Opinion ID: 1232513
Heading Depth: 1
Heading Rank: 2

Heading: counts 3, 4, 5, and 6depletion of trust account

Text: ¶ 21. Count 3 alleged the second of the six counts in the OLR complaint charging Knickmeier with violating SCR 20:8.4(c). ¶ 22. Count 4 alleged a violation of SCR 20:1.15(d) [8] which in general, requires a lawyer who is in possession of property in which the lawyer and another person claim an interest, to keep that property as trust property until there is an accounting and severance of the disputed interest. Knickmeier admitted this count of misconduct. ¶ 23. Count 5 alleged a violation of SCR 20:1.15(b). [9] Knickmeier also admitted his violation of this rule which requires a lawyer, upon the request of a client, to render a full accounting regarding property held in trust. ¶ 24. Count 6 alleged a violation of SCR 20:1.15(e). [10] Knickmeier also admitted his misconduct with respect to this rule which in general, requires the lawyer to keep complete records of trust account funds and other trust property including a disbursement journal listing the date and payee of each disbursement with all disbursements being paid by check. ¶ 25. In this grouping of counts relating to the depletion of J.R.'s monies held by Knickmeier in his trust account, only Count 3 which alleged fraud, misrepresentation, deceit or dishonesty, was at issue at the hearing before the referee because as noted, Knickmeier had acknowledged his misconduct as alleged in Counts 4, 5, and 6. ¶ 26. The evidence the referee heard established that in early 1999 while Knickmeier was representing J.R. in connection with J.R.'s mother's estate, certain property was sold resulting in a $45,785 payment to J.R. That money was deposited by Knickmeier in his trust account because J.R. was, at that time, incarcerated. On March 1, 1999, Knickmeier traveled to the prison where J.R. was incarcerated and obtained J.R.'s signature on an agreement which set forth guidelines for Knickmeier's supervision of the trust account monies. That agreement, which Knickmeier also signed, provided, among other things, that Knickmeier would not disburse any funds from the account unless previously authorized by J.R. either orally or in writing. ¶ 27. In his testimony before the referee, Knickmeier asserted that it was his intent when he signed that agreement to protect these funds from being wasted by J.R. on alcohol, drugs, and criminal activities. The referee, however, also heard testimony that only three months after the agreement was signed, the trust account funds were totally depleted by Knickmeier. By June 5, 1999, J.R.'s money in the account had been expended and the guidelines in the agreement between Knickmeier and J.R. had not been followed from the very first day. The referee found that on March 1, 1999, Knickmeier withdrew more than $500 from the account in order to pay his phone bill, and the following day he withdrew an additional $838.83. Thus, according to the referee, by March 2, 1999, Knickmeier had already disbursed more to himself from J.R.'s trust monies than he was entitled to receive under his agreement with J.R. ¶ 28. In addition, the referee determined that Knickmeier had extended loans to himself from the trust account funds without any documentation. Specifically, on two separate occasions, Knickmeier had withdrawn $1100 for himself which he later described as a principal advance. That first $1100 principal advance occurred on May 10, 1999, as part of a $3000 withdrawal from the trust account made that day by Knickmeier; the second $1100 principal advance was made on May 20, 1999, as part of another $3200 withdrawal made by Knickmeier from the trust account on that day. Knickmeier acknowledged at the hearing before the referee that he had not obtained J.R.'s prior consent for those two principal advances. According to Knickmeier he thought that was unnecessary because he considered these advances to be part of an earlier loan. ¶ 29. Although Knickmeier had not prepared a contemporaneous document reflecting these disbursements, after J.R.'s grievance was filed, and in response to the OLR's request for information and documentation, Knickmeier drafted a document then identifying these two $1100 withdrawals as principal advances. ¶ 30. The referee also noted that Knickmeier had taken a loan from J.R.'s trust account monies in order to finance the purchase of one-half interest in a motorcycle; Knickmeier had also paid his office phone bill and had purchased athletic event tickets using money from the trust account. The referee determined that all of those transactions had occurred without Knickmeier having first obtained J.R.'s authorization in writing as the March 1, 1999, agreement required. Based on the evidence, including OLR's analysis of Knickmeier's later-constructed trust account records, the referee found that Knickmeier had repeatedly used the trust account funds for his own, not J.R.'s purposes. The referee wrote: Respondent's position of acting to protect these funds for [J.R.] is not supported by the credible evidence. These funds were not protected in any way and Respondent used this money often for his own benefit. He also failed to provide any meaningful accounting as was repeatedly requested by [J.R.]. When the accounting was provided, it was after misconduct claims had been filed. The withdrawal of funds by Respondent from this $45,785 deposit occurred without the consent of [J.R.]. The testimony of [J.R.] is credible on this point as it is corroborated by communications to or about Respondent . . . . ¶ 31. According to the referee, Knickmeier had violated SCR 20:8.4(c) as alleged in Count 3 by withdrawing funds from J.R.'s trust account for personal purposes without any notice to or consent from J.R., and by not keeping current records of trust account withdrawals. The referee determined that this constituted dishonesty, fraud, deceit or misrepresentation. Furthermore, characterizing the March 1, 1999, guideline agreement as fraudulent from the time it was signed, the referee found that Knickmeier had, from the very first day of the agreement, used it to obtain personal access to J.R.'s funds. The referee reasoned that Knickmeier's actions in concealing what had happened to the money after the account had been depleted, supported the conclusion that Knickmeier  . . . had intentionally and without consent used much of the trust money for his own purposes and not those of his client. Specifically, Knickmeier had used the funds to pay his law office phone bills, to purchase athletic event tickets, and the one-half interest in a motorcycle. ¶ 32. As noted, Knickmeier admitted his misconduct as alleged in Counts 4, 5, and 6 of the OLR's complaint. He acknowledged that he had made disbursements from the trust account before an accounting and severance of interest had occurred, and that he had paid himself funds that he should have held in trust until he provided J.R. with an accounting, something he also failed to do. Knickmeier also admitted that, as alleged in Count 5, he had failed to timely respond to J.R.'s request for an accounting and, as alleged in Count 6, he had failed to keep the records required for trust account funds including a disbursements journal listing the date and payment of each disbursement and a listing of the trust account checks he had written to himself. Although Knickmeier acknowledged this misconduct with respects to Counts 4, 5, and 6, he claimed these violations were technical and de minimus violations which did not harm his client.