A Gift

The New Jersey Supreme Court recently reinstated an attorney after ordering his disbarment in May 2014 for intentional misappropriation.

The path post-disbarment was unusual as recounted in the court’s order

and the Court thereafter on respondent’s motion for reconsideration, having remanded the matter to the special ethics master for a hearing at which respondent could present additional proofs of his defense that the funds at issue in the Cox matter were a gift to respondent, as well as evidence pertaining to respondent’s credibility;

And the special ethics master having conducted said hearing and having submitted to the Disciplinary Review Board his supplemental report with the findings of fact and conclusions of law based on the additional proofs;

And the Disciplinary Review Board thereafter having filed a supplemental decision with the Court (DRB 16-077), accepting the credibility determinations of the special ethics master and finding that in the aggregate the record lacks convincing evidence that respondent knowingly misappropriated client funds, and having recommended to the court that the formal ethics complaint be dismissed and that respondent be reinstated to the practice of law.;

And good cause appearing;

It is ORDERED that the disbarment Order filed May 12, 2014, is hereby vacated…

The charges were dismissed and the attorney was immediately reinstated.

NJ.com had reported on the 2014 order of disbarment

In the days before 91-year-old Doris Cox died in January 2008, her attorney, Michael Luciano, withdrew $100,000 from her bank accounts, court papers say.

Luciano has claimed the money was a “gift” that Cox had said she wanted to give him several months beforehand, court papers say. He later used the funds to purchase bonds for himself or his children, court papers say.

But state judiciary officials didn’t buy that argument about the gift, and last week the state Supreme Court disbarred the Livingston attorney for the knowing misappropriation of client funds.

The order of disbarment, approved on Monday, was effective immediately.

In its decision recommending disbarment, the court’s Disciplinary Review Board noted how Luciano had no written evidence to show he had permission to take the money as a gift.

The attorney also failed to report the $100,000 on tax returns, the decision states.

“Given respondent’s failure to maintain the funds in a manner that was consistent with his stories, the only possible explanation for his transfer of the funds to the trust account was so that they could be hidden from the government and Cox’s beneficiaries,” the decision states.

Luciano is planning to file a motion to reconsider the disbarment, said his attorney, David Glazer. Luciano was admitted to the bar in New Jersey in 1984.

“We think it’s…a miscarriage of justice,” Glazer said. “We don’t believe that Michael did anything wrong.”

Glazer said Luciano’s clients can testify to his honesty, decency and compassion. “I don’t think you’ll find a single client who will have a negative thing to say about Michael Luciano,” Glazer said.

Cox, a retired elementary school teacher who later worked as a veterinary technician, was referred to Luciano by a friend in order to have her will redrawn, according to the decision.

In December 2005, Cox designated Luciano as her power of attorney, and he later handled all of her financial affairs, the decision states. Cox had no family, the decision states.

Her friend testified at a hearing that Cox’s state of mind was “fine” until “the last month or so,” the decision states. At that time, Cox was incoherent and “she did not understand what day or time it was,” the decision states.

Eight days before Cox died on Jan. 11, 2008, Luciano prepared a $25,000 check payable to himself from one of her bank accounts, according to the complaint filed against him by the court’s Office of Attorney Ethics.

Luciano signed Cox’s name on the front of the check and deposited the funds into his attorney trust account, the complaint states.

On Jan. 9 – two days before Cox’s death – Luciano obtained a $75,000 check payable to Cox from another account, the complaint states. He signed Cox’s name on the back of the check and deposited it into his account, the complaint states.

Following Cox’s death, Luciano used the funds to purchase bonds for himself or for his children, the complaint states.

The transfer of the $100,000 was discovered during a random audit of Luciano’s law firm by the Office of Attorney Ethics in August 2009, the decision states.

After Cox died, Luciano also received additional payments totaling more than $100,000 in attorney fees for handling the estate and a commission as the executor of her estate, the decision states.

During the ethics investigation, Luciano claimed that Cox had told him about the $100,000 gift during a July 30, 2007 meeting, the decision states. After receiving the ethics complaint, Luciano said he accepted the gift in lieu of attorney fees, according to his answer to the complaint.

“Ms. Cox emphatically stated that she wished to gift respondent $100,000.00,” according to Luciano’s answer. “Although Ms. Cox was not a blood relative her relationship with respondent was that of a relative or family member.”

But state judiciary officials concluded “there was no gift and that he availed himself of the $100,000 left in Cox’s account, which he knew she no longer needed,” the decision states.

The report of the Disciplinary Review Board proposing dismissal is linked here . 

It recounts the finding of the Special Master

although the evidence offered in support of respondent’s claim that Cox had gifted the $100,000 to him was “not overwhelming,” it was “just enough to push the scales to defeat the OAE’s burden of proof below the required clear and convincing evidence standard.” Consequently, the special master recommended respondent’s reinstatement to the practice of law.

The DRB majority concludes that misappropriation was not established by clear and convincing evidence with some misgivings but could no longer recommend disbarment “without hesitancy”

…some of respondent’s explanations for his actions remain contradictory, even irreconcilable, such as his failure to identify the gift on the inheritance tax return and his failure to declare the $100,000 as income. Yet, the ultimate question is, not what respondent did with the money or how he described the money or whether he should have paid taxes on the money. Rather, the ultimate issue is whether respondent knowingly misappropriated the funds in the first instance. Given the additional evidence presented on remand, it is no longer necessary to look at respondent’s subsequent actions to prove that he was not authorized to take the monies. In the face of the additional evidence that the monies were gifted to him, when considered in the aggregate with the OAE’s evidence, we are no longer able to come to a clear conviction, without hesitancy, that respondent knowingly misappropriated $100,000 from Cox.

And

Certainly, a person of honor is not immune from engaging in unethical behavior. Indeed, we do not go so far as to say that respondent has established, by clear and convincing evidence, that Cox had gifted $100,000 to him. We find, however, that, when considering all of the evidence, in the aggregate, the record lacks clear and convincing evidence that respondent knowingly misappropriated funds belonging to his client, Doris A. Cox. We recommend, therefore, that the complaint be dismissed, and that respondent be reinstated to the practice of law.

Finally, we take the opportunity to express a concern. The lack of a writing, demonstrating that Cox gifted the funds to respondent, disturbs us greatly.

Maybe not greatly enough, as indicated by the dissent of two DRB members

In our view, the corroboration of the “gift” by respondent’s family members, law partner, and former secretary is self-serving both to his interests and to theirs. That his client was generous to others does not convince us of her generosity toward him, for several reasons.

First, up until the time of the “gift,” respondent billed Cox for the services he provided to her. Why, then, would she reward him with a six-figure “bonus?” This is particularly so, given that her rewards to others were in writing in the form of specific bequests in her will or the identification of beneficiaries to her annuity and pension.

Second, it is unfathomable to us that an attorney as experienced and meticulous as respondent would fail to obtain a writing confirming that Cox has gifted $100,000 to him.

Third, respondent’s failure to report such a substantial sum of money to any taxing authority, together with his admission that he did not want the beneficiaries to know about the gift, smacks of dishonesty so premeditated in scope as to trump all other evidence suggesting – and it only suggests — a gift.

The dissenters also considered the age and infirmity of the client, which drew this response from the majority

Here, the dissenting members of this Board have based their determination, in part, on their view that Cox’s age and poor health rendered her vulnerable and that respondent took advantage of her. We note, however, that there was no evidence of her vulnerability; that age and health alone do not necessarily render one vulnerable; and that, compared to the record in [prior disciplinary cases], the record here lacks evidence that respondent took advantage of Cox. In our view, the strong character evidence produced at the rehearing undercuts such a conclusion.

I think there is at least a possibility that too much weight was given to the character evidence and too little to the proven facts.

Notably, Rule 1.8(c) of the New Jersey Rules of Professional Conduct provides

A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client. For purposes of this paragraph, related persons include a spouse, child, grandchild, parent, grandparent, or other relative or individual with whom the lawyer or the client maintains a close, familial relationship.

(Mike Frisch)