ARDC Hearing Board Recommends 60-day suspension for conversion of client funds

Filed April 6:

A lawyer who handled real estate matters converted client funds. Because he apologized, cooperated with the ARDC and presented evidence of mitigation, he received a very short suspension for conversion.

The misconduct findings are explained here:

Respondent converted escrow funds when he transferred the majority of these funds from his client trust account to his operating account and then shortly thereafter used most of the funds for his own purposes and without authority. After considering his role in transferring and spending the funds, the timing of his conduct, and his short-term need for funds, the Hearing Panel concluded his conversion was knowing and dishonest.
B.    Respondent is charged with failing to hold property of a client or third person that is in the lawyer’s possession in connection with a representation separate from the lawyer’s own property in violation of Rule 1.15(a).
Rule 1.15(a) of the Rules of Professional Conduct requires an attorney who is entrusted with client and/or third person funds in connection with a representation to hold such funds separate from his or her own funds and in a client trust account. Ill. Rs. Prof’l Conduct R. 1.15(a) (2010). When an attorney has used client and/or third person funds for his own purposes without authority, his conduct has been found to constitute conversion in accordance with disciplinary precedent even if the rightful owner has not made a demand for the funds. In re Karavidas, 2013 IL 115767, par. 62. A finding of conversion, while alone insufficient to justify the imposition of professional discipline, can support a finding that the attorney violated Rule 1.15(a) by failing to appropriately safeguard client funds and therefore, discipline is warranted. Karavidas, 2013 IL 115767, pars. 78-79.
Here, it is undisputed that Respondent commingled escrow funds related to the Olthoff/Harvey matter with his funds. Specifically, the evidence shows that on June 6, 2014, Respondent deposited $7,000 in escrow funds related to the Olthoff/Harvey matter into his client trust account. As he acknowledges, he was then obligated to hold these funds in his trust account on behalf of the Olthoffs and Harveys and in accordance with the terms of the May 31, 2014 occupancy agreement. Instead, between June 11, 2012, and June 13, 2012, prior to disbursing any funds with respect to the Olthoff/Harvey matter, Respondent transferred $7,000 from his trust account into his operating account without authorization. This transfer left a balance of $233.52 in his client trust account, which was $6,766.48 less than the $7,000 he should have been holding in his trust account on behalf of the Olthoffs and Harveys.
Respondent also admits that shortly after the $7,000 was transferred into his operating account, he spent the majority of the funds for his own purposes. In fact on June 19, 2014, after both transfers were made into his operating account but before disbursement occurred to the Olthoffs and Harveys, the balance in Respondent’s operating account dropped to $64.59. Accordingly, based on the evidence presented and the admitted facts, we find Respondent’s conduct undoubtedly violated Rule 1.15(a) as he both commingled and converted client and third person funds.
C.    Respondent is charged with engaging in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4(c). 
The Administrator also alleges Respondent acted knowingly in converting the Olthoff/Harvey escrow funds and accordingly, violated Rule 8.4(c). Rule 8.4(c) prohibits an attorney from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation. Ill. R. Prof’l Conduct R. 8.4(c). The Illinois Supreme Court has recognized that while the uniqueness of each case makes it impossible to define every act or form of conduct that constitutes a violation of Rule 8.4(c), this rule is “broadly construed to include anything calculated to deceive, including . . . the suggestion of falsity.” Edmonds, 2014 IL 117696, pars. 53, 62.The Court, in making dishonesty findings, has recognized that “motive and intent are rarely proved by direct evidence, but rather must be inferred from conduct and the surrounding circumstances.” Id. at par. 54. Therefore, the Court has widely accepted the reliance on circumstantial evidence, where appropriate, in finding a violation of this Rule. See Id. at par. 55; In re Discipio, 163 Ill. 2d 515, 523-24, 645 N.E.2d 906 (1994); In re Krasner, 32 Ill. 2d 121, 127, 204 N.E.2d 10 (1965).
Here, the circumstantial evidence supports the conclusion that Respondent acted knowingly when using the funds in question. It is undisputed that Respondent personally transferred the funds from his trust account into his operating account, and at the time he made these transfers, he had access to both his trust account and operating account information. Taking this into consideration, we find the timing of these transfers highly concerning.
Respondent transferred almost all of the Olthoff/Harvey escrow funds into his operating account within one week of depositing the funds into his client trust account. He then spent the majority of these funds for his own purposes within a week. Moreover, on the days surrounding the transfers, his operating account had negative daily ending balances and insufficient funds to cover the expenses drawn on the account, which included his family health insurance premium and checks made payable to himself. Respondent’s need for these funds, even if only for the short-term, demonstrates a clear motive for the transfers.
We find implausible Respondent’s claim that at the time he made the transfers he was both unaware of the negative balance in his operating account and of the impending insurance premium deduction in large part due to poor bookkeeping practices. A simple review of his operating account information, which he had access to when he made the electronic transfers, would have shown the account’s repeated negative balances. With respect to the insurance premium, that same amount was deducted monthly both before and after June 2014. And, while he asserts that he thought the insurance premium amount had changed in June 2014, he offered insufficient evidence to corroborate his claimed belief. Moreover, he admittedly knew the funds transferred into his operating account were escrow funds and also that he had an ethical obligation to segregate escrow funds from his own. We find it unlikely that an attorney with this understanding would act so carelessly when handling escrow funds. So although we recognize Respondent was overwhelmed with his law practice in 2014, and as a result, might have had some deficiencies in his bookkeeping practices that year, we are unconvinced that his use of escrow funds was the result of these deficiencies. The more probable explanation, which the evidence supports, is that in June 2014 Respondent had a short-term financial need and he knowingly satisfied that need by using the funds in question.
Moreover, we find incredible Respondent’s assertion that he transferred the escrow funds into his operating account in mid-June because he had believed, based on a conversation with his client, that the Olthoffs would be moving out of the property before June 30, 2014, and that disbursement in the amounts of $1,500 to the Harveys and $5,500 to the Olthoffs would be necessary around that time. First, Respondent failed to offer any evidence to corroborate this belief. If a conversation to this extent had taken place, testimony from Respondent’s client regarding the conversation would have been of benefit. Also, the occupancy agreement does not contemplate the distribution of less than $2,500 to the Harveys and $5,500 to the Olthoffs if the Olthoffs moved out earlier than June 30, 2014. In addition, Respondent’s claim belief that disbursement might have been necessary in mid-June, fails to explain why he transferred the funds into his operating account when he could have just disbursed the escrow funds directly from his trust account and why he made two separate transfers of funds, two days apart, rather than transferring the funds on the same day in a single transaction. Respondent admittedly has no explanation for this conduct.
Respondent’s generally positive financial situation in 2014 and his ability to access additional funds if a need arose do not convince us that his conduct in using the escrow funds was unintentional. As discussed above, Respondent’s short-term need for funds in June 2014 was undeniable. Although he might have been able to legitimately gain access to funds some other way, including possibly borrowing money from family, the process for doing so would have been likely more complicated than a quick transfer of funds between accounts.
Based on the foregoing, we find the Administrator proved by clear and convincing that Respondent acted knowingly when he used the Olthoff/Harvey escrow funds, and as a result, violated Rule 8.4(c).
Comment: this is a case where the respondent acted appropriately in the discipline process. He admitted he was wrong, cooperated with the ARDC and took corrective measures. 

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ARDC Hearing Board Recommends Six Month Suspension For Attorney Who Suffered From Depression

Filed November 20:

The ARDC Hearing board has recommended a six month suspension stayed 90 days by one year of probation. The attorney neglected several client matters. However, at the hearing there was testimony that she suffered from migraines and severe depression but that she had obtained treatment for those medical issues. The case is also significant because the Panel noted that the ARDC’s expert, a psychiatrist, appeared to offer new and conflicting opinions at trial.

The discussion concerning the mitigating factors is set forth below:

“Respondent’s conduct was related to a mental health condition but she demonstrated to us that she has obtained treatment and is not likely to harm the public while her treatment continues.

In requesting a suspension until further order of the court, the Administrator relies on the testimony of Dr. Silberberg that Respondent is not currently fit to practice and will not be fit until she demonstrates a sustained period of compliance with his four recommendations. This case presents the unusual situation of a medical expert who gave inconsistent testimony regarding Respondent’s fitness to practice. We find Dr. Silberberg’s testimony on direct examination that Respondent is not currently fit to practice law to be a significant change from the following opinions expressed in his written reports.
In his first report, Dr. Silberberg opined, “Ms. Beckert is currently fit to practice law with reasonable judgment and skill and to adhere to the rules of professional conduct provided she is actively engaged in treatment for her Major Depression, Recurrent and professional monitoring to prevent relapse” In his second report, Dr. Silberberg opined, “Ms. Beckert is currently fit to practice law with reasonable judgment and skill and to adhere to the rules of professional conduct provided she is actively engaged in treatment and professional monitoring for her Major Depression, Recurrent to prevent relapse. The treatment must involve strategies to recognize early signs of relapse of depression, treatment of aggravating conditions such as thyroid illness, migraines and iron deficiency anemia; and also the development of insight into her responsibility when she lost control of her professional life in 2011-2012.” And yet, when asked if he had changed the latter opinion since he issued it in his second report, Dr. Silberberg answered, “No, that is my opinion.” Thus, we are uncertain about the basis for his testimony at the hearing that Respondent is not currently fit to practice law. 
Because of the inconsistency between the testimony and the reports and the lack of explanation for the inconsistency, we decline to rely on Dr. Silberberg’s testimony that Respondent is not currently fit to practice. We find the opinions set forth in his written reports more reliable and consistent with the evidence before us. Having carefully considered all of the evidence, we find Respondent is currently fit to practice law provided that she continues to comply with treatment recommendations. We further find Respondent has complied with the recommendations addressing the mental and physical issues that were causally connected to the misconduct.
As Dr. Silberberg acknowledged, Respondent has been receiving psychotherapy and medication management from her psychiatrist, Dr. Cigante. She has also seen a neurologist for treatment of her migraines. Although she had not been able to get an appointment with the neurologist before her most recent meeting with Dr. Silberberg, she did see the neurologist shortly thereafter and has a plan to follow up with him every six months.
Respondent also obtained attorney Radke’s agreement to act as a mentor and monitor of her practice. While Dr. Silberberg expressed concern about Respondent’s reliance on attorney Radke, who represented Respondent in this proceeding, we observed both Respondent and attorney Radke during the hearing in this matter and do not share Dr. Silberberg’s concerns. Attorney Radke is a very capable attorney, and he and Respondent appeared to work well with each other.
Dr. Silberberg noted in his second report that Respondent had not complied with his recommendation to “attend any classes/professionalism courses recommended by ARDC at the frequency and duration required by ARDC to improve her efficiency, accountability and effectiveness as an attorney.” We question Dr. Silberberg’s qualifications to make such a recommendation and do not find that Respondent’s lack of compliance with this particular recommendation negatively impacts her fitness to practice law. As a general principle, the Illinois Supreme Court governs attorney legal education obligations. It is not the role of a medical expert to recommend legal education requirements for a respondent. Respondent testified she has been working toward fulfilling her mandatory legal education requirements and is aware she must do so in order to return to active status. In our view, no additional legal education requirements are necessary. Therefore, we do not adopt Dr. Silberberg’s recommendation in this regard.
The evidence demonstrated that Respondent has obtained treatment for her depression and migraines, has credibly expressed her intention to maintain treatment in the future, and has obtained a mentor to assist with her practice. This is not a situation in which Respondent is unable or unwilling to acknowledge the need for treatment, or is currently unable to adhere to the Rules of Professional Conduct. We believe the purposes of the disciplinary process will be best served by a suspension stayed in part by probation, subject to conditions. That said, given that Respondent’s prior untreated depression led to significant adverse impacts on the matters at issue in this proceeding, we believe that, if Respondent should violate the terms of her probation, she should be suspended until further order and required to demonstrate that she is fit to return to practice.
Supreme Court Rule 772 provides that an attorney may be placed on probation if she demonstrates that she
(1) Can perform legal services and the continued practice of law will not cause the courts or the legal profession to fall into disrepute;
(2) Is unlikely to harm the public during the period of rehabilitation and the necessary conditions of probation can be adequately supervised;
(3) Has a disability which is temporary or minor and does not require treatment and transfer to inactive status; and
(4) Is not guilty of acts warranting disbarment.
The requirements for probation are met in this case. Respondent is an experienced lawyer who capably represented clients when she was not suffering from severe depression. Her depression is in partial remission and does not require transfer to inactive status. Respondent’s continued compliance with her treatment recommendations can and will be monitored throughout the probationary period, which will protect the public and legal profession. If she complies with the recommended probationary conditions, we consider the risk of future misconduct to be minimal. As a protective measure, a suspension until further order of the court will go into effect if Respondent fails to comply with any of the probationary conditions.
We believe Respondent’s misconduct warrants a short period of actual suspension, particularly given that the misconduct in the Mamon matter was not related to her depression. A suspension of six months and until further order of the court, stayed after 90 days by one year of probation, is appropriate and consistent with the following cases, which involve misconduct similar to Respondent’s as well as evidence of a disability that contributed to the misconduct.
The attorney in In re Thomson, 98 CH 81, M.R. 17012 (Nov. 22, 2000), neglected eight client matters, most of which were bankruptcy matters, and failed to return unearned fees. Thomson suffered from debilitating alcoholism at the time of his misconduct but had regained his sobriety at the time of the hearing. Because Thomson had not made an effort to return any of the unearned fees at the time of the hearing, the majority of the Hearing Board Panel determined a short period of actual suspension was warranted, but the remaining portion of the suspension would be stayed by probation. The Panel noted that probation is appropriate when an attorney has committed misconduct occasioned by a disability. Probation, when combined with a stay of a portion of a suspension, “provides a strong incentive for the attorney to continue on the path toward rehabilitation.” Thomson, 98 CH 81, Hearing Bd. at 31-32, citing In re Kunz, 122 Ill. 2d 547, 524 N.E.2d 544 (1988). Thomson was suspended for three years and until further order of the court, with all but the first three months stayed by three years of probation.
The attorney in In re Kofkin, 07 CH 23, M.R. 22643 (Nov. 18, 2008), was suspended for one year and until further order of the court, with the suspension stayed after 60 days by two years of probation. Kofkin neglected four client matters, failed to return unearned fees to two clients, and failed to cooperate with the Administrator’s investigation. The Administrator’s psychiatric expert diagnosed Kofkin with recurrent major depression during the time of the misconduct, and found a causal relationship between Kofkin’s condition and some of the misconduct. Similar to Respondent, Kofkin pursued mental health treatment as recommended by the Administrator’s expert.
In In re Burkhart, 09 CH 99, M.R. 25174 (Mar. 19, 2012), the attorney neglected four patent matters over a four-year period and improperly used the name of a deceased attorney in the name of his law firm. Burkhart entered into a settlement agreement in connection with three of the neglected matters but was not able to make full restitution due to problems with depression. Burkhart began treatment for his depression prior to the filing of the disciplinary complaint. At that time he had limited concentration and ability to organize and stopped practicing law. His condition improved over time. The Administrator’s psychiatric expert diagnosed Burkhart with recurrent major depressive disorder, largely in remission, and a personality disorder, not otherwise specified. The Administrator’s expert opined that Burkhart could practice law in accordance with the Rules of Professional Conduct if he remained in treatment with a mental health professional and obtained a primary care physician. Burkhart was suspended for one year and until further order of the court, with all but the first 90 days stayed by a two-year period of probation.
Like the attorneys in the foregoing cases, Respondent has taken steps to address the mental health issues that contributed to her misconduct and has indicated her commitment to treatment. A period of probation will allow Respondent to be monitored to ensure she can provide legal services without harm to the public, with the added protection of additional suspension in the event of noncompliance with the probation conditions.”

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