On an Order to Show Cause why respondent should not be disbarred or otherwise disciplined.
For disbarment -- Chief Justice Wilentz and Justices Clifford, Schreiber, Handler, Pollock, O'Hern and Garibaldi. Opposed -- None.
This disciplinary proceeding against respondent, Theodore J. Kazlow, arises out of two complaints filed by the District I Ethics Committee (Committee), identified as the Karwick and Crandley matters.
In the Crandley matter, the Committee found that respondent had committed unethical conduct by misrepresenting himself as a fully licensed attorney in violation of R. 1:21-3. The Disciplinary Review Board (DRB) found that the record not only supported the Committee's finding, but found further that respondent had misrepresented the status of an action to a client in violation of DR 1-102(A)(4) and that respondent's conduct adversely reflected on his fitness to practice law in violation of DR 1-102(A)(6).
The Karwick matter centered on respondent's investment of his client's funds in Compcord, Inc. and on the use of his client's funds to operate his law office. The Committee found that
respondent had been "grossly negligent," but stopped short of finding that respondent had intentionally misappropriated his client's funds.
The DRB, however, found that the facts "compel the conclusion that respondent, when incorporating Compcord, Inc., saw an opportunity to make a quick profit for himself, and utilized his client's money to take advantage of that opportunity." Implicit in that finding is the conclusion that respondent intentionally misappropriated his client's funds.
As found by the DRB, the relevant facts are:
In April of 1981, the respondent was retained by Loretta J. Karwick to represent her at settlement on the sale of her home. Mrs. Karwick was a neighbor of the respondent and his mother. She became depressed following the death of her husband, and was under psychiatric care and taking medication for depression when she retained the respondent. Since she intended to undergo immediate voluntary treatment and would not be available for the scheduled settlement, she executed what she recalled to be a blank Power of Attorney in favor of the respondent. She testified that she understood that the respondent would attend the closing for her and would take possession of the net proceeds of the estate. Respondent was then to forward between $5,000 and $10,000 to Mrs. Karwick, and was to invest the balance in certificates of deposit. After reaching this agreement with respondent, Mrs. Karwick voluntarily entered the Seabrook Rehabilitation Center, a facility for the treatment of alcoholism. Mrs. Karwick remained there for five weeks. She then spent three months at a halfway house and thereafter moved to a 'three-quarter' home, where she remained until May of 1982.
Prior to entering Seabrook, and at the respondent's suggestion, Mrs. Karwick gave her two checkbooks, one savings account passbook and a stock certificate to the respondent. The stock certificate was eventually returned to Mrs. Karwick. Excluding that stock certificate, the assets turned over to the respondent, including the funds gained from the sale of the house, totaled $78,080.01, according to the accountant who was retained by the Division of Ethics and Professional Services to investigate this matter.
Following receipt of the $62,394.88 obtained from the sale of the Karwick property, the respondent opened an account, entitled the Theodore James Kazlow Operating Account, at the Union Trust Company in Wildwood, New Jersey and deposited those monies in this account on April 30, 1981. Thereafter, on May 16, 1981, the respondent withdrew $50,000 and purchased a Certificate of Deposit for that amount in the name of Loretta Karwick, c/o Theodore J. Kazlow at Union Trust Company. The certificate has a November 16, 1981 maturity date. The 1981 Statement of Earnings marked as Exhibit J-1 in evidence at the ethics hearing shows that the Certificate of Deposit earned
$942.41 in 1981 but that a penalty of $1,999.90 was assessed due to early close out. Respondent claimed to have thereafter invested the $50,000 in a company known as Compcord, Inc., although he produced no supporting documentation.
At no time did Mrs. Karwick authorize this 'investment'. Indeed, she was unaware of respondent's actions for some time and was unable to obtain an accounting from him.
The accountant's report further indicates that, although respondent claimed administration fees of $1300 and expenditures on behalf of Mrs. Karwick in the amount of at least $8,000, a total of $2,693.96 from the Karwick funds deposited in respondent's operating account could not be accounted for by the accountant. Additionally, although a total of 46 checks were written by respondent for the operation of his law practice, he deposited only $570 of his own money in the 'operating ...