Opinion ID: 1991440
Heading Depth: 1
Heading Rank: 7

Heading: trust account irregularities

Text: On September 16, 1981, after receiving a copy of the complaint filed with the committee by Ocean Federal, the Office of Attorney Ethics commenced a demand audit of respondent's trust account. Follow-up audits were conducted on November 4, 1981 and December 29, 1981. The audit initially revealed that, with the exception of $48.00 remaining in the account at the conclusion of the transaction, all of the funds in the Huff real estate matter had been properly disbursed and accounted for. Respondent later explained that the outstanding $48.00 had been paid out of an account he maintained with the Monmouth County Clerk's Office. Examination of respondent's trust account records disclosed that there were sixty-six ledger sheets with open credit balances totaling $16,054.96. There were also thirteen ledger sheets with open debit balances amounting to $2,600.16. The net balance was $13,454.80. However, the balance in respondent's trust account on the date of the audit was only $13,007.44. Consequently, respondent was $447.36 out of trust. Further examination disclosed that many of the trust account ledger sheets reflected old outstanding balances. More specifically, eleven of the thirteen ledger sheets showing debit balances dated back prior to 1981. Of these, there was one account whose last transaction occurred in 1974. Four accounts dated back to 1976, one to 1977, two to 1978 and three to 1979. The individual clients' trust ledger accounts similarly showed credit balances that had been open for a considerable period of time. In fact, fifty-three of the sixty-six ledger sheets showing credit balances dating back prior to 1981. Of these, thirteen dated back to 1975 and before, three to 1976, three to 1977, seven to 1978, eight to 1979 and nineteen to 1980. Respondent indicated that the credit balances were primarily fees he had earned but not removed from the account. He could not, however, explain the existence or age of the debit balances. He stated it had been his impression that his accountant had been maintaining his trust account in an appropriate manner. He had not been made aware of any problems that may have existed. When the auditor advised him of the problems he had found, respondent requested and was given an opportunity to correct them. In an attempt to reconcile his records, respondent instructed his secretary to carry out sixty-five separate banking transactions. On November 2 and 3, 1981, respondent drew fifty-three checks totalling $7,557.54 from his trust account for deposit to his business account. In so doing, respondent attempted to cancel out those credit balances which ostensibly represented fees and reimbursements due him. Respondent contemporaneously drew twelve checks totalling $2,265.27 from his business account for deposit to his trust account. These transactions represented an attempt to eliminate the debit balances reflected in the trust ledger sheets. However, even after the sixty-five transactions had been completed, there was still a shortage in the trust account of $394.30. In fact, the auditor noticed that a new account with a debit balance had been opened since the date of the initial audit. This debit, in the amount of $901.43, was created on October 22, 1981, when respondent drew a check on behalf of a client, James Davis, without first collecting or depositing covering funds. Based upon the foregoing, the committee found that respondent had failed to carry out contracts of employment and to represent his clients zealously, in violation of DR 7-101; engaged in conduct which adversely reflected on his fitness to practice law, in violation of DR 1-102; and had failed to preserve the identity of funds belonging to a client or to comply with the provisions of R. 1:21-6, in violation of DR 9-102.