Sunday, May 08, 2016

Manhattan DA Pinches Disbarred Lawyer, Two Others In Alleged Scheme To Loot & Launder Approx. $5 Million From Attorney Trust Accounts; Victims Include Dementia-Suffering Client Clipped For $500K

From the Office of the New York County District Attorney:
  • Manhattan District Attorney Cyrus R. Vance, Jr., announced the indictment of ELI LUSKI, 53, as well as brothers JAY KATZ, 68, and DAVID KATZ, 62, a former attorney, for conspiring to steal and launder approximately $5 million from the escrow accounts of Manhattan-based attorneys over the course of six years.
    According to court documents and statements made on the record in court, from January 2010 to February 2016, LUSKI, JAY KATZ, and DAVID KATZ conspired to enlist attorneys to steal money held in attorney escrow accounts, which contain funds that attorneys hold in trust for their clients and others. The defendants are charged with conspiring to steal approximately $5 million from three escrow accounts, and directing the stolen funds to designated bank accounts.

    Beginning in January 2010, DAVID KATZ, at the time a licensed attorney in New York, allegedly misappropriated more than $900,000 from his own attorney escrow account and transferred the majority of the funds to LUSKI. On June 25, 2013, DAVID KATZ was disbarred from the practice of law by the Departmental Disciplinary Committee for the First Judicial Department for similar conduct.

    After stealing from DAVID KATZ’s attorney escrow account, LUSKI, JAY KATZ, and DAVID KATZ allegedly enlisted two other attorneys to steal funds from their own escrow accounts on the defendants’ behalf.

    Over the course of the next three years, LUSKI, JAY KATZ, and DAVID KATZ, assisted by one of the co-conspirators, stole more than $3 million from that attorney’s escrow account through unauthorized transfers to the defendants’ personal and business accounts, and to third parties’ accounts on behalf of the defendants. The defendants, with the help of the second co-conspirator, are additionally charged with stealing nearly $500,000 from an escrow account containing funds that a Court expressly ordered that attorney to hold for safekeeping on behalf of a client suffering from dementia.(1)

    Upon receiving the funds, LUSKI and JAY KATZ worked together to launder more than $1 million through check-cashing businesses and through one of JAY KATZ’s businesses, Banner Realty Company.
Source: DA Vance: Three Men, Including Former Attorney, Charged with Conspiring to Steal and Launder $5 Million from Attorney Escrow Accounts.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:
  • This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.

    There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.

    This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.[...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.
(1) The Lawyers’ Fund For Client Protection Of the State of New York manages and distributes money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the New York bar acting as an attorney or a fiduciary.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.