In re Salo

• Decision Date: 27 July 2010
• Citation: 77 A.D.3d 30,906 N.Y.S.2d 16
• Parties: In the Matter of Frederick William SALO, an attorney and counselor-at-law: Departmental Disciplinary Committee for the First Judicial Department, Petitioner, Frederick William Salo, Respondent.
• Court: New York Supreme Court — Appellate Division

906 N.Y.S.2d 16

77 A.D.3d 30

In the Matter of Frederick William SALO, an attorney and counselor-at-law: Departmental Disciplinary Committee for the First Judicial Department, Petitioner, Frederick William Salo, Respondent.

Supreme Court, Appellate Division, First Department, New York.

July 27, 2010.

Alan W. Friedberg, Chief Counsel, Departmental Disciplinary Committee, New York (Stephen P. McGoldrick, of counsel), for petitioner.

Michael S. Ross, for respondent.

LUIS A. GONZALEZ, Presiding Justice, RICHARD T. ANDRIAS, DAVID B. SAXE, DAVID FRIEDMAN, JAMES M. CATTERSON, Justices.

PER CURIAM.

Respondent Frederick William Salo was admitted to the practice of law in the State of New York by the Third Judicial Department on March 1, 1994. At all times relevant to this proceeding, he has maintained an office for the practice of law within the First Judicial Department.

In this proceeding, the Departmental Disciplinary Committee (DDC) seeks respondent's disbarment or, in the alternative, his suspension from the practice of law for no less than three years. The six charges at issue (two others having been withdrawn) are summarized below.

Charge 1 alleges that respondent misappropriated third-party funds from his escrow account in violation of DR 9-102(A). This charge relates to respondent's representation of a client (Jose Orellana) whose personal injury action was settled for $198,000 in December 2001. After respondent made payments on account of the settlement to Orellana and himself out of his Chase Bank IOLA account, $40,000 remained in the IOLA account. As respondent wrote in a subsequent letter to Orellana, he continued to hold the $40,000 in the IOLA account pending resolution of the lien held by Reliance Insurance Company (Reliance) on the settlement proceeds based on its payment of worker's compensation benefits. Because Reliance went into receivership, its lien was not resolved until June 1, 2005. During the period from October 15, 2002 through April 22, 2005, respondent withdrew funds from the IOLA account that caused its balance to fall below the amount of the Reliance lien, whether the lien amount is deemed to have been $40,000 (the amount of Reliance's original claim) or, as respondent argues, $32,000 (the reduced amount to which Reliance's successor finally agreed on April 28, 2005). The balance on deposit in the IOLA account first fell below $32,000 on March 31, 2003, and dropped to a low of $102.88 on April 2, 2005.

Charge 2 alleges that respondent, by intentionally converting third-party funds to his personal use as alleged in Charge 1, engaged in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of DR 1-102(A)(4).

Charge 5 alleges that respondent commingled funds by transferring funds from his personal bank account to his IOLAaccount in violation of DR 9-102(A). This charge is based on respondent's transfer of $32,000 of his personal funds to his IOLA account on or about January 12, 2004, and on a second deposit of personal funds in the amount of $32,100 into the IOLA account on April 27, 2005. The latter deposit was the source of the funds used to pay off the Reliance lien on June 1, 2005.

Charge 6 alleges that checks drawn on respondent's IOLA account did not contain a designation indicating that they were issued from a special bank account, thereby violating DR 9-102(B)(2).

Charge 7 alleges that, on or about November 7, 2003, respondent paid a client settlement funds by giving him a check drawn on respondent's IOLA account that was made payable to "cash," thereby violating DR 9-102(E).

Charge 8 alleges that, by engaging in the conduct underlying the above charges, respondent engaged in conduct that adversely reflects on his fitness as a lawyer in violation of DR 1-102(A)(7).

Respondent admits the factual allegations underlying the above charges, and does not contest Charges 5, 6 and 7. He does, however, dispute the contention that he acted with venal intent, and therefore does contest Charge 2, as well as Charge 1 to the extent it incorporates allegations of venal intent. He also contests Charge 8.

The primary issue before us is whether respondent's conversion of escrow funds was, in light of the post-traumatic stress disorder (PTSD) and depression from which he suffered at the time, done without venal intent. Respondent argues that, because he acted under the influence of the aforementioned psychological maladies and without venal intent, the sanction for his misconduct should be limited to a public censure.

At the hearing held before a Referee on March 28, 2007, the expert psychological/psychiatric reports submitted by both sides were in agreement that respondent suffered from PTSD at the time of theconduct at issue (December 2001 through April 2005).¹ Respondent argues that there was no intentional conversion of funds; rather, he unknowingly and inadvertently usedthe lien funds for his own use because at the time he suffered from severe PTSD and depression triggered by the attacks of September 11, 2001 (9/ 11). He further contends that he was unable to reconcile his IOLA account during the relevant time period, which was related to his practice of keeping a "cushion" of earned legal fees in his IOLA account.² Thus, he thought he was using his own money to pay personal expenses. Notably, during the period in question (2003-2005), respondent withdrew funds from his " cushion" of fees at the same rate as when he first opened the IOLA account in late 1998. Respondent also contends that he had no motive to misappropriate third-party funds, given that he allegedly had sufficient funds in a brokerage account to cover all personal expenses.

In support of his contention, respondent raises a number of points about his personal background. First, as confirmed by both mental health experts, while growing up he suffered greatly under an emotionally and physically abusive father and passive mother. According to the experts, this set the stage for the onset of severe PTSD after 9/11, manifested by feelings of loss of control, anxiety, panic attacks and nightmares.

Respondent was also hampered in meeting his professional obligations in the wake of 9/11 by the location of his law office, which was 100 Church Street, in the immediate vicinity of the World Trade Center. Although he was not at his office at the time of the attack, he had only limited access to it for many months thereafter. When he was given access to the office during this period, he was escorted by the police up 18 flights of stairs, in the dark (there was no power), and he was given only a few minutes to collect files that had survived the attack. His computer, on which the electronic ledger of his IOLA account had been stored, was destroyed, as were most of his files. Moreover, he did not receive bank statements for several months due to problems with mail service.

In October 2002 (years before the DDC opened its inquiry into this matter), respondent sought psychological treatment from the aforementioned Dr. Levitt. In her report, Dr. Levitt confirmed that respondent descended into alcohol abuse following 9/11 as a coping mechanism. The alcoholism continued untilhe stopped drinking completely in January 2003. During the period in question, he was not taking on any new cases, as he could barely function as an attorney. During the period from 2002 through 2005, he settled 17 cases, which was about what a busy personal injury attorney typically would accomplish in one month. As stated in her report, Dr. Levitt found that respondent experienced "extreme anxiety related to his work as a lawyer, and was even worried about such activities as opening mail and returning phone calls, for fear that he would hear more bad news and not be able to cope with it." She noted that, whenrespondent began treatment, he "was barely getting any work done"; that he had "stacks of unopened mail sitting on his desk that he was too anxious to open"; that it was "difficult for him to sustain concentration on any one task"; and that "[s]ometimes he would lose track of time and would spend the entire day writing one letter."

Based on her observations, Dr. Levitt diagnosed respondent as suffering from PTSD and major depressive disorder related to 9/11 and the abuse he suffered as a child. The PTSD was manifested by symptoms including intense fear and feelings of helplessness, difficulty in concentrating, avoidance, hyper-arousal, and significant impairment in daily functioning. As relevant to this proceeding, Dr. Levitt concluded that it was

"likely that [respondent's] PTSD symptoms interfered with his ability to focus on reconciling his attorney trust bank account.... Like other anxiety-producing activities, reconciling his accounts was an activity that he avoided for an extended period of time.... [H]is inability to work consistently on anything other than the immediate task at hand, combined with his problems with intrusive and disorganized memories that sometimes led to states of confusion, could have led to mistaken judgment and his misperception of the source of the funds in his attorney trust bank account. I further believe with a reasonable degree of scientific certainty that because of his PTSD symptoms Mr. Salo avoided reconciling his bank accounts, and had he undertaken the task of doing such reconciliations, his PTSD symptoms would have interfered with his ability to successfully complete the task."

Similarly, the DDC's expert, Dr. Hoffman, adopted Dr. Levitt's findings and independently determined the following:

"[I]t is my opinion, to a reasonable degree of medical certainty, that Mr. Salo suffers from the results of chronic childhood physical and emotional abuse, from symptoms consistent with a depressive disorder, symptoms consistent with an anxiety disorder and with [PTSD]. I believe that at the time of the actions which are under investigation, Mr. Salo was in dire psychological condition as described ... in Dr. Leavitt's [ sic

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