Franklin, Matter of

• Citation: 365 A.2d 1361,71 N.J. 425
• Parties: In the Matter of Benjamin FRANKLIN, III, an Attorney-At-Law.
• Decision Date: 16 November 1976
• Court: United States State Supreme Court (New Jersey)

Page 425

71 N.J. 425

365 A.2d 1361

In the Matter of Benjamin FRANKLIN, III, an Attorney-At-Law.

Supreme Court of New Jersey.

Argued April 6, 1976.

Decided Nov. 16, 1976.

Donald M. Malehorn, Morristown, for Morris County Ethics committee.

Richard L. Amster, Millburn, for respondent (Amster & Levin, Millburn, attorneys).

PER CURIAM.

The respondent, an attorney at law of this State, was the subject of a complaint, filed with the Morris County Ethics Committee, that charged him with submitting 'exaggerated, fraudulent, or non-existent' expenses on his weekly reports, between January 1, 1973 and July 21, 1973, to the Rockaway Corporation, of which he was president and chief executive officer. This conduct allegedly violated (1) DR 1--102(A)(3) which provides a lawyer shall not '(e)ngage in illegal conduct that adversely reflects on his fitness to practice law' and (2) DR 1--102(A)(4) which prohibits a lawyer from engaging 'in conduct involving dishonesty, fraud, deceit or misrepresentation.'

In his answer the respondent conceded that he could not substantiate these expenses. However, he denied any violations of the Disciplinary Rules and claimed that his dispute with the Rockaway Corporation had been settled.

Although no testimony was presented at the formal hearing before the Ethics Committee, an Agreed Statement of Facts between the Ethics Committee's prosecutor and the respondent was admitted into evidence with three exhibits. These exhibits included that settlement agreement between the Rockaway Corporation and respondent, a report of Peat, Marwick, Mitchell & Co., certified public accountants, submitted to the Rockaway Corporation, and 12 weekly expense vouchers which respondent had submitted to the Corporation between May 12, 1973 and July 21, 1973. After the hearing respondent submitted an affidavit in which he acknowledged that 'some of the claimed reimbursements were insupportable.'

On the basis of this record the Morris County Ethics Committee submitted a presentment to this Court in which it found that respondent had submitted fraudulent expense vouchers to his employer between January and July 1973 and had received 'reimbursement in substantial amounts for entertainment expenses which he never incurred.' The Committee concluded that this conduct violated DR 1--102(A)(3) and (4).

Respondent had practiced law in this State between 1947 and 1960. He then became general counsel and secretary to the Rockaway Corporation's corporate predecessor. On January 1, 1966, he was elected president and chief executive officer of the Corporation and continued in that capacity until August 3, 1973. He has not practiced law since January 1, 1966.

As an emolument of his position respondent was entitled to reimbursement of business expenses incurred for entertainment, food and liquor. The annual amounts which he incurred between 1966 and 1972 for these purposes ranged between $13,538 and $67,384. In the period between January 1, 1973 and July 23, 1973, these expenses totaled $44,037. The stipulated facts before the Ethics Committee included the assertion that '(n)either party to this stipulation is prepared to factually prove or disprove the validity of' any of these reimbursements. However, the letter report sent to the Rockaway Corporation by Peat, Marwick, Mitchell & Co. recited that individuals whom respondent claimed to have entertained were asked to verify the occasions. Based on the oral responses, no support for $11,775 out of the $44,037 of the 1973 expenses was found. In making this calculation the accountants included as unsupportable expenses those which were claimed for group meetings after at least half of the alleged participants had stated no meeting occurred.

The settlement agreement recited that differences had arisen between the Corporation and respondent in connection with expenses, for which respondent had been reimbursed between 1966 and 1973, in the aggregate amount of approximately $319,000. The agreement provided that Franklin would pay $5,000 and assign to the Corporation his interests in two pension plans which had a total aggregate value, including respondent's contributions, of $46,000. In return the Corporation released him from any expense account claims it might have had.

The third exhibit introduced at the hearing consisted of weekly expense reports between May 7, 1973 and July 21, 1973, with supporting itemized daily statements. No testimony or evidence was introduced concerning these expenditures, other than the accountant's hearsay report which did not specifically refer to the itemized information.

After the hearing respondent submitted an affidavit to the Committee in which he stated that the settlement agreement represented the mutual desire of the parties to reach an accommodation. He had refused to permit an admission of fraud to be inserted in the agreement and he would not agree that he 'had defrauded or cheated Rockaway in any fashion.' He 'was not in possession of any facts or documentation which could assist in establishing the validity of claimed reimbursement,' He did 'acknowledge that some of the claimed reimbursements were insupportable,' but he did not know 'what portion was insupportable and portion was in all respects legitimate.'

We are satisfied, as the Committee found, that the proofs establish that the respondent deliberately overstated his expense account between January 1, 1973 and July 21, 1973 to the extent of $11,775. Indeed respondent concedes that some of the claimed reimbursements were overstated and unsupportable, although an unknown portion was 'in all respects legitimate.'

We are aware of the common practice of many companies to permit executives to be reimbursed for travel and expenses. Here Rockaway Corporation, a publicly held company listed on the American Stock Exchange, had reimbursed respondent substantial sums in prior years ($49,000 in 1970, $58,000 in 1971, and $67,000 in 1972). Peat, Marwick, Mitchell & Co., the Corporation's auditors in those years, never questioned these disbursements and the Committee's presentment acknowledged that there was no proof of the invalidity of such reimbursements. The quarrel arose between the Corporation and respondent with respect to some expenditures during the first seven months of 1973, and the dispute was settled between the parties, the Corporation apparently having been satisfied with the reimbursement which it received.

Although the commercial marketplace may accept such practices, we do not. The respondent was obligated to adhere to the high standard of conduct required of a member of the bar even though his activities did not involved the practice of law. In re Ryan, 66 N.J. 147, 150, 329 A.2d 553 (1974); In re Carlsen, 17 N.J. 338, 346, 111 A.2d 393 (1955); In re Genser, 15 N.J. 600, 606, 105 A.2d 829 (1954). We find that he is guilty of violating DR 1--102(A)(3) for...