Attorney Suspended For Depositing Checks He Received On Behalf Of His Client Into His Own Business/Operating Account And Improperly Commingling Those Funds

In Matter of Goldsmith, 2018 N.Y. App. Div. LEXIS 1410 (1st Dept. Mar. 1, 2018), the Court suspended an attorney who deposited checks he received on behalf of his client in a breach of contract action into his own operating account (instead of an escrow account, as required) and improperly commingled those funds with his own funds. This case serves as a cautionary tale of the severe consequences that can arise from neglecting proper financial management within a law firm.

The Committee Obtains The Lawyer’s Bank Records, Which Demonstrate Misconduct

The Court found, among other things, that:

“The bank records obtained by the Committee sufficiently demonstrate that respondent engaged in professional misconduct by misappropriating, converting, or commingling client funds, such as warrants his immediate suspension from the practice of law. (Matter of Pierre, 153 AD3d 306, 59 N.Y.S.3d 371 [1st Dept 2017]; Matter of Afilalo, 139 AD3d 175, 180, 33 N.Y.S.3d 154 [1st Dept 2016]; Matter of Getreu, 113 AD3d 148, 978 N.Y.S.2d 6 [1st Dept 2013]; Matter of Powell, 263 AD2d 121, 699 N.Y.S.2d 9 [1st Dept 1999]).

By depositing checks he received on behalf of his client in the breach of contract action into his own business/operating account, respondent failed to preserve client funds in an escrow or special account as required under Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.15(b) and he improperly commingled those funds with his own funds (Matter of Fletcher, 58 AD3d 254, 869 N.Y.S.2d 428 [1st Dept 2008]; Matter of Rennie, 260 AD2d 132, 696 N.Y.S.2d 444 [1st Dept 1999]).

Accordingly, [*8]  the Committee‘s motion is granted, and respondent is suspended from the practice of law pursuant to 22 NYCRR 1240.9(a)(1), (3), and (5), effective immediately, and until further order of this Court.”

Don’t Gamble With Your Law License

In New York, escrow account violations are the top reason for attorney discipline. Attorneys must be vigilant and ensure that misappropriations from their escrow accounts are not happening, even if the account is managed by another law firm partner. A single bounced check can lead to an automatic report to the Attorney Grievance Committee and an audit of the preceding six months of records. It is important to note that even if no client is harmed, attorneys can still face discipline for commingling personal funds with business funds and other escrow-related misconduct.

Even if you have no books at all, and have never maintained accurate records, we can help quickly reconstruct your books and automate future processes.

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.