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Lawyer disbarred for misuse of client funds

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Lawyer disbarred for misuse of client funds

Lack of intent for improperly transferring client funds held in a trust account does not protect a lawyer from disbarment, which continues to be “the presumptively appropriate sanction” when a lawyer misuses clients funds.

In a November 21 ruling, the Supreme Court rejected a lawyer’s argument that he was trying to protect clients and save his law firm when he failed to report for several months misappropriations from the firm’s trust accounts and several transfers into and from the trust account, including some to cover firm payments into his personal bank account.

Quote The referee in the case had recommended finding the lawyer guilty of two relatively minor infractions but not imposing any penalty because of the length and publicity of the case. Justices, though, reversed the referee’s recommendation of not guilty on several charges, including wrongly transferring monies out of the trust account and failing to report trust account problems to the Bar, and disbarred him.

“The Court has long held that the misuse of client funds ‘is one of the most serious offenses a lawyer can commit’ [citation omitted],” justices said in the unanimous per curiam opinion. “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.”

As for lack of intent, the opinion noted, “[T]he 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 summary of the case, another partner was supervising the trust account, and beginning in September 2009 several improper transfers were made from the fund. The attorney, the majority shareholder of the firm, learned of the transfers in February 2010 and additional improper transfers in December 2010.

The attorney did not report the improper transfers to the Bar and to other firm partners, and did not make any changes to prevent further improper transfers and ensure compliance with trust accounting rules. The trust account supervising partner when the transfers began eventually left the firm and was, along with the lawyer, charged with violating Bar rules. The former partner reached a consent judgement with the Bar and testified at the lawyer’s disciplinary hearing.

(According to the Bar’s charging document, all of the trust account shortages were eventually repaid by September 2011, but deficits of over $1 million were maintained for much of 2010 and into 2011.)

Although the referee discounted testimony from the firm’s comptroller that the lawyer personally directed many of the improper transfers, the justices said there was unrefuted evidence that at least 10 transfers were made to the firm’s operating account to cover payments made to the attorney’s personal bank account, improper transfers continued after the attorney took direct control of the trust account, and that in December 2010 the attorney personally made a transfer of one client’s funds to cover the obligations to another client, which the attorney did not deny.

The attorney also deposited into the trust account personal funds, loans, and proceeds from a co-counseling agreement, which violated a Bar rule at the time against co-mingling personal and trust accounting funds. (That rule has since been changed to allow, in certain instances, attorneys to deposit personal funds to make up shortages.)

The court rejected the attorney’s contention he lacked intent to violate Bar rules, citing several cases, including Fla. Bar v. Riggs, 944 So. 2d 167, 171 (Fla. 2006), which held “[k]nowingly or negligently engaging in sloppy bookkeeping amounts to intent under rule 4-8.4(c).”

As for the sanction, the court said disbarment was warranted because the attorney did not stop the improper transfers once he learned of them, did not put in place corrective procedures, and that the wrongful transfers continued.

“[The attorney] entirely abandoned his duty to protect clients’ funds held in trust,” the opinion said. “This Court will not allow attorneys to abdicate their responsibility to protect clients’ property and enjoy the privilege of practicing law.”

The attorney had been emergency suspended in December 2011, but was reinstated upon the referee’s recommendation a month later. The Bar completed its investigation and filed changes in 2014. The Supreme Court, after hearing oral arguments, suspended the attorney pending its ruling last May.

The court acted in Case No. SC14-100.