In re Luthm
| Decision Date | 25 February 2021 |
| Docket Number | Docket No. 20-115 |
| Parties | In the Matter of Richard A. Luthmann An Attorney at Law |
| Court | New Jersey Supreme Court |
Disciplinary Review Board
Ashley Kolata-Guzik, on behalf of the Office of Attorney Ethics, waived appearance for oral argument.
Respondent waived appearance for oral argument.
To the Honorable Chief Justice and Associate Justices of the Supreme Court of New Jersey.
This matter was before us on a motion for final discipline filed by the Office of Attorney Ethics (OAE), pursuant to R. 1:20-13(c)(2), following respondent's guilty pleas and convictions, in the United States District Court for the Eastern District of New York, to one count of conspiracy to commit wire fraud, contrary to 18 U.S.C. § 1343 and 18 U.S.C. § 1349, and one count of conspiracy to commit extortionate collection of credit, contrary to 18 U.S.C. § 894(a). The OAE asserted that respondent's convictions and associated misconduct constitute violations of RPC 4.1(a)(2) (); RPC 8.4(b) (); and RPC 8.4(d) ().
For the reasons set forth below, we determine to grant the OAE's motion for final discipline and recommend to the Court that respondent be disbarred.
Respondent was admitted to the New Jersey bar in 2004 and to the New York bar in 2006. At the relevant times, he practiced law with The Luthmann Law Firm, PLLC, in Staten Island, New York. He also maintained a law office in Iselin, New Jersey.
Although respondent has no history of final discipline in New Jersey, on May 15, 2019, the Court temporarily suspended him based on the criminal misconduct underlying this matter. In re Luthmann, 237 N.J. 587 (2019). He remains suspended to date.
We now turn to the facts of this matter.
On November 30, 2017, a federal grand jury in the United States District Court for the Eastern District of New Jersey indicted respondent and his co-defendants. The indictment charged respondent with eleven crimes: wire fraud; two counts of aggravated identity theft; money laundering conspiracy; money laundering; access device fraud; kidnapping conspiracy; kidnapping; extortionate collection of credit conspiracy; extortionate collection of credit; and using, carrying, and possessing a firearm.
In December 2017, respondent was arrested and detained until March 2018, when he was released on a $1.5 million collateral bond. While released on bail, respondent sent his wife a threatening letter, because he believed that she was cooperating with the government's prosecution of him. In addition, contrary to the terms of a protective order, respondent provided a friend with three copies of wiretap interception transcripts for distribution to others. Consequently, in June 2018, the District Court revoked respondent's bail and he was sent to FMC Devens, an administrative security federal medical center.
On March 18, 2019, before the Honorable Ramon E. Reyes, Jr., U.S.M.J., respondent entered guilty pleas to counts one and nine of the indictment, conspiracy to commit wire fraud, contrary to 18 U.S.C. § 1343 and § 1349, and conspiracy to commit extortionate collection of credit, contrary to18 U.S.C. § 894(a). Respondent allocuted to very few facts in support of his pleas.
In respect of the conspiracy to commit wire fraud charge, respondent stated that he represented "a company that was ripping off Chinese people and Chinese companies in the scrap metal business." Respondent further admitted that, in furtherance of the conspiracy, the companies exchanged e-mails "that traveled interstate."
As to the extortionate collection of credit charge, respondent allocuted that "one of the individuals that was in that company had a dispute with the other individuals and there was a situation and an encounter." Although respondent denied having been present, he stated that the encounter involved someone who brandished a firearm, and "the individual was threatened" in connection with an unpaid "business debt." Respondent acknowledged that he knew that the encounter would be taking place at his law office.
At the September 5, 2019 sentencing proceeding before the Honorable Jack B. Weinstein, U.S.D.J., respondent affirmed his guilty plea. Judge Weinstein's Statement of Reasons Pursuant to 18 U.S.C. § 3553(c)(2), datedOctober 15, 2019, set forth the facts underlying respondent's criminal conduct.1
Specifically, through his law practice, respondent met the clients who became his co-conspirators and co-defendants. For several years, respondent represented Co-Conspirator 1 in litigation relating to the scrap metal business, which involved exporting scrap metal from the United States, in large shipping containers, to foreign customers, who paid per unit of weight for scrap metal, separated and "charged for by value."
In 2015, following respondent's introduction of Co-Conspirator 1 to Co-Conspirator 2, who also was a client, the three individuals devised a scheme to defraud companies seeking to buy scrap metal. Co-Conspirator 1 identified potential victims, and respondent registered two companies to operate the fraud; facilitated the opening of bank accounts for the fraud; and corresponded with "customers." Respondent involved Co-Conspirator 2 in the scheme, because respondent believed that he had organized crime connections and could help settle potential disputes.
The names of the fraudulent companies were similar to the names of two legitimate scrap and recycling businesses and were used to defraud eightcompanies. In early October 2015, one of the fraudulent companies contracted to sell scrap metal worth $31,500. The purchaser wired the funds to respondent's New York Interest on Lawyer Account Fund trust account. The monies were then wired to an account controlled by Co-Conspirator 1. Because no scrap metal delivery was made, the purchaser threatened criminal charges. The conspirators returned the money to the purchaser but used the lessons of this failure to develop a more sophisticated fraud scheme.
For each subsequent purchaser, the second fraudulent company arranged to sell and ship a container of scrap metal, which had been diluted with cheaper metal. The valuable scrap metal was placed on top of the filler metal and in close proximity to pre-drilled holes in the container, in order to convey the appearance that the entire container was filled with the valuable metal.
The conspirators also began using aliases when they interacted with customers, recruited a blind person under the care of a guardian ad litem to be the nominal president of one of the fraudulent companies, and laundered the proceeds of the transactions through various banks. Respondent suggested designating the blind person as the nominal president, asserting that his disability precluded him from being sued.
The conspirators operated quickly to complete as many sales as possible before it became known that they were shipping overvalued material. In just afew weeks, they made more than $484,000 from fraudulent sales. Approximately $190,000 of this money was transferred to respondent, who also charged $15,000 to a debit card associated with the fraudulent company's bank account. In addition, respondent actively was involved in monitoring payments and replying to bank inquiries regarding monetary transfers.
While the scrap metal scheme was ongoing, respondent demanded legal fees and other money from Co-Conspirator 1, including money to pay an enforcer to meet with members of a Chinese organized crime enterprise hired by disgruntled customers. The story about the Chinese organized crime enterprise was false. In December 2016, respondent arranged for Co-Conspirator 2 and the enforcer, who had purportedly dealt with the Chinese organized crime enterprise, to hold Co-Conspirator 1 in a room at respondent's law office and to extort him. A loaded gun was pointed toward Co-Conspirator 1, who was directed not to call the police.
During the sentencing hearing, Adam Trusz, the procurement and operations manager for GDB International, testified that he purchased and organized the logistics for scrap metal product. Trusz stated that he received a telephone call from Arthur Sharpe, of Omni Metals, which was one of the fraudulent companies, inviting Trusz to visit a warehouse for the purpose ofevaluating and purchasing insulated copper wire, which would be loaded in a container and shipped to China for recycling.
Trusz met with a third party, who was not affiliated with Omni, at a warehouse, where Trusz examined boxes and bales of insulated copper wire. Neither Sharpe nor respondent were present.
On this particular occasion, the product that Trusz could examine was limited. He was permitted to examine "certain places and then approach the product only at the times that they would deem comfortable." If he tried to examine the container from a different vantage point, he was "pushed aside."
The limitations placed on Trusz's examination of the container did not raise any red flags. Trusz explained that "[t]he nature of the business is a lot of times, people get aggravated with the way that we approached them." The contents appeared "perfect." Thus, GDB entered into a contract with Omni for the purchase of one load of the insulated copper wire, for $140,000.
Trusz testified that, in the scrap metal industry, payment is made at the time a container is loaded with product. Thus, the funds were wired, and the container was loaded, sealed, and removed by truck for shipment to China.
When the container arrived in China, government x-rays revealed that the container was filled with concrete and covered with insulated copper wiring, which created the outward appearance...
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