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Matter of Pomerantz

July 17, 1998

IN THE MATTER OF RANDEE POMERANTZ, AN ATTORNEY AT LAW.


The opinion of the court was delivered by: Per Curiam

Argued June 16, 1998

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

Respondent was admitted to the bar of New Jersey in 1986. In 1995, the District XIV Ethics Committee (DEC) charged respondent with five counts of knowing misappropriation of client trust funds, R.P.C. 1.15, 8.4(c), failure to make prompt payment of funds, R.P.C. 1.15(b), two counts of commingling personal funds with attorney trust account funds, R. 1:21-6, misrepresentation and fraud, R.P.C. 1.15(a), 8.4(c), and failing to keep the records required by Rule 1:21-6(b) and (c), R.P.C. 1.15(d). The matter was referred to a Special Master.

The Special Master found that respondent failed to keep required records in violation of R.P.C. 1.15(d), commingled funds in violation of R.P.C. 1.15(a), and violated R.P.C. 8.4(c) defining as professional misconduct "conduct involving dishonesty, fraud, deceit or misrepresentation." The Special Master concluded, however, that respondent's misappropriation of funds was negligent, not knowing, and therefore recommended a three-year suspension rather than disbarrment. The Disciplinary Review Board (DRB), on the other hand, determined that respondent committed knowing misappropriation of client funds and consequently recommended disbarrment by a vote of seven to two. We agree that the record clearly and convincingly establishes that, among other violations, respondent knowingly misappropriated client funds. Therefore, we adopt the recommendation of the DRB and order that respondent be disbarred.

I.

Respondent first came to the attention of the Office of Attorney Ethics (OAE) when respondent's bank, First Fidelity, sent two letters to the OAE on May 4, 1992 indicating that respondent's trust account had been overdrawn on two occasions. First, on April 14, 1992, a shortage of $1,213.59 occurred when a $1,353 deposit was not credited until the next business day. The second overdraft occurred on April 20, 1992, when a check was returned for insufficient funds, creating an overdraft in the amount of $875.43.

On May 21, 1992, the OAE contacted respondent, requesting that within ten business days respondent provide a written, documented explanation including copies of particular documents. In a letter dated July 7, 1992, respondent explained:

We represent a client who has been in good standing with us for several years. In order to help them [sic] with a debt consolidation, we were paying debts for them [sic] through our Attorney Trust Account. Our client would first deposit the necessary monies into our account and we would draw the necessary checks. One local creditor of our client went directly to the bank, in spite of a dated check.

Unfortunately, our client's check deposit bounced causing the overdraft.

The OAE was not satisfied with this explanation and requested additional documentation on July 13, 1992. Respondent's accountant, Patrick M. Walsh, sent copies of some of the requested documents to the OAE. The OAE was still unsatisfied and scheduled a demand audit of respondent's books and records, explaining to her that "[i]t appears from the records submitted that you were out of trust." The September 30, 1992 audit disclosed many problems with respondent's trust account.

After conducting a de novo examination of the record, we adopt the factual findings made by the DRB:

The Zall Matter

This count of the complaint charged respondent with knowing misappropriation of client funds [RPC 1.15(a) and RPC 8.4(c)] and with failure to make prompt payment of funds [RPC 1.15(b)].

Barbara Zall retained respondent to represent her in a divorce proceeding. At a hearing on February 10, 1992, the parties placed on the record the terms of a settlement agreement. The final judgment of divorce, entered on March 19, 1992, required respondent to disburse from her trust account $22,547.49 to Zall and $10,000 to the attorney for the husband. On February 20, 1992, ten days after the final hearing and about one month before the entry of the final judgment of divorce, respondent sent the husband's attorney a proposed form of judgment, as well as a trust account check for $10,000 for the husband's share of equitable distribution. Respondent did not disburse the $22,000 to Zall until April 6, 1992, eighteen days after the date of the final judgment of divorce, thereby raising a suspicion that, in the interim, the Zall funds had not been kept intact in her trust account. The circumstances surrounding the payment to Zall were hotly contested at the ethics hearing.

According to Patty Wooster, respondent's former paralegal assistant, and Catherine Cromlish (a/k/a Catherine Tzounkas), respondent's former bookkeeper, Zall called the office almost every day asking for her funds. Cromlish testified that in March 1992, when respondent was in Florida, respondent told Cromlish that Zall would be paid when respondent returned to New Jersey. According to Cromlish, she discovered that respondent's trust account had insufficient funds to pay Zall and so informed respondent during at least two telephone conversations. Cromlish testified that one of these conversations took place when respondent was in Florida. Cromlish testified further that respondent told her not to worry about the account, assuring her that enough funds would be available to pay Zall.

On March 26, 1992 respondent wrote a check to Zall. As noted earlier, she did not send the check to Zall, however, until April 6, 1992, eighteen days after the date of the final judgment of divorce. It was this check that triggered one of the overdrafts in respondent's trust account, prompting her bank, First Fidelity, to write to the OAE.

Respondent did not dispute that she was out-of-trust. She blamed the problem on poor accounting practices and, in particular, on her bookkeeper's failure to maintain proper records. In essence, thus, respondent contended that the use of other clients funds had been inadvertent.

As to the delay in the distribution to Zall, respondent testified that the reason for such delay was twofold. First, respondent explained, it was her practice not to distribute funds in divorce cases until she had received the final judgment of divorce with a "raised seal;" she added that she was waiting to receive that document to send the funds to Zall. Respondent acknowledged that she deviated from this practice when she distributed the $10,000 funds to the attorney for Zall's husband. She claimed, however, that she and the attorney had agreed that the payment would be made before the execution of the divorce documents. The second reason for the delay, respondent asserted, was that she wanted to wait until her return from Florida to send a check to Zall. When pressed by the presenter for documentary proof of her trip to Florida, such as an airline ticket, respondent was unable to produce any.

Respondent testified that she still represents Zall, who has never complained about her services.

The OAE presenter, in turn, charged that respondent deliberately delayed the disbursement to Zall because respondent knew that, due to her personal expenditures, her trust account did not have sufficient funds to pay Zall. In fact, the OAE charged, on April 10, 1992, four days before the check was dishonored, respondent already knew that her trust account was overdrawn. And she knew it, the OAE argued, because on April 10, 1992 she deposited $3,500 of her own funds into the trust account to cover a shortage in another matter, Danmor. According to the OAE, this deposit proved that respondent actually knew much more about her trust account balances than she admitted knowing.

The OAE investigative auditor, Barbara Galati, testified that, on twenty separate occasions between October 23, 1991 and April 14, 1992, when the Zall check was presented for payment, respondent's trust account contained less than the amount required to be on deposit for the Zall matter alone. Moreover, according to Galati, from the date the check was written, March 26, 1992, until it was presented for payment, April 14, 1992, there were not enough funds on deposit in respondent's trust account to cover the disbursement to Zall. Galati testified that the trust account shortages were caused by respondent's use of trust funds to make payments unrelated to the Zall matter. Among the payees were:

another client, Ronnie D'Esposito; respondent's minor daughters' bank accounts; contractors performing work on respondent's house; respondent's housekeeper; the owner of the building where respondent's husband conducted his business; respondent's husband's business; Freehold Mitsubishi, from whom respondent bought a car; and respondent herself.

The OAE presenter also took the position that, despite respondent's and Cromlish's testimony, respondent was not in Florida during March 1992. The presenter relied on the absence of any documentary proof of that trip. The presenter also pointed to numerous checks signed by respondent during the month of March. The presenter charged that such checks showed one of two things: either respondent was in New Jersey in March or she improperly signed the checks in blank.

The Schneeberg Matter

This count of the complaint charged respondent with knowing misappropriation of client funds, in violation of RPC 1.15(a) and RPC 8.4(c), and with commingling of personal funds and trust funds, in violation of R. 1:21-6.

In November 1991 respondent's father, Sidney Schneeberg, passed away, leaving respondent as the sole beneficiary and executrix of his estate. From time to time, respondent would receive installment distributions from the estate. Instead of opening a separate bank account for the estate, she would deposit the funds in her trust account. Respondent told OAE auditor Galati that she used her trust account because it was easier to keep track of the payments and deposits in connection with the estate. The total periodic distributions for the estate amounted to $370,000. It is undisputed that respondent was entitled to such funds. The alleged ethics impropriety consisted of respondent's commingling the estate funds and trust funds and withdrawing funds in excess of those deposited for the estate. According to OAE auditor Galati, on nine occasions between November 18, 1991, the date of the deposit of the first estate distribution, and September 1992, the date of the last entry on the estate ledger card, respondent withdrew more than the funds on deposit for the estate, thereby invading client trust funds.

Respondent did not deny that she was out-of-trust. In fact, the account reconciliations prepared by respondent's accountant after the OAE notice of the demand audit, showed that respondent had invaded client funds. Respondent claimed, however, that such invasion had been inadvertent, due to poor recordkeeping. Respondent attempted to shift the blame to her bookkeeper, Catherine Cromlish, contending that she had entrusted Cromlish with the responsibility of maintaining the estate account. Cromlish, in turn, testified that respondent knew at all times the exact balance of the estate account and that she, Cromlish, always followed respondent's directions on how much to withdraw from the account. According to Cromlish, respondent asked her constantly, sometimes daily, about the balance in the estate account. Cromlish pointed out that the Schneeberg ledger card contained entries made by respondent herself. Hence, Cromlish suggested, respondent had to be aware of the status of the account and, therefore, that the withdrawals exceeded the amount of funds on deposit. In fact, Cromlish testified, respondent was aware that at times the estate account had a negative balance. Cromlish also testified that, whenever she brought this problem to respondent's attention, respondent appeared unconcerned and assured her that there would be additional distributions from the estate.

The OAE's position was that respondent knew the precise balance of the estate account and that she, therefore, knowingly invaded client funds. For example, the OAE pointed out, on January 2, 1992 respondent made the largest deposit of funds toward the Schneeberg account, $171,823.59. On that same day, respondent wrote seventeen checks against her trust account, totaling $171,823.48, or eleven cents less than the funds on deposit for the estate. The OAE urged a finding that respondent could not have written a large number of checks (seventeen) and have come within only a few cents of its balance without knowing the exact balance of the account.

Toward the end of the ethics hearing, the OAE presenter introduced a new theory as to why respondent had deposited the estate funds in her trust account. The OAE presented evidence that several judgments had been entered against respondent and her husband, following their default on loans for medical equipment for the husband's business. According to OAE, respondent ...


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