Sunday, August 27, 2017

Law Partners Avoid Major Bar Discipline, Get 6-Month License Suspensions After Admitting That Their Failure To Regularly Supervise Firm's Sticky-Fingered Bookkeeper Or Audit Company Bank Records Led To Theft Of Over $2.5 Million In Client Cash; Loot Eventually Paid Back With Victims Made Whole

The New York Law Journal reports:
  • Two veteran lawyers who ran a boutique practice in the Bronx have had their licenses suspended for failing to supervising a bookkeeper—and personal friend of one of the lawyers—who stole more than $2.5 million from firm bank accounts, including escrow accounts.

    The bookkeeper eventually paid back the money, which was siphoned from funds tied to some 200 client matters, and ultimately no clients or third parties lost cash. But lawyers Jay Zucker and Steven Kwestel admitted to several acts of professional misconduct and have stipulated, along with a state attorney grievance committee, that they should receive six-month suspensions because of their wrongdoing, according to the court.

    A unanimous panel of the Appellate Division, First Department, agreed, issuing a decision that granted the lawyers' and the First Department grievance committee's joint motions for discipline by consent.

    Zucker and Kwestel "admit that they failed to regularly supervise" the bookkeeper—referred to only as "MT" in the decision—and they admit that they did not "review or audit the firm's bank account records, and thereby failed to take reasonable steps to safeguard client and/or third-party funds," the panel wrote Aug. 15 in Matter of Zucker, 2017 NY Slip Op 06149.
    ***
    MT came to the lawyers' firm, Zucker & Kwestel, with solid professional recommendations, including from Zucker's sister, a retired attorney, the panel noted when listing "mitigating" factors put forward by the lawyers as part of their stipulation submitted with the joint motion for discipline by consent.

    Another mitigating factor was that the lawyers "came to implicitly trust MT over the years," based partially on "his diligence and personal friendship with … Zucker."

    There also were "no early warning signs of MT's defalcations," and "upon learning of MT's thefts respondents took immediate action which included spending hundreds of hours reconstructing and reconciling escrow account records and obtaining reimbursement as a result of which no clients or third parties were harmed." And they, too, were "victims of MT's thefts," the court said.

    But aggravating factors included that Zucker and Kwestel did not report MT's stealing to law enforcement. However, the lawyers noted that MT's restitution of the misappropriated money "was conditioned upon [the lawyers] entering into a nonreporting agreement" with him, one that "did not prohibit [the attorneys] from answering questions from law enforcement if contacted about the thefts."

    MT was hired in 2003 to be the firm's full-time bookkeeper and controller, wrote the panel, consisting of Justices John Sweeny Jr., Dianne Renwick, Richard Andrias, Ellen Gesmer and Marcy Kahn.

    After initial training, during which Zucker and Kwestel reviewed his work, the lawyers began delegating responsibilities to MT, and eventually authorized him to be a signatory on the firm's escrow accounts, out of ignorance of the pertinent disciplinary rules, and to execute online transfers of funds from the firm's escrow accounts provided they approved of it.

    MT frequently worked out of the firm's New Jersey office, where Zucker and Kwestel rarely were, according to the court. Eventually he was fired, and Zucker and Kwestel retained civil counsel to negotiate repayment of the misappropriated funds.

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