For suspension -- Chief Justice Wilentz and Justices Clifford, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None.
[117 NJ Page 482] This disciplinary proceeding results from a random compliance audit of the trust funds of respondent, Victor Librizzi, Jr., by the Office of Attorney Ethics (OAE) pursuant to Rule 1:21-6(c). On receipt of the auditor's report, the OAE filed a
complaint with the District V-C Ethics Committee (DEC) charging the respondent with a number of ethical infractions. The charges included failure to maintain his trust account in accordance with Rule 1:21-6; in violation of DR 9-102(C) (RPC 1.15(d)); failure to maintain cash receipts and disbursement journals and failure to reconcile the trust account on a regular basis, in violation of DR 9-102(B) (RPC 1.15(a)); failure to safeguard clients' funds, in violation of DR 9-102(B) (RPC 1.15(a)); commingling of personal and clients' funds, in violation of DR 9-102(A); misappropriation of clients' funds, in violation of DR 9-102 and DR 1-102(A)(4) and (6); borrowing from trust account funds and replenishing of the trust account to replace misappropriated funds, in violation of DR 9-102(B)(1) (RPC 1.15(a)), and DR 9-102 (RPC 1.15), and DR 1.102(A)(4) and (6) (RPC 8.4(c).*fn1
After a hearing, the DEC concluded that respondent's conduct was unethical. He violated DR 9-102 and DR 1-102, by his failure to keep proper records, reconcile his trust account, maintain contemporaneous ledger cards, and properly safeguard clients' funds. However, because the DEC found no clear and convincing evidence that respondent knowingly misappropriated client funds, it recommended a private reprimand.
On its review of the record, the Disciplinary Review Board (DRB) found that the DEC's finding of unethical conduct was fully supported by clear and convincing evidence. The DRB concluded that respondent was grossly negligent in maintaining his trust account records, in violation of DR 9-102 and superseding RPC 1.15, but found that respondent had not knowingly misappropriated his trust account. A five-member majority of the DRB recommended that respondent be suspended from the practice of law for one year, two members recommended
that respondent be disbarred and one member concluded that a six month suspension was proper. Our independent review of the record leads us to conclude that a six-month suspension is the appropriate discipline.
Respondent was admitted to the bar in 1967. Prior to the filing of the complaint in this matter, respondent had an unblemished professional career. He has been a sole general practitioner for the last sixteen years. His practice consisted primarily of real estate matters and related litigation. Additionally, for the last twelve years he served as a municipal prosecutor.
In May of 1985 respondent was randomly selected for an OAE audit. After receiving notice of the audit and prior to meeting with the OAE auditor, respondent attempted to reconcile the trust account records that were available. His reconciliation showed a shortfall in his trust account of approximately $25,000. He traced this shortfall primarily to two matters, involving his clients Costanza and Maffie. However, respondent could not identify the other sources of the $25,000 shortage. In order to replenish his trust fund, he borrowed $25,000 from his parents.
At his meeting with the OAE auditor, respondent informed her of the $25,000 shortage and of the mistakes he had made in the Costanza and Maffie matters. The subsequent audit disclosed the other remaining shortage as resulting primarily from the Moshier transaction.
The audit encompassed a review of respondent's trust account records from September 1, 1982, through August 31, 1985. Respondent admits that he did not maintain his records in compliance with Rule 1:21-6. He never retained an accountant prior to the audit and maintained his own records. In his own words, "charitably [the records] were in somewhat [sic] disarray."
That is an understatement. There were no receipts and disbursements journals. There were no records available showing deposits in the trust account. Deposit tickets were not consistently marked with client names. No deposit notations were entered on check stubs. Client ledger cards were not properly maintained and did not consistently reflect deposit information, which had to be traced from the case files. Moreover, client ledger cards made available for the audit reflected inaccurate or omitted disbursements. For a twelve year period from the inception of his sole practice, from 1973 to 1985, respondent did not reconcile his trust account. He testified that the bank envelopes containing the trust account statements were not even opened.
Respondent maintained both a trust account and a business account. He paid both business and personal expenses from his business account. He also had three different lines of credit with his bank, a Check-King (overdraft protection up to $2,500 limit), revolving credit (unsecured promissory note, renewable every thirty days), and Insti-Credit (installment loans of varying amounts). Respondent's record keeping of his business account was only slightly less egregious than his record keeping of his trust account. He testified that he reconciled his business account "sporadically, every three to four months." However, he testified that "there was no particular need" to reconcile the business account more often because of his lines of credit, and based on his close relationship with the bank he was confident that the bank "never would bounce a check, never did and never will." Records of respondent's bank disclose that he had continuous new loans and renewals from as early as 1980.
Apparently respondent's assumption that the bank would never bounce a check was correct. No client suffered any financial injury or complained to any ethics committee. Respondent was never notified of any shortage in his trust account.
As stated previously, the $25,000 shortage primarily arose from transactions involving three clients, Costanza, Maffie and Moshier. In Costanza's matter, respondent received a check on February 22, 1984, in the amount of $4,768.36 to satisfy a tax lien on certain property previously owned by Costanza and on which he held a mortgage. Respondent stamped the check "Payable to Victor Librizzi Trust Account." Inadvertently, however, on that same day, respondent deposited the check in his business account. Five days later, respondent issued a trust account check in the amount of $4,700.60 payable to the Township of Montclair. A trust account ledger for Costanza lists the $4,700.60 disbursement. There is no debit entry of $4,768.36.
Similarly, in Maffie, respondent received a check payable to Maffie in the amount of $6,500, representing a real estate deposit. On January 13, 1984, respondent deposited the check in his business account without making any notation of such deposit on Maffie's ledger card. Subsequently, on February 14, 1984, respondent received an additional $1,500 deposit on the property, which he placed in his trust account, and noted on the Maffie ledger card. Thereafter, on March 28, 1984, respondent issued a trust-account check to the seller in the amount of $8,000, and noted that trust account disbursement on the ledger card.
In Moshier's case respondent again misdeposited the client's funds in his business account. On March 5, 1984, respondent deposited the buyer's draft of $9,500 in his business account. The Moshier ledger card erroneously indicates that the $9,500.00 draft had been deposited in the trust account. On May 3, 1984, respondent issued a trust-account check to Moshier in the amount of $9,500.00. Hence, in the first three months of 1984, respondent erroneously deposited in his business account total trust funds in the amount of $20,768.38.
The OAE relies heavily on client Tabatchnick's matter as evidence that respondent intentionally ...