Florida lawyer disbarred for improper use of trust funds and “engag(ing) in dishonest and deceitful conduct”

Hello everyone and welcome to this Ethics Alert which will discuss the recent (November 21, 2018) Florida Supreme Court disciplinary opinion which disbarred a lawyer for misusing client trust funds and, inter alia, “engag(ing) in dishonest and deceitful conduct by using one client’s funds to pay obligations owed to another client.”  The referee had recommended that no discipline be imposed.  The case is: The Florida Bar v. Jeremy W. Alters, Case No.: SC14-100 and the link to the case is here:  http://www.floridasupremecourt.org/decisions/2018/sc14-100.pdf

Procedurally, the lawyer was suspended on an emergency basis on December 28, 2011 after the Bar filed a petition for emergency suspension; however, he was reinstated by the Court based upon the referee’s recommendation on January 25, 2012.  The Bar filed a Complaint on January 22, 2014 and, after hearing oral arguments on May 21, 2018, the Court suspended the lawyer on its own motion, pending the issuance of this opinion.

According to the facts, the lawyer’s partner supervised the trust account an, starting in September 2009, multiple improper transfers were made from the trust account.  The lawyer was the majority shareholder of the firm and he became aware of those improper transfers in February 2010.  He also became aware of additional improper transfers in December 2010. The Bar Complaint states that all of the trust account shortages were repaid by September 2011; however, there were shortages of over $1 million in 2010 and 2011.

The lawyer did not report the improper transfers to the Bar or to other firm partners and, according to the opinion, he did not make any efforts to prevent further improper transfers and ensure compliance with trust accounting rules. The partner who supervised the trust account when the improper transfers occurred later left the firm and was also charged with violating Bar rules. That lawyer made consent agreement for discipline with the Bar and testified at this lawyer’s disciplinary hearing.

The referee discounted testimony from the law firm’s comptroller that the lawyer personally directed many of the improper transfers; however, according to the opinion, there was unchallenged evidence that at least 10 transfers were made to the firm’s operating account to cover payments made to the lawyer’s personal bank account, the improper transfers continued after the lawyer took direct control of the trust account, and the lawyer personally made a transfer of one client’s funds to cover the obligations to another client in December 2010.

The lawyer also deposited personal funds, loans, and proceeds from a co-counseling agreement to make up shortages, which constitutes commingling.  The Bar Rules have been revised to permit this commingling to cover shortages and lawyers are also required to report trust account shortages to The Florida Bar.

The lawyer argued that he did not intend to violate the Bar Rules.  The opinion rejected that argument and cited several cases, including Florida Bar v. Riggs, 944 So. 2d 167, 171 (Fla. 2006), which held that “(k)nowingly or negligently engaging in sloppy bookkeeping amounts to intent under rule 4-8.4(c).”  The opinion also stated that the court “has disbarred attorneys even for gross negligence in maintaining a trust account,” pointing to cases where although the attorneys may have not directly taken trust account funds, they had “abandoned their professional duty to safeguard their clients’ funds.”

According to the opinion, “the referee recommends that (the lawyer) only be found guilty of having violated Bar Rules 4-1.15 (Safekeeping Property) and 5-1.1(b) (Application of Trust Funds or Property to Specific Purpose)” and “(b)ased on her findings of fact, recommendations as to guilt, and findings in aggravation and mitigation, the referee recommends that (the lawyer) not be further sanctioned.”

The unanimous opinion reversed the referee’s not guilty findings on multiple rule violations, including improperly transferring funds out of the trust account and failing to report trust account shortages to the Bar, and disbarred the lawyer stating “(t)he Court has long held that the misuse of client funds is one of the most serious offenses a lawyer can commit”. “Disbarment is the presumptively appropriate sanction, under both the (Florida) Standards (for Imposing Lawyer Sanctions) and existing case law, when a lawyer intentionally misappropriates trust funds.”

The opinion further stated that disbarment was appropriate because, in addition, the lawyer did not stop the improper transfers once he learned of them, did not initiate corrective procedures, and the wrongful transfers continued after he took control of the trust account.   “(The lawyer) entirely abandoned his duty to protect clients’ funds held in trust.” “This Court will not allow attorneys to abdicate their responsibility to protect clients’ property and enjoy the privilege of practicing law.”

With regard to the imposition of costs, the referee recommended that the Bar be awarded “only its administrative costs of $1250, and that (the lawyer) be awarded his costs in the amount of $143,913.35, despite recommending that (he) be found guilty of having violated two Bar Rules…we find that the referee abused her discretion; we disapprove the referee’s recommended award of costs, award the Bar its costs of $305,360.03, and award (the lawyer) nothing.”   The opinion also states “the court directs that no further proceedings in this case shall be held before Circuit Judge Marcia B. Caballero as referee.”

Bottom line:  This Florida Bar disciplinary case, which began in 2011, was one of the most media intensive, protracted, and contentious that I have seen in my many years of practice.  The Florida Supreme Court has made it very clear in its opinion that it will not tolerate trust account violations such as these, even if the lawyer claims that he or she did not intend to violate the Bar rules.

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.

29605 U.S. Highway 19 N. Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Joseph Corsmeier about.me/corsmeierethicsblogs

 

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Florida lawyer who hired convicted federal felon and failed to notice trust account theft of $4.8 million is disbarred

Hello everyone and welcome to this Ethics Alert, which will discuss recent Florida Supreme Court opinion which disbarred a lawyer who hired an individual who had been convicted of a felony wire fraud and who then stole $4.8 million from the lawyer’s trust account.  The case is: The Florida Bar v. Randall Lawrence Gilbert, SC15-204, and the March 22, 2018 opinion is here:  http://www.floridasupremecourt.org/decisions/2018/sc15-2004.pdf

According to the opinion, the lawyer hired Sacks as a bookkeeper in February 2005 after he was referred by a friend. During the interview, Sacks told the lawyer that he was living in a halfway house after having been recently released from federal prison.  He also claimed that he was a disbarred New York attorney and that he was a certified public accountant.

The lawyer conducted no research or investigation regarding Sacks’ claims or the reason for the felony and alleged disbarment. Sacks was actually never a New York lawyer or a CPA and he had been convicted in 2002 on “11 counts of “wire fraud” and a sentenced to ‘41 months imprisonment, followed by a total of five (5) years [probation, and ordered to pay] [r]estitution in the amount of $7,906,332.14.’”

In an April 2005 meeting with Sacks’ probation officer, the lawyer also signed a form acknowledging the risk of hiring Sacks which stated that Sacks had been ordered to pay $7.9 million in restitution and provided the above details regarding the conviction. The probation officer also told the lawyer that he did not believe that it would be appropriate for Sacks to work at a law firm given his criminal history.

Five months after being hired, Sacks forged the lawyer’s signature on a trust account check for nearly $21,000.00 that was used to pay for cosmetic surgery for Sacks’ girlfriend.  The lawyer then fired Sacks and made false statements to the probation officer regarding the reason that he fired him.  The lawyer then sent Sacks to therapy and rehired him in October 2005.

Sacks carried business cards identifying himself as a JD and a CPA.  The lawyer eventually gave Sacks “full rein” over the real-estate closing side of his practice, which grew quickly after the mortgage foreclosure crisis in 2008 and he also made him the firm’s chief financial officer.

Sacks deposited funds into the firm’s trust account which were intended to pay off mortgages on client properties, then transferred the properties to a shell company that he created to keep the mortgages active with monthly payments; however, he misappropriated millions of dollars.

The opinion states that Sacks handled all law firm trust account matters and prepared information for the law firm’s CPA.  The lawyer claimed that he reviewed financial reconciliations prepared by Sacks and looked at the first and last page of bank account statements. The thefts were discovered in February 2014 when the lawyer received a call from another lawyer asking why a mortgage for that lawyer’s client was still pending when it should have been satisfied.

The law firm’s title insurer had to pay more than $3.6 million in claims.  The lawyer lost $1 million when Sacks did not pay off the mortgage on his home in a refinancing and also paid approximately $1.03 million to individuals who lost money as a result of the thefts.

The referee found that the lawyer “delegated all matters regarding the administration of the firm’s trust account to Sacks, including preparing trust account reconciliations, acting as the firm’s contact person and intermediary with the trust account reviews by Old Republic, Gilbert’s title insurance underwriter, and dealing with the firm’s CPA.”  He was also “curiously uncurious” about the employee’s criminal past and claims of expertise.

The referee recommended a two-year suspension, followed by two years’ of probation.  The opinion stated “Indeed, this case gives new meaning to the phrase ‘turning a blind eye” and, after reviewing the mitigation, aggravation and case law, disbarred the lawyer.

Bottom line:  This is a very extreme example of a lawyer completely failing to supervise a non-lawyer with access to a trust account and also engaging in conduct involving dishonesty and misrepresentation.  Lawyers are required to supervise non-lawyers, particularly if they are provided with access to the lawyer’s trust account, which is not recommended.

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.

29605 U.S. Highway 19 N. Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Joseph Corsmeier about.me/corsmeierethicsblogs

Amendment to Florida Bar Rule 5-1.1 permitting lawyers to use credit unions for IOTA trust accounts became effective on February 1, 2018

Hello everyone and welcome to this Ethics Alert will discuss the amendment to the Florida Bar’s trust account rules which permits credit unions to maintain IOTA trust accounts, which became effective February 1, 2018.  The Supreme Court opinion is here:  http://www.floridasupremecourt.org/decisions/2017/sc16-1961.pdf 

The proposed amendment to Florida Bar Rule 5-1.1, which was unanimously approved by the Florida Bar’s Board of Governors (BOG) in 2016 and adds federally insured credit unions to the list of financial institutions authorized to hold trust accounts.  Florida lawyers were previously only permitted to place IOTA funds in banks and savings and loans institutions because they were not federally insured.  In 2014, the U.S. Congress passed a federal statute which expanded federal deposit insurance to include credit unions and the coverage is for up to $250,000.00, which is the same as bank and savings and loans deposits.

According to a quote in a 2016 Florida Bar News article, 41 states currently permit IOTA funds to be placed in credit union accounts and North Carolina’s proposed rule is awaiting approval.  The chair also stated that credit unions pay “a little bit more interest” since they are nonprofit entities and banks are for profit.

A representative of the Credit Union National Association also indicated that the higher interest rates and lower costs associated with credit unions “will likely translate into higher revenue generated to The Florida Bar Foundation.”  The Bar Foundation is paid the interest on IOTA trust accounts. It has been reported that the Bar Foundation’s IOTA income has been greatly reduced because of the record low interest rates which have been near zero for a number of years.

Bottom line:  This Bar Rule revision now permits Florida lawyers to open IOTA Trust Accounts at both credit unions and banks; however, lawyers continue to be responsible for insuring the institution’s full compliance with the Florida Bar Trust Account Rules and their compliance as well.

Be careful out there!

Disclaimer:  this Ethics Alert is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Please note:  Effective June 27, 2016, my new office address is:

29605 U.S. Highway 19 N., Suite 150, Clearwater, Florida 33761

E-mail addresses and telephone numbers below will remain the same.

 

Joseph A. Corsmeier, Esquire

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

29605 U.S. Highway 19 N., Suite 150,

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

 

 

Florida lawyer suspended for 1 year for converting client funds and conditioning repayment on complaint withdrawal

Hello everyone and welcome to this Ethics Alert which will discuss the recent Florida Supreme Court opinion that suspended a lawyer for 1 year for failing to repay client funds and conditioning payment of the funds to the client on withdrawal of her Bar complaint.  The Florida  Supreme Court opinion is The Florida Bar v. Michael Eugene Wynn, No. SC-1323 (February 16, 2017) and is here:  http://www.floridasupremecourt.org/decisions/2017/sc15-1323.pdf.

The lawyer stipulated that he had converted $500.00 that he received from a client for his own use and then conditioned repayment on the client’s agreement to withdraw a complaint that she had filed with The Florida Bar.  The lawyer also failed to notify his employer of the disciplinary proceedings.

“On October 10, 2013, Respondent emailed Ms. Rhodes (the client) informing her that $500 was needed for the costs of deposition transcripts. On October 10, 2013, Ms. Rhodes paid $500 to Respondent to be used towards the cost of deposition transcripts and wrote in the memo “Legal Fees.” Respondent deposited the $500 into his business operating account on October 15, 2013, rather than to his trust account. Respondent failed to pay for the deposition transcripts as had been intended.”

“On November 8, 2014, Respondent arranged for Ms. Rhodes and Mr. Rhodes to meet him at MidFlorida Bank in Arcadia, Florida in order to repay the $500. During the meeting, Respondent presented Mr. and Mrs. Rhodes with a receipt of funds he drafted. Ms. Rhodes signed the document, which was notarized, without any discussion about its contents. The receipt of funds indicated that the funds were repaid and requested that the Bar complaint be dismissed. Respondent repaid the $500 upon the condition that Ms. Rhodes would request dismissal of the Bar grievance she filed against Respondent. By letter dated November 9, 2014, Respondent provided a copy of the receipt of funds to the Bar and requested closure of the file.” (emphasis supplied).

The referee accepted the stipulation an recommended a 90 day suspension followed by two years of probation wherein the lawyer would be required to be monitored by another lawyer, submit quarterly reports by a CPA (if in private practice), undergo an office procedures and record-keeping analysis by the Diversion/Discipline Consultation Service (DDCS-formerly LOMAS), attend ethics school, a trust accounting workshop, and a stress management workshop, and pay the Bar’s costs.

After confirming that the Court has wide discretion in imposing discipline and after reviewing relevant cases, the opinion stated as follows:

“Here, as in several of the cases discussed above, Respondent converted client funds for his own use and repaid the funds at a later time. In addition, as in Frederick, he attempted to condition the repayment upon the client’s agreement not to complain to the Bar about his misconduct. Based on the existing case law, we conclude that the Bar is correct that a one-year suspension, followed by two years’ probation with the conditions recommended by the referee, is warranted. As we have noted many times, misuse or misappropriation of client funds is one of the most serious offenses a lawyer can commit, and disbarment is presumed to be the appropriate punishment. Fla. Bar v. Travis, 765 So. 2d 689, 691 (Fla. 2000). We see no reason under the circumstances of this case, even given the referee’s uncontested findings of mitigation, to impose anything less than a rehabilitative suspension.” (emphasis supplied).

Bottom line: this case clearly illustrates that lawyers are held to an extremely strict and fiduciary standard when handling client funds and, as the opinion states, disbarment is presumed to be the appropriate punishment for misuse or misappropriation of client funds.  In addition, it is unethical for a lawyer to condition repayment of client funds to a withdrawal of a Bar complaint (or an agreement not to file a complaint).

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

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.

29605 U.S. Highway 19, N., Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Florida lawyer suspended for 91 days for obtaining witness information for NCAA related to University of Miami football investigation for a fee

Hello and welcome to this Ethics Alert which will discuss the September 8, 2016 Florida Supreme Court disciplinary Order suspending a lawyer for 91 days for, inter alia, scheduling witness statements and obtaining information for the NCAA related to its investigation of the University of Miami football program for a fee.  The case is The Florida Bar v. Maria Elena Perez, SC14-733.  The Report of Referee is here: 8/2/16 Perez Report of Referee and the Supreme Court’s Order is here:  9/8/16 SC Order approving ROR

The case involved the high profile NCAA investigation of the University of Miami and former football booster Nevin Shapiro, who gave gifts and made payments to recruits, football players and UM staff which resulted in the NCAA’s decision to reduce football scholarships and place the UM athletics department on probation.

According to the referee’s report, the lawyer began representing Shapiro in April 2010 to defend federal criminal charges in the federal District of New Jersey, a Securities and Exchange Commission Complaint in the Southern District of Florida, and involuntary bankruptcy proceedings in the Southern District of Florida.  All of these matters related to Shapiro’s Ponzi scheme, which ultimately resulted in Shapiro’s conviction for money laundering and wire fraud.  The lawyer also defended Shapiro in a Florida state court defamation action brought against him in September 2011 by former rap musician Luther Campbell.

The lawyer met with the NCAA and agreed to schedule witness examinations in the bankruptcy case specifically to assist the NCAA with its investigation of the Miami football program.  She was paid $18,325.00 by the NCAA for her services.  The lawyer was found guilty of violating the following Bar Rules:  4-1.5 (fees and costs for legal services) , 4-3.1 (meritorious claims and contentions), 4-3.4 (fairness to opposing party and counsel), 4-4.1 (truthfulness in statements to others), 4-4.2 (communication with person represented by counsel), 4-4.4 (respect for rights of third persons), 4-8.4(a)(c)(d) (misconduct), and 5-1.1(b) (trust accounts- application of funds or property to a specific purpose).  The lawyer was also found guilty of acting incompetently (4-1.1) and negligently (4-1.3) in another unrelated case.

Bottom line:  This lawyer agreed to assist the NCAA with its investigation of the University of Miami by obtaining witness statements and information and engaged in misconduct which resulted in a rehabilitative suspension, including improper fees, untruthful statements to others, communication with unrepresented persons, and trust account violations.  The lawyer will be required to file a petition for reinstatement and show that she is fit to practice by clear and convincing evidence before resuming practice.

Be careful out there.

Disclaimer:  this Ethics Alert  is not an advertisement and 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.

29605 U.S. Highway N., Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

 

Florida Bar’s Board of Governors approves amendment to Bar Rule which would permit credit unions to accept IOTA accounts

Hello everyone and welcome to this Ethics Alert will discuss the recent vote of the Florida Bar Board of Governors (BOG) to revise Bar Rule 5-1.1 to permit credit unions to accept and administer the IOTA trust accounts of Florida lawyers.  The vote is discussed in an article in The August 15, 2016 issue of The Florida Bar News.  The article is here:  8/15/16 Bar News proposed IOTA trust account rule credit unions.

The proposed rule amendment, which was unanimously approved at the BOG’s recent meeting, would add federally insured credit unions to the list of financial institutions authorized to hold trust accounts.  Florida lawyers are currently only permitted to place IOTA funds in banks and savings and loans institutions.  In 2014, the U.S. Congress passed a federal statute which expanded federal deposit insurance to include credit unions and the coverage is for up to $250,000.00, which is the same as bank and savings and loans deposits.

According to a quote in the article from the chair of the BOG Disciplinary Procedure Committee, which considered the rule revision, 41 states currently permit IOTA funds to be placed in credit union accounts and North Carolina’s proposed rule is awaiting approval.  The chair also stated that credit unions pay “a little bit more interest” since they are nonprofit entities and banks are for-profit.

A representative of the Credit Union National Association indicated that the higher interest rates and lower costs associated with credit unions “will likely translate into higher revenue generated to The Florida Bar Foundation.”  The Bar Foundation is paid the interest on IOTA trust accounts. It has been reported that the Bar Foundation’s IOTA income has been greatly reduced because of the record low interest rates which have been near zero for a number of years.  The proposed Bar Rule revision has been sent to the Supreme Court of Florida for review and potential implementation.

Bottom line:  If this Bar Rule revision is implemented by the Florida Supreme Court, Florida lawyers will be able to open IOTA Trust Accounts at credit unions, which provides an additional option; however, lawyers remain responsible for insuring the institutions full compliance with the Florida Bar Trust Account Rules and for their compliance as well.

Be careful out there!

Disclaimer:  this Ethics Alert is not an advertisement and 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.

29605 U.S. Highway 19 N., Suite 150,

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

 

 

Florida Supreme Court reprimands lawyer for distributing settlement funds without paying medical provider which had letter of protection

Hello everyone and welcome to this Ethics Alert blog which will discuss the March 3, 2016 Florida Supreme Court Order and reprimanding a lawyer for failing to pay a provider who held a letter of protection in a personal injury matter from the proceeds of a personal injury settlement.  The case is: The Florida Bar v. Daniel J. Grieco, II, Case No.: SC16-225, TFB File No.: 215-10,507 (6A) (March 3, 2016).  The Conditional Plea for Consent Judgment is here: Grieco CJ and the SC Order is here: Grieco 3/3/16 SC Order

According to the Conditional Plea for Consent Judgment, the lawyer (who was admitted in 1972) represented a woman in a personal injury case which was settled for $12,000.00.  The lawyer disbursed the settlement funds to the client without satisfying a letter of protection from one of the client’s medical providers.  The lawyer was told at that time that the medical provider was seeking insurance reimbursement for the medical services.

The lawyer stated that the medical provider did not indicate that insurance did not cover the services and he did not know that the bill was still outstanding until after the distribution of the settlement funds.  The client subsequently made offers to settle her bill with the provider “based upon the rate for services she was previously billed as a private pay patient; however, her offers have been rejected.  Based upon this conduct, Respondent admits he is guilty of violating Rule 5-1.1(f) (Trust Accounts – Disputed Ownership of Trust Funds).”  In addition to the public reprimand, the lawyer must complete the Bar’s Ethics School and pay the Bar’s costs and the cost of the school.

Bottom line: Lawyers must be aware of the importance of handling and resolving any letters of protection before settlement funds are distributed.  Under the Florida Bar rules, if the lawyer does not receive a response from the medical provider, the funds should remain in the IOTA trust account.  If the matter is not resolved and the funds remain in the trust account for an extended period of time, under the Bar rules, the lawyer must consider placing the funds into the registry of the court for the court to decide how the distribution should be handled.  The same is true if the client is disputing payments to medical providers (or the lawyer’s fees and costs).

Be careful out there!

Disclaimer:  this Ethics Alert is not an advertisement and 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