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In re James

Decided: October 14, 1988.

IN THE MATTER OF CHARLES H. JAMES, AN ATTORNEY AT LAW


On an order to show cause why respondent should not be disbarred or otherwise disciplined.

For suspension -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None.

Per Curiam

This disciplinary proceeding arose out of a 1984 audit of respondent's accounts pursuant to the Random Audit Program. Respondent is charged with nine counts of ethical violations, including failure to maintain required records, failure to safeguard client funds, failure to pay promptly funds to a client, gross negligence in accounting for client funds, and misappropriation.

The District XIV Ethics Committee (the Ethics Committee) returned a presentment, charging that respondent misunderstood the purpose of a lawyer's trust account, used his trust account as a second business account, used clients' trust account funds to advance costs to other clients, and used clients' funds to pay litigation expenses and payroll taxes, resulting in his trust accounts being "out of trust."

The Ethics Committee also found that respondent failed to disburse money in a timely fashion, and that he misused clients' funds, but found that respondent's misuse of clients' funds did not result in a knowing misappropriation, that no clients were injured as a result of his conduct, that he freely acknowledged his violations, and took remedial measures to prevent a recurrence. In the eyes of the Ethics Committee, although respondent failed to safeguard his clients' funds, his conduct did not constitute a knowing misappropriation. Consequently, the Ethics Committee concluded that "were it not for the fact that this is a trust account matter, which is governed by specific cases,

we would recommend private discipline. However, since this is a trust account matter, we feel we must recommend public discipline."

The Disciplinary Review Board (DRB) concluded that the evidence clearly and convincingly supported the finding that the respondent was "guilty of unethical conduct for his serious record keeping derelictions." Although the DRB unanimously recommended that public discipline was warranted, it was divided on the appropriate measure of discipline, the majority concluding that a public reprimand was sufficient, while the minority recommended an imposition of a one-year suspension. Our independent review of the record leads us to conclude that a suspension is required.

I

As found by the DRB, the facts are:

Respondent was randomly selected for a compliance audit of his trust account pursuant to R. 1:21-6(c). Auditors of the Random Audit Program visited respondent's office on September 19 and November 28, 1984. The audit disclosed the following deficiencies and irregularities:

1. THE HALL MATTER

Respondent held $6,502.04 in his trust account on behalf of Mrs. Florentine Hall from March 25, 1980 through September 24, 1984. These funds were ultimately disbursed to Mrs. Hall via a trust account check which was honored on October 2, 1984. The amount of $6,502.04 should have remained in respondent's trust account for the entire period of time between deposit and disbursement. However, on at least 28 occasions between February 22, 1982 and September 12, 1984, the balance on deposit in respondent's account was less than $6,502.04. On one such occasion, February 15, 1983, the balance on deposit in the account was $833.90, meaning that respondent was at least $5,668.14 out-of-trust.

2. THE JONES MATTER

Respondent held $2,410.56 in his trust account on behalf of members of the Jones family from August 30, 1982 through October 9, 1984. These funds should have remained in respondent's trust account for the entire period of time between deposit and disbursement. However, on no less than 20 different occasions between those dates, the balance on deposit in the trust account was less than $2,410.56. On one such occasion, February 15, 1983, the balance on

deposit in the account was $833.90, meaning that respondent was $1,576.66 out-of-trust as to these clients alone.

3. THE GANNON AND MATUSIAK MATTER

Respondent represented William F. Gannon and Joseph Matusiak in connection with their acquisition of commercial property in the City of North Wildwood. After making the initial purchase of the tax certificate as a "strawman" with funds provided by his clients, respondent continued to satisfy additional obligations on their behalf utilizing funds on deposit in his trust account without first obtaining additional moneys from them. From November 6, 1981 through September 17, 1984 respondent's ledger cards for Messrs. Gannon and Matusiak reflected a continuous negative balance ranging from a high of ($5,075.80) on November 5, 1982 to a low of ($1,419.44) on September 17, 1984. Disbursement on behalf of these clients was, therefore, made from other funds in the trust account.

4. THE FORD MATTER

Respondent represented Helen Ford in connection with a personal injury matter. On February 15, 1983, respondent received a check from the insurance company in the amount of $5,100 representing settlement process. He immediately took his fee of $2,000 by issuing a trust account check to his own order. Nine days later, on February 24, 1983, the settlement check was deposited into his own trust account. The $2,000 fee was therefore drawn against other funds in his trust account.

5. STATE and FEDERAL TAX PAYMENTS

Respondent's payroll ledger card, entitled "CHJ Payroll," consistently contained negative balances from at least April 1982 through September 1984 as respondent disbursed funds for payment of taxes in excess of funds deposited in the trust account for that purpose. Examination of respondent's records disclosed that $2,988.96 in payments out of respondent's trust account represented penalties and interest imposed for failure to make required payments in a timely manner. Additional payments totaling $5,546.37 represented respondent's personal share of his employees' Social Security obligations from 1982 through 1984. As a result of these payments, on one occasion, August 23, 1984, the "CHJ Payroll" ledger card reflected a negative balance of $7,013.98.

6. FAILURE TO MAINTAIN REQUIRED RECORDS

Examination of respondent's books and records disclosed that respondent failed to maintain a separate ledger page for each trust client, failed to maintain receipt and disbursement journals, and failed to reconcile trust account bank statements with the trust account ledger.

Upon receiving notification of the random audit, respondent conducted his own review of the trust account. On September ...


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