Financial Difficulties Lead To Suspension

A two-year suspension of an attorney has been ordered by the New York Appellate Division for the First Judicial Department

The material facts of this matter are undisputed. Respondent, 75 years old, was a named principal in the law firm of Liddle & Robinson. His practice is focused on representing allegedly defrauded investors and financial and securities professionals disciplined or fired for alleged misconduct, for which he is paid mostly on a contingency basis. Since his law practice did not generate a regular, steady cash flow, respondent relied on bank loans, and later litigation financing, to help pay his law firm’s ongoing expenses, which required that respondent and his law partners act as personal guarantors. In or about 2015, respondent and his firm began to experience financial difficulties and relationships with their lenders soured.

One lender sued respondent and several of his partners and ultimately obtained a $6.5 million judgment against them. Respondent’s firm’s landlord also obtained a $646,233 judgment against the firm, and the firm’s business accounts were restrained and garnished. By July 2018, respondent no longer had access to his firm’s accounts and by the end of July 2018, all of the firm’s business and payroll accounts had been brought to a zero balance. In or about August 2018, respondent resorted to using his law firm’s escrow account as a business/operating account and all firm receipts and payments were channeled through the escrow account. This included receiving payments from clients and others via checks and wire transfers. In addition, firm expenses and staff and attorneys’ salaries were paid from the escrow account by check, wire transfers, and ATM withdrawals. Respondent continued this practice through at least April 2019. Respondent testified that his use of the escrow account was the only immediately viable option available to keep his firm from closing. Closure would have devastated most of his clients and negatively impacted his employees, many of whom had worked for him for decades. Respondent denied that his use of the escrow account evinced any fraudulent or dishonest intent on his part to evade creditors. The audit conducted by the Committee’s investigative accountant showed that during the period at issue, deposits into and withdrawals from the escrow account totaled approximately $700,000; during this time, the account did not hold any client funds.

In March 2019, respondent filed for bankruptcy and his firm followed in July 2019. Both respondent, who continued to practice law throughout the bankruptcy proceedings, and his firm were granted discharges in March 2022; no fraud claims were brought by any creditor. Respondent lost almost all of his personal assets.

Sanction for improper use of escrow account

Respondent’s mitigation evidence is not sufficiently compelling to warrant a lesser sanction. Respondent asserts that there was no commingling or misuse of client funds and no clients were harmed and there is but a slim likelihood that he will repeat his misconduct. He further points to a previously unblemished 47-year legal career and record of accomplishment; his precarious financial situation given his age, that his law practice is his primary source of income and that he provides financial assistance to his working adult children; and his charitable contributions and community work. Though respondent asserts that firm attorneys performed pro bono work under his supervision and that he personally represented many clients without any fees for decades, he presented no evidence to the Referee of substantial pro bono activities. Respondent further asserts that his expressions of remorse were evinced in a deposition transcript, the relevant portion of which was lost due to no fault of his own. The Committee correctly notes that notwithstanding the lost deposition transcript that purportedly contained respondent’s statements of remorse, respondent had ample opportunity to express remorse during his hearing testimony but failed to do so. Based on the record and relevant caselaw in this Department, a two-year suspension is warranted.

The lost transcript involved technical issues in a remote proceeding due to the pandemic. (Mike Frisch)