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Matter of Gold

Decided: May 26, 1989.

IN THE MATTER OF STEPHEN GOLD, 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, Pollock, O'Hern, Garibaldi, and Stein. Opposed -- None.

Per Curiam

The Disciplinary Review Board (DRB), with four members dissenting, stated that it was unable to conclude that respondent had committed a knowing misappropriation. We agree to the extent that the evidence was insufficient to establish that respondent knowingly misappropriated trust funds after December 19, 1979, the date of publication of In re Wilson, 81 N.J. 451. Although we find that respondent committed unethical conduct meriting public discipline, we agree with the DRB that respondent's suspension since 1984 is sufficient discipline.

The underlying facts are accurately summarized in the DRB decision and recommendation:

This matter is before the Board based upon a Report submitted by James E. Quinn, J.S.C., Ret., Special Master sitting for the District XIII Ethics Committee.

On February 10, 1982, the Hunterdon County Grand Jury handed down Indictment No. 30-J-81 charging respondent with embezzlement in violation of N.J.S.A. 2A:102-2 and misapplication of entrusted property in violation of N.J.S.A. 2:21-15. His first trial resulted in a hung jury and a mistrial was

declared. A second trial was commenced but again resulted in a mistrial when the method of jury selection was found to be improper. On February 27, 1984, respondent retracted his plea of not guilty and entered a plea of guilty to the first count of the indictment charging him with embezzlement. On June 8, 1984, in accordance with a plea agreement entered into with the Hunterdon County Prosecutor's Office, respondent was sentenced to pay a fine of $750.

In pleading guilty to the charge of embezzlement, respondent admitted that he knew and did nothing to prevent Michael Gold, his older brother and senior partner in the Gold & Gold firm, from misappropriating public and private clients' funds from the law firm's trust accounts from January 30, 1978, through August 31, 1979.

More specifically, during the course of his testimony in the first criminal trial and the hearing before the Special Master, respondent stated that on January 30, 1978, he received a $25,000 check from his client, the Hunterdon County Board of Recreation Commissioners, and deposited same in the Gold & Gold trust account. These funds were to be used in the purchase of land known as the Alpaugh tract. However, upon receiving the closing documents, respondent found some of them to be improperly completed. There were also problems concerning title to the property. Consequently, the closing had to be postponed.

The County's funds should have remained on deposit in the trust account until closing or such time as disbursements were otherwise authorized. However, on numerous occasions between January 30, 1978 and August 31, 1979, the period covered by the indictment, the balance in the account fell below $25,000. By respondent's own admission, "the Alpaugh deposit, which came in on January 30, eight weeks earlier, the $25,000 was completely gone and out of the account by March 30."

In providing the court with a factual basis for his plea of guilty, respondent stated that

As to Count I, I will plead guilty to aiding and abetting my brother, Michael, knowing that Michael was misappropriating money from the trust account during the years 1978, 1979, even though I did not take the money myself, but I permitted Michael to take monies out of partnership trust accounts knowing that the monies belong [sic] to clients. I recognize that that would be aiding and abetting embezzlement.

Upon receiving notice of respondent's conviction, the District XIII Ethics Committee conducted an investigation into the acts and practices of the Gold & Gold law firm that gave rise to the criminal proceedings. During the course of this investigation it became apparent that, as early as November 1976, the law firm was experiencing numerous and frequent overdrafts of its general business account at the New Jersey National Bank. On November 30, 1976, the bank asked the firm to make alternative banking arrangements because the "situation of continuing and frequent overdrafts cannot be tolerated." The bank advised the firm that effective December 13, 1976, it would no longer accept deposits to the firm's account. Contemporaneously, respondent was also aware of a frequent overdraft condition in the firm's other general business account at Town and Country Bank.

From the inception of their joint practice respondent's brother, as senior partner, ran the office, directed the bookkeeper, met with the accountants and assumed responsibility for the maintenance of the firm's bank accounts. However, in early 1978, given the serious overdraft conditions in the firm's business accounts, respondent directed the bookkeeper to cease using the firm's business account. Respondent instructed her instead to conduct all business and process all transactions through the firm's primary trust account.

According to respondent, this merger of the firm's business and trust accounts was necessary because his brother was constantly drawing checks out of the general business account without any regard for the balance therein. As he stated,

What I wanted done was the, the bulk of the fees be deposited in the trust account so that they could be monitored. I felt that this was a reasonable way of controlling Mike's going to the bank and simply writing out checks without regard to what was there.

Therefore, respondent decided

that the fees that were coming in on a weekly or monthly basis were to be deposited directly into the trust account. I did that for a series of reasons. One, I knew the accountants had been going, checking the -- and balancing the trust account. So I knew that the funds would -- could in effect be identified. It was our own money that we were putting in the trust account. I did not consider that a violation of any sort, and it gave a way of monitoring and trying to solve this problem with the general account. It was really the only way I saw to control the fees.

Having made and implemented the decision to merge the firm's accounts, respondent issued numerous checks representing payment of both law firm and personal obligations. He also drew checks payable to himself or cash. His brother continued to do the same.

Additionally, upon receiving the proceeds of loans obtained from clients in order to satisfy his partner's obligations and ultimately eliminate shortages that turned up in the firm's trust account, respondent deposited said funds in the trust account and made disbursements therefrom. Evidence adduced at the hearing disclosed that these lender clients were not advised to retain, nor were they represented by, independent counsel. However, all such loans were repaid without any loss to the clients in question.

Although the law firm had purchased the safeguard or one-write bookkeeping system in or about 1968, "the girl started for a while and then got away from it and just didn't do it. . . . The journal and the other things [the secretaries] would write up periodically and wasn't kept on such a basis that you could look at it any time." In fact, there were periods when the balances were not calculated for weeks at a time.

When bank statements, tax notices and other financial papers came in, they were simply placed in a box for the accountants' review during what were supposed to be quarterly visits. However, respondent acknowledged that it was "not every quarter. Sometimes it would be semi-annual or an annual ...


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