Thursday, May 19, 2016

New York Fund That Provides Reimbursement To Clients Who Were Fleeced By Dishonest Attorneys Hits Its All-Time Record For Annual Payout$; $12.3 Million In Coughed-Up Funds In 2015 More Than Doubled 2014 Payout$

The New York Law Journal reports:
  • Reimbursements from a state-maintained fund to compensate the clients of dishonest attorneys reached a record $12.3 million in 2015, or more than double the amount paid out in 2014, the state Lawyers' Fund for Client Protection said.(1)

    The total reimbursement made to the clients of 51 lawyers was the highest in the fund's 33-year history. All the lawyers involved have been suspended, disbarred or are deceased, the fund said in its annual report for 2015.

    The fund's executive director, Timothy O'Sullivan, [...] credited the increase to the anomaly of claims from several high-volume compensation cases rather than the emergence of new abusive kinds of misconduct by lawyers.

    "I don't believe it's a trend of seeing our numbers of dishonest lawyers going through the roof," O'Sullivan said. "But for some reason, we got hit substantially [with claims] within this one year."

    Nearly two-thirds of total payouts in 2015 went to former clients of five attorneys: William Parente ($2.03 million in client reimbursements), Stephen Krawitz ($1.73 million), Donald B. Rosenberg ($1.44 million), Robert Fontanelli ($1.36 million) and Timothy Griffin ($1.05 million).

    While thefts from clients' real property escrow accounts remain the most common misconduct resulting in reimbursements from the fund, O'Sullivan said 2015 was atypical because three of the most abusive attorneys—Krawitz, Rosenberg and Fontanelli—stole money from proceeds of settlements that clients had won in litigation.

    The fund is composed of money accumulated by a $60 assessment on the $375 biennial registration fee on attorneys in New York state.
Source: Five Cases Drive Surge in Client Compensation (requires paid subscription; if no subscription, TRY HERE, then click the appropriate link for the story).

Go here for the 33-year 'hit parade' of New York lawyers whose dishonest conduct led to Fund payouts, & amounts awarded to their clients 1982-2015 (total payouts per attorney range from as little as $40 to over $4,000,000).

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.

Typical losses reimbursed by the Fund include the theft of escrow deposits in real property trans- actions, estate and trust assets, settlements in personal injury litigation, debt collection receipts, money embezzled in investment transactions within an attorney-client relationship and the practice of law, and unearned fees paid in advance to lawyers who falsely promise their legal services.

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.