The ARDC hearing board has recommended disbarment of an attorney for converting $294,550.87 client funds.
The finding: “Respondent misappropriated at least $294,550.87 from his client, Plain Bay Sales LLC. His taking of the fundswas dishonest because he knew the funds in the account did not belong to him and that he was not authorized to take and use them. He also failed to promptly return those funds to his client when asked to do so.”
How did this occur?
The attorney withdrew funds from an escrow account he had set up for his client. The lawyer testified that he was authorized to withdraw the funds, but the Panel did not believe him. The client accused the lawyer of wrongfully withdrawing funds because the client paid all but one (9 of 10) of the lawyer’s invoices. The client appears to have believed that it was being overcharged. The balance of the unpaid invoice was approximately $27,000, less than one-tenth the amount withdrawn from the escrow account.
The Violation of Rule 1.15(a).
A lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property. Ill. R. Prof’l Cond. 1.15(a). Rule 1.15(a) obligates attorneys holding client or third-party funds to safeguard those funds. In re Woods, 2014PR00181, M.R. 28568 (Mar. 20, 2017)(Hearing Bd. at 19). An attorney violates Rule 1.15(a) where the attorney uses client or third-party funds without authority, thereby causing the balancein the account into which those funds were deposited to fall below the amount the attorney should be holding. Id. Wefind that the Administrator proved that Respondent used, without authority, at least $294,550.87 that he was supposed to be holding for Plain Bay Sales, and therefore that he violated Rule 1.15(a).
It is apparent from the foregoing discussion of the evidence that Respondent and Katie Prudent presented directly conflicting testimony regarding whether or not Respondent was authorized to withdraw funds from the FBO for his own benefit. Consequently, our finding of misconduct rests primarily on our credibility determinations. In short,we must decide if we believe Respondent or Ms. Prudent.
We did not find Respondent’s testimony to be credible for a myriad of reasons. We found him to be evasive during portions of his testimony, particularly during the Administrator’s cross-examination of him, where he seemed to be striving to avoid answering the Administrator’s relatively straightforward questions. (See, e.g., Tr. 396-99.)We also found numerous flaws and inconsistencies in his testimony. …
The Panel found a violation of Rule 1.15(d) because he failed to return the property to the client.
The Violation of Rule 8.4.(c)
As with our finding that Respondent took his client’s funds without authorization, our analysis of whether he did so dishonestly rests primarily on our credibility findings. As we discussed at length above, we did not findRespondent credible. Rather, we believe his shifting explanation for his withdrawal of funds from the FBO account was simply a post hoc justification for taking and using his client’s funds without authorization, which, given his many years of experience, he surely knew he was not permitted to do.
Moreover, assuming for the sake of argument that Respondent legitimately believed that Plain Bay Sales owed him additional attorney’s fees beyond what he had invoiced, his unilateral taking of funds from the FBO accountknowing that his client did not authorize him to do so would still be dishonest. See Doyle, 99 CH 100 (Review Bd. at3-4) (affirming Hearing Board’s finding of dishonesty where the attorney took money that did not belong to him without authorization, notwithstanding his argument that he was entitled to the money as fees.)
We find that the evidence demonstrated that Respondent knowingly and intentionally used at least $294,550.87that he should have been holding in the FBO account for Plain Bay Sales. By knowingly using funds that did notbelong to him, without authority to do so, Respondent engaged in dishonest conduct. Accordingly, we find that theAdministrator proved by clear and convincing evidence that Respondent violated Rule 8.4(c).
The Hearing Panel recommended disbarment.
Comment: This is a rare conversion case where the lawyer appeared for the hearing and sought to defend his conduct. The fact that all invoices were paid.