In re PRB Docket No. 2012.155
Professional Responsibility Board. Jean Brewster Giddings, Chair.
Beth DeBernardi, Disciplinary Counsel, Burlington, for Petitioner-Appellant.
P. Scott McGee, Norwich, for Respondent-Appellee.
Present: Reiber, C.J., Dooley, Skoglund and Robinson, JJ., and Durkin, Supr. J., Specially Assigned.
[¶1] Office of Disciplinary Counsel appeals the determination of the Hearing Panel of the Professional Responsibility Board that attorney should receive a private admonition sanction for violating Vermont Rule of Professional Conduct 1.15 by commingling personal and client funds in his client trust account. We affirm.
[¶2] The parties stipulated to the following facts. Attorney was admitted to the Vermont bar in 1983. He worked as a solo practitioner and independent contractor until 1986, at which time he signed on as an associate with another law firm. In 1997, he again established his own private practice. At that time, he opened an Interest on Lawyer Trust Account (IOLTA), which he presently still maintains. Attorney uses this client trust account for real estate transactions and in connection with his estate and disability work. Attorney employs secretaries, social workers, paralegals,
and associates, and he contracts with an independent bookkeeping service.
[¶3] In 2011, attorney randomly was selected to complete an IOLTA account survey. While responding to the survey, he realized that he had been violating the rules by using his IOLTA account to escrow funds that were not directly client related. Attorney retained an independent certified public accountant (CPA) who reviewed all his IOLTA account transactions going back to 1997 to identify any other irregularities. The CPA's review was " comprehensive and exhaustive" and included review of " all deposits and withdrawals and all transactions." He concluded that all of the client funds were accounted for. After review, attorney self-reported all violations to Disciplinary Counsel. In addition to retaining a CPA, attorney retained the assistance of legal counsel. He also purchased bank records and probate court records to confirm information that had been lost in a flood.
[¶4] Attorney reported three categories of IOLTA violations. First, attorney commingled personal and client funds by creating subaccounts within his IOLTA trust account in which he deposited personal funds. Attorney deposited these funds in escrow to be used later to pay liabilities owed to third parties, but the funds were labeled as attorney's personal funds while in the account. The funds were deposited separately into easily identifiable IOLTA subaccounts, and attorney maintained a separate ledger to ensure that he would not confuse the client and personal funds. Attorney discontinued these accounts once he realized their use was improper.
[¶5] With respect to commingling personal and client funds, the parties stipulated that attorney's mental state was one of negligence; he did not knowingly or intentionally violate the rules. He mistakenly believed that creating separate escrow accounts was permitted, if not required, under the rules, as long as the accounts were segregated and labeled for specific purposes. His conduct resulted in no actual injury to his clients.
[¶6] Second, bookkeeping errors resulted in funds being overdrawn from several of the IOLTA subaccounts. Attorney attributed these errors to his or his bookkeeper's failure to enter the correct inclusive date when issuing a check to close out an account. This resulted in higher balances than actually existed. As soon as each error was discovered, the bookkeeper deposited funds sufficient to bring the accounts in good standing. No overdraft notices were ever issued.
[¶7] With respect to the overdrawn subaccounts, the parties stipulated that attorney's mental state was one of negligence. The errors were due to poor bookkeeping and inadequate oversight practices. His conduct resulted in no actual injury but had the potential to cause injury because some client funds were used to cover the negative balances.
[¶8] Third, residual funds remained in several client subaccounts when matters were closed by other associates or when associates left the firm. Most of these funds were fees payable to attorney or funds earmarked for bank charges that never were debited from the subaccount. Some of these funds were payable to clients or third parties. Attorney since has closed the dormant accounts by making the necessary payments. Attorney has, with the assistance of his CPA, established additional checks and reconciliation protocols to avoid future errors.
[¶9] With respect to surpluses in subaccounts, the parties stipulated that attorney's mental state was one of negligence. Again, these were errors due to poor bookkeeping and inadequate oversight practices.
A small number of clients suffered minor injury due to the delay in receiving these funds.
[¶10] Attorney appeared before the hearing panel. After considering the parties' stipulations and arguments, the panel ordered that attorney be privately admonished for violating Rule 1.15(a)(1) by commingling personal and client funds; Rule 1.15(b) by depositing his own money in excess of that required for bank fees; and Rule 1.15(f)(2) by using money held in trust for one client to carry out business for another client without that client's permission. The hearing panel considered attorney's mental state of negligence in concluding that public reprimand was the presumptive sanction, but reduced the sanction to private admonition based on several mitigating factors, ...