Opinion ID: 1515981
Heading Depth: 1
Heading Rank: 3

Heading: Sanctions Hearing [5]

Text: After the allegations in the Petition were deemed admitted, the Board convened on June 28, 2006, to hear testimony with respect to sanctions. The ODC called the following witnesses: Randolph K. Herndon, the Receiver for Fountain's law practice; Joseph McCullough, the auditor for the LFCP; Bernadeane Thompson, a former client of Fountain, and Marvin A. Davis, Jr., another former client. Fountain was present at the hearing and represented by James E. Liguori, Esquire. Fountain did not call any witnesses or present other evidence. Four witnesses testified at the hearing on sanctions. Mr. Herndon testified about his efforts to identify Fountain's clients and trace retainers those clients had paid to Fountain. At a meeting with Fountain on July 17, 2005, Fountain admitted to Mr. Herndon that there were several clients who had provided Fountain with retainers, portions of which remained unearned. This was troubling to the Receiver, because Fountain's escrow account had a very minimal balance and his operating account had a negative balance. Mr. Herndon testified that these unearned fees totaled approximately $46,000. [6] Mr. Herndon also testified that during June 2005, Fountain had collected approximately $20,000 in retainers from eight clients, but no work had been done on most of these client files. According to Mr. Herndon, Fountain had essentially checked out, and the little work that was done in June 2005, was performed by a legal assistant. Fountain missed one or two hearings and missed some filing deadlines. During this time, Fountain was making frequent ATM cash withdrawals from his operating account, often from ATM machines at Dover Downs. Mr. Herndon described several instances where, based on his review of client files and Fountain's bank records, Fountain had kept unearned retainers. For example, Mr. Herndon described a situation involving a client named Joe Young, who had paid a $10,000 retainer to Fountain in December 2004. Fountain told Mr. Herndon that $5,000 of that retainer had been earned. Nevertheless, all of it had been deposited into Fountain's operating account which, as of July 2005, had a negative balance. In another situation involving a car warranty case, a client gave Fountain a $3,000 retainer. Fountain told Mr. Herndon that $1,500 had been earned. In April 2005, the client requested his money back because his car had been fixed. Fountain sent the client a letter stating that the client was not entitled to any refund. Mr. McCullough, the LFCP auditor, testified about his audit report. He explained that Fountain did not have any cash receipts or cash disbursement journals. Mr. McCullough was able to determine, however, that many retainers received by Fountain were deposited directly into Fountain's operating account, from which cash withdrawals were then made. Mr. McCullough cited illustrative examples. In one case, a $5,000 retainer check was deposited into Fountain's escrow account on March 31, 2005, followed by a cash withdrawal on April 1, 2005, of $5,000. In another case, a $1,000 retainer check was deposited into Fountain's operating account, from which $1,000 in cash was immediately withdrawn. Mr. McCullough also testified that 47 former clients of Fountain had filed claims with the LFCP, for a total of $268,000. Of these, 31 claims totaling $101,635 have been paid. Ms. Thompson testified about the work that Fountain did for her in connection with the debt which her business owed to Center Capital. On July 15, 2004, Ms. Thompson gave Fountain two checks, one for $12,500 and one for $2,500. The $12,500 check was supposed to be used to make a $10,000 payment to a debtor, with the remaining $2,500 to be Fountain's fee. The second $2,500 check was a down payment toward a $5,000 retainer for Fountain representing Ms. Thompson's business and, in Fountain's words keeping the wolves from the door. On July 16, 2004, Ms. Thompson received a call from Wachovia Bank, advising that Fountain was attempting to cash the $12,500 check. Ms. Thompson thought this was odd and called Fountain to ask why he had cashed the check. Fountain assured Ms. Thompson that he would put the money into his escrow account. Fountain subsequently cashed two smaller retainer checks that Ms. Thompson provided, one for $1,000 and one for $1,500. As noted above, the $10,000 payment to the debtor was never made. Instead, Fountain told Ms. Thompson that he had negotiated that payment down to $7,000. The $3,000 difference was not refunded to Ms. Thompson. She was never provided any accounting for those funds, nor was she given a statement showing how, if at all, it was earned. Likewise, with respect to the $5,000 retainer that was supposed to be used to keep the wolves from her door, Ms. Thompson never received any accounting. Ms. Thompson testified that Fountain did very little work. The new security agreement which she signed in December 2004 was never sent to Center Capital. Moreover, Fountain did not timely provide it to her. According to Ms. Thompson, the agreement that Fountain presented to her in December 2004 should have been given to her in November 2004, because it required her to make certain payments starting in December. Although $7,000 was eventually paid to Center Capital, Fountain did not make the payment until March 2005, and Ms. Thompson did not learn that until August 2005. The last witness to testify was Marvin Davis, Jr. In early 2005, Mr. Davis retained Fountain to represent him in a criminal case. Mr. Davis and his ex-wife were charged with Medicaid fraud. Mr. Davis wanted to resolve the matter by reimbursing the State for the Medicaid payments. Fountain told Mr. Davis to make a check payable to Fountain in the amount of $10,531, which Fountain would pay to the State. Mr. Davis' check, which was dated March 3, 2005, was deposited into Fountain's operating account on March 4, 2005. Although Fountain was supposed to pay this money to the State on Mr. Davis' behalf, he did not do so. Mr. Davis did not know that Fountain had not paid the State. Mr. Davis was later arrested because the payment was not made, and as a result he was put on 18-month probation. Mr. Davis also retained Fountain in connection with another matter and paid him a $4,000 retainer. Fountain later withdrew his representation and referred Mr. Davis to a Dover attorney. The $4,000 retainer was not refunded. Mr. Davis also loaned Fountain $2,000 which has not been repaid. According to Mr. Davis, Fountain owes him a total of $16,531.