Disbarment Proposed Where Misappropriated Funds Used To Pay Law School Tuition
The California State Bar Court Hearing Department found insufficient evidence of several allegations but nonetheless found violations that led to a disbarment recommendation.
At issue were funds obtained in litigation in which her spouse was counsel of record
class actions [that] were brought on behalf of heirs and descendants of persons killed during the Armenian Genocide of 1915-1918, who had purchased life insurance policies sold by New York Life Insurance Company and AXA, S.A…
On January 10, 2005, the district court entered an order and judgment approving a $20 million settlement of the NYLIC class action. The NYLIC class action settlement agreement created, inter alia, an “Unclaimed Benefits Fund,” with $3,000,000 and nine specific, designated beneficiaries.
The attorney created two organizations – CAR and CMA – that received some proceeds of the litigation.
While a number of charges were unproven, the found misconduct involved moral turpitude
In contrast, this court does find that Respondent’s actions in creating and funding the Sharebuilder account were acts of moral turpitude. Respondent created this account using the name and personal information of her daughter without the daughter’s knowledge or permission. Respondent then transferred $30,000 of CAR funds into the account, purporting to justify that transfer with the explanation that it represented a repayment of a loan made to CAR by the daughter. In fact, no such loan had ever been made. Respondent then continued to maintain control over the funds, about which the daughter had no knowledge until being subpoenaed by the State Bar to testify in this matter. These actions by Respondent represented a misappropriation by her of CAR funds for which she had a fiduciary duty and constituted acts of moral turpitude by Respondent, in willful violation of the prohibition of section 6106.
Respondent’s transfers of funds for the benefit of her children, although apparently authorized by the CAR board, were handled in a manner resulting in Violations of section 6106. Two of these transfers were in the form of direct payments by CAR to the Loyola Law School for the tuition of two of Respondent’s children. While the board approved these payments as compensation for work performed by the children for CAR, the payments were not treated as payable income being received by the children but instead were falsely reported on the tax return, signed by Respondent, as charitable contributions by CAR to the school.
For similar reasons, several payments made by Respondent to her daughter for work the daughter had performed for CAR were handled by Respondent in a manner violating section 6106. These payments, all for $5,000, were apparently authorized by the board but were not treated as taxable income being paid to the daughter. Neither a W-2 nor a Form 1099 was issued to the daughter. Nor were the transfers recorded internally as money paid for services rendered. Instead, the payments were falsely recorded by Respondent as being repayments of loans.
Sanction
Here, Respondent had been disciplined on two separate occasions prior to her misconduct in this matter. Her prior misconduct included acts of dishonesty, like here. Despite the rehabilitative efforts of the prior discipline, Respondent effected numerous acts of misappropriation and moral turpitude and, despite a third discipline in 2011, has continued to evidence a complete lack of insight into the impropriety of her conduct. Under such circumstances, it is this court’s conclusion that a disbarment recommendation is both appropriate and necessary to protect the public and the profession.
(Mike Frisch)