On an Order to show cause why respondent should not be disbarred or otherwise disciplined.
Chief Justice Wilentz and Justices Handler, Pollock, Garibaldi, Stein and Coleman join in this per curiam opinion. Justice O'hern has filed a separate Dissenting opinion.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
IN THE MATTER OF WALTER L. ROTH, JR., An Attorney at Law (D-104-94)
Argued February 28, 1995 -- Decided June 16, 1995
Following an investigative audit conducted in May 1991, the Office of Attorney Ethics (OAE) filed a seven-count complaint with the District XIV Ethics Committee against Walter L. Roth, Jr. Roth was charged with four counts of knowing misappropriation of client trust-account funds in four different transactions: the McCracken matter, the Four Seasons matter, the Hillcrest matter, and the $10,000 Loan matter. Roth was also charged with one count of commingling of funds, one count of gross neglect of a client matter, and one count of misrepresentation to the OAE. Roth admitted to both commingling client funds in his trust account and failing to pursue a client matter with diligence, but denied that he had knowingly misappropriated client funds or that he had misrepresented facts to the OAE.
In the McCracken matter, Roth deposited in his trust account, on July 30, 1990, $1,300 paid by his clients that were to be sent in settlement of certain debts owed by the McCrackens. Roth did not send the money to opposing counsel who then filed a grievance with the OAE. The OAE conducted an audit of Roth's books and records and found certain deficiencies. On October 11, 1991, Roth forwarded the $1,300 to the opposing attorney. However, in the interim, the $1,300 was not kept inviolate. Those funds were invaded on two occasions, August 14, 1990 and August 17, 1990 as a result of Roth's issuance of trust account checks in excess of the available balance.
In the $10,000 Loan matter, Roth deposited a $10,000 personal loan from his father into his trust account. On two separate occasions, Roth withdrew money totalling $11,000. The first withdrawal was for $3,000 and the second withdrawal was for $8,000. Because his trust account was overdrawn by $1,000, Roth invaded client funds. Roth claimed that when he made the second withdrawal he did not recall, nor could he determine, how much money he had previously withdrawn from his trust account.
In the Four Seasons matter, Roth deposited in his trust account an $8,000 check from a client. Before waiting for that check to clear, Roth wrote himself a $4,000 check, representing his fee. Thereafter, the $8,000 check bounced. He therefore invaded client trust funds. When notified of the bounced check, Roth told the OAE investigator that he could not replace the $4,000 because he had spent it to pay personal expenses. Roth replenished the invaded funds nine months later.
In the Hillcrest matter, Roth wrote a $7,500 check on his trust account on behalf of Prudential-Hillcrest Homes Realty (Hillcrest), a real-estate agency owned by his father. At the time, which was about four weeks after the tragic death of Roth's mother, there were no corresponding funds on deposit standing in the credit of Hillcrest. Because his father was in "bad shape," Roth wrote the check, intending to thereafter seek reimbursement from his father. Roth failed to follow-up with his father. Because there were insufficient funds to cover the check, client funds were invaded. It took Roth three months to replenish the trust account.
In his defense, Roth stated that the invasion of clients' trust funds was negligent, not knowing. He argued that he had extremely poor record-keeping procedures. He also contended that his ability to maintain client trust records had been adversely affected by his depressive condition and ongoing familial difficulties, including the tragic death of his mother and the break-up of a lengthy marriage. Roth was under psychiatric care and was prescribed drugs to address his problems that his doctor believed affected his ability to function properly.
The Special Ethics Master concluded that the OAE had failed to demonstrate by clear-and-convincing evidence that Roth had knowingly misappropriated client funds, or that his conduct had amounted to dishonesty or fraud. The Special Master recommended that Roth be suspended for six months and that he be subject to monitoring to ensure proper trust accounting in the future.
The Disciplinary Review Board (DRB) divided five-to-three on the issue of knowing misappropriation and partly rejected the finding of the Special Master. The majority of the DRB found that record clearly and convincingly established that Roth's misappropriation of client funds in the McCracken matter, the Hillcrest matter, and the Four Seasons matter was knowing. Thus, the majority of the DRB recommended disbarment. Three members of the DRB found that the proofs did not support the determination that Roth knowingly misappropriated client funds. Those members would have recommended a six-month suspension.
HELD: Walter L. Roth is disbarred for the knowing misappropriation of clients' funds.
1. Misappropriation includes the temporary, unauthorized use of client funds, whether or not the attorney denies any personal gain or benefit therefrom. The lawyer's motive is irrelevant in determining the appropriate discipline for knowing misappropriation. The principal reason for attorney discipline is to preserve the confidence of the public in the integrity and trustworthiness of lawyers. Nothing less than disbarment for knowing misappropriation will preserve public confidence in the profession. (pp. 20-220
2. The totality of the circumstances demonstrates clearly and convincingly that Roth knowingly misappropriated clients' funds. Circumstantial evidence includes repeated invasions of client funds that were required to be held inviolate. The testimony adduced convincingly suggests that Roth knew or had to know that he was invading client funds. (pp. 22-23)
3. Roth contends that his "shoddy bookkeeping," his depression, and simple forgetfulness combined to obscure his knowledge that his client trust account had been invaded on several occasions. The court rejects those defenses, finding that the cumulative effect of Roth's multiple invasions of clients' trust-account funds diminishes the persuasiveness of any of the proffered explanations or justifications. The record clearly and convincingly demonstrates that Roth believed that he could treat clients' funds as if they were his own. (pp. 25-26)
4. The testimony of Roth's psychiatrist in respect of Roth's depressive condition and treatment does not demonstrate a loss of comprehension sufficient to explain or excuse his knowing acts of misappropriation. Therefore, the appropriate discipline is disbarment.
JUSTICE O'HERN, Dissenting, is of the view that the proofs did not clearly and convincingly establish that there had been a knowing misappropriation of clients' funds within the meaning of In re Wilson. According to Justice O'Hern, the confluence of human events--the death of a mother, the grief of a father, the depression of Roth--should be taken into account, especially considering that no client suffered any loss because of Roth's conduct.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and COLEMAN join in this per curiam opinion. JUSTICE O'HERN has filed a separate Dissenting opinion.
Following an investigative audit conducted in May 1991, the Office of Attorney Ethics (OAE) filed a seven-count complaint with the District XIV Ethics Committee against respondent, Walter L. Roth, Jr. Respondent was charged with four counts of knowing misappropriation of client trust-account funds involving four separate transactions: the McCracken matter, the Four Seasons matter, the Hillcrest matter, and the $10,000 Loan matter. Respondent was additionally charged with one count of commingling of funds, one count of gross neglect of a client matter, and one count of misrepresentation to the OAE. Respondent admitted that he had commingled personal and client funds in his trust account, and that he had failed to pursue a client matter with diligence, but disputed that he had knowingly misappropriated client funds, or that he had misrepresented facts to the OAE.
The report of the Special Ethics Master characterized the essential issue as whether "the misappropriations were done knowingly, as OAE contends, or negligently, as Respondent contends," and concluded that the OAE had failed to demonstrate by clear-and-convincing evidence that respondent had knowingly misappropriated client funds, or that the conduct of respondent had amounted to dishonesty or fraud. The Special Master recommended that respondent be suspended for six months and be subject to monitoring to ensure proper trust accounting in the future. The Disciplinary Review Board (DRB) divided five-to-three on the issue of knowing misappropriation and partly rejected the finding of the Special Master. The majority of the DRB found that "the record clearly and convincingly establishes that respondent's misappropriation of client funds in [the McCracken matter, the Four Seasons matter, and the Hillcrest matter] was knowing," and concluded that disbarment was the only appropriate sanction. Three members of the DRB found that the proofs did not support the determination that respondent knowingly misappropriated client funds and would have imposed a six-month suspension.
Respondent is charged with four counts of knowing misappropriation arising from four transactions. In its Decision and Recommendation, the DRB summarized the relevant evidence from each of the four matters.
The DRB first detailed the factual background of the McCracken matter:
Respondent represented Horace and Carol McCracken in negotiating a settlement of their outstanding debts owed to Debt Consultants, Inc. On or about July 27, 1990, respondent and Daniel C. Hoffman (the grievant in the McCracken matter), counsel for Debt Consultants, settled the matter for $1,300. By letter to respondent dated July 27, 1990, Hoffman confirmed the terms of the settlement and enclosed a stipulation of settlement to be executed by respondent's clients. Respondent received this letter a day or two later.
On July 30, 1990, the McCrackens gave respondent a check in the amount of $1,300, payable to "Walter L. Roth, Jr." Respondent deposited that check in his trust account on that same day.
On August 27, 1990, respondent wrote to Hoffman, enclosing an executed consent order and assuring him that the McCrackens' check would follow within seven days. On October 2, 1990, the court signed the stipulation of settlement. Although respondent acknowledged having received the signed stipulation in October or November 1990, he did not send Hoffman the $1,300 payment. Respondent had no explanation for his failure to send the payment after the receipt of the signed stipulation. His testimony was that "I just didn't do it * * * . I felt that basically everything was coming down around me." Respondent was alluding to several personal problems that beset him at the time, detailed below.
By letter dated October 9, 1990, Hoffman complained to respondent that payment had not been made. Hoffman also informed respondent that he would be seeking the entry of a judgment in the amount of $2,771.30. Indeed, on January 28, 1991, the court entered a judgment against the McCrackens in the amount of $2,331.16, together with pre-judgment interest in the amount of $349.67, for a total of $2,680.83 plus costs and counsel fees.
During a telephone conversation with Hoffman, in March 1991, respondent claimed that his secretary had mistakenly deposited the $1,300 check in the wrong account, a fact of which he had become aware only after the receipt of Hoffman's letters complaining about the non-payment. Hoffman then agreed to accept the $1,300, if paid immediately. Once again, respondent did not send the payment to Hoffman. That fact caused Hoffman to write respondent a letter, on April 1, 1991, questioning respondent's earlier explanation of the misdeposit and also informing respondent that he would be notifying the disciplinary authorities of respondent's conduct, within seven days from the date of the letter.
On May 6, 1991, upon receipt of the Hoffman grievance, the OAE conducted a second audit of respondent's books and records. When respondent failed to produce all the requested records, the audit was continued until May 20, 1991, at respondent's office. Several future visits to respondent's office were necessary. Prior to the May 20, 1991 audit, by letter dated May 16, 1991, the OAE instructed respondent to submit a reconstruction of his trust account records, along with quarterly reconciliations as of certain specific dates. Respondent then engaged an accountant, Earl J. Kelly, to prepare the appropriate trust records and the quarterly trust account reconciliations. According to respondent, his accountant worked in conjunction with the OAE during the entire summer of 1991, in order to reconstruct his attorney records. After certain deficiencies were identified, respondent replenished the trust account by depositing $9,168.47 into his trust account on September 24, 1991. After a thorough review of the reconstructed records, the OAE determined that they were in compliance with R. 1:21-6.
On October 11, 1991, respondent finally sent the $1,300 settlement to Hoffman. According to respondent, he delayed sending the funds to Hoffman until his accountant had completed his trust account reconciliations.
In the interim, however, the $1,300 was not kept inviolate in respondent's trust account. Approximately two weeks after the July 30, 1990 deposit of the $1,300 check in his trust account, respondent invaded those funds. He did so by issuing trust account checks in excess of its available balance. Specifically, on August 13, 1990, respondent's trust account balance was $2,523.54, including the $1,300 McCracken funds and $1,223.54 in other funds. On that date, two trust account checks totalling $2,620 were presented for payment: check No. 4337, in the amount of $120, payable to "Clerk-U.S. Bankruptcy Court," and check No. 4339, in the amount of $2,500, payable to "Prudential Hillcrest Homes" ("Hillcrest"). On that date, August 13, 1990, there were no funds on deposit standing to the credit of Hillcrest. Respondent personally issued both checks, which were unrelated to the McCracken matter. After those checks were cashed, the trust account became overdrawn by $121.46 and the $1,300 McCracken funds were invaded.
By letter dated August 14, 1990, the bank in which respondent kept his trust account notified the OAE of the $121.46 overdraft. The bottom of that letter indicated that a copy had been sent to respondent. Although respondent acknowledged having received a copy of the bank's notice, the record is not clear as to the exact date on which he received it.
On August 14 and 17, 1990, respondent deposited $2,500 and $3,047 in his trust account, respectively. On August 17, 1990, the trust account balance was $5,425.54, including the replenished $1,300 McCracken funds and $4,125.54 in other funds. On that same date, however, respondent issued three checks totalling $4,500, which were unrelated to the McCracken matter: check No. 4340, in the amount of $500, payable to "W. Lundgraf;" check No. 4341, in the amount of $3,500, payable to "Fred and Marsha Johnson;" and check No. 4342 in the amount of $500, payable to "W.L. Roth, Esq." After the payment of those checks on August 17, 1990, the balance in the trust account dropped to $925.54. Once again, the $1,300 McCracken funds were invaded.
Respondent testified that he had no knowledge regarding the trust account balances on either August 13 or August 17, 1990.
Q. What was your balance in your trust account right before you wrote [check no. ...