NY Judge Kiboshes Attorneys' Outrageous Attempt To Stiff Client Out Of $4.3 Million Proceeds From Real Estate Sale Placed In Escrow & Subsequently Stolen By Law Firm's Office Manager/Bookkeeper

In Nassau County, Long Island, the New York Law Journal reports:

• Ruling in four cases related to the theft of client funds by an employee, a judge rejected a Nassau County law firm's "outrageous" argument that it is not obligated to repay the money.
  
  In a 97-page decision, Nassau County Supreme Court Justice Vito DeStefano granted summary judgment for Wendy and Stephen Baron, who say the firm refuses to return $4.3 million stolen from their escrow account, on claims of unjust enrichment and conversion against the firm and its two founding partners.
  
  DeStefano said [] that permitting Galasso, Langione, Catterson & LoFrumento to keep funds that were stolen by former employee Anthony Galasso and used to cover up his theft from other firm accounts, would essentially require a finding that the embezzled money was "successfully laundered." Galasso, a nonlawyer who served as the firm's bookkeeper and office manager, did time for the theft.
  
  The judge also granted judgment to the plaintiffs on their claim of constructive trust against the holding company for a Garden City condo that the firm bought in 2005 with $360,000 of the stolen funds.
  
  According to the judge's ruling, in 1988, Peter Galasso and James Langione launched the law firm that eventually became Galasso, Langione, Catterson & LoFrumento.
  
  In 1993, Anthony Galasso, Peter Galasso's brother, got a job with the firm working as a gofer and eventually worked his way up to become the firm's office manager and bookkeeper.
  
  In 2002, Wendy Baron filed for divorce from Stephen Baron and Peter Galasso represented the latter.
  
  While the matter was pending, Stephen Baron sold a parcel of commercial property in Hicksville and deposited the $4.8 million in net proceeds from the sale into an escrow fund for which Peter Galasso served as escrow agent, though DeStefano noted that contentions by Peter Galasso and the firm as to the identity of the escrow agent are "inconsistent and have shifted significantly" through the proceedings.
  
  From 2004 to 2007, Anthony Galasso gradually siphoned $4.5 million from the Baron escrow account into the firm's Interest on Lawyer Account and into its operating accounts through the use of about 90 online transfers. [...] After Peter Galasso found that there was about $466,000 left in the Baron account, he reported his brother to the authorities.
  
  Anthony Galasso ultimately pleaded guilty in 2008 to 22 counts of grand larceny and was sentenced to two-and-a-half to seven-and-a-half years in prison and ordered to make $2 million in restitution. He was released in 2013.
  
  The ensuing disciplinary case against Peter Galasso drew close attention from members of the bar, given its implications for disciplinary proceedings against attorneys for wrongdoing committed by their firms' employees.
  
  In 2012, the Appellate Division, Second Department, suspended Peter Galasso from practice for two years, finding that he did not keep a watchful eye on the firm's bank accounts.
  
  With the backing of some bar groups that said Peter Galasso's punishment was unduly harsh, he appealed the suspension to the Court of Appeals, which affirmed the vast majority of the charges against him, but remitted the matter to the Second Department.
  
  In 2013, the Second Department ruled that it was sticking with its previous order to suspend Peter Galasso for two years. He was reinstated in December (NYLJ, Dec. 24, 2015).
  
  Last year, the Second Department suspended Langione from practice for six months, finding that, while he also had a duty to safeguard client funds, he put down his personal funds toward purchase of the office, not funds stolen by Anthony Galasso, as Peter Galasso had (NYLJ, June 25, 2015).
  
  Langione was reinstated this April and both he and Peter Galasso are both back at work for the firm, now called Catterson & LoFrumento.
  
  ***
  As the Court of Appeals found in 2012 in Peter Galasso's disciplinary case, DeStefano said that Peter Galasso and the firm used the Baron escrow funds to their benefit and noted that the Second Department found that Peter Galasso failed to "maintain appropriate vigilance over his firm's bank accounts resulting in actual and substantial harm to his clients."

For the story, see Judge Orders Firm to Pay Back Bilked Clients.

For the court ruling, see Baron v. Galasso (if lnk expires, TRY HERE).