Trust Account Issues Draw Sanction

The New York Appellate Division for the Second Judicial Department has imposed a two-year suspension for escrow account misuse

The petition alleges five charges of misconduct related to the respondent’s escrow account maintained at Chase Bank, entitled “Spaeth & Counsel, LLC, Attorney Trust Account IOLA,” with an account number ending in 0515 (hereinafter the escrow account).

Charge one alleges that between May 15, 2020, and May 18, 2020, the respondent was required to maintain $15,000 in the escrow account on behalf of the Prioleau real estate matter. Notwithstanding, the balance in the respondent’s escrow account during that period fell to $13,563, which was $1,437 less than what the respondent was required to maintain. On May 19, 2020, the respondent was required to maintain a total of $35,000 in the escrow account on behalf of the Prioleau and Fucci real estate matters. Notwithstanding, the balance in the escrow account on that date was $34,810.30, which was $189.70 less than what the respondent was required to maintain. Between May 20, 2020, and June 29, 2020, the respondent was required to maintain $15,000 in the escrow account on behalf of the Prioleau real estate matter. Notwithstanding, the balance in the escrow account during that period was less than what he was required to maintain, with deficiencies ranging from $30.88 to $4,948.63. As a result, the respondent misappropriated funds entrusted to him as a fiduciary, in violation of rule 1.15(a) of the Rules of Professional Conduct (22 NYCRR 1200.0).

Charge two alleges that between April 29, 2020, and June 30, 2020, at a time when fiduciary funds were on deposit in the escrow account, the respondent had approximately 52 instances of depositing personal funds into the escrow account, totaling approximately $19,682.92. As a result, the respondent commingled personal funds with funds entrusted to him as a fiduciary, incident to his practice of law, in violation of rule 1.15(a) of the Rules of Professional Conduct.

Charge three alleges that between May 1, 2020, and July 31, 2020, the respondent made improper disbursements from the escrow account, including withdrawals through third-party electronic fund transfer services, Venmo and Zelle. During this time period, the respondent made approximately 34 electronic fund transfers using Venmo and approximately 26 electronic fund transfers using Zelle for amounts ranging from $4.53 to $1,900. Additionally, the respondent made two wire transfers of $1,200 and $3,000, respectively, and two “electronic transfers” of $146 and $362, respectively. As a result, the respondent violated rule 1.15(e) of the Rules of Professional Conduct.

Charge four alleges that the respondent failed to maintain separate accounts for fiduciary funds entrusted to him, incident to his practice of law, and for his personal/business funds. In addition to the facts stated in connection with charge two described above, between July 2, 2020, and July 31, 2020, the respondent caused approximately 32 deposits of personal funds into the escrow account. Between May 1, 2020, and July 31, 2020, the respondent made approximately 64 disbursements from the escrow account to pay for personal expenses. As a result, the respondent violated rule 1.15(b)(1) of the Rules of Professional Conduct.

Charge five alleges that as a result of the facts and misconduct alleged in charges one through four, the respondent engaged in conduct that adversely reflects on his fitness as a lawyer, in violation to rule 8.4(h) of the Rules of Professional Conduct.

Response

The respondent admitted to the factual allegations in the petition but denied any of the allegations of misconduct. The respondent testified that he was admitted to the Bar in 2017 and is a sole practitioner. The respondent explained that in late 2019, he was in an accident and underwent surgery on his dominant hand and wrist, which affected his ability to work. The respondent stated that the balances in his personal and business accounts fell into the negative. On or about February 8, 2020, Chase Bank deactivated the respondent’s personal accounts without warning.

The respondent stated that he was unable to open a new account due to the COVID-19 pandemic. The respondent testified that he was unable to work and remained “virtually unemployed” through the pandemic, finishing only two real estate closings. According to the respondent, all client funds were deposited into and paid out of the escrow account exactly when they were supposed to be and without delay. On April 29, 2020, the respondent received a deposit of $1,200 into the escrow account from “IRS Treas.” The respondent explained that deposit was a federal stimulus check and he had the check deposited into the escrow account because it was his only bank account at the time. The respondent confirmed that April 29, 2020, was the first time that he deposited personal funds into the escrow account.

Venmo

The respondent admitted that the Zelle and Venmo transactions in the escrow account in May 2020, June 2020, and July 2020, were all personal transactions to various friends and roommates and for personal expenses not involving client funds. The respondent claimed that the August 27, 2025 escrow account was not linked to his Venmo account prior to Chase Bank closing his personal accounts.

Sanction

we find that the respondent’s actions were acts of volition, he failed to show sufficient remorse, he personally benefitted from his misconduct, and he failed to honor his obligations as a fiduciary. We agree with the Special Referee that a plan to reimburse the fiduciary funds in the escrow account does not excuse the misappropriation.

Under the totality of the circumstances, we find that the respondent’s conduct warrants a suspension of two years

(Mike Frisch)