Conversion Of Client Funds Leads To Disbarment

The attorney in Matter of Castro faced 11 charges of professional misconduct stemming from his conversion of client funds. The Attorney Grievance Committee’s charges included neglect of a legal matter, misappropriation of client funds, commingling personal funds with client funds, using client funds for personal expenses without permission, failing to obey a court judgment, recording a court proceeding without seeking court approval, and entering into a loan transaction with a client without giving required advisories and obtaining informed consent. After a hearing, a referee found that seven of the charges were sustained and recommended disbarment. Generally, of course, a theft of client funds results in disbarment.

Conversion Of Client Funds

The charges against the attorney arose from three separate matters. In the first matter, he was retained to file a notice of appeal on behalf of a client and tasked with obtaining trial transcripts. The client gave him a check for $3,500 specifically earmarked for the transcripts, but the attorney deposited the check into his business account and used the funds for personal expenses without paying for the transcripts. In other words, the attorney converted the client funds for his own use. Conversion of client funds is one of the deadliest sins of attorney ethics and, as noted above, typically results in disbarment.

In the second matter, the attorney was retained to represent a client in a foreclosure action and received a $10,000 retainer. He used $5,000 of the retainer to pay personal expenses and did not use the remaining funds for the client’s case. In the third matter, the attorney entered into a loan transaction with a client, borrowing $15,000 without giving required advisories or obtaining the client’s informed consent.

The Attorney Grievance Committee recommended disbarment, while the attorney argued for a public censure. Ultimately, the Court ordered the attorney’s disbarment, and ordered him to make restitution to the clients affected by his misconduct in the amount of $18,500.

Notably, in imposing disbarment upon the attorney, the Court declined to provide the attorney with an extension of time to submit additional information about his firm’s accounting:

Respondent’s request for a further extension of time is denied….
210 A.D.3d 107

Don’t let escrow violations become a problem for your law firm. At Law Ledgers, we specialize in helping attorneys avoid these common pitfalls by working closely with you to create a plan for proper supervision, and actively monitoring your books to protect you from theft. Contact us today to schedule a consultation and see how we can help you safeguard your escrow accounts and avoid disciplinary action.

Please note that the information provided on this website is for general informational purposes only and is not intended as legal or tax advice. The information is subject to change, and it is important to consult a specialist before making any decisions. Law Ledgers provides accounting services to New York lawyers and law firms, including escrow protection, tax advice and bookkeeping administration. Contact us today for personalized support.