Title: In the Matter of Robert V. Kelly, An Attorney at Law
Citation: N/A
Docket Number: d-123-99
State: new-jersey
Issuer: new-jersey Supreme Court
Date: June 16, 2000

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). PER CURIAM This is an attorney disciplinary case. Respondent, Robert V. Kelly of Belmar, was admitted to practice in New Jersey in 1970. In 1993, he incorporated National Recovery Services, Inc. ( NRC ), a business that located people who were owed funds from bankruptcy proceedings ( claimants ) and then solicited their authority to recover those funds for a fee. Kelly was the sole shareholder, officer, director, and employee of NRC. In soliciting business, Kelly used his attorney letterhead. He also signed his solicitation letters as an attorney. Kelly included with the solicitation letter a Funds Recovery Contract, and a Limited Power of Attorney, appointing him as the claimant's attorney solely for the recovery of unclaimed funds. After successfully soliciting a claimant, Kelly moved before the Bankruptcy Court for the payment of the unclaimed funds. In all relevant moving papers, Kelly identified himself as the attorney for NRS and as the applicant, and stated that the applicant had been retained by the claimant. In May 1996, the Office of Attorney Ethics (OAE) was notified by an assistant clerk of the U.S. Bankruptcy Court for the Eastern District of New York that she had received a complaint from a claimant, who indicated that Kelly had failed to remit to him funds he had received in the claimant's behalf. In response to that complaint, the OAE scheduled an audit of Kelly's records. The OAE's audit established that between February 1995 and June 1996, Kelly deposited funds due to eight separate claimants into an NRS checking account. Payments were not made to the claimants for periods ranging from eighteen to 471 days. During that time, Kelly used the funds to pay for business and personal expenses, as well as to pay other claimants. In addition, Kelly had deposited the funds of two other claimants into his attorney trust account. Those funds also were used by Kelly for his personal and business expenses and to pay other claimants whose funds had been deposited into the NRS account and subsequently depleted. Based on its investigation, the OAE filed a formal complaint against Kelly, alleging misappropriation of escrow funds, among other things. A hearing on the charges was held before a special master, who concluded that Kelly was guilty of misconduct for which he should be disbarred. Throughout the proceedings, although he had held himself out as an attorney to the claimants and the Bankruptcy Court, Kelly maintained that his representation of NRS did not constitute the practice of law because at the time of his representation in these matters, it was not necessary to be an attorney to file an application in Bankruptcy Court in behalf of a claimant for the turnover of unclaimed funds. Kelly offered several explanations for his delay in remitting the funds to the claimants, including bookkeeping errors, inability to locate claimants who had relocated, misfiling of a claimant's address, and death of a corporate contact person. Moreover, although he conceded that the balances in the NRS account had fallen below the amounts due the claimants, he maintained that the missing funds were indeed available. In addition, while admitting that he had used the claimants' funds without their authorization and for prohibited purposes, he claimed that he had done so in an effort to cut short and reduce the overall recordkeeping responsibilities that overwhelmed him and not in an attempt to knowingly misappropriate the funds. He further maintained that he was not aware that such procedures were incorrect or deficient. On de novo review, the Disciplinary Review Board ( DRB or Board ) concluded that Kelly had acted as the attorney for the claimants when he petitioned the Bankruptcy Court in their behalf for payment of the unclaimed funds. Thus, it found that Kelly was obligated to hold those funds in trust until they were properly disbursed. The Board rejected Kelly's psychiatric defense, finding that there was no evidence indicating that he was out of touch with reality [or that] he could not appreciate the nature and quality of his actions because of depression and alcohol abuse. The Board unanimously recommended that Kelly be disbarred. The matter is before the Supreme Court for its independent review, pursuant to R. 1:20-16. HELD: Respondent Robert Kelly's misappropriation of trust funds warrants his disbarment. 1. Attorneys must always behave honestly and must never engage in fraudulent or deceptive activity. (p. 10) 2. Even if Kelly acted solely as attorney for NRS and not for the claimants, his misappropriation of the entrusted funds would support disbarment. (pp. 11-12) 3. Kelly's claims of poor bookkeeping and eventual recoupment of funds by the claimants, even if true, do not provide mitigation or justification for his actions. (p. 12) 4. None of the evidence offered by Kelly, including the medical report, established that depression and/or alcohol problems eroded his competency. (pp. 12-13) CHIEF JUSTICE PORITZ and JUSTICES O'HERN, STEIN, COLEMAN, LONG, and VERNIERO join in the Court's opinion. JUSTICE LaVECCHIA did not participate. IN THE MATTER OF ROBERT V. KELLY, An Attorney at Law. Argued May 1, 2000 -- Decided June 16, 2000 On an Order to show cause why respondent should not be disbarred or otherwise disciplined. Lee A. Gronikowski, Deputy Ethics Counsel, argued the cause on behalf of the Office of Attorney Ethics. Robert V. Kelly, argued the cause pro se. PER CURIAM On February 11, 1998, District XIV Ethics Committee filed a complaint against respondent Robert V. Kelly, a Belmar attorney admitted in 1970, claiming that he used his status as an attorney to solicit clients for his wholly-owned business that located lost funds; used his law license to obtain funds on behalf of those clients from the United States Bankruptcy Court; and, instead of promptly delivering the funds to clients or holding them in trust, used certain of those funds for personal expenses. The complaint alleged violations of RPC 1.15(a) (safeguarding property); RPC 1.15(b) (failure to promptly notify a client or third person of the receipt of property in which the client or third person has an interest and failure to promptly turn over the property); RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation and knowing misappropriation of escrow funds ); and RPC 1.15(d) and R. 1:21-6 (record-keeping violations). A Special Master conducted disciplinary hearings and recommended disbarment. In turn, the Disciplinary Review Board (DRB) unanimously accepted that recommendation, finding that the evidence clearly and convincingly established that respondent knowingly misappropriated trust funds. Respondent contests those conclusions. We have conducted an independent review of the record, R. 1:20-16(c), and have determined that the ethical violations found by the DRB are supported by clear and convincing evidence. In re Pena, 162 N.J. 15, 17 (1999) (citing In re DiMartini, 158 N.J. 439, 441 (1999)). NO. D-123 Decided June 16, 2000 Order returnable Opinion by PER CURIAM IN THE MATTER OF : ROBERT V. KELLY, : O R D E R AN ATTORNEY AT LAW : It is ORDERED that ROBERT V. KELLY of BELMAR, who was admitted to the bar of this State in 1970, be disbarred and that his name be stricken from the roll of attorneys of this State, effective immediately; and it is further ORDERED that ROBERT V. KELLY be and hereby is permanently restrained and enjoined from practicing law; and it is further ORDERED that all funds, if any, currently existing in any New Jersey financial institution maintained by ROBERT V. KELLY pursuant to Rule 1:21-6 be restrained from disbursement except on application to this Court, for good cause shown, and shall be transferred by the financial institution to the Clerk of the Superior Court, who is directed to deposit the funds in the Superior Court Trust Fund, pending the further Order of this Court; and it is further ORDERED that ROBERT V. KELLY comply with Rule 1:20-20 dealing with disbarred attorneys; and it is further WITNESS, the Honorable Deborah T. Poritz, Chief Justice, at Trenton, this 16th day of June, 2000. /s/ Stephen W. Townsend CLERK OF THE SUPREME COURT