Imperfect Security

A six-month suspension has been imposed by the New Jersey Supreme Court based on facts found by the Disciplinary Review Board, which has recommended a one-year suspension.

The client (Masucci) had inherited over a million dollars

Masucci was concerned that she would be frivolous with the money and eventually deplete the Trust. Therefore, on July 16, 2013, she retained respondent to handle all her financial matters, for an annual fee of $12,500. Respondent held Masucci’s funds in trust and made necessary disbursements as requested. Masucci also asked respondent to make investments on her behalf using the Trust funds.

To that end, respondent invested some of her funds in his family business, Grillo Funeral Home, where he serves as funeral director. The alleged violations of the complaint do not stem from this investment, but from a subsequent loan from Masucci to Respondent

In 2013, grievant, Sanford B. Klausner, established Cubicon Corporation (Cubicon) and sought investors to fund this start-up venture. Cubicon intended to fund, promote, and monetize certain intellectual property that Klausner possessed relating to the “Internet of Things.’’  In the fall of 2013, through introduction by a mutual friend, Klausner met with respondent in Monterey, California, to discuss Cubicon. Respondent understood Cubicon’s technology to be a new architecture for the internet of things, which allowed machine-tomachine communication without human intervention. For example, an individual could use a “wearable” that could detect a medical emergency, and then notify a hospital, a personal physician, and an ambulance. It could be programmed to react automatically based on the circumstances it detects. Klausner assured respondent that a meeting with Cisco Systems, Inc. (Cisco) to license the technology was imminent.

The grievance involved a $500,000 loan to Respondent to invest in Cubicon.

Because respondent believed the risk was all his, he did not inform Masucci that this was a high-risk investment. He claims that, because her investment was in him and not Cubicon, and because she had “perfect security,” her investment was not risky. Accordingly, respondent argues that he met his ethics obligations by fully disclosing to Masucci the value of the property that secured her loan to him. Masucci agreed with respondent, testifying that he assumed all the risks. She also indicated, however, that respondent had assured her that she would not lose her initial investment. When asked how she was protected in the transaction, she simply replied, “I trust him implicitly.”

Trust can have a downside.

Violations

We agree with the DEC’s finding that respondent violated RPC 1.8(a), and that most of the remaining violations should be dismissed for lack of clear and convincing evidence. We do not agree, however, with the DEC’s recommended dismissal of the RPC 1.15(d) charge because respondent retained outstanding balances in his trust account, a violation of that Rule.

We dismiss the alleged violation of RPC 1.5(a). Respondent and Masucci both detailed the extensive amount of time respondent dedicated to her on a monthly, weekly, and, often, daily basis. Additionally, respondent collected $12,500 in 2014, $7,500 in 2015, and has not charged Masucci a fee since, despite continuing to work on her behalf.

Further, to prove an attorney charged unreasonable fees in violation of RPC 1.5(a), the presenter must demonstrate why the amount charged is unreasonable in relation to the results achieved, the amount of work performed, and the usual and customary fee in the locality for similar services, among other factors. See RPC 1.5(a)(1-8). The presenter introduced no evidence of respondent’s excessive fee vis-i~-vis these factors.

Proposed sanction

We acknowledge that respondent’s forty-five years as an attorney with an otherwise unblemished record serves as mitigation. His career in this regard, however, cuts both ways. As an experienced attorney, and as a business owner with acumen, he knew or should have known that he was taking advantage of Masucci’s trust and reliance. Hence, that mitigation does not serve to offset the enhancement of discipline. Therefore, based on the totality of circumstances, we determine that the appropriate quantum of discipline for respondent’s misconduct is a one-year suspension.

The court cut the sanction by half. (Mike Frisch)