“Strong” Censure Not Enough

The New Jersey Supreme Court approved a recommendation by its Disciplinary Review Board for a three-month suspension of an attorney.

From the board report

This matter was before us on a recommendation for a (strong) censure filed by the District VB Ethics Committee (DEC)…. The Office of Attorney Ethics (OAE) urged the imposition of a one-year suspension. Respondent’s counsel, in turn, took the position that either a reprimand or a censure is appropriate. For the reasons expressed below, we determine to impose a three-month suspension.

The misconduct involved ethical violations in three real estate closings.

In one

Respondent stipulated that she had not properly collected or disbursed the closing funds, despite having certified that the HUD-I contained an accurate accounting of her disbursements for the transaction. For example, even though the HUD-I showed $212,874 in total proc,eeds to the sellers, respondent disbursed only $15,000 to the Grahams. Also, she wired $93,074.46 directly to Jorge Abbud, even though he was not listed on the HUD-I.

 Her counsel argued

In his summation, respondent’s counsel characterized respondent as not a venal person, but an “unwitting dupe,” who trusted Abbud and the parties to the transactions. She thought that Abbud had the lenders’ authorization to direct her to act as she did.

But

Respondent agreed to represent three buyers in real estate transactions arranged by loan officer Jorge Abbud. In all three matters, which closed between April 2007 and March 2008, respondent served as the settlement agent and drafted the HUD-Is. Respondent gave the parties the use and occupancy agreements and other customary closing documents for their signature, including sellers’ and buyers’ affidavits of title. She prepared some of those documents, while others were prepared by the lender. Nevertheless, respondent witnessed the signing of various false affidavits and certifications for the closings. She also disbursed funds in a manner inconsistent with the HUD-Is in all of the transactions. Throughout the proceedings below, she admitted that to the extent that she disbursed to Abbud funds that did not appear at all on the HUD-Is and disbursed to the buyers and the seller’s funds in amounts that were at odds with the HUD-Is, she was guilty of conduct involving dishonesty, fraud, deceit, or misrepresentation, violations of RPC 8.4(c).

Respondent also admitted that RPC 1.5(b) required her to provide her buyer clients, whom she did not regularly represent, with a writing setting forth the rate or basis of her fee and that, by failing to do so, she violated that RPC. She denied, however, that she had violated that rule with regard to the sellers…

In furnishing affidavits of title or owner occupancy agreements to the buyers for their signatures and having them sign those documents with the above representations, respondent facilitated what is commonly known as occupancy fraud. That type of fraud takes place when, in order to obtain more favorable loan terms, the borrower (the buyer) misrepresents to the lender that the property will be owner-occupied. Lenders typically offer lower mortgage rates and higher loans for owner-occupied homes, because investment properties historically present a higher delinquency risk.

The board rejected conflicts allegations

That respondent represented both buyers and sellers in some aspects of these transactions is undisputed, however. But we cannot find a violation of RPC 1.7(a). Respondent testified that she had explained the conflict to all of the clients in the three transactions and had obtained written conflict waivers from them. Those waivers are both comprehensive and fully informative. There is no evidence to contradict respondent’s version of the events in this regard. Because the clients gave informed consent, confirmed in writing, after full disclosure, we determine to dismiss the RPC 1.7(a) charges in all three matters.

A strong censure was deemed an insufficient sanction. (Mike Frisch)