Trust Overdraft For Phone Sex Charges Leads To Disbarment

The New Jersey Supreme Court disbarred an attorney for intentional misappropriation and other misconduct as described in the Disciplinary Review Board report.

The case reinforces the court’s properly unsympathetic view of knowing misappropriation.

It started with overdrafts on a trust account for a purpose unrelated to legitimate client affairs.

On January 24, 2013, Kearny [Federal Savings Bank]  notified the [Office of Attorney Ethics] of a $96.63 overdraft in respondent’s trust account following three consecutive $36 electronic charges from UNI Information Inc. (UNI). UNI is a corporate entity located in California that provides adult entertainment in the form of “phone sex talk.” Kearny honored the charges, but assessed an insufficient funds fee of $105 for the three overdraft charges, which increased the overdraft to $201.63…

According to respondent, he was charging the UNI calls directly to his trust account because he had personal funds in the account, at that time, and did not have a business account, but was in the process “of reestablishing one as soon as possible.” He added that he began authorizing UNI charges to his trust account in April 2012. UNI charged the following rates: $18 for fifteen minutes; $36 for thirty minutes; $54 for forty-five minutes; and $80 for seventy-five minutes. Respondent maintained that he would never know when the UNI charges would “hit” his account. He stopped using the trust account for the UNI charges after he received the OAE’s January 28, 2013 letter.

But the overdraft led the OAE to investigate and learn of instances of misappropriation from clients.

The misconduct and potential mitigation

The complaint clearly and convincingly demonstrates that respondent continuously invaded client funds to support his alcohol, gambling, and phone sex proclivities. After he invaded client funds, he supplemented one client’s funds with either personal funds or engaged in “lapping” to satisfy the amounts he owed his clients. In other words, he used funds from one client to cover the amounts he owed another client. There is no question that respondent knew he was invading other client funds. This was no more evident than when, after he used Taylor’s funds to repay Bishop and McArdle, he purportedly obtained a loan from Taylor, to justify the shortage in his trust account to the OAE.

 Although respondent’s alcoholism, his compulsive gambling, and his depression, exacerbated by his mother’s illness and ultimate death evoke a sense of compassion, those circumstances do not and cannot excuse his knowing misappropriation of client funds. The Court consistently has rejected alcoholism as a defense to knowing misappropriation…

Gambling addiction, too, has not saved from disbarment attorneys who knowingly misappropriated clients’ monies to fund their habit…

Mental illness, too, has been insufficient to override the disbarment penalty required in knowing misappropriation cases. The Court rejected a defense of manic-depressive illness and underlying bipolar disorder in a case involving one instance of knowing misappropriation and three instances of forgery…

The attorney defaulted on the charges. and has been subject to an interim suspension since January 2015.

The matter thus reflects two of the most important tools in effective attorney discipline.

First, it shows the value of the mandatory overdraft notice to bar counsel.

Here, the notice served as a trigger to uncovering serious misconduct before a client complained. It can take a long time to catch the Rob Peter to Pay Paul (not Pal) type of escrow account thief.

Second, interim suspensions serve to protect the public while the long slog to suspension/disbarment plays out.

Here, in the face of default, the attorney has already been out of circulation for two years. (Mike Frisch)