The Supreme Court has disbarred a lawyer who failed to adequately supervise the bookkeeper who stole from his trust account, continued to practice after being emergency suspended, and failed to appoint a receiver for his separate debt management companies.
The case began when two checks from the attorney’s law firm trust account were returned for lack of funds, although they were honored when presented the following day. That triggered a Bar audit, which showed substantial trust fund irregularities.
The Bar auditor concluded that the attorney knew of the shortages and had improperly taken fees and other costs from the trust account. An outside CPA hired by the attorney concluded that the attorney’s longtime bookkeeper had both embezzled from and mismanaged the trust account without the attorney’s knowledge.
The referee agreed with the latter finding and held while the attorney was responsible for negligent oversight, he had not knowingly participated in the theft of funds.
After the emergency suspension, the Bar filed two contempt motions. In the first, the referee found the attorney continued to represent three clients after the suspension, failed to notify debt collection clients of his suspensions, provided the Bar with a false affidavit that all clients had been notified, and continued to withdraw and disburse monies from trust accounts. In the second motion, the referee found the attorney had failed to honor his agreement to appoint an emergency receiver, even though he had access to funds for that purpose.
Aside from those matters, Bar investigators found the attorney’s debt management companies were under investigation in four states for failing to properly register, and three of those states had ordered the companies to refund customers’ money and that action was being sought in the fourth.
The referee in the case had recommended a six-month suspension for the trust account violations and a further one-year suspension, followed by a year’s probation, after being found in contempt for continuing to practice after being suspended, failing to appoint a receiver for his debt management operations, and for failing to notify all his debt collection clients of his suspension.
The court upheld the referee’s finding on guilt and mitigating and aggravating factors, but overturned the recommended sanctions.
The court noted in cases where an attorney takes money from a trust account, disbarment is the presumed penalty; and when trust account losses have been caused by an attorney’s negligence, penalties have ranged from lengthy suspensions to disbarment, depending on the facts of the case.
“In any event, regardless of whether we conclude that a lengthy suspension or disbarment is the appropriate sanction in [the underlying trust account case], when considered together with [the attorney’s] contempt cases, disbarment is the overall appropriate sanction,” the court said. “The court has consistently disbarred suspended attorneys who are found in contempt for violating this court’s orders.”
The court acted September 4 in case nos. SC11-1136, SC11-1578, and SC11-2343.