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Lawyer disbarred for hiring an embezzler who, in turn, embezzled from the firm

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In a case which the Supreme Court said “gives new meaning to the phrase ‘turning a blind eye,’” a Florida lawyer has been disbarred after he hired a convicted embezzler, fired him for trying to steal around $21,000, then rehired the man and failed to adequately supervise him as he stole more than $4.7 million from the firm’s trust account over four years.

“[A]s an attorney and fiduciary, [the lawyer] was directly responsible for his firm’s trust account and for supervision of employees,” the March 22 opinion said. “As an attorney, he owed a duty to the public and to his clients to safeguard their money.”

The court also agreed with the referee in the case that the lawyer also acted dishonestly and misled the employee’s probation officer about the reasons for the initial firing, which likely would have led to the employee’s return to prison.

The referee in the case had recommended a two-year suspension. The court, citing an egregious failure of the lawyer’s oversight, particularly given the employee’s criminal history and the dishonesty with the probation officer, ordered disbarment instead. The Bar sought disbarment while the attorney argued for a six- to 12-month suspension. The court had previously suspended the lawyer, pending the outcome of the case.

The attorney, on the recommendation of a friend and client, first hired the employee in 2005, when the latter was at a halfway house after being released from federal prison following a conviction for embezzling almost $8 million. The man’s probation officer met with the attorney and warned him against hiring the ex-felon, a caution the attorney ignored.

The man claimed to be a disbarred New York attorney and also a CPA in that state. Neither was true, but the attorney never checked the veracity of either claim. The attorney allowed the man, on firm business cards, to identify himself as a “J.D.” and “CPA” and some clients believed he was an attorney member of the firm.

Five months after being hired, the employee forged the lawyer’s name on a $20,950 check to pay for his girlfriend’s cosmetic surgery. When the theft was discovered, the man returned the check and the lawyer fired him. However, the lawyer did not report the theft to the probation officer and when the officer, learning of the termination, asked the lawyer why, the lawyer refused to discuss the reason.

Instead, the lawyer paid for therapy for the man and rehired him when it was completed. When pressed by the probation officer, the lawyer refused to provide more information and said the termination has been because of “a misunderstanding.”

The lawyer had concentrated in construction law but as the housing boom peaked and then declined and the mortgage foreclosure crisis hit, the firm did more real estate closing work. The lawyer placed the employee in charge of that process, including access to and control of the firm’s trust account.

According to the Bar’s auditor, about the time the employee’s probation ended in 2010, he began stealing from the trust account. In the scheme, the employee took money from a closing intended to pay off the old mortgage and transferred it to an offshore company he controlled. He would keep the old mortgage alive and hide the theft by making the monthly payments.

The lawyer did little more supervision than spending two to four minutes a month reviewing bank statements with the employee, and never checked information provided by the employee to the firm’s CPAs. Finally in February 2014, another attorney inquired why a mortgage that should have been paid off was still active with monthly payments being made.

The lawyer began an investigation of the trust account but still waited almost two weeks before closing the account and protecting clients. During that time, the employee stole another $95,000. Over a 49-month period, the employee’s more than 190 individual thefts totaled more than $4.7 million — including about $1 million from the lawyer when he refinanced his home. The firm’s title insurance company wound up paying out more than $3.6 million in claims.

The attorney reported the theft to law enforcement, reported the trust account violations to the Bar, hired a forensic accountant to review the trust account, sued the employee’s bank to get back stolen funds, and personally paid off $1.03 million to individuals who lost money because of the employee, although the largest creditor has not been made whole.

The court acknowledged that the referee found several mitigating factors, but concluded those did “not outweigh the egregiousness of [the attorney’s] conduct. Given all of these circumstances, we conclude that the disciplinary sanction of disbarment is warranted and appropriately serves the three-pronged purpose of attorney discipline: (1) it is fair to society; (2) it is fair to the Respondent; and (3) it is severe enough to deter other attorneys from similar misconduct.”

The court acted in Case No. SC15-2004.

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