Category Archives: Lawyer misrepresentations to law firm re billings

Illinois imposes one year suspension on (former) law firm partner who falsified and received $69,800.00 in client expense reimbursement

Hello everyone and welcome to this Ethics Alert which will discuss the recent Illinois Supreme Court Order which imposed a one year suspension on a law firm partner who falsified and received $69,800.00 in client expense reimbursement claims.  The case is In re: Lee Mark Smolen, Disciplinary Commission, M.R.27199, No. 2013PR00060 (March 12, 2015).  The summary disciplinary Order is here: http://www.state.il.us/court/SupremeCourt/Announce/2015/031215.pdf

As I reported in my January 12, 2015 Ethics Alert, a law firm audit found that the lawyer had submitted $69,800.00 in falsified taxi expenses and questioned an additional $379,000.00 reimbursed expenses.  The lawyer admitted that he “falsified and submitted for reimbursement more than 800 receipts for cab rides he did not take. He further admits he received reimbursement totaling $69,800 for the fabricated receipts.”

According to the Hearing Board Report, the expenses were charged to an unallocated client account which was “virtually unmonitored”.  The lawyer agreed that the law firm could withdraw $400,000.00 from his account to cover the expenses and the cost of the audit and he testified he used the cab money to pay for client entertainment, saving the time of making out expense reports.  He testified that he only slept three or four hours a night and typically spent 12 to 15 hours a day at work.

The Report further stated that the lawyer’s “mental health issues and his misconduct” were considered and one doctor opined there was a “loose association” between the lawyer’s personality disorder and his misconduct because the lawyer “was excessively devoted to work as a result of his obsessive-compulsive disorder.”  Another doctor stated that the lawyer’s depressive disorder and anxiety disorder led to “tremendous impairment of judgment” which led to the misconduct.  Both doctors found that the lawyer’s mental health played at least a minor role in his misconduct and gave it “some weight” as a mitigating factor.

 

According to the Report:  “We recognize that the amount of Respondent’s falsified expenses is greater than the amounts in the (cited) cases but in light of (the lawyer’s) significant mitigation we do not believe a suspension of more than one year is warranted.  We believe a one-year suspension addresses the severity of the misconduct and also takes into consideration the substantial mitigating factors.”

The Report recommended that (the lawyer) be suspended for one year and until he completed at least twelve months of continuous treatment with a psychiatrist. The lawyer’s suspension would terminate after one year if he “demonstrates his completion of treatment to the Administrator’s satisfaction.”  The Illinois Supreme Court adopted the Report and suspended the lawyer for one year with the recommended conditions.

Bottom line:  As I said previously, this lawyer admitted that he falsified and submitted for reimbursement more than 800 receipts for cab rides he did not take and received payment for nearly $70,000.00 from clients for the fabricated receipts.  An audit also questioned an additional $379,000.00 in reimbursed expenses.  In light of the large amount of the lawyer’s admitted misappropriation, it is surprising that the Board did not recommend disbarment for the misconduct and also that the Illinois Supreme Court approved the one year suspension recommendation.

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.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Filed under Attorney discipline, Attorney Ethics, Attorney misrepresentation, deceit, dishonesty, joe corsmeier, Joseph Corsmeier, Lawyer conduct adversely affecting fitness to practice, Lawyer discipline, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer expense reimbursement, Lawyer misappropriation, Lawyer misrepresentation, Lawyer misrepresentations to law firm re billings, Lawyer Professionalism, Lawyer sanctions

Illinois Disciplinary Board recommends one year suspension for partner who falsified and submitted $69,800.00 in client expense reimbursement claims

Hello everyone and welcome to this Ethics Alert which will discuss the recent Illinois Disciplinary Board Report which recommended a one year suspension for a law firm partner who falsified and submitted $69,800.00 in client expense reimbursement claims. The case is In re Lee Mark Smolen, Commission No. 2013PR00060 (1/7/14). The Board’s Report and Recommendation is here: http://www.iardc.org/HB_RB_Disp_Html.asp?id=11590

According to the Report and Recommendation, the lawyer (former Sidley Austin partner Lee Smolen) was employed in the firm real estate department since he was admitted to practice in 1987. He admitted that “he falsified and submitted for reimbursement more than 800 receipts for cab rides he did not take. He further admits he received reimbursement totaling $69,800 for the fabricated receipts.” He charged the expenses to an unallocated client account which was virtually unmonitored.

“In 2005, (the lawyer) billed 3,576 hours, which included time billed to clients and time spent on services to the firm. (The lawyer) billed 3,483 hours in 2006 and 3,332 hours in 2007. (citation omitted).” “(The lawyer) typically spent 12-15 hours per day at work and did additional work after he came home and on weekends. (citation omitted). He slept three or four hours per night. (citation omitted). (The lawyer’s) annual compensation at the time he left Sidley was $3.5 million. (citation omitted). He was one of the most highly compensated partners in the firm. (citation omitted).”

“(The lawyer’s) conduct was purposeful and intentional. We do not accept his explanation that he simply acted without thinking. (The lawyer) made conscious decisions and took conscious action each time he created and submitted a false receipt. He charged the cab rides to the Wells Fargo unallocated account, which he controlled. There was no reason for (the lawyer) to take the actions he took unless he intended to make the Sidley accounting department and management believe something that was not true, i.e., that he incurred valid cab ride expenses for which he was entitled to be reimbursed. (citation omitted).

“We do not find credible (the lawyer’s) assertion that he did not realize he was doing anything wrong. An attorney of any level of experience should recognize the wrongfulness of fabricating expenses. Given (the lawyer’s) substantial legal experience and accounting background, his professed lack of awareness is implausible.

“(The lawyer’s) purported use of the reimbursement funds for a legitimate purpose does not alter our finding of dishonesty. Other than (the lawyer’s) testimony, no evidence supports his claim that he used the funds for client development. (The lawyer’s) testimony on this issue was inconsistent and he has no records or receipts to corroborate his assertion. Respondent’s wife testified that she withdrew cash from their checking account and gave it to (the lawyer), but she had no knowledge how (the lawyer) spent the cash.

The lawyer is now employed with DLA Piper and two DLA partners testified at his hearing. According to that testimony, the lawyer appeared before DLA Piper’s executive committee and told them that he made a “horrible mistake” and the firm executive committee voted unanimously to recommend that he be employed by the firm. A partner testified that he monitors the lawyer’s billings and they are appropriate and he was initially concerned about the lawyer joining the firm, however, he is now “fully supportive” of the lawyer’s membership in the firm.

According to the Report, the lawyer’s “mental health issues and his misconduct” were also considered. One doctor opined there was a “loose association” between the lawyer’s personality disorder and his misconduct because the lawyer “was excessively devoted to work as a result of his obsessive-compulsive disorder.” Another doctor stated that the lawyer’s depressive disorder and anxiety disorder led to “tremendous impairment of judgment” which led to the misconduct. The opinions found that the lawyer’s mental health played at least a minor role in his misconduct and have it “some weight” as a mitigating factor.

“We recognize that the amount of Respondent’s falsified expenses is greater than the amounts in the (previously cited) cases but in light of (the lawyer’s) significant mitigation we do not believe a suspension of more than one year is warranted. We believe a one-year suspension addresses the severity of the misconduct and also takes into consideration the substantial mitigating factors.”

“Accordingly, we recommend that (the lawyer) be suspended for one year and until he completes at least twelve months of continuous treatment, from the date of the hearing, with Dr. Spira or another psychiatrist acceptable to the Administrator. The lawyer’s suspension will terminate after one year if he demonstrates his completion of treatment to the Administrator’s satisfaction.”

Bottom line: This lawyer admitted that “he falsified and submitted for reimbursement more than 800 receipts for cab rides he did not take” and received payment for a total of $69,800.00 from the clients for the fabricated receipts. In light of the large amount of the lawyer’s admitted misappropriation, it is surprising that the Board did not recommend disbarment for the misconduct. The Report and Recommendation will now be reviewed by the Illinois Supreme Court which will issue a final opinion.

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.
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

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Filed under deceit, dishonesty, fraud, joe corsmeier, Joseph Corsmeier, Lawyer discipline, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer false statements, Lawyer misappropriation, Lawyer misrepresentation, Lawyer misrepresentations to law firm re billings, Lawyer Professionalism, Lawyer sanctions

Pennsylvania lawyer receives 2 year stayed suspension for neglecting cases and paying sanctions with firm funds without telling firm or client

Hello everyone and welcome to this Ethics Alert which will discuss the recent Pennsylvania Supreme Court opinion which imposed an agreed 2 year stayed suspension with probation for a lawyer who neglected client cases over two years, had monetary sanctions imposed on him and paid the sanctions out of firm operating funds without telling his partner or the client, and deceiving client by claiming that his billings were for legal services and not sanctions. The disciplinary opinion is Office of Disciplinary Counsel v. Christopher Roulhac Booth, Jr., No. 106 DB 2013 (Pa. SC 11/13/14) and the opinion and disciplinary board report are online here: http://www.pacourts.us/assets/opinions/DisciplinaryBoard/out/106DB2013-Booth.pdf

According to the opinion and consent agreement, the lawyer neglected cases for over 2 years, had $65,000.00 in monetary sanctions imposed on him and paid the sanctions out of firm accounts without telling his partner or the client. The lawyer had concealed his conduct from his partner and the client, Wachovia Bank. After Wachovia learned of the defaults and sanctions they terminated the firm and hired other counsel.

The lawyer also took additional funds from the law firm’s operating account. According to the consent agreement “(d)uring his tenure with (the law firm), Respondent dispersed, or caused to be dispersed, monies from the firm’s operating account in an amount in excess of $117,000, which disbursements he concealed from the firm and which were in excess of the fees and profits of the partnership to which he would have been entitled under the partnership agreement. Respondent has repaid the firm the amount of $40,000 and has arranged for the repayment of the remainder of the funds by relinquishing fees that were due to Respondent.”

The consent agreement states: “the instant matter does not involve the misappropriation of client funds; rather it involves the ‘misdirection’ of operating funds and subsequent misrepresentation to Respondent’s partner of the true purpose of the use of the operating funds, which was to satisfy sanctions orders resulting from Respondent’s neglect. Furthermore, Respondent attempted to deceive the client, Wachovia, into believing that Respondent’s billings were for services rendered rather than for services and sanctions.”

The consent agreement stated as mitigation that the lawyer had self-reported the misconduct and suffers from depression and in aggravation, that the lawyer had served as a member of a Pennsylvania disciplinary hearing committee.

Bottom line: This lawyer was found to have neglected cases over 2 years, had monetary sanctions imposed upon him and paid the $65,000.00 in sanctions out of his law firm’s operating account without telling his partner or the client and making false statements to the client, and improperly taking an additional $117,000.00 from the firm’s operating account. In other states, including Florida, this lawyer may or would have received a much more severe sanction, including potentially disbarment.

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

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Filed under Attorney discipline, Attorney Ethics, Attorney misrepresentation, deceit, dishonesty, fraud, joe corsmeier, Joseph Corsmeier, Lawyer discipline, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer false statements, Lawyer lack of diligence, Lawyer misrepresentation, Lawyer misrepresentations to law firm re billings, Lawyer Professionalism, Lawyer sanctions

Wisconsin Supreme Court imposes one year suspension on lawyer for greatly inflating his billable hours to qualify for almost $50,000.00 in law firm bonuses

Hello everyone and welcome to this Ethics Alert blog which will discuss recent Wisconsin Supreme Court opinion imposing a one year suspension a lawyer who inflated his billable hours to qualify for bonuses from his law firm.  The case is: In the Matter of Matthew C. Siderits, Case No. 2011AP259-D (1/4/13).  The opinion is online at: http://www.wicourts.gov/sc/opinion/DisplayDocument.html?content=html&seqNo=91260.

According to the disciplinary opinion, the lawyer’s law firm had a compensation system for shareholders which provided for a bonus if a shareholder’s billings exceeded 1,800 hours for the year.  The lawyers at the firm typically entered billable hours either by completing daily “time sheets” and having their assistants entered the billable hours into the firm’s computerized billing system or entering their billable time directly into the law firm’s billing system.  Toward the end of each calendar year, the shareholders met to review each shareholder’s billable hours as recorded in the firm’s billing system to determine whether the partner was likely to meet the 1,800 hour bonus target.

The firm’s billable time period ended at the end of December and the firm’s partnership then met to determine which partners were entitled to receive a bonus and the bonuses were paid after the beginning of the next year.  The disciplined lawyer was the firm’s treasurer and he reviewed each lawyer’s hourly compilation and signed off on the final distributions/bonuses.  In addition, as a shareholder, the lawyer participated in the meetings and in bonus distributions for each year.  The lawyer was a partner/shareholder from 2004 until he was terminated in 2009.

The lawyer recorded over 1,800 hours in 2007 and 2008 (1,803.3 hours in 2007 and 1806.3 hours in 2008) and he was paid a bonus of $23,451.12 in early 2008 for his 2007 billings and $23,526.92 in early 2009 for his 2008 billings.  After the firm paid the lawyer each of the bonuses, but before the bills were sent to the clients, the lawyer reduced, or “wrote-down,” his billable hours for those years.  In early 2008, the lawyer wrote-down 29.2 hours of time from his 2007 billings without notifying the firm, and the reductions caused his billable hours to drop 25 hours below the 1,800 level.  In early 2009, the lawyer wrote-down 231.9 hours from his 2008 billings, again without notifying the firm, which reduced his 2008 billable hours to below 1,600.  In 2009, the firm discovered the lawyer’s 2007 and 2008 billing conduct and terminated him.  His interest in the firm’s profit sharing plan was forfeited and he also repaid a total of $60,000 to compensate the firm for the bonuses which he did not earn and for other unspecified damages claimed by the firm.

The lawyer admitted at the disciplinary hearing before the referee that he did not actually bill 1,800 hours in either 2007 or 2008 and that he wrote-down about 29 hours in 2007 and about 230 hours in 2008.  He also admitted that he was not entitled to receive the bonuses in question, but claimed he did not know at the time that this would disqualify him from the bonuses.  He further admitted that he never told anyone else in the firm that he wrote-down his time for either 2007 or 2008 and that he entered all of the write-downs directly into the system so that neither his assistant nor the bookkeeper was aware of the write-downs.

The referee found that the lawyer violated rules related to all five counts of the alleged misconduct, including engaging in conduct involving dishonesty, fraud, deceit or misrepresentation, and breaching his fiduciary duty to his law firm and his duty of honesty in his professional dealings with it.  The referee also found in aggravation, a dishonest or selfish motive, a pattern of misconduct, and a refusal to acknowledge the wrongful nature of the conduct and, in mitigation: absence of a prior disciplinary record, a timely good faith effort to make restitution or to rectify the consequences of misconduct, a cooperative attitude toward the disciplinary proceedings, and good character or reputation.  The referee recommended an 18-month suspension, did not comment on costs, and did not recommend restitution, because of the lawyer’s $60,000.00 payment to the firm.

In his report, the referee commented on the lawyer’s claim that he spent 140 hours writing a (17 page) brief: “(i)t is inconceivable to me that an experienced attorney could expect anyone to believe that he spent 140 hours on a relatively straightforward brief; especially since the matter had been fully briefed previously and the new brief was substantially based on the work of an associate.  His protestations to the contrary are simply not credible. Furthermore, his time on that brief was entered late in the year, at times one would not normally expect an attorney to be working on the brief, in large quantities, and entered days and weeks after the work was allegedly performed.  The same amounts were then routinely deleted following the end of the year, without following the normal procedure of deleting them on the paper pre-bills.  (The lawyer) entered the computer system himself, telling no one, and deleted all of the time that he entered.  The time he ultimately billed the client was within the realm of reason, and consistent with what two other attorneys testified should be the time for such a brief.  He never discussed with his partners any of the massive write downs that he did on Matter “A” (the 17 page brief).  The referee also found that this same pattern existed for lawyer’s other write-downs for 2008.

The disciplinary opinion upheld the referee’s findings and imposed a 12 month suspension stating:  “(t)his case does not turn on the bare fact that (the lawyer) wrote-down his time; this case is about (the lawyer) abusing his write-down discretion and lying to his law partners in order to collect almost $47,000 in bonuses to which he was not entitled.  (The lawyer) cannot seriously contend that firms must have a written policy forbidding stealing and lying before a misconduct charge for one of these actions can be sustained.  As to (the lawyer’s) ignorance-of-the-law defense, we emphatically reject it.  To allow an ignorance-of-the-law excuse in lawyer ethics cases would encourage and reward indifference to the ethics code and the cases interpreting it, a pernicious outcome.”

“In any event, the injunction against stealing from one’s own law firm is not an abstract one, and this court has stated it clearly and repeatedly…”(h)owever, given the unique circumstances of this case, and acknowledging that the imposition of discipline in attorney disciplinary cases is not an exact science, we believe that the recommended 18-month license suspension is not quite necessary.  We conclude that a 12-month license suspension is sufficient to advance the objectives of lawyer discipline.  This is so due to the number of mitigating factors that appear in the record.  (The lawyer) has no previous disciplinary history.  He lost his job with the Firm.  He paid $60,000 to the Firm to compensate for the bonuses to which he was not entitled and for other unspecified damages claimed by the Firm.  He forfeited his interest in the Firm’s profit sharing plan.  As explained below, these disciplinary proceedings have been costly to (the lawyer).  We are persuaded that, given these particular circumstances, (the lawyer) understands the seriousness with which this court views his conduct, and he will not likely repeat it.”

Bottom line:  This opinion makes it quite clear that a lawyer (at least in Wisconsin) will be subject to discipline for falsifying billable time to obtain a firm bonus, even if not clients are ultimately harmed and it doesn’t help if the lawyer makes apparently false statements to support his billings, including that he spent 140 hours on a 17 page brief…

…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

www.jac-law.com

 

 

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Filed under Attorney discipline, Attorney Ethics, deceit, joe corsmeier, Lawyer discipline, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer false statements, Lawyer misrepresentation, Lawyer misrepresentations to law firm re billings, Lawyer sanctions