Prominent Attorney Feels Financial Squeeze After Being Hit With F'closure, IRS Tax Liens; Faces Suspension For "Inappropriately Borrowing" Client Cash

In Louisville, Kentucky, the Courier Journal reports:

• David Friedman, who won major court victories for the American Civil Liberties Union of Kentucky as its volunteer general counsel for 25 years, including a Ten Commandments case before the U.S. Supreme Court, has left the organization and been ousted from his law firm after being accused of keeping money owed to two clients. The Kentucky Bar Association filed a motion Dec. 7 to temporarily suspend Friedman, 57, from practicing law.

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• According to court records and interviews, Friedman withheld, for eight months last year, portions of about $116,000 he owed clients who had won a whistleblower case against the Metropolitan Sewer District. He paid them in full only after they threatened to prosecute and alerted other partners at Friedman's law firm, according to one of the clients, Ray Barber, a former MSD inspector.

• In an interview, Friedman's lawyer, Peter Ostermiller, did not dispute that account. Responding to a request for an interview, Friedman issued a statement this week apologizing to his clients, his former law partners and family and friends, saying he has “sought to make amends for what occurred.”

• On Nov. 6, Friedman was “disassociated” from the Louisville firm — then known as Fernandez Friedman Haynes & Kohn — based on “allegations that would bring the firm into disrepute,” said Allan Cobb, its outside counsel. No criminal charges have been filed.

• Court records showed that Friedman and his wife were sued for foreclosure on their Crescent Hill home in 2007 and again in May 2009 for failing to repay loans. Both cases were later resolved. The IRS also placed liens on the home in 2007 and 2008 totaling $180,021 that are still pending. Barber said in an interview that Friedman eventually told him that he faced foreclosure. “I told him if he needed the money, I would have lent it to him,” said Barber, who now is a farmer in Michigan. “I thought the world of David.”(1)

• In his statement, Friedman said he regretted “any pain or problems” he caused Barber and fellow plaintiff Sarah Lynn Cunningham, a former MSD engineer. Ostermiller noted the clients have been reimbursed in full and no other complaints against Friedman have emerged. He also said the incident should be weighed against Friedman's contributions as a lawyer, including his “defense of people who nobody else would defend.”(2)

For more, see Civil liberties lawyer David Friedman accused of keeping cash owed to clients.

(1) According to the story, ACLU supporters — and Friedman's legal adversaries — said they were stunned by the allegations. Suzy Post, a past director of the organization, said she was saddened. “He is such a sterling guy.” Bill Stone, a longtime ACLU member and former city law director, said he was “surprised and disappointed. It will be a serious setback if he's not fighting religious liberty cases.” Francis Manion, senior counsel for the conservative American Center for Law and Justice, which frequently battles the ACLU, said, “I have never known David to be anything but an honorable, highly professional and skilled attorney.” State Rep. Tom Riner of Louisville, a Baptist minister, once said of him: “I just wish we had a couple of Christian lawyers like David Friedman,” and U.S. District Judge John G. Heyburn II called him “an exceptional advocate for his causes and clients.”

Friedman, who reportedly has argued more than 40 cases before the 6th U.S. Circuit Court of Appeals, won his biggest triumph in 2005 when he persuaded the U.S. Supreme Court that Ten Commandments displays in two Kentucky courthouses illegally crossed the line separating church and state, according to the story.

(2) A recent California story in The Fresno Bee [see Valley lawyers turn to crime in tough times] noted that the the bad economy may be driving some attorneys to "temporarily borrow" client escrow money, only to later find that the can't pay it all back:

• Attorneys who steal from clients often start off by "borrowing" money from their clients' trust accounts. They put a little bit of the money back, but not all. After a while, they end up being unable to repay, said Andrew Kaufman, a professor of legal ethics at Harvard Law School. [Carol] Langford[, a San Francisco lawyer who defends lawyers before the California State Bar Court in disbarment cases,] said lawyers often are in denial. They believe they can pay the money back. "Probably 65% to 75% of the time, they're wrong," she said.