Closing Time
The New Jersey Supreme Court censured an attorney for misconduct found by its Disciplinary Review Board
Respondent and the [Office of Attorney Ethics] entered into a disciplinary stipulation, dated April 24, 2018, which sets forth the following facts in support of respondent’s admitted ethics violations.
In July 2011, an attorney reported to the OAE respondent’s systematic practice of overcharging recording costs and retaining excess funds, in connection with his service as the settlement agent in real estate closings. The OAE began an investigation, and respondent provided a written submission, wherein he admitted, but defended, that practice. Specifically, respondent asserted that, as a settlement agent, his practice was proper, pursuant to the Real Estate Settlement Procedures Act (RESPA), a federal law governing real estate transactions. Respondent, thus, maintained that he had committed no ethics violations.
The OAE investigation was then “held in abeyance pending the outcome of a class action” lawsuit involving the attorney who had reported respondent’s conduct. On May 19, 2016, while the investigation was still on hold, the Court issued its decision in In re Fortunato, 225 N.J. 3 (2016), censuring an attorney for engaging in the same practice, and ordering that attorney to review his real estate closing records for the last seven years, and to return all excess recording costs to the aggrieved parties.
In October 2016, the class action litigation concluded and the OAE reactivated its investigation in this matter. In March 2017, the OAE provided respondent a copy of our decision in Fortunato and the Court’s corresponding Order, and directed him to conduct a review of his records for the last seven years, including client ledger cards, HUD-1 forms, and billing invoices, to identify all excess recording costs that he had retained. The OAE informed respondent that, if he were still asserting that his conduct was proper, the relevant party to the transaction “had to have been informed of the same and billed appropriately.”
From March through December 2017, respondent conducted a review of his real estate closing records for the prior seven years, and provided the OAE with a summary of all excess recording costs that he had retained. The OAE granted him multiple extensions to complete the review. Respondent then refunded to various parties $76,254 in excess recording fees that he had improperly retained.
Abandoning his RESPA defense, respondent then admitted that, from 2010 through 2017, he had systematically and improperly retained excess recording costs from real estate transactions in which he had served as settlement agent. Moreover, he admitted that, during the same time frame, he had signed hundreds of HUD-ls, confirming that they were true and accurate accounts of the transactions and affirming that he had “caused or will cause the funds to be disbursed in accordance with this statement.” In all of those transactions, however, the HUD-1 was neither an accurate account of the transaction nor a true reflection of the disbursement of the settlement funds. Respondent, thus, admitted that he had systematically violated RPC 1.15(b), by retaining the inflated recording costs, instead of promptly notifying his clients or third parties of his receipt of funds to which they were entitled and promptly disbursing those funds to them. Moreover, respondent admitted that, by his execution of the HUD-1 s in these transactions, he had engaged in a pattern of misrepresentation, in violation of RPC 8.4(c).
A censure for a seven-year pattern of overcharging and dishonesty? It must be Monday in New Jersey. (Mike Frisch)