondent's failing was not that he was venal, but
that he did not bring himself to discuss the cover of the check
with his father while his father was mourning the loss of his
wife. As respondent explained the situation:
It's in the middle of the day, the broker
from Hillcrest comes over and says I'm going
to have to pay bills tomorrow; now, I've got
a choice, my dad is in bad shape, I can
pickup [sic] the phone, this is the way I'm
reconstructing it, I can pickup [sic] it
again and say dad, hop in your truck and get
a check up here for $7500 or I can hand the
check over, go home that night, pick the
proper moment to tell him, he will write it,
bring it up, put it in the bank and the money
is never out of the account, for whatever
reason I did not do that.
Thus, when respondent drew the check he did not know that
there would be an invasion of client funds. He believed the
check would be covered. When he went to his father's home that
evening to get the covering check from his father (who was fully
able to cover the $7,500), he found his father in a disconsolate
state over the recent, tragic death of his wife in an automobile
accident. For whatever reason, sympathy or his own grief over
his mother's death, respondent did not attend to business. He
never found "the proper moment." Did that display of humanity
make Walter Roth a thief? There must be more to the Wilson rule
than this. Yes, respondent waited several months to correct the
situation, but he, too, was in the grips of a deep depression,
not induced solely by the death of his mother, but surely not
alleviated by it. As his associate from 1986 to 1989 explained:
"[A] lot of times [respondent] would sit in his office with just
a banker's lamp on, not the overhead lights, just sit and stare
off into space * * * ."
Insistence on proof that an attorney's
personal suffering caused him to
misappropriate funds is both unrealistic and
pointless. Our human experience is
sufficient to infer a relationship between
severe personal stress and acts of imprudence
or even desperation. The question should not
be one of causation, but rather whether our
disciplinary system is sufficiently flexible
in unique circumstances to temper the
imposition of discipline by taking into
account the influence of extraordinary
events.
[In re Bell,
126 N.J. 261, 269 (1991) (Stein,
J., concurring in part, dissenting in part).]
It should so be in this case as well. The confluence of human
events--the death of a mother, the grief of a father, the
depression of the respondent--should be taken into account,
especially considering that no client suffered any loss on
account of respondent's conduct.
SUPREME COURT OF NEW JERSEY
D-
104 September Term 1994
IN THE MATTER OF :
WALTER L. ROTH, JR., : ORDER
AN ATTORNEY AT LAW :
It is ORDERED that WALTER L. ROTH, JR., of PITMAN, who was
admitted to the bar of this State in 1979, be disbarred,
effective immediately; and it is further
ORDERED that respondent's name be stricken from the roll of
attorneys and that he be permanently restrained and enjoined from
practicing law; and it is further
ORDERED that all funds, if any, currently existing in any
New Jersey financial institution maintained by WALTER L. ROTH,
JR., pursuant to Rule 1:21-6, shall be restrained from
disbursement except upon application to this Court, for good
cause shown, and shall be transferred by the financial
institution to the Clerk of the Superior Court, who is directed
to deposit the funds in the Superior Court Trust Fund, pending
further Order of this Court; and it is further
ORDERED that respondent reimburse the Disciplinary Oversight
Committee for appropriate administrative costs incurred in the
prosecution of this matter.
WITNESS, the Honorable Robert N. Wilentz, Chief Justice, at
Trenton, this 16th day of June, 1995.
/s/ Stephen W. Townsend
CLERK OF THE SUPREME COURT
NO. D-104 SEPTEMBER TERM 1994
Application for
Disposition Disbar
Decided June 16, 1995
Order returnable
Opinion by PER CURIAM