A Three Phase Conspiracy

The New Jersey Supreme Court has imposed a three-year suspension of a convicted attorney effective from June 2017, the date of Respondent’s suspension.

The offense was described by the Disciplinary Review Board

On May 17, 2017, before the Honorable Kevin McNulty, U.S.D.J., respondent entered a guilty plea to one count of making false entries to deceive the FDIC and First State Bank (FSB) (18 U.S.C. §§ 1005 and 2) and one count of conspiracy (18 U.S.C. § 371) to make false entries and to influence the action of the FDIC by making or inviting reliance on a false statement, document, or thing (18 U.S.C. §§ 1005, 1007). Respondent entered her plea pursuant to an Information, voluntarily waiving her right to an indictment by a grand jury.

Specifically, respondent admitted that, in 2009 and 2010, while she was serving as outside counsel to FSB, she and several co-conspirators engaged in a complex scheme to deceive FSB and government regulators regarding FSB’s financial condition.

The scheme involved respondent and four additional co-conspirators. Co-Conspirator One (CC One) was an attorney, licensed to practice law in New Jersey, who provided services to FSB. Co-Conspirator Two (CC Two) held a senior management role at FSB and served on FSB’s Board of Directors (the FSB Board). CC Two recommended to the FSB Board that FSB hire Co-Conspirator Three (CC Three) to act as FSB’s investment advisor, and CC Three, in turn, identified himself to FSB as undertaking efforts to raise capital for FSB through one of two entities based in Canada (collectively, “the Canadian Company”). Co-Conspirator Four (CC Four) held himself out as a principal of several insurance companies operating in New Jersey.

By September 2009, respondent, CC One, CC Two, and CC Three knew that the FDIC and the New Jersey Department of Banking and Insurance (NJDOBI) (collectively, the Regulators) had determined that FSB was insufficiently capitalized. Around the same time, CC Two proposed to the FSB Board that FSB retain CC Three to restructure its investment portfolio. Accordingly, FSB entered into a contract with CC Three, wiring roughly $12 million dollars in FSB funds to the Canadian Company for CC Three to invest on FSB’s behalf.

Subsequently, respondent became involved in an elaborate, three-phase scheme to deceive FSB and the FDIC regarding FSB’s true financial health.

Sanction

On balance, in light of the magnitude of the harm to the client, respondent’s misuse of her role as FSB’s attorney in connection with the conspiracy, and her continued participation at each juncture in the conspiracy’s three distinct phases, we determine that a three-year suspension is the quantum of discipline necessary to protect the public and preserve confidence in the bar.

A report on the plea from the United States Attorney’s office for the District of New Jersey

The three-phase scheme took place from 2009 to 2010. The first phase was to fraudulently infuse $7 million of capital into FSB. In the second phase of the scheme, various conspirators caused FSB to make millions of dollars in loans based on material misrepresentations in order to cover up the fraudulent nature of the capital infusion and end inquiries from FSB’s auditors. The final phase involved lying to the FDIC and FSB, among others, about the fraudulent capital infusion and loans.

(Mike Frisch)