Roth, Matter of

• Citation: 658 A.2d 1264,140 N.J. 430
• Parties: In the MATTER of Walter L. ROTH, Jr., an Attorney at Law.
• Decision Date: 16 June 1995
• Court: United States State Supreme Court (New Jersey)

Page 430

140 N.J. 430

658 A.2d 1264

In the MATTER of Walter L. ROTH, Jr., an Attorney at Law.

Supreme Court of New Jersey.

Argued Feb. 28, 1995.

Decided June 16, 1995.

Walton W. Kingsbery, III, Deputy Ethics Counsel, on behalf of Office of Atty. Ethics.

Charles J. Sprigman, Jr., for respondent.

PER CURIAM.

Following an investigative audit conducted in May 1991, the Office of Attorney Ethics (OAE) filed a seven-count complaint with the District XIV Ethics Committee against respondent, Walter L. Roth, Jr. Respondent was charged with four counts of knowing misappropriation of client trust-account funds involving four separate transactions: the McCracken matter, the Four Seasons matter, the Hillcrest matter, and the $10,000 Loan matter. Respondent was additionally charged with one count of commingling of funds, one count of gross neglect of a client matter, and one count of misrepresentation to the OAE. Respondent admitted that he had commingled personal and client funds in his trust account, and that he had failed to pursue a client matter with diligence, but disputed that he had knowingly misappropriated client funds, or that he had misrepresented facts to the OAE.

The report of the Special Ethics Master characterized the essential issue as whether "the misappropriations[ ] were done knowingly, as OAE contends, or negligently, as Respondent contends," and concluded that the OAE had failed to demonstrate by clear-and-convincing evidence that respondent had knowingly misappropriated client funds, or that the conduct of respondent had amounted to dishonesty or fraud. The Special Master recommended that respondent be suspended for six months and be subject to monitoring to ensure proper trust accounting in the future. The Disciplinary Review Board (DRB) divided five-to-three on the issue of knowing misappropriation and partly rejected the finding of the Special Master. The majority of the DRB found that "the record clearly and convincingly establishes that respondent's misappropriation of client funds in [the McCracken matter, the Four Seasons matter, and the Hillcrest matter] was knowing," and concluded that disbarment was the only appropriate sanction. Three members of the DRB found that the proofs did not support the determination that respondent knowingly misappropriated client funds and would have imposed a six-month suspension.

I

Respondent is charged with four counts of knowing misappropriation arising from four transactions. In its Decision and Recommendation, the DRB summarized the relevant evidence from each of the four matters.

A

The DRB first detailed the factual background of the McCracken matter:

Respondent represented Horace and Carol McCracken in negotiating a settlement of their outstanding debts owed to Debt Consultants, Inc. On or about July 27, 1990, respondent and Daniel C. Hoffman (the grievant in the McCracken matter), counsel for Debt Consultants, settled the matter for $1,300. By letter to respondent dated July 27, 1990, Hoffman confirmed the terms of the settlement and enclosed a stipulation of settlement to be executed by respondent's clients. Respondent received this letter a day or two later.

On July 30, 1990, the McCrackens gave respondent a check in the amount of $1,300, payable to "Walter L. Roth, Jr." Respondent deposited that check in his trust account on that same day.

On August 27, 1990, respondent wrote to Hoffman, enclosing an executed consent order and assuring him that the McCrackens' check would follow within seven days. On October 2, 1990, the court signed the stipulation of settlement. Although respondent acknowledged having received the signed stipulation in October or November 1990, he did not send Hoffman the $1,300 payment. Respondent had no explanation for his failure to send the payment after the receipt of the signed stipulation. His testimony was that "I just didn't do it * * *. I felt that basically everything was coming down around me." Respondent was alluding to several personal problems that beset him at the time, detailed below.

By letter dated October 9, 1990, Hoffman complained to respondent that payment had not been made. Hoffman also informed respondent that he would be seeking the entry of a judgment in the amount of $2,771.30. Indeed, on January 28, 1991, the court entered a judgment against the McCrackens in the amount of $2,331.16, together with pre-judgment interest in the amount of $349.67, for a total of $2,680.83 plus costs and counsel fees.

During a telephone conversation with Hoffman, in March 1991, respondent claimed that his secretary had mistakenly deposited the $1,300 check in the wrong account, a fact of which he had become aware only after the receipt of Hoffman's letters complaining about the non-payment. Hoffman then agreed to accept the $1,300, if paid immediately. Once again, respondent did not send the payment to Hoffman. That fact caused Hoffman to write respondent a letter, on April 1, 1991, questioning respondent's earlier explanation of the misdeposit and also informing respondent that he would be notifying the disciplinary authorities of respondent's conduct, within seven days from the date of the letter.

On May 6, 1991, upon receipt of the Hoffman grievance, the OAE conducted a second audit of respondent's books and records. When respondent failed to produce all the requested records, the audit was continued until May 20, 1991, at respondent's office. Several future visits to respondent's office were necessary. Prior to the May 20, 1991 audit, by letter dated May 16, 1991, the OAE instructed respondent to submit a reconstruction of his trust account records, along with quarterly reconciliations as of certain specific dates. Respondent then engaged an accountant, Earl J. Kelly, to prepare the appropriate trust records and the quarterly trust account reconciliations. According to respondent, his accountant worked in conjunction with the OAE during the entire summer of 1991, in order to reconstruct his attorney records. After certain deficiencies were identified, respondent replenished the trust account by depositing $9,168.47 into his trust account on September 24, 1991. After a thorough review of the reconstructed records, the OAE determined that they were in compliance with R. 1:21-6.

On October 11, 1991, respondent finally sent the $1,300 settlement to Hoffman. According to respondent, he delayed sending the funds to Hoffman until his accountant had completed his trust account reconciliations.

In the interim, however, the $1,300 was not kept inviolate in respondent's trust account. Approximately two weeks after the July 30, 1990 deposit of the $1,300 check in his trust account, respondent invaded those funds. He did so by issuing trust account checks in excess of its available balance. Specifically, on August 13, 1990, respondent's trust account balance was $2,523.54, including the $1,300 McCracken funds and $1,223.54 in other funds. On that date, two trust account checks totalling $2,620 were presented for payment: check No. 4337, in the amount of $120, payable to "Clerk-U.S. Bankruptcy Court," and check No. 4339, in the amount of $2,500, payable to "Prudential Hillcrest Homes" ("Hillcrest"). On that date, August 13, 1990, there were no funds on deposit standing to the credit of Hillcrest. Respondent personally issued both checks, which were unrelated to the McCracken matter. After those checks were cashed, the trust account became overdrawn by $121.46 and the $1,300 McCracken funds were invaded.

By letter dated August 14, 1990, the bank in which respondent kept his trust account notified the OAE of the $121.46 overdraft. The bottom of that letter indicated that a copy had been sent to respondent. Although respondent acknowledged having received a copy of the bank's notice, the record is not clear as to the exact date on which he received it.

On August 14 and 17, 1990, respondent deposited $2,500 and $3,047 in his trust account, respectively. On August 17, 1990, the trust account balance was $5,425.54, including the replenished $1,300 McCracken funds and $4,125.54 in other funds. On that same date, however, respondent issued three checks totalling $4,500, which were unrelated to the McCracken matter: check No. 4340, in the amount of $500, payable to "W. Lundgraf;" check No. 4341, in the amount of $3,500, payable to "Fred and Marsha Johnson;" and check No. 4342 in the amount of $500, payable to "W.L. Roth, Esq." After the payment of those checks on August 17, 1990, the balance in the trust account dropped to $925.54. Once again, the $1,300 McCracken funds were invaded.

Respondent testified that he had no knowledge regarding the trust account balances on either August 13 or August 17, 1990.

Q. What was your balance in your trust account right before you wrote [check no. 4337 and check no. 4339]?

A. I don't know.

Q. When was the last time before you wrote these two checks that you checked on what your balance was in your trust account?

A. I haven't the faintest idea, could have been up to a year.

Q. When you wrote these two checks what did you think was the balance in your trust account?

A. I have no idea.

* * * * * *

Q. [T]hree days after you had bounced a check on your trust account and you had made certain deposits in the three days there and then you wrote out checks totalling [$]4500, do you have any idea what you thought your trust account balance was on the 17th when you wrote this check, when you wrote this series of checks?

A. No.

Respondent asserted that the misappropriation of the McCracken funds was negligent and attributable to respondent's failure to keep client ledger cards adequately and to reconcile the trust account with bank statements. Respondent testified that "[n]obody" had kept the ledger cards up-to-date and that he had attempted no "monthly, weekly or quarterly reconciliations of trust accounts versus trust balances," despite having received a letter in 1988 from the OAE...