Blumenstyk, Matter of
| Decision Date | 12 December 1997 |
| Citation | 704 A.2d 1,152 N.J. 158 |
| Parties | In the Matter of Larry BLUMENSTYK, an Attorney at Law. |
| Court | New Jersey Supreme Court |
Thomas J. McCormick, Assistant Ethics Counsel, on behalf of the Office of Attorney Ethics.
Donald R. Belsole, Morristown, for respondent (Belsole and Kurnos, attorneys; Mr. Belsole and Janemary S. Belsole, on the brief).
This attorney-disciplinary case is before the Court based on the decision of the Disciplinary Review Board (DRB or Board) recommending the disbarment of respondent, Larry Blumenstyk. In 1995, the Office of Attorney Ethics (OAE) notified respondent that he would be the subject of a random compliance audit of his attorney books and records. The OAE's preliminary report based on that audit concluded that respondent had knowingly misappropriated trust funds belonging to two clients. The results of a later demand audit confirmed that conclusion. The complaint brought by the OAE and filed with the District X Ethics Committee (DEC) charged respondent with knowing misappropriation of client funds, in violation of RPC 1.15 () and RPC 8.4(c) (). The DRB and the DEC both determined that between December 1994 and June 1995 respondent knowingly misappropriated a total of $85,412.55 1 of trust funds belonging to two clients. The DRB found that respondent used the misappropriated funds primarily for personal expenses.
II
Upon a de novo review of the record, the Court is satisfied by clear and convincing evidence that respondent was guilty of unethical conduct involving the knowing misappropriation of clients' funds in violation of RPC 1.15 and RPC 8.4(c).
The facts, as recapitulated by the DRB, disclose that respondent, who was admitted to the New Jersey bar in 1977 and is engaged in the practice of law in Morristown, Morris County, misappropriated from the trust account of a client Donald Cresitello, viz:
Respondent represented Donald Cresitello in a real estate matter. On December 2, 1994, respondent deposited into his trust account $65,000 received from Cresitello. The entire $65,000 should have been held intact from the date of deposit until January 27, 1995, when respondent paid the funds over to the proper recipient. However, on December 19, 1994 and January 16, 1995, respondent invaded client trust funds held in behalf of Cresitello, in the amounts of $10,000 and $5,412.55, respectively. Respondent did not have his client's authorization to withdraw the funds.
The facts further reveal knowing misappropriation of trust funds belonging to another client, Edith Messler, viz:
Respondent represented Edith Messler in a personal injury matter. The case settled for $115,000. On November 1, 1994, January 17, 1995 and March 3, 1995, deposits totaling that amount were made to respondent's trust account. Messler was entitled to receive $76,237.65 of the total deposited. Accordingly, the $76,237.65 should have remained on deposit in respondent's trust account until respondent released the funds on June 15, 1995. (The delay in disbursing the funds to Messler was not respondent's fault). However, between November 3, 1994 and May 3, 1995, respondent drew ten checks payable to himself, totaling $95,412.55. Respondent was entitled to a legal fee of $25,412.55 for the Messler matter. Therefore, he utilized $70,000 ($95,412.55 minus $25,412.55) of the Messler funds for his own purposes. Respondent did not have his client's authorization to withdraw the funds. Respondent misappropriated the following amounts from Messler on the following days:
January 27,1995 $ 4,587.45
February 7, 1995 $ 5,412.55
March 20, 1995 $ 5,000.00
April 24, 1995 $30,000.00
April 28, 1995 $10,000.00
May 3, 1995 $15,000.00
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Noting that respondent was well aware of the state of his attorney trust and business accounts during the time period in question, the DRB found that respondent's misappropriations were knowing. Thus, as respondent stated, The DRB further concluded that on several occasions respondent transferred misappropriated funds from his trust account to his business account to avoid overdrafts in the business account and that respondent's records revealed that he had taken loans from family members.
Respondent cites the fact that he borrowed the funds only temporarily and his restitution of the funds as mitigating factors.
We are fully cognizant, as was the DRB, of respondent's explanation for his misconduct. He stated that he had made financial commitments with the expectation that he would receive, in March 1994, a distribution from personal trust funds established by his parents in the amount of approximately $100,000. He used the funds to defray personal expenses solely for his own convenience, including a family vacation to Israel in December 1994 (approximately $15,000), his son's Bar Mitzvah in April 1995 (approximately $30,000), and tax payments to the Internal Revenue Service in April 1995 ($21,199). Because of his parents' physical and marital difficulties, the anticipated distribution was not made until June 1995. On June 9, 1995, almost three months before he was notified that he would be the subject of a random audit, respondent deposited $100,046.99 of his personal funds into the trust account, and thereby fully restored the amounts that had been improperly withdrawn from the respective accounts. Respondent stated that although he could have borrowed the money he needed from other sources, he chose not to do so because he could not bring himself to discuss his finances with his wife or parents. Respondent acknowledges that he now realizes that not telling his wife about his finances was "absolutely stupid."
Respondent relies on In re Noonan, 102 N.J. 157, 506 A.2d 722 (1986), and In re Gallo, 117 N.J. 365, 568 A.2d 522 (1989), as a basis for more lenient discipline. In both Noonan and Gallo, however, the Court determined that the misappropriations were negligent, rather than knowing. Clearly, that is not the case here, where respondent admitted that he knowingly misappropriated his clients' funds.
Respondent's restitution of the funds prior to notification of the random audit of his records indicates that he did intend only to "borrow" funds in the sense that he planned to use the funds for his own purposes only temporarily before restoring them. Nevertheless, restitution does not alter the character of knowing misappropriation and misuse of clients' funds.
Intent to deprive permanently a client of [his or her] funds ... is not an element of knowing misappropriation. Nor is the intent to repay funds or otherwise make restitution a defense to the charge of knowing misappropriation. A lawyer who uses funds, knowing that the funds belong to a client and that the client has not given permission to invade them, is guilty of knowing misappropriation. The sanction is disbarment.
[In re Barlow, 140 N.J. 191, 198-99, 657 A.2d 1197 (1995).]
See also In re Freimark, 152 N.J. 45, 57-58...
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