Loan Wolf
The New Jersey Supreme Court has ordered an indeterminate suspension of an attorney who had received a series of loans from a client and failed to respond to the ensuing bar complaint, rather than the recommended one-year suspension.
The Court having determined from its review of the matter that the appropriate quantum of discipline for respondent’s unethical conduct is an indeterminate suspension pursuant to Rule 1:20-15A(a)(2)…
The Disciplinary Review Committee described the violations.
Ironically, the client/complainant had retained Respondent’s firm to collect an unpaid loan
One month later, in May 2017, Filosa agreed to provide respondent with funds to assist paying a mortgage on his residence and for other personal expenses. Between May 31, 2017 and September 5, 2018, Filosa provided respondent five interest-free loans, in amounts ranging from $5,000 to $150,000, and totaling $450,000.
The client sued Respondent
On December 16, 2020, the DNJ issued a $425,444.42 default judgment in favor of Filosa and against respondent, which sum included respondent’s unpaid loan balance, the consequential damages Filosa requested in his complaint, and interest on those amounts.
Ethical violations
Based on the foregoing facts, the OAE charged respondent with having violated RPC 1.8(a) for accepting five interest-free loans from Filosa, totaling $450,000, without complying with the safeguards of that Rule. Specifically, respondent failed to set forth, in writing to Filosa, the terms of the loan transactions and the desirability of seeking independent counsel. Additionally, respondent failed to provide Filosa the opportunity to seek the advice of independent counsel concerning their loan transactions, and he failed to secure Filosa’s informed consent, in writing, to the essential terms of their transactions. Similarly, the OAE charged respondent with having violated RPC 1.7(a)(2), given the significant risk that his representation of Filosa would be materially limited by his personal interest in borrowing money from his client.
The OAE declined, however, to charge respondent with having committed knowing misappropriation of “client and/or escrow funds,” in violation of RPC 1.15(a) and the principles of In re Wilson, 81 N.J. 451 (1979), and In re Hollendonner, 102 N.J. 21 (1985). Specifically, the OAE noted that, although respondent had accepted improper loans from Filosa, there was no clear and convincing evidence that he “knowingly misappropriated funds belonging to” Filosa.
Failure to respond to the bar complaint
Effective May 31, 2023, following his total failure to reply to the OAE’s correspondence, the Court temporarily suspended respondent for his failure to cooperate. Greenblum, 254 N.J. 50. As previously noted, he remains temporarily suspended to date.
Sanction
Respondent’s improper loan transactions, thus, appeared to have forced Firm I into a settlement with its former client for less than half of the legal fees to which it was entitled. Moreover, by surreptitiously attempting to divest Firm I of its legal fees through his loan arrangements with Filosa, respondent’s conduct appeared to constitute an attempt to knowingly misappropriate Firm I’s funds, in violation of the principles of In re Siegel, 133 N.J. 162 (1993). However, given the OAE’s express determination declining to charge respondent with knowing misappropriation, we determine to leave the OAE’s decision undisturbed…
In conclusion, respondent’s misconduct resulted in significant financial harm to both his former law firm and client. Respondent not only may have attempted to divest his former law firm of its legal fees for his own pecuniary benefit, but also needlessly wasted the resources of his client and former law firm, both of whom were forced to institute litigation as a result of his misconduct. More egregiously, respondent has refused, for years, to make any attempt to repay a substantial federal court judgment in favor of Filosa, resulting in at least a $425,444.42 loss to his former client. Consistent with disciplinary precedent, coupled with the serious aggravating factors present in this matter, we determine that a one-year suspension is the appropriate quantum of discipline necessary to protect the public and preserve confidence in the bart.
New York disbarred Respondent. (Mike Frisch)