New Jersey lawyer suspended for charging excessive and false fees to clients and claimed that everyone did it

Hello everyone and welcome to this Ethics Alert which will discuss the November 8, 2023 New Jersey Supreme Court opinion imposing a one year suspension on a lawyer for charging inflated and false fees to clients.  The case is In the Matter of Marcy E. Gendel, No. D-68-088158 (November 8, 2023). The New Jersey Supreme Court opinion is here:  https://drblookupportal.judiciary.state.nj.us/DocumentHandler.ashx?document_id=1171364 and the report of the New Jersey Disciplinary Review Board is here:  https://drblookupportal.judiciary.state.nj.us/DocumentHandler.ashx?document_id=1166042. 

According to the NJ Disciplinary Review Board report, an audit found that the lawyer overcharged clients and made false statements on applications for Superstorm Sandy aid claiming that a badly damaged property was her primary residence. The audit found that she overcharged clients in real estate transactions by collecting fake fees or fee amounts that were higher than the actual expenses incurred.

The audit also found that the lawyer overcharged her clients for government recording fees, land survey fees and title insurance fees and collected and retained fees that she never incurred for bank and overnight fees in real estate closings.  In 138 real estate transactions from 2011 to 2015, the lawyer was found to have overcharged her clients nearly $67,000.00.  The report states:  “For at least seven years”, the lawyer “engaged in a carefully constructed scheme to bleed clients of funds to which she was not entitled.”

The report states that the audit was ordered after the lawyer “blurted out” during a real estate closing that she had found a way to take money from clients, and she was surprised that no one else had thought of it. She said senior citizen clients could be charged realty transfer fees without a discount that was applied, and the lawyer could then pay the reduced fee and keep the difference. She estimated that this could allow an attorney to keep an extra $50,000.00 to $100,000.00 per year.  The lawyer made the comment at a closing in front of her client, the listing realtor, and another lawyer, who was on the local Bar ethics committee. The lawyer then sent a letter to the New Jersey Office of Attorney Ethics about the conversation.

The audit showed that the lawyer did not implement the plan that she described lawyer and she claimed that she made the comment to express frustration that each county in New Jersey had its own system for recording property deeds, which would make it easy for people to steal for years without detection and that she was making the point that a new e-recording system would provide more checks and balances. 

After a hearing before the New Jersey Office of Attorney Ethics, the lawyer began reimbursing her client and she told that agency that she began estimating recording fees when the exact amount was unknown before a Housing and Urban Development statement was prepared. 

The lawyer said that she began charging a flat amount to record deeds because she saw that everyone else was doing it, and it made her bookkeeping process simpler. She also said her bank fee charges charge reflected the time spent at the bank and the excessive land survey fees were intended to reimburse the time that she spent reviewing the documents.  The lawyer also said that she was unaware of the New Jersey Supreme Court’s 2016 decision in In re Fortunato, in which the New Jersey Supreme Court ordered a lawyer to return excess recording costs that he had charged to clients in closings. 

The disciplinary review board found that the lawyer’s misconduct was “far more egregious than that of the attorneys in Fortunato and its progeny because she overcharged clients for services that were clearly known ahead of a property’s closing.”   The report further found that the lawyer “systematically inflated multiple charges and retained the differences for herself.”  She “took no responsibility for her actions and instead insisted she engaged in the misconduct because everyone else was doing it.”

The New Jersey Supreme Court Order suspended the lawyer for one year and until further order of the court.

Bottom line:  The lawyer was found to have engaged in a large amount of serious misconduct in this case, including charging excessive fees and costs; however, she surprisingly received only a one-year suspension.  That may or would not have happened if the lawyer practiced in Florida (or other jurisdictions).

Be careful out there.

Disclaimer:  this communication is not an advertisement, does not contain any legal advice, does not create an attorney/client relationship, and the comments herein should not be relied upon as legal advice by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2999 Alt. 19, Suite A

Palm Harbor, Florida 34683

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Joseph Corsmeier about.me/corsmeierethicsblogs

West Virginia lawyer’s license is annulled and suspended for, inter alia, billing over 24 hours multiple times

Hello everyone and welcome to this Ethics Alert blog which will discuss the recent West Virginia Supreme Court of Appeals opinion annulling the license of a lawyer who admitted that he billed more than 24 hours in a day multiple times while representing indigent clients. The lawyer was also suspended for 3 years for overbilling the West Virginia Public Defenders Services Corporation and ordered to pay restitution in a separate case.  The opinion is here:  http://www.courtswv.gov/supreme-court/docs/fall2022/20-1027%20and%2022-0342-armstead-p.pdf 

The lawyer admitted that he charged more than 24 hours four different days and charged 15 hours or more on for an additional 11 days. He also admitted to allegations in a separate count that he charged more than 24 hours per day on three different days and 15 hours or more each day for an additional 25 days. 

The lawyer also admitted that he failed to communicate the scope of his representation and the basis of his fee with one client; however, he did not admit to an allegation that he failed to file a divorce case for another client who paid him more than $3,225.00 and claimed that the failure to file was due to the client’s indecision.

The suspension was imposed based upon allegations that the lawyer overbilled the Public Defender Services Corporation and the Supreme Court ordered the lawyer to allow the agency to withhold more than $58,000.00 in unpaid vouchers as restitution for prior overpayments and to refund $3,225.00 to the divorce client.

Bottom line: This lawyer’s license was annulled, and he was separately suspended for 3 years for egregious overbilling of both clients and a governmental agency and was ordered to pay restitution to the agency and the client.

Be careful out there.

Disclaimer:  this communication is not an advertisement, does not contain any legal advice, does not create an attorney/client relationship, and the comments herein should not be relied upon as legal advice by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2999 Alt. 19, Suite A

Palm Harbor, Florida 34683

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Joseph Corsmeier about.me/corsmeierethicsblogs

Illinois disciplinary complaint alleges that law firm partner double billed clients and charged personal expenses to firm

Hello everyone and welcome to this Ethics Alert, which will discuss the recent Illinois disciplinary complaint which alleges that a now former law firm partner double billed clients more than $108,674.00 and improperly charged personal expenses of $78,790.43 to the law firm. The case is Illinois Attorney Registration and Disciplinary Commission v. Robert John Hankes, Commission No. 2019PR00102, and the complaint is here:  https://www.iardc.org/19PR0102CM.html

According to the complaint, “In 2009, the firm performed services for a separate client (a construction company) in connection with a contract dispute. The firm assigned that matter an internal number that it used for billing purposes, and Respondent was aware of that number because he was the billing attorney responsible for the matter. That billing number became dormant in 2011, about two years after the firm’s involvement in the contract dispute ended.”

The financial institution’s agreements with the customer companies permitted them to be billed directly by the law firm for legal services in certain matters.  The complaint alleges that in one matter, the lawyer billed both the financial institution client and one of its lessees $23,782.50 for the same legal services related to a lease. The lawyer applied the double payment to the dormant law firm account that he reactivated and controlled.

According to the complaint, between January 31, 2018 and September 27, 2019, the lawyer sent eight more false invoices to the financial institution’s customer companies, receiving $108,674.00, which he deposited into the reactivated account. He also allegedly billed the financial institution for those same services.

During that same time, the lawyer allegedly also charged his business and personal expenses to the dormant account, receiving $78,790.43, including golf fees, dining, and travel expenses.  The lawyer was terminated in October 2019 after the alleged misconduct was discovered.

Bottom line:  If the allegations in this Illinois disciplinary complaint are true, this lawyer was greedy and believed that his surreptitious actions would keep his misconduct from being discovered.  He was wrong.

Be careful out there.

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2999 Alt. 19, Suite A

Palm Harbor, Florida

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Please note:  My office has moved and the new office address is 2999 Alt. 19, Palm Harbor, FL 34683.  All other contact information remains the same.

Joseph Corsmeier about.me/corsmeierethicsblogs

 

Iowa lawyer suspended for 4 months without possibility of reinstatement for misappropriating fees from his law firm

Hello everyone and welcome to this Ethics Alert, which will discuss the recent Iowa Supreme Court opinion which suspended a lawyer for 4 months without the possibility of reinstatement for misappropriating fees from his law firm and stated that “(w)e think the time has come to ratchet up the disciplinary sanctions for nonclient theft.”  The case is Iowa Supreme Court Disciplinary Board v. Curtis Den Beste, No 19-0360.  The September 13, 2019 Iowa Supreme Court opinion is here: https://www.iowacourts.gov/courtcases/7209/embed/SupremeCourtOpinion.

The lawyer began practicing law in Iowa in 2000.  He received an offer in 2007 to practice with a law firm and entered into an agreement with the law firm regarding fees.  The agreement required him to deposit all earned client fees into the firm trust account or the general/operating account and he would be paid fifty percent of the earned fees and the firm would keep the remainder.

Beginning in 2015, the lawyer accepted cash payments for fees from some clients and kept the fees instead of depositing them as required by his agreement with the firm.  According to the opinion, after his misconduct was discovered, “(the lawyer) agreed to self-report his misconduct to the disciplinary board and to provide an accounting of the diverted funds as well as a repayment plan.”

The lawyer’s accounting (which was confirmed by the Iowa Bar/Disciplinary Board) showed that he received a total of $18,200.00 and, after for the fifty-percent split and other tax and reimbursement considerations, the lawyer wrongfully misappropriated $9,200.00 from the law firm.

“It is certainly true that, in many cases, fee disputes between a lawyer and his or her current or former law firm might simply be contract disputes and nothing more. For example, a lawyer with a good-faith claim to fees should not be sanctioned merely for exercising or asserting such a claim. But not all fee disputes between a lawyer and a law firm are garden variety contract disputes. Some involve outright and undisputed theft. In such cases, the imposition of discipline is clearly appropriate.”

“The question then arises whether theft from a client is more serious than theft from a law firm or other third party. In our prior cases, the difference has often been dramatic. Theft of any amount by a lawyer from a client ordinarily results in revocation. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Parrish, 925 N.W.2d 163, 170–71 (Iowa 2019); Iowa Supreme Ct. Att’y Disciplinary Bd. v. Guthrie, 901 N.W.2d 493, 500–01 (Iowa 2017). But theft of funds from a law firm can result in much lesser sanctions. Henrichsen, 825 N.W.2d at 529–30.”

“There are, perhaps, some reasons for the distinction between client theft and law firm theft. For instance, many clients have little power against a lawyer in whom the client places trust. A lawyer who steals from a client is preying on those often in an extremely vulnerable position who have placed trust in the lawyer and advanced funds to the lawyer to protect their interests. The relationship between a law firm and a lawyer ordinarily will have less of a power imbalance. The firm is in a better position, perhaps, than a client to monitor the proper handling of fees.”

“Yet, a lawyer who acts dishonestly toward an employer raises serious questions of whether the lawyer has the necessary integrity to practice law.”

“(W)e think the time has come to ratchet up the disciplinary sanctions for nonclient theft. That said, this case may not be the appropriate case to do so. In particular, given our caselaw, Den Beste was not on notice that he faced a possible revocation when he entered into the stipulation in this case. Cf. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Cepican, 861 N.W.2d 841, 845 (Iowa 2015) (finding the attorney did not waive his right to contest a complaint of theft-based misconduct by failing to respond because he did not receive adequate notice of the allegation of theft). Thus, we rely on our precedent and impose a sanction in this case consistent with our prior cases. At the same time, we use this case as a vehicle to put the bar on notice that an attorney who steals from a law firm without a colorable claim may well incur stiffer disciplinary sanctions than have been imposed in our past cases.”

Thus, we rely on our precedent and impose a sanction in this case consistent with our prior cases. At the same time, we use this case as a vehicle to put the bar on notice that an attorney who steals from a law firm without a colorable claim may well incur stiffer disciplinary sanctions than have been imposed in our past cases.

“Upon full consideration of this matter, we order that the license of Curtis W. Den Beste to practice law in Iowa be suspended indefinitely with no possibility of reinstatement for a period not less than four months, effective with the filing of this opinion.”

A dissenting justice would have revoked the lawyer’s license to practice law.

“On multiple occasions, Den Beste knowingly embezzled money from his law firm and then attempted to conceal what he had done. He had no colorable claim to nor was there any fee dispute regarding that money. “[I]t is almost axiomatic that the licenses of lawyers who convert funds entrusted to them should be revoked.” Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Irwin, 679 N.W.2d 641, 644 (Iowa 2004). Accordingly, I would revoke Den Beste’s license to practice law.”

Bottom line:  The opinion discusses the differences between law firm theft and theft from the client and others.  The Iowa Supreme Court has provided notice to lawyers that future law firm theft will result in stiffer disciplinary sanctions than in the past.

Be careful out there.

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2999 Alt. 19, Suite A

Palm Harbor, Florida

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Please note:  My office has moved and the new office address is 2999 Alt. 19, Palm Harbor, FL 34683.  All other contact information remains the same.

Joseph Corsmeier about.me/corsmeierethicsblogs

Louisiana Supreme Court suspends lawyer for 3 years for, inter alia, converting client funds, false statements, and dishonesty, fraud, deceit, misrepresentation

Hello everyone and welcome to this Ethics Alert which will discuss the recent Louisiana Supreme Court disciplinary opinion which imposed 3 year suspension on a lawyer who neglected a legal matter, failed to communicate with a client, charged an unreasonable fee, failed to refund unearned fees, converted client funds, made false statements to the ODC, shared legal fees with a non-lawyer, facilitated the unauthorized practice of law by a non-lawyer, shared fees with a corporation not licensed to practice law, and engaged in conduct involving dishonesty, fraud, deceit, misrepresentation. The disciplinary opinion is In re: Stacy L. Morris, Case No. 14-B-1067 (La. SC 10/15/14) and is online here: https://www.ladb.org/DR/handler.document.aspx?DocID=8294

According to the opinion, the Louisiana Office of Disciplinary Counsel (ODC) filed formal charges against the lawyer in in August 2011 arising out of four client matters. The lawyer answered and denied any misconduct. A formal hearing was held by a hearing committee in January and March 2012. In January 2012, the ODC filed a second set of formal charges against the lawyer, arising out of one client matter. The lawyer answered these formal charges but did not specifically deny, admit, or stipulate to any allegations of misconduct. A formal hearing on this matter was held by a hearing committee in May 2012.

The hearing committee made factual findings, which were modified by the disciplinary board. The factual findings were that the lawyer neglected a legal matter, failed to communicate with a client, charged an unreasonable fee, failed to refund unearned fees, converted client funds, made false statements to the ODC, shared legal fees with a non-lawyer, facilitated the unauthorized practice of law by a non-lawyer, shared fees with a corporation not licensed to practice law, and engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation.

The disciplinary board recommended that the lawyer receive a suspension of one year and one day (which would require that the lawyer file a rehabilitative application and be reinstated). The ODC appealed and requested disbarment.

The opinion upheld the factual findings and discussed the egregiousness of the violations, including her conversion of $21,400.00 related to one client and $7,258.00 related to another client, as well as the fact that the lawyer had not paid any restitution to her clients. The opinion stated that, although disbarment was the presumed sanction for the conversion, the lawyer had significant mitigation, including the fact that she suffered from various illnesses during the time of her misconduct, that she worked primarily as a solo practitioner since 2001 without the benefit of professional mentoring relationships, and that she devoted a substantial portion of her practice to representations in the public interest in under-served areas of the community and suspended the lawyer for 3 years.

Bottom line: This lawyer was found to have engaged in conduct which violated numerous Louisiana Bar rules; however, the Court considered her significant mitigation and reduced the presumed sanction of disbarment to a 3 year suspension.

Let’s be careful out there.

Disclaimer: this e-mail does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670
jcorsmeier@jac-law.com
http://www.jac-law.com

New Jersey Review Board recommends that lawyer be disbarred for misappropriating funds from a $3.5 million judgment from his first trial as a fee and other rule violations

Hello everyone and welcome to this Ethics Alert blog which will discuss the recent New Jersey Disciplinary Review Board opinion recommending disbarment of a lawyer for misappropriating proceeds from a multi-million judgment that he obtained after his first jury trial.  The disciplinary opinion is In the Matter of Feng Li, Supreme Court of New Jersey, Disciplinary Review Board, Docket No. DRB 12-310, District Docket No. XIV-2010-0090E (April 3, 2013).  The disciplinary board’s opinion is online at http://www.judiciary.state.nj.us/drb/decisions/Feng_Li_12_310.pdf.

According to the opinion, which is very long and detailed, the lawyer was admitted to the New Jersey and New York Bars in 2004 and the Pennsylvania Bar in 2005 and he had no disciplinary history in New Jersey.  After graduating from law school, the lawyer received no job offers from law firms and was employed by Net Access performing legal research.  He never worked for a law firm or had his work reviewed by another lawyer.

In brief summary, Alfred and Diana Peng retained the lawyer on January 3, 2005 to file a lawsuit in connection with Mr. Peng’s retirement investments.  Prior to that time, the only legal services that the lawyer had performed involved drafting wills and handling real estate transactions.  Since he had never previously prepared a written fee agreement, the lawyer obtained a retainer agreement from the internet which provided for a contingent fee and tracked the percentages appearing in  the New Jersey Bar rule.

In September 2005, Mr. Peng asked the lawyer to take over the “Sy” litigation which had been pending in New York on behalf of a group of doctors, including himself. In He indicated that the matter involved a real estate dispute pending in a New York court.  The lawyer was not aware of the size or complexity of the litigation and assumed that it involved a minor real estate dispute and he agreed to the representation.  Over the next few days, Mr. Peng told him that there were other plaintiffs, that an October 7, 2005 trial date had been set, and that, although another lawyer was then representing the partners, they all wanted to retain him.

According to the lawyer, Mr. Peng contacted him at home on the evening of September 27, 2005 and said that, because the trial date of October 7, 2005 was approaching, the fee agreement had to be prepared immediately.  The lawyer stated that he wanted to be paid hourly; however, he agreed to a contingent fee and returned to his office, modified the contingent fee agreement that he had used during his prior representation of the Pengs, and faxed the agreement to the partners.  The lawyer did not explain the terms of the contingency fee agreement to the clients or discuss the agreement or whether New York or New Jersey law would apply to the agreement.

A non-jury trial took place in New York from September 17, 2007 through October 22, 2007.  After pre-judgment interest was calculated, the judge awarded approximately $3.5 million to the partners.  Subsequently, although he knew that the clients’ disputed his fee, the lawyer deposited $1,259,942.80 of the settlement funds into bank accounts in the names of his wife and children (who were 9 and 15 years old).  The lawyer admitted that he took his legal fees without his clients’ knowledge or consent and that they had not authorized the amount of the fee that he had taken.

The clients filed a lawsuit against the lawyer in New Jersey in September 2009 and the judge ordered the lawyer to repay the funds into his trust account.  The lawyer said on the record that he would comply with the order; however, he then filed a motion for a restraining order in New York to prevent the New Jersey Order from being enforced.  On January 25, 2010, the New York Appellate Division denied the restraining order and the lawyer filed a bankruptcy petition the next day, naming his clients as creditors.

The disciplinary complaint followed and a special master was appointed.  At the Bar hearing, the lawyer claimed that he had made a mistake by taking the funds without authorization.  The Bar lawyer apparently showed more examples of the lawyer’s misrepresentations which had not been charged in the Bar complaint, including an apparently false affidavit.  The special master recommended that the lawyer be disbarred for the knowing misappropriation of approximately $500.000.00 which were not a result of the litigation in which the lawyer had obtained the verdict. 

The New Jersey Disciplinary Review Board agreed with the special master that the lawyer had knowingly misappropriated funds from the judgment and recommended that he be disbarred for misappropriating the $1.2 million in fees along with a number of other disciplinary rule violations, including failure to follow trust account rules and misrepresentation, fraud, and/or deceit.  One of the board member’s dissented and would have imposed a three month suspension and two others dissented and would have imposed a one year suspension.  The opinion also commented on the lawyer’s inexperience as a factor in its decision.  The New Jersey Supreme Court will now issue a final disciplinary opinion.

Bottom line:  This inexperienced lawyer apparently got in way over his head.  Although he obtained a $3.5 million verdict for the clients, he apparently misappropriated a large amount of client funds claiming that the funds were his fee and violated numerous other Bar rules and he will most likely be disbarred.  The lawyer will also be subject to civil lawsuits and potential criminal prosecution. 

Be careful out there…and don’t do this!

 

Disclaimer: this e-mail does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

 

Joseph A. Corsmeier, Esquire

 

Law Office of Joseph A. Corsmeier, P.A.

 

2454 McMullen Booth Road, Suite 431

 

Clearwater, Florida 33759

 

Office (727) 799-1688

 

Fax     (727) 799-1670

 

jcorsmeier@jac-law.com

 

www.jac-law.com