Unindicted Co-Conspirator Attorney Disbarred

Reciprocal disbarment was imposed by the New York Appellate Division for the Second Judicial Department who had consented to disbarment in New Jersey.

The court summarized the New Jersey allegations

Count one charged the respondent with violations of rules 8.4(b), 8.4(c), and 1.15(a) of the RPC in connection with his role in a massive fraud known as an “advanced fee fraud” perpetrated by the Harbor Funding Group (hereinafter HFG). In essence, the respondent facilitated the fraudulent transfer and theft of millions of dollars in escrow funds. HFG was a corporate entity that was purportedly in the business of providing funding for real estate transactions. HFG was not a legitimate business operation and was prosecuted by the United States Attorney for the Eastern District of New York. The principal coconspirators were William C. Lange, Joseph Pascua, Brad Russel, Frank Perkins, and Kristofer J. Lange. The respondent was identified as an unindicted coconspirator in the government’s filings. In exchange for his cooperation, the respondent was not criminally prosecuted. HFG and its principal coconspirators represented to individuals involved with real estate developers primarily in a region known as the Gulf Opportunity Zone (a region impacted by Hurricane Katrina) that HFG could fund real estate development if the prospective parties provided a 10% advanced fee or deposit. HFG, in fact, had no access to real estate financing. The only fund available to HFG was the 10% advance fee made by numerous real estate investors and parties. HFG and the investors agreed that the fee would be placed in escrow to be held by an attorney. The respondent agreed to be an escrow agent on behalf of HFG.

The respondent was paid an agreed percentage based on the amount of investment. He stated to the OAE that he earned $21,500 for his role in the fraudulent scheme. Escrow agreements were executed, but these agreements contained a provision which permitted HFG to unilaterally request release of the escrow funds. The respondent used the provision to transfer millions of dollars to HFG and the principal coconspirators, ignoring his fiduciary duties owed to the escrow clients. The respondent failed to keep his escrow clients informed, failed to advise them of the disbursement of their funds, and failed to provide them with an accounting of their funds. Count two charged the respondent with violations of rules 1.15(a), 1.4(b) and (c), 8.4(b), and 8.4(c) of the RPC in connection with his role in a real estate transaction as the escrow agent for an earnest money escrow agreement involving Imperial Development Tracewood, LLC (hereinafter the seller), and Kennie Arriola, Ingrid Arriola, Herman Kinscher, Ben Arriola, Imedla Young, and Erik Kinscher (hereinafter collectively the buyers). Pursuant to the escrow agreement, the respondent agreed to hold the earnest money in accordance with the terms of the contract or until written release disbursement instructions were received from the seller.

On July 17, 2008, the buyers wired $100,000 into a trust account maintained by the respondent at Bank of America (account ending 2099), and separately wired an additional $40,000 into the account, for a total of $140,000. Thereafter, on July 25, 2008, the respondent wired $105,000 of the $140,000 to an account held by HFG, and on September 5, 2008, wired the remaining $35,000 to an account held by an unrelated corporation named APV, LLC. In neither instance did the respondent receive written authorization from the buyers or the seller before he disbursed the escrow funds.

Count three charged the respondent with violations of rules 1.15(a), 1.4(b) and (c), 8.4(b), and 8.4(c) of the RPC in connection with his role as the escrow agent of funds received on behalf of his client, OFP/Oliver Byington (hereinafter OFP). On July 24, 2008, the respondent received $200,000 in escrow funds from OFP. Four days later, on July 28, 2008, the respondent disbursed the funds received from OFP to HFG, without obtaining authorization from OFP to release the escrow funds. In addition, the respondent took a fee from the escrow proceeds in the amount of $625 without the knowledge or permission of OFP. OFP’s funds were fraudulently transferred by the respondent and misappropriated by HFG.

Count four charged the respondent with violations of rules 1.15(a), 8.4(b), and 8.4(c) of the RPC in connection with his role as the escrow agent for a loan to be provided by HFG to Providence Home Building & Design, Inc. (hereinafter Providence). The escrow agreement provided for the release of the funds on deposit if any of three enumerated conditions occurred. On July 9, 2008, Providence wired $67,000 to an escrow account (account ending 2099) maintained by the respondent at Bank of America. On July 10, 2008, Providence wired $100,000 to an escrow account (account ending 2099) maintained by the respondent at Bank of America. On July 11, 2008, the respondent transferred the $167,000 received from Providence to another trust account (account ending 9648) maintained by the respondent at Bank of America. On September 4, 2008, Providence wired an additional $80,000 into the respondent’s escrow account (account ending 2099).

On September 12, 2008, the respondent wired $248,881.72, of which $80,000 consisted of funds received from Providence, from the account ending 2099 to a bank account at First National Bank of Alaska for an unrelated corporate entity called APV, LLC. The escrow agreement did not authorize the respondent to send Providence’s funds to APV, LLC.

Count five charged the respondent with violating RPC rule 1.15(d) and rule 1:21-6 of the New Jersey Court Rules based on his failure to comply with various recordkeeping requirements under the Rules, namely, contemporaneous three-way reconciliations.

The New York FBI Field Office posted on the related criminal conviction. (Mike Frisch)