That’s Not Entertainment
A two-year suspension of an entertainment law attorney has been imposed by the New York Appellate Division for the First Judicial Department.
Respondent focuses her practice on corporate transactions, with an emphasis on entertainment matters. Prior to April 23, 2010, respondent maintained a business operating account, a personal account, and an escrow account, all with Chase Bank. In May 2010, the Internal Revenue Service levied against respondent’s personal and business accounts in connection with a tax lien, withdrawing approximately $24,000. Thereafter, respondent began depositing the legal fees she received into her escrow account and paying personal and business expenses therefrom. Continuing through September 2012, respondent deposited legal fees and other personal funds exceeding $500,000 into her Chase escrow account. Respondent also named her accountant, a non attorney, as a signatory on her escrow account. Between 2010 and 2012, the accountant signed numerous checks on the escrow account, which were payments of respondent’s business and personal expenses. In addition, the accountant signed 14 escrow checks made payable to cash and effectuated other cash withdrawals from the escrow account.
Respondent testified before the Referee that she had received notice of the IRS levies, that she had discussed the matter with her accountant, and that she was aware that there were outstanding federal tax liens against her. In addition, respondent testified that, as of May 2010, in her view, her Chase escrow account was no longer an escrow account because no client funds were deposited into the account. Respondent testified that her escrow account had not held client funds since approximately 2006. According to respondent, although she discussed the IRS levies with her accountant, the two never spoke of her using the escrow account for personal and business purposes to avoid further levies. Respondent did not call her accountant as a witness.
By making her accountant, a non attorney, an authorized signatory on the escrow account, respondent violated Rule 1.15(e), and we therefore confirm the Hearing Panel’s recommendation that we sustain charge two. By depositing legal fees and personal funds into her escrow account, using the account to pay business and personal expenses, and permitting her accountant to make cash withdrawals from the account, respondent violated Rule 1.15(b)(1) (a lawyer shall maintain separate accounts received incident to the practice of law) and Rule 1.15(e) (all special account withdrawals shall be made to a named payee and non lawyers are not authorized to be signatories). Accordingly, we confirm the Hearing Panel’s recommendation to sustain charges one, three, and four.
Contrary to respondent’s argument, the fact that she stopped depositing client funds into her escrow account does not exempt the account from Rule 1.15 requirements. The record supports the finding that respondent’s misuse of her escrow account was for the intended purpose of shielding funds from the IRS in violation of Rule 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation) and Rule 8.4(d) (conduct prejudicial to the administration of justice). [*3]Accordingly, we confirm the Hearing Panel’s recommendation sustaining charges five and six.
Respondent testified that she failed to provide some clients with letters of engagement or retainer agreements for matters which she knew at the time of retention would incur fees in excess of $3,000. We agree with the Hearing Panel’s conclusion that such conduct violates Rule 8.4(d) and 22 NYCRR 1215.1, and therefore sustain charge eight.
Respondent was also charged with violating Rule 8.4(h) (conduct adversely reflecting on fitness as a lawyer) for filing a false affirmation by certifying in her “2011” biennial attorney registration that she was in compliance with Rule 1.15. In the pre hearing stipulation, however, the DDC alleged that respondent had falsely affirmed she was in compliance with Rule 1.15 when she filed her biennial registration statement on December 17, 2010. Although the DDC did not formally amend charge nine in the stipulation, nor did it request that charge nine be corrected at the hearing, we agree with the Hearing Panel that the incorrect reference to 2011 rather than 2010 in the charge was a typographical error. We also find that based upon the parties’ pre-hearing stipulation, respondent was on notice that the actual year in dispute was 2010 and, in view of the violations concerning her escrow account during that year, the 2010 affirmation of compliance was a false statement. Therefore, we confirm the Hearing Panel’s recommendation sustaining charge nine.
The attorney sought a public censure. The court rejected the suggestion. (Mike Frisch)