“Uniquely Positioned” To Uncover Partner’s Thefts

The New York Appellate Division for the Second Judicial Department has imposed a three-year suspension for an attorney’s failure to adequately supervise his thieving law partner. The attorney also failed to fully respond to the complaints that poured in in the wake of the partner’s defalcations. There were 30 complaints with 17 responses and a failure to respond to further requests for information.

The court stated:

In determining an appropriate measure of discipline to impose, the Grievance Committee has expressed strong disagreement with the Special Referee’s conclusion and the respondent’s contention that he was a victim of Belletieri’s fraudulent scheme. The respondent’s position is that Bellettieri [the partner] acted alone, without his knowledge, and that he acted to hide his misconduct from the respondent. He submits that had he been able to obtain Bellettieri’s testimony at the hearing, the extent of the obstruction he created to prevent the respondent from finding out what he was doing would be revealed. The division of labor at BF & L [the law firm] was such that the respondent and [partner] Laudonio attended closings, while Belletieri ran the office, particularly the escrow accounts. The respondent issued checks at closings only after confirming that the requisite funds were in BF & L’s escrow account. He maintains that he had no reason to suspect criminal behavior on the part of Bellettieri, who was the firm’s founder and “a pillar of the community.” Moreover, the high volume of transactions engaged in on a daily and weekly basis, together with the onerous schedule of closings the respondent was required to attend, would have made it a practical impossibility for him to reconcile the firm’s accounts while continuing to meet his duties to clients.

The Grievance Committee maintains that the respondent displayed a long-term, near total ignorance of his fiduciary duties as attorney and escrowee. He ignored multiple warning signs and blatantly apparent indicators of criminality which could have forestalled such a massive escrow fraud by Belletieri. These included the $900,000 defalcation in BF & L’s former escrow account at Fleet Bank in 2003, Bellettieri’s refusal to produce the records for that account despite the respondent’s requests, and the mysterious destruction of records maintained in BF & L’s storage archive at that time. In the face of these warnings, greater oversight and immediate intervention was warranted.

With respect to the respondent, it bears noting that he was no stranger to the real estate and mortgage business. Far from being a business novice, he had an accounting background and had worked for an accounting firm for about three years after graduating from law school. He thereafter worked for a Manhattan law firm which handled real estate matters, where he was trained to represent buyers and sellers in residential and commercial transactions before starting his own practice and eventually entering a partnership with Bellettieri. He was comfortably drawing approximately $7,000 per week from BF & L during the period in question and knowingly permitted Bellettieri’s commingling in order to allow BF & L to continue operating. The respondent’s disciplinary history consists of one Letter of Caution, dated April 29, 2005, for his delay of approximately three years in resolving a $4,000 escrow problem arising from the sale of real property in Ozone Park, Queens. While it may have been difficult and time consuming to obtain the necessary documents to establish that the subject premises was a two-family dwelling on the tax records as of 1937, the Grievance Committee found no valid reason for the respondent’s excessive delay in turning over the first $1,000 to the seller, who had promptly vacated the premises pursuant to the possession agreement. The respondent’s failure to take any meaningful measures to resolve the tax record issue until after the filing of the underlying complaint resulted in the issuance of a Letter of Caution.

While the respondent was, to some extent, victimized by Bellettieri, he was also uniquely positioned to put an end to Bellettieri’s scheme and thereby minimize damage to clients who had entrusted funds to BF & L. In this regard, he failed to uphold his nonwaivable fiduciary duty. Under the totality of circumstances, the respondent is suspended from the practice of law for a period of three years.

I’m not sure that I’ve seen this long a suspension for failure to discover the thefts of a law partner. (Mike Frisch)