Filed September 23, 2013
In re James DiChristofano
Commission No. 2012PR00038
Synopsis of Hearing Board Report and Recommendation
Respondent represented a client in a real estate closing. After the closing, certain real estate tax issues arose necessitating Respondent retain another attorney, Jeffrey Blumenthal, to assist the client. The client paid Mr. Blumenthal by sending a check to Respondent. Respondent then deposited the check in his operating account. Before paying Mr. Blumenthal, the balance in the account was below the amount owed. Mr. Blumenthal requested his funds on numerous occasions, but was not paid for approximately eight months.
Respondent claimed he did not see the check from the client for several months and that a member of his staff deposited the check in his operating account. Respondent further stated he believed the check was payment for legal services he provided to the client.
The Hearing Board found Respondent commingled and converted funds belonging to Mr. Blumenthal and failed to return his funds promptly. However, the Panel concluded Respondent did not engage in dishonesty and recommended he be censured and complete the course offered by the Illinois Professional Responsibility Institute.
BEFORE THE HEARING BOARD
ILLINOIS ATTORNEY REGISTRATION
In the Matter of:
Commission No. 2012PR00038
REPORT AND RECOMMENDATION OF THE HEARING BOARD
The hearing in this matter was held on July 16, 2013, at the Chicago offices of the Attorney Registration and Disciplinary Commission ("ARDC"), before a Panel of the Hearing Board consisting of Patrick M. Blanchard, Chair, Terence M. Heuel, and David A. Dattilo. Emily A. Adams and Peter L. Apostol appeared on behalf of the Administrator. Respondent appeared and was represented by Ross S. Carponelli1
The Administrator filed a one-count Complaint against Respondent on April 27, 2012, alleging Respondent represented Sarno Investment Properties, LLC ("Sarno") in the purchase of real property. After the closing, it was learned that the warranty deed did not contain all the property index numbers associated with the property and that the real estate taxes on some of those property index numbers were sold at a tax sale. Respondent then retained attorney Jeffrey S. Blumenthal to assist him in resolving these issues.
Respondent forwarded Mr. Blumenthal's invoice for services to Sarno, who then paid Respondent the amount due to Mr. Blumenthal. Respondent deposited these funds in his operating account, but the account was overdrawn before tendering the funds to Mr. Blumenthal. The Complaint further alleged Mr. Blumenthal attempted to request his funds on several occasions from Respondent, but received no response. Respondent ultimately paid Mr. Blumenthal approximately eight months after receiving the funds from Sarno.
Respondent's Answer to Complaint admitted some of the factual allegations, denied others, and denied all charges of misconduct. Respondent affirmatively stated he did not see the check from Sarno for several months and that a member of his staff deposited the check in his operating account. Respondent further stated he believed the check from Sarno was payment for legal services he provided to Sarno.
The Administrator alleged Respondent engaged in 1) conversion; 2) commingling; 3) failing to hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property; 4) failing to promptly deliver to a third person funds that the third person is entitled to receive; 5) conduct involving dishonesty, fraud, deceit or misrepresentation; and 6) conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute in violation of Rules 1.15(a), 1.15(d), and 8.4(c) of the 2010 Illinois Rules of Professional Conduct.
The Administrator presented the testimony of Jonathan Borkowsky, Jeffrey S. Blumenthal, and Robert Dreger. Administrator's Exhibits 1 through 25 were received in
evidence. (Tr. 7, 44, 132). Respondent testified on his own behalf and presented the testimony of Harriet Escobar. Respondent's Exhibits 1, 2, 5, 6, 10, 11, 12, 13, 15, and 16 were received in evidence. (Tr. 137-140, 219-220).
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In attorney disciplinary proceedings, the Administrator has the burden of proving the charges of misconduct by clear and convincing evidence. Illinois Supreme Court Rule 753(c) (6); See also, In re Ingersoll, 186 Ill. 2d 163, 710 N.E.2d 390 (1999). Clear and convincing evidence constitutes a high level of certainty, which is greater than a preponderance of the evidence, but less than proof beyond a reasonable doubt. See, e.g., People v. Williams, 143 Ill. 2d 477, 577 N.E.2d 762 (1991). It is the responsibility of the Hearing Panel to determine the credibility of the witnesses, weigh conflicting testimony, draw reasonable inferences and make factual findings based upon all the evidence. In re Timpone, 157 Ill. 2d 178, 623 N.E.2d 300, 308 (1993).
I. Respondent is charged with conversion, commingling, and failing to hold property of a third person that is in a lawyer's possession in connection with a representation separate from the lawyer's own property in violation of Rule 1.15(a).
A. Evidence Considered
In October 2008, Respondent agreed to represent Sarno Investment Properties, LLC ("Sarno") in the purchase of real property located in Oak Lawn, Illinois ("Oak Lawn property"). On November 18, 2008, Respondent represented Sarno at the real estate closing for the Oak Lawn property for a fee of $300. (Respondent's Answer to Administrator's Complaint; Tr. 28). According to Jonathan Borkowsky, the managing member of Sarno, Respondent had represented Sarno in three to five previous real estate closings. The agreed fee was $300 per matter. (Tr. 26-28).
In late 2009, Mr. Borkowsky learned the warranty deed for the Oak Lawn property did not contain all of the property index numbers associated with the property. Upon Mr. Borkowsky's request, Respondent agreed to "look into" the matter. However, they did not enter into a separate fee agreement for this work. (Tr. 29, 46-47). After some investigation, Respondent learned that the real estate taxes on some of the "missing" property index numbers had not been paid and had been sold at a tax sale conducted by the Cook County Treasurer. (Respondent's Answer).
In December 2009, Respondent contacted Jeffrey S. Blumenthal to assist him in resolving the issues relating to the Oak Lawn property. (Tr. 30, 58). Mr. Blumenthal was licensed in Illinois in 1979 and concentrates in real estate tax deed litigation. (Tr. 51-53). After a conference call with Respondent and Mr. Blumenthal, Mr. Borkowsky agreed to use Mr. Blumenthal's services. Mr. Borkowsky understood Mr. Blumenthal would be paid $250 per hour by Sarno. (Tr. 30-32). By letter to Mr. Blumenthal dated December 9, 2009, Respondent stated, "You and our client is Sarno [sic] ? I have consulted with the client and he is in agreement to retain your services at the rate of $250 per hour." (Tr. 54-57; Adm. Ex. 1).
Mr. Blumenthal testified that although he sent his billing statements to Respondent, he understood he would be paid by the client, Sarno. (Tr. 57-58). Accordingly, on January 4, 2010, Mr. Blumenthal sent Respondent a bill for his fees and costs in the amount of $3,021.10. (Respondent's Answer; Adm. Ex. 2). In an e-mail from Respondent to Mr. Blumenthal sent January 4, 2010, Respondent acknowledged receiving Mr. Blumenthal's bill. (Tr. 172; Adm. Ex. 23; Resp. Ex. 5). In February, March, and July 2010, Mr. Blumenthal sent Respondent additional invoices in the amounts of $3,121.10, $3,308.10, and $3,351.10 respectively. (Tr. 62-Adm. Ex. 2).
Mr. Borkowsky sent a check to Respondent dated April 27, 2010, payable to "LAW OFFICES OF JAMES A. DICHRISTOFANO," in the amount of $3,021.10. The memo section of the check stated, "PAYMENT IN FULL FOR JEFF BLUMENTHAL." (Respondent's Answer; Tr. 33-34; Adm. Ex. 3).
Mr. Borkowsky testified Respondent asked him to list Respondent as payee and that Respondent would then handle any payment to Mr. Blumenthal. Mr. Borkowsky agreed, but included the language in the memo line so there would be no confusion. Mr. Borkowsky intended that Respondent pay Mr. Blumenthal's January 2010 statement in full. (Tr. 34-36). He never intended the proceeds of that check be applied to any fees owed to Respondent and never authorized Respondent to use any portion of these funds for his own business purposes. (Tr. 36).
On May 13, 2010, the balance in Respondent's operating account was $-646.44. On May 14, 2010, the check from Sarno was deposited in Respondent's operating account. The balance that day was $2,330.67. By May 17, 2010, the balance was $1,180.67. (Adm. Ex. 5). On June 14, 2010, the balance in Respondent's operating account was $-62.66. (Adm. Ex. 6). Respondent admitted he used funds from his operating account to pay his personal and business expenses in May and June 2010. (Tr. 179-182; Adm. Exs. 5, 6).
Mr. Borkowsky acknowledged Respondent incurred some additional fees relating to the Oak Lawn property, but they were never discussed. He received bills from Respondent and testified he had "paid his office a few times," but was uncertain if he had paid Respondent for his additional work relating to the Oak Lawn property. Mr. Borkowsky does not believe he owes Respondent any fees because he had to hire another attorney to pursue a legal malpractice action against him. 2 (Tr. 47-49).
Respondent has been licensed in Illinois since 2004 and has represented Mr. Borkowsky for approximately five years in multiple matters. (Tr. 140-141). After the Oak Lawn property tax matter was resolved, Respondent sent Mr. Borkowsky two bills totaling $5,200 representing fees and costs. (Tr. 148-149). According to Respondent, he and Mr. Borkowsky had agreed on a flat fee of $5,000 for this work. (Tr. 148). However, there was no written fee agreement and Respondent did not produce copies of the bills he sent to Mr. Borkowsky during this disciplinary proceeding. (Tr. 167, 171-172).
Respondent testified that Mr. Borkowsky did not have the funds to pay him as he had just spent $35,000 resolving the tax issues on the Oak Lawn property. After a few months, Respondent sent Mr. Borkowsky another bill. In that bill, Respondent included the fees owed to Mr. Blumenthal by attaching Mr. Blumenthal's January 2010 invoice. (Tr. 149-150).
Respondent acknowledged he received a check from Mr. Borkowsky, but believed it represented his fees and deposited it in his operating account. (Tr. 150). Sometime between June and September 2010, Respondent learned the check was meant for Mr. Blumenthal. (Tr. 150-151, 174-177, 190-191). Respondent testified that in late 2010 he explained to Mr. Blumenthal that Mr. Borkowsky was a "slow payer" and "I am probably never going to see the rest of these funds from [Sarno] ? I am going to give you everything that came in on the case." (Tr. 152). In a letter to the ARDC dated January 27, 2011, Respondent stated he was "under the impression that we would have to divide up the funds based on percentage of outstanding invoice still open [sic]." (Resp. Ex. 12). According to Respondent, he was never paid any legal fees by Sarno for his work after the closing related to the Oak Lawn property. (Tr. 202-203).
B. Analysis and Conclusions
Respondent argues that he was due fees from Sarno and therefore had a claim to the funds. However, he provided no evidence to support this. It appears Respondent was not in the practice of providing retainer agreements, engagement letters, or accountings to Sarno. This is especially troubling given his testimony that he and Mr. Borkowsky orally agreed to a $5,000 fee for this work when he had previously represented Sarno in real estate closings for $300. He claims he sent bills to Sarno, but did not present any such proof to this Panel.
In contrast, it is undisputed Mr. Blumenthal sent Respondent an invoice in January 2010 in the amount of $3,021.10. Respondent acknowledged receiving that invoice and forwarding it to Mr. Borkowsky. Mr. Borkowsky then sent a check for that exact amount to Respondent with a notation in the memo section stating, "PAYMENT IN FULL FOR JEFF BLUMENTHAL." Mr. Borkowsky testified he included that notation because the funds were intended as payment in full for Mr. Blumenthal's services. He was equally clear that the funds were not intended as payment for any legal services provided by Respondent. The Administrator presented consistent evidence that this method of payment was agreed to by Mr. Borkowsky, Respondent, and Mr. Blumenthal. Accordingly, we find clear and convincing evidence that the $3,021.10 received by Respondent was for Mr. Blumenthal's services and, therefore, belonged to Mr. Blumenthal.
Once Respondent received funds from Sarno belonging to Mr. Blumenthal, Respondent had a duty to keep those funds separate from his own property, so that the funds were protected from actual or potential loss. Under Rule 1.15(a), property of third persons in a lawyer's possession in connection with a representation must be kept separate from the lawyer's own property. The language of the Rule is mandatory. Similarly, commingling occurs when a lawyer deposits funds belonging to a client or third person into the lawyer's own personal or business account. See In re Clayter, 78 Ill. 2d 276, 399 N.E.2d 1318 (1980). When Mr. Blumenthal's
funds were deposited in Respondent's operating account, Respondent commingled funds and violated 1.15(a).
Conversion is defined as any unauthorized act, which deprives someone of his property permanently or for an indefinite time. See In re Rosin, 156 Ill. 2d 202, 620 N.E.2d 368 (1993). Conversion of funds occurs when a lawyer uses funds for a purpose other than that for which they were delivered and is typically proven when the account is either overdrawn or when the balance in the account becomes less than the sum total of all client and/or third person funds the lawyer is required to maintain in trust. In re Ushijima, 119 Ill. 2d 51, 58, 518 N.E.2d 73 (1987); In re Cheronis, 114 Ill. 2d 527, 502 N.E.2d 722 (1986).
Respondent admitted he used the funds to pay his personal and business expenses. Additionally, the balance of Respondent's operating account fell below the amount owed to Mr. Blumenthal on many occasions in May and June 2010. Therefore, we find clear and convincing evidence Respondent converted Mr. Blumenthal's funds.
Respondent argues he cannot be guilty of conversion because the funds at issue were not client funds or Mr. Blumenthal's funds, but rather his fees. For the reasons discussed above, we reject this argument. For those same reasons, his reliance on In re Smith, 89 CH 601 and In re Vrdolyak, 137 Ill. 2d 407, 560 N.E.2d 840 (1990), is misplaced. In Smith, the attorney was charged in a 31-count complaint with various violations of the Rules of Professional Conduct including commingling and conversion. Unlike this matter, both the Hearing and Review Boards found the funds at issue were attorney's fees and recommended dismissal of the charges.
In Vrdolyak the firm's office manager erroneously deposited client funds in the firm's operating account after being told by an associate attorney's secretary that the funds belonged there. Because Vrdolyak had no direct involvement with the matter and had no knowledge of the
funds, the Court determined Vrdolyak could not be guilty of professional misconduct. Vrdolyak, 137 Ill. 2d at 428-429.
In this case, Respondent was directly responsible for the Sarno matter and was responsible for retaining Mr. Blumenthal. As we found, Respondent agreed to accept the funds from Sarno on behalf of Mr. Blumenthal and agreed to pay him from those proceeds. He was directly responsible for the funds. As a result, he is guilty of professional misconduct.
II. Respondent is charged with failing to promptly deliver to a third person funds that the third person is entitled to receive in violation of Rule 1.15(d).
A. Evidence Considered
We consider the evidence presented in section I in addition to the following.
On June 17, 2010, Mr. Blumenthal sent Respondent an e-mail requesting payment of his fees. The e-mail indicated, and Mr. Blumenthal testified, he had left several messages previously for Respondent, but had not received a response. Mr. Blumenthal did not receive a response to the June 17 e-mail. (Tr. 68-70; Adm. Ex. 12).
Mr. Blumenthal contacted Mr. Borkowsky directly in August 2010 regarding the payment of his fees. Mr. Borkowsky explained he had already sent a check to Respondent and provided Mr. Blumenthal with a copy of that check. (Tr. 37-38, 70-73; Adm. Ex. 3).
Mr. Blumenthal again contacted Respondent by sending e-mails and leaving telephone messages. In an e-mail dated November 12, 2010, Mr. Blumenthal references a telephone conversation with Respondent in August 2010. He also advised Respondent that he had talked to the client and that the client "insists that he has paid you." (Tr. 73-76; Adm. Ex. 13). On December 14, 2010, Mr. Blumenthal sent another e-mail to Respondent requesting his funds. (Adm. Ex. 14).
In a letter to Respondent dated December 27, 2010, Mr. Blumenthal references several telephone messages left for Respondent and e-mails sent to Respondent. Enclosed with that letter was a copy of the complaint he made against Respondent to the ARDC. (Adm. Ex. 15). However, Mr. Blumenthal testified this letter was returned to his office by the post office as undeliverable. (Tr. 83, 91-92; Resp. Exs. 12, 13).
Mr. Blumenthal received a check in the amount of $3,200.00 from Respondent in January 2011. (Tr. 78-80; Adm. Exs. 16, 19, 24). The check was dated December 16, 2010, and cleared Respondent's operating account on January 13, 2010. (Adm. Ex. 17). Mr. Blumenthal mailed subsequent billing statements to Respondent, some of which were returned as undeliverable. According to Mr. Blumenthal, he is still owed $151.10. (Tr. 81-86; Adm. Ex. 19).
Respondent acknowledged there was a breakdown in communication with Mr. Blumenthal in July. At that time, Respondent's assistant reduced her hours and there was a gap in responding to emails and telephone calls. (Tr. 153-154). According to Respondent, Mr. Blumenthal was using an e-mail that was not readily accessible to Respondent and the emails went to "spam." (Tr. 154).
B. Analysis and Conclusions
It is undisputed Respondent received Mr. Blumenthal's January 2010 invoice around January 4, 2010. Sarno paid the invoice with a check dated April 27, 2010, and the check was deposited in Respondent's operating account on May 14, 2010. The Administrator presented evidence that Mr. Blumenthal attempted to contact Respondent by e-mail and by telephone on numerous occasions from to June 2010 to December 2010 requesting his funds. Mr. Blumenthal finally received a payment from Respondent in January 2011, one year after Mr. Blumenthal sent his first invoice and eight months after Respondent received payment from Sarno.
We are not convinced that Respondent did not receive Mr. Blumenthal's e-mails. However, even assuming he did not receive some of the numerous e-mails and telephone messages, the Administrator presented ample evidence to show that Mr. Blumenthal and Respondent were in direct communication on several occasions from June to December 2010. Mr. Blumenthal was clear that he wanted his funds, especially after learning the client had paid his invoice in April 2010. As discussed above, the funds belonged to Mr. Blumenthal and Respondent had a duty to promptly deliver those funds to him. Respondent failed to do so in violation of Rule 1.15(d).
We are mindful Mr. Blumenthal testified he is still owed $151.10. However, there was no evidence presented that Respondent owes this money. The agreement was that Sarno would pay Mr. Blumenthal's fees. Accordingly, we make no finding with respect to this additional amount allegedly owed to Mr. Blumenthal.
III. Respondent is charged with engaging in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4(c).
A. Evidence Considered
We consider the evidence presented in sections I and II in addition to the following.
Respondent's administrative assistant, Harriet Escobar, testified she deposited the check from Sarno in Respondent's operating account and identified the handwriting on the deposit slip as hers. However, she admitted she had no specific recollection of actually depositing the check. (Tr. 211, 218). Similarly, she did not have a specific recollection of notifying Respondent that she had deposited the check, but she testified she notified Respondent, in some manner, of every deposit she made. (Tr. 215-217). In a letter to the ARDC dated January 27, 2011, Respondent stated Ms. Escobar never showed him a copy of the check and did not notify him of the deposit. (Resp. Ex. 12).
Respondent had numerous personal and business credit cards. Between May 2010 and January 2011, Respondent owed approximately $20,000-$25,000 on those cards. However, Respondent explained "not all of that is my debt." (Tr. 164-165). On May 30, 2010, the balance on Respondent's Master Card was $16,601.02 and he was assessed a late charge. (Tr. 182-183; Adm. Ex. 10). On June 2010, Respondent made two payments on this account totaling $1,165. (Adm. Ex. 11). A payment of $650 was made on Respondent's Bank of America card on June 1, 2010. (Adm. Ex. 9). Respondent admitted the funds to make this payment came from his operating account. (Tr. 185).
During this time, Respondent's office rent was $800 per month, payroll expenses were approximately $2,000 per month, and his telephone bills were $180-$240 per month. (Tr. 162-164). As of February 2012, Respondent also owed $54,000 in student loans. (Tr. 165-166).
B. Analysis and Conclusions
The Administrator asserts Respondent violated Rule 8.4(c) because he knew the check from Sarno was for Mr. Blumenthal, but nevertheless deposited it in his operating account. He then used the proceeds to pay his substantial credit card debt and monthly business expenses. In addition, Respondent delayed paying Mr. Blumenthal until the matter was brought to the ARDC's attention. Respondent submits he was not aware of the Sarno check for several months. Moreover, he believed he had some claim to the payment from Sarno and testified his plan was to divide any payments ultimately received from Sarno between himself and Mr. Blumenthal.
The Court has stated that in determining whether certain conduct violates Rule 8.4(c) each case is unique and the circumstances surrounding the respondent's conduct must be taken into consideration. In re Cutright, 233 Ill. 2d 474, 910 N.E.2d 581 (2009). Ms. Escobar credibly testified that she made the deposit and acknowledged her handwriting on the deposit slip. As the check was made out to Respondent, it was not unreasonable to deposit it in Respondent's
operating account. It was also not unreasonable that Respondent used the funds from his operating account to pay his business expenses, especially if he did not know the Sarno check was in his account.
The delay in paying Mr. Blumenthal does not necessitate a finding that Respondent violated Rule 8.4 (c). Respondent's testimony that he thought the funds were his and that he would pay Mr. Blumenthal after receiving full payment of all fees from Sarno was not unreasonable. Respondent's difficulties arose because he failed to supply Sarno with an engagement letter, fee agreement, or accounting for his work. While these bad business practices resulted in commingling and conversion, they did not rise to the level of dishonesty, fraud, deceit or misrepresentation.
The Administrator showed Respondent had credit card debt, monthly business expenses, and outstanding student loans. However, there was insufficient evidence to support the inference that Respondent could not meet his financial obligations. He had missed one payment on one account prior to depositing Sarno's check in his operating account and then made a double payment on that account after depositing the Sarno check in his operating account. This alone does not show financial distress and a corresponding dishonest motive to take Mr. Blumenthal's funds.
We also note that the letter from Mr. Blumenthal, which enclosed his ARDC request for investigation, was returned as undeliverable. Accordingly, there was no evidence that Respondent knew of the ARDC investigation when he finally paid Mr. Blumenthal $3,200.
Consequently, we find the Administrator failed to present clear and convincing evidence that Respondent violated Rule 8.4(c).
IV. Respondent is charged with engaging in conduct which tends to defeat the administration or justice or to bring the courts or the legal profession into disrepute.
A. Evidence Considered
We consider the evidence presented in sections I, II and III.
B. Analysis and Conclusions
Although Supreme Court Rule 770 is not referenced in this charge, we note that the charge reflects language found in that Rule. In In re Thomas, 2012 IL 113035, para. 92, the Court held that Rule 770 is not itself a Rule of Professional Conduct and "one does not violate Rule 770." Although Thomas precludes charging a "violation" of Rule 770, there is still an open question of whether Thomas precludes charging an attorney under common law with engaging in conduct which "tends to defeat the administration of justice or bring the courts or the legal profession into disrepute." See In re Terronez, 2011PR00085 (Hearing Bd. at 19-21) (final disposition pending). Accordingly, we will address the merits of this charge.
There is no evidence that Respondent's misconduct tended to defeat the administration of justice. However, commingling and converting funds and failing to deliver Mr. Blumenthal's funds promptly certainly brings the legal profession into disrepute. We note, however, that our ultimate recommendation in this case would not change if we dismissed this charge pursuant to Thomas.
EVIDENCE OFFERED IN AGGRAVATION AND MITIGATION
Robert Dreger is an attorney licensed to practice in Illinois since 1981. (Tr. 108-109). Mr. Dreger represented Sarno in a civil matter against Respondent and other defendants arising out of the purchase of the Oak Lawn property. The cause of action against Respondent alleged professional negligence and sought $3,871 in damages. This amount reflected the fees Sarno
paid to Respondent for the closing and the additional fees Sarno paid to Mr. Blumenthal. (Tr. 110-118). Respondent was represented by Michael Malatesta in the civil matter.
According to Mr. Dreger, Respondent did not participate in the initial stage of the civil matter and he obtained a default judgment against Respondent. That was later vacated, but Mr. Dreger believed Respondent acted in a way to aggravate the system. (Tr. 133-136).
Sarno and Respondent agreed to settle the civil matter in 2013. (Tr. 118-120). In an initial draft of the Settlement Agreement, there is no reference to Sarno's payment of $3021.10 to Respondent. (Tr. 120; Adm. Ex. 20). Respondent's attorney then sent a revised draft of the Settlement Agreement to Mr. Dreger that included the following paragraph:
WHEREAS, on April 27, 2010, Sarno issued a check to DiChristofano in the amount of $3,021.10 and included in the memo section "Payment in Full for Jeff Blumenthal" however that money was specifically made out to DiChristofano with the understanding and intent by Sarno that those funds were going to DiChristofano and that any funds that were to be paid to Blumenthal were to be made by DiChristofano based upon his sole discretion once the matter had concluded and whatever the final accounting DiChristofano and Blumenthal eventually agreed upon. The Sarno funds paid to DiChristofano represented the property of DiChristofano. The language included in the memo section was included only to prevent any further request for any additional fees from DiChristofano regarding the matter and not intended to be labeled as the property of Blumenthal.
(Tr. 121-123; Adm. Ex. 21).
Mr. Dreger testified including this paragraph was an "insidious" act. He believed it was irrelevant to the civil matter and requested Mr. Malatesta remove it from the Settlement Agreement. (Tr. 124-128; Adm. Ex. 25). Ultimately, Mr. Dreger and Mr. Malatesta agreed to revise the language of that paragraph to read, "WHEREAS on April 27, 2010, Sarno issued a check to DiChristofano in the amount of $3021.10 for fees and services." This paragraph was then incorporated into the final Settlement Agreement executed by the parties. (Tr. 128-133; Adm. Ex. 22; Resp. Ex. 6).
Respondent testified he had not seen the drafts of the Settlement Agreement prior to this disciplinary hearing and had no involvement in the drafting of the Settlement Agreement. He merely signed the final copy at Mr. Malatesta's direction. (Tr. 204-207).
After receiving payment from Respondent, Mr. Blumenthal asked to withdraw his complaint to the ARDC and requested the ARDC "close its file" without any action against Respondent. (Resp. Ex. 11). According to Mr. Blumenthal, Respondent had satisfied him that "this was an innocent mistake and that there was no fraud or ethical problem with the delay in my payment." (Tr. 97-99).
Respondent admits he had trouble with communication in the past, but has since revamped his office and required his assistants to take CLE classes. (Tr. 155, 161). Respondent currently has five assistants who check his email account. In addition, all e-mails are forwarded to his cell phone. (Tr. 154-155). He denies he engaged in any misconduct and characterizes the situation as a billing or collection issue. Respondent also claims he has been harmed by this disciplinary process and is disappointed in his clients and the ARDC. (Tr. 159-161). He has no prior discipline.
The purpose of the attorney disciplinary system is not to punish the attorney for his misconduct, but "to protect the public, maintain the integrity of the legal profession, and protect the administration of justice from reproach." In re Winthrop, 219 Ill. 2d 526, 559, 848 N.E.2d 961 (2006). In determining the appropriate sanction, we consider the nature and seriousness of the misconduct and any aggravating and mitigating circumstances shown by the evidence. See In re Gorecki, 208 Ill. 2d 350, 802 N.E.2d 1194 (2003).
In mitigation, Respondent did not act with a dishonest motive. He also has no prior discipline. In an effort to maintain better lines of communication, he has made changes to his
staffing and office procedures. We decline to consider Mr. Blumenthal's attempted withdrawal of his ARDC complaint in mitigation. The fact that Mr. Blumenthal eventually believed Respondent did not violate any Rules of Professional Conduct is irrelevant to these proceedings.
In aggravation, we may consider the potential harm caused by Respondent's lack of care. See In re Saladino, 71 Ill. 2d 263, 375 N.E.2d 102 (1978) (discipline should be closely linked to the harm caused or the unreasonable risk created by attorney's lack of care). Commingling and converting funds, even absent a dishonest motive presents a substantial risk of harm. See In re Cheronis, 114 Ill. 2d 527, 502 N.E.2d 722 (1986). However, as stated previously, while Respondent had credit card debt and other liabilities, there was insufficient evidence presented to show he was experiencing financial difficulties. Accordingly, we do not consider this evidence in aggravation.
The Administrator contends Respondent's conduct with respect to the language of the Settlement Agreement drafts should be considered in aggravation. We may consider uncharged misconduct in aggravation when it is similar to the current charges and established by the evidence in the record. In re Storment, 203 Ill. 2d 378, 786 N.E.2d 963 (2002). Respondent was represented by counsel in the civil matter and stated he had no involvement with the drafts of the Settlement Agreement. Mr. Dreger testified he dealt only with Respondent's counsel on this issue. Consequently, the Administrator failed to establish by the evidence in the record that Respondent had any connection to this conduct and we do not consider it in aggravation.
Respondent suggests if the Panel finds misconduct the appropriate sanction is a reprimand. In support of this recommendation, Respondent relies on In re Rawson, 96 CH 264, and In re Downey, 93 CH 328, M.R. 11849 (Jan. 23, 1996). As a preliminary matter, we believe Respondent's reliance on Downey is erroneous. Downey deposited $1,000 in escrow funds in
his business/personal account. Thereafter the account was overdrawn and Downey did not repay the funds for almost three years. There was also evidence that Downey was retaining the funds because of a fee dispute. Although the Review Board recommended a reprimand, the Court confirmed the recommendation of the Hearing Board and imposed a 179-day suspension and ordered Downey complete a course on the Illinois Rules of Professional Conduct.
In Rawson, the attorney was reprimanded for failing to promptly distribute or account for funds he received in connection with a real estate transaction. After making appropriate disbursements, the attorney retained about $9,000 of the proceeds for his legal fees. Although he was in regular communication with his clients about his actions, he did not provide a written accounting of his application of the funds. Unlike this matter, there was no finding of commingling or conversion because the attorney established he was entitled to retain the funds.
Relying on In re Freiman, 118 Ill. 2d 341, 515 N.E.2d 78 (1987), In re Cheronis, 114 Ill. 2d 527, and In re Loiben, 01 CH 66, M.R. 18030 (May 24, 2002), the Administrator recommends a four-month suspension. In Loiben, the attorney was suspended for five months for forging his client's signature on a settlement check and then depositing the check in his business/personal account. Loiben then converted $3,113 owed to the client and her medical providers when the balance in his business/personal account fell below that amount. In aggravation, restitution was not made for almost seven years after receiving the settlement check and the client's credit report was affected by the delay in paying her medical bills.
In Freiman the attorney deposited a settlement check in his "special funds account" and drew a check that same date payable to the client for her portion of the settlement proceeds. The client did not deposit the check for one year and when she did, it was dishonored due to insufficient funds. After the attorney deposited the settlement check but prior to the client's
attempt to negotiate her check, respondent's bank withdrew funds from his "special funds account" to satisfy a garnishment. After respondent advised the bank the account was a trust account, the bank returned the funds. The attorney repaid the principal two years after the check was dishonored and interest an additional two years after that. There was evidence that the attorney was experiencing financial difficulties and deposited personal and business funds in the "special funds account" to shield it from garnishment. He then satisfied his debts with his own money and client funds. The Court suspended Freiman for four months.
Cheronis agreed to take a portion of his client's bond refund as his fee. When he received the bond refund, he deposited the check in his personal/business account. Within three weeks of depositing the funds, the account was overdrawn. A short time later, his client requested disbursement of his funds, but Cheronis did not make all the requested disbursements. Cheronis paid the full amount by installments over a period of months. During this time, Cheronis experienced severe financial difficulties, lost his home, and filed for bankruptcy. In determining the appropriate sanction, the Court reasoned, "because the respondent put his client at substantial risk, in light of respondent's financial difficulties, of not be able to recover funds entrusted to the respondent, we believe the respondent's conduct warrants a period of suspension." Cheronis, 114 Ill. 2d at 536. Cheronis was suspended for three months.
The cases cited by the Administrator are distinguishable as they involve more egregious misconduct and additional aggravating factors. Loiben forged his client's signature, failed to make restitution for seven years, and caused actual harm to his client. Because he was experiencing financial difficulties, Freiman hid his assets in his client account and then used client funds to pay his personal debts. He also took several years to make restitution. Cheronis's financial troubles were extreme and put his clients at risk. In this matter, there was no evidence
that Respondent's financial condition actually put Mr. Blumenthal's funds at risk. There was also no evidence Mr. Blumenthal suffered actual harm.
The Court has repeatedly stated that conversion of another's funds, with or without a dishonest motive, cannot be countenanced. See In re McLennon, 93 Ill. 2d 215, 443 N.E.2d 553 (1982). Attorneys who have commingled and converted funds have received sanctions ranging from censure to disbarment. See In re Young, 111 Ill. 2d 98, 488 N.E.2d 1014 (1986). Absent clear evidence of dishonest motive or economic harm, the Court has stated that censure is the appropriate sanction. See In re Walner, 119 Ill. 2d 511, 519 N.E.2d 903 (1988). Also, in matters where the conversion is an isolated act involving a relatively small amount of money, censure is the appropriate sanction. See In re Enstrom, 104 Ill. 2d 410, 472 N.E.2d 446 (1984); In re Lewis, 118 Ill. 2d 357, 515 N.E.2d 96 (1987).
In In re Young, 111 Ill. 2d 98 the attorney agreed to hold approximately $3,200 in escrow, but instead deposited the funds in his personal business account. The balance of that account fell below $3,200 on several occasions over the next 16 months and on one occasion the account was overdrawn. In ordering censure, the Court relied on the absence of a dishonest motive and the fact that there was a bona fide dispute justifying retention. See also In re Sherman, 60 Ill. 2d 590, 328 N.E.2d 553 (1975) (commingling and converting client funds and making misleading statements during the disciplinary investigation warranted censure); In re Lee, 96 SH 413, M.R. 12611 (June 12, 1996) (converting approximately $500 earmarked to pay client's medical provider warranted censure where neither the client nor the provider suffered any permanent financial loss, no dishonest motive was found, and the attorney cooperated and made restitution).
Although we are somewhat troubled by Respondent's attitude that he has been unfairly burdened by this disciplinary process, we believe censure is the appropriate sanction. We are encouraged Respondent has taken steps to improve communication with his clients and has made changes to his office procedures. He stated he added more assistants and has required his staff to take "CLE classes." We believe Respondent would similarly benefit from additional instruction and require him to take the course offered by the Illinois Professional Responsibility Institute.
Accordingly, after considering the nature of the Respondent's misconduct, the evidence in mitigation and aggravation, and the precedent discussed above, we recommend that the Respondent, James DiChristofano, be censured and be required to complete the Illinois Professional Responsibility Institute course within one year of the Court's final order in this matter.
Patrick M. Blanchard
I, Kenneth G. Jablonski, Clerk of the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois and keeper of the records, hereby certifies that the foregoing is a true copy of the Report and Recommendation of the Hearing Board, approved by each Panel member, entered in the above entitled cause of record filed in my office onSeptember 23, 2013.
Kenneth G. Jablonski, Clerk of the
1 At the commencement of the hearing, Counsel for Respondent requested leave for Michael Palermo to file an appearance on behalf of Respondent. The Chair granted this oral request and directed Mr. Palermo to file a written appearance with the Clerk of the Commission after the conclusion of the hearing. However, no written appearance was ever filed.
2 The allegations of legal malpractice do not relate to the charges in this disciplinary proceeding.