The New Jersey Supreme Court has reprimanded an attorney for ethics violations described by the Disciplinary Review Board
The OAE investigator testified concerning the six recordkeeping violations initially revealed by the 2019 random audit. Specifically, he explained that the audit revealed that respondent had failed to maintain client ledger cards and, instead, kept a general ledger reflecting all receipts and disbursements for all client matters, without the individual three-way reconciliations that would have enabled him to promptly identify potential errors. Consequently, this led to negligent misappropriation of entrusted funds through over-disbursements and duplicate payments across four client matters.
The investigator further recounted the OAE’s exhaustive efforts to obtain additional financial records from respondent that would have enabled it to close the random audit and subsequent investigation, including numerous letters, emails, and telephone calls. The investigator explained that, although respondent had provided some responsive documentation, including the recreated client ledger cards, he failed to explain the inactive balances and shortages in his ATA.
During cross examination, the investigator testified that respondent had failed to provide the additional documents requested in the OAE’s July 22, 2022 letter, including copies of his updated client ledger cards for the specific client matters identified in respondent’s June 10 and June 13, 2022 correspondence.
Respondent’s line of questioning on cross-examination partially focused on whether, prior to setting deadlines for the production of documents, the OAE confirmed with respondent whether he or his accountant could, in fact, comply with the deadlines. The investigator testified that the OAE had selected deadlines that provided respondent with a reasonable amount of time within the Rules to submit a written reply that was “fully responsive” to the OAE’s requests. The investigator further testified that the OAE was aware that respondent needed time to recreate and reconcile his financial records because he had failed to maintain those records in accordance with the Rules. The investigator acknowledged that respondent “eventually” provided the documents and, further, that there was no evidence that he sought to conceal or withhold any information from the OAE. The investigator further testified that the OAE identified respondent’s recordkeeping deficiencies, including the four ATA shortages, only after he provided his reconstructed financial records. However, the investigator explained that the OAE was unable to fully determine what deficiencies existed, or the extent of any potential ATA shortages, without access to respondent’s recreated and updated client ledger cards.
The investigator acknowledged that respondent “eventually” provided the documents and, further, that there was no evidence that he sought to conceal or withhold any information from the OAE. The investigator further testified that the OAE identified respondent’s recordkeeping deficiencies, including the four ATA shortages, only after he provided his reconstructed financial records. However, the investigator explained that the OAE was unable to fully determine what deficiencies existed, or the extent of any potential ATA shortages, without access to respondent’s recreated and updated client ledger cards.
For his part, respondent testified that he had his “own form of recordkeeping” which he admitted failed to comply with R. 1:21-6. He conceded that he failed to maintain client ledger cards and explained that he maintained his records as best he could and in the same way the records were maintained at his prior firm. He testified that the audit was the first time anyone had explained to him how he was required to maintain his firm’s financial records. He admitted that the errors would not have occurred if he had prepared individual client ledger cards. Respondent reiterated, however, that all the information included in the reconstructed client ledger cards was on his general ledger.
Sanction
Here, like the reprimanded attorneys in Sherer, Steinmetz, and Osterbye, respondent’s poor recordkeeping practices caused the negligent misappropriation of client funds. Further, the censured attorney in Tobin, unlike respondent, had prior discipline and allowed the matter to proceed as a default. Thus, based upon precedent, we conclude that the baseline discipline for respondent’s misconduct is a reprimand. To craft the appropriate discipline in this case, however, we also consider aggravating and mitigating factors.
In aggravation, respondent has refused to accept full responsibility for his misconduct. Specifically, although he admitted that his poor recordkeeping resulted in negative client balances, he asserted that nothing in the record supported the OAE’s contention that he “negligently misappropriated” any client funds. Moreover, although he stipulated that he failed to reply to OAE requests by the stated deadlines, he argued that nothing in the record established that he failed to cooperate.
In mitigation, respondent experienced personal and medical issues at some point during the random audit or investigation. However, we accord this consideration minimal weight in view of the contradictory evidence concerning the timing of those events. Specifically, in his June 6, 2022 e-mail to the OAE, he claimed that his father “passed away unexpectedly and a few weeks later [his] grandfather passed away of a heart attack.” However, he testified at the ethics hearing that his grandfather passed away on June 7, 2020. He also testified that his father passed away in 2020, not 2022, as inferred by his e-mail.
Assuming respondent simply misspoke when he testified the year was 2020, that timeframe would only account for respondent’s failure to reply to the OAE’s February 17 and May 4, 2022 letters. Moreover, if the events occurred in 2022 as respondent implied in his e-mail to the OAE concerning his grandfather’s death, he sent that e-mail on June 6, the day before his grandfather died.
In further mitigation, respondent has no formal discipline in his eighteen-year career