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In re Blaher

Supreme Court of New Jersey

March 21, 2019

In The Matter Of Neal Jonathan Blaher An Attorney At Law

          Argued: November 15, 2018

         District Docket No. XIV-2018-050IE

          Eugene A. Racz appeared on behalf of the Office of Attorney Ethics.

          Respondent did not appear, despite proper notice.

          Ellen A. Brodsky Chief Counsel

          DECISION

          BOARD BONNIE C. FROST, CHAIR

         To the Honorable Chief Justice and Associate Justices of the Supreme Court of New Jersey.

         This matter was before us on a motion for reciprocal discipline, pursuant to R, 1:20-14(a), filed by the Office of Attorney Ethics (OAE). The motion is based on respondent's disbarment in Florida, [1] for the New Jersey equivalents of RPC 1.7(a) (concurrent conflict of interest), RPC 1.15(a) (failure to safeguard funds - knowing misappropriation of trust funds), RPC 1.15(d) (recordkeeping improprieties), and RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation). The OAE recommends respondent's disbarment. For the reasons expressed below, we agree with the OAE's recommendation.

         Respondent was admitted to the New Jersey and Pennsylvania bars in 1986, and the Florida bar in 1987. At the relevant time, he practiced law in Florida. He has no history of discipline in New Jersey, but has been administratively ineligible to practice law in this state since 2015.

         On November 17, 2014, the Florida Bar (Bar) filed a Petition for Emergency Suspension (petition) against respondent. According to the petition, on April 24, 2014, the Bar received notification from PNC Bank (PNC) of a $448.99 overdraft in respondent's trust account. The overdraft resulted in an audit of respondent's PNC trust account and his prior trust account at Fifth Third Bank. The Bar's investigation into respondent's practices revealed that he had misappropriated client trust funds. From the audit period of April 1 through July 31, 2014, his trust account shortages ranged from $400 to $9, 730.59. The shortages resulted from respondent's disbursing trust account funds to himself, to which he was not yet entitled. Respondent described those funds as "advanced attorney fees." Each such improper disbursement impacted funds belonging to other clients. He took the funds in anticipation of his receipt of future payments from clients. Respondent calculated the amounts of anticipated fee payments and removed almost equivalent amounts from his trust account for his personal use. In order to conceal the shortages that he created by improperly advancing the fees, respondent inaccurately reflected the status of the funds in his attorney records. The Bar's auditor prepared an affidavit, certifying that respondent was not in compliance with the Florida bar rules during the audit period and that he had "misappropriated" client funds from the trust account for personal expenses.

         In his October 15, 2014 deposition, respondent admitted his practice of taking advances of anticipated fees before his clients paid him. He conceded that he needed the funds and took the advances, hoping that it would be a "short-term situation." He maintained that his conduct was in keeping with the "spirit" of the Florida rules.

         Respondent used the fee advances to pay personal and business expenses, such as payroll, rent, life insurance, health insurance, cellular service, credit card bills, and the Internal Revenue Service. He also transferred trust account funds to his personal bank account. At the deposition, respondent acknowledged that he intentionally engaged in this conduct. Although he had funds in a personal retirement account, he admitted that he chose not to use them to pay for office expenses "because it would permanently deprive him of money that he could not put back in savings."

         The petition listed seven examples of respondent's taking of advanced fees:

         1. On May 23, 2013, in the Madhvani 11024 matter, respondent transferred $1, 500, as fees, from his trust account to his operating account, even though the client's credit card payment in the same amount did not clear until May 30, 2013, which caused a trust account shortage for seven days.

         2. On January 13, 2014, in the Cortex USA matter, respondent transferred $4, 400, as fees, from his trust account to his operating account, although the client had not yet wired the funds. Eight days later, on January 21, 2014, the client wired $3, 700 to respondent's trust account. As of June 27, 2014, after additional disbursements to respondent and to the U.S. Patent and Trademark Office, the Cortex client ledger card had a negative $1, 845.10 balance. On July 7, 2014, respondent cured the shortage by depositing $1, 950 into the account. The improper fee disbursement caused a six-month trust account shortage.

         3. On January 14, 2014, in the Andrew DeStefano matter, respondent transferred $2, 150, as fees, from his trust account to his operating account. He did not deposit a portion of the client's funds until January 27, 2014, and the account was not fully funded until February 10, 2014, causing a twenty-seven day trust account shortage.

         4. In the Manny's Original Chophouse 14001 matter, on January 31 and February 14, 2014, respondent disbursed $812.50 and $2, 600, respectively, as fees, from his trust account to his operating account, for a total of $3, 412.50. Respondent did not deposit the client's funds until March 10, 2014, causing a thirty-eight day trust account shortage.

         5. On February 3, 2014, in the Brian Thorton matter, respondent disbursed $1, 000 as fees for "annual processing" from his trust account to his operating account, even though the deposit associated with the fees did not clear until February 11, 2014, which caused an eight-day trust account shortage.

         6. From January 2 through April 15, 2014, in the Go Waiter 14002 matter, respondent made several fee disbursements before collecting sufficient funds from the client. The disbursements resulted in recurring negative balances.

         7. On April 18, 2014 in the Madhvani 11020 and Madhvani 11024 matters, respondent disbursed $3, 000 as fees from his trust account to his operating account. The client's $3, 000 payment for the matters did not clear until May 7, 2014, causing a nineteen-day trust account shortage.

         During respondent's deposition, he admitted that his ledger cards did not accurately reflect the activity in his trust account. He did not correctly identify the dates or amounts of disbursements that resulted in shortages in his trust account when he made improper fee disbursements. He did not record his fee advances until he received payments from his clients. More specifically, to force the reconciled bank statements to match the journal balance, respondent inflated the bank balance on his reconciliations by the amount of the fees he improperly advanced to his operating account, thereby concealing the shortages he caused by advancing fees. Respondent also failed to provide the Bar with copies of canceled checks for the Fifth Third trust account, admitting that he did not maintain the copies. Respondent's practices thereby violated the Florida recordkeeping rules.

         On November 18, 2014, respondent filed an Emergency Response to Petition for Emergency Suspension, asserting that he cooperated fully with the Bar and produced the requested documentation. He requested that the matter proceed through "a more appropriate route, rather than the granting of the emergency suspension." Respondent alleged that the petition was replete with misstatements, mischaracterizations, and omissions of material facts.

         Respondent contended that, because of his changing practice, the substantially lesser legal fees he received impacted his "fee revenue flow," exacerbated by the fact that he was being paid at a slower pace for services rendered. He admitted "[ultimately, there were instances during this time period when fees were disbursed from trust for steady work being done on specifically identified and current projects I was handling for an established client, even though the funds had not yet been received or deposited into the trust account." Respondent admitted further that he even submitted documentation to the Bar showing these "limited fee advances."

         According to respondent, "at no time was money disbursed indiscriminately." Rather, "only when a specific project for an existing client had been agreed to, and work begun on that project, were anticipated fees calculated and withdrawn."

         Respondent also accused the Bar of mischaracterizing his deposition testimony. He asserted that he had a source for repayment "in the event of even the most unexpected failure of the anticipated fees coming in, namely funds held in a personal retirement account that significantly exceeded the amount of any fee advances and that could be retrieved at any time on short notice." Respondent maintained that he had taken funds from his retirement account during the time and incurred the penalty for ...


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