Zauber, Matter of

Decision Date18 January 1991
Citation583 A.2d 1140,122 N.J. 87
PartiesIn the Matter of Kenneth P. ZAUBER, an Attorney-at-Law.
CourtNew Jersey Supreme Court

Richard J. Engelhardt, Asst. Ethics Counsel, on behalf of Office of Attorney Ethics.

Richard F. Aronsohn, for respondent (Aronsohn & Weiner, attorneys, Ronald S. Bergami, on brief).

PER CURIAM.

Following a jury trial, respondent, Kenneth P. Zauber, was convicted in the United States District Court for the District of New Jersey of Racketeer Influenced and Corrupt Organization Act (RICO) conspiracy, in violation of 18 U.S.C.A. § 1962(d), and of soliciting kickbacks in connection with an employee benefit plan, in violation of 18 U.S.C.A. § 1954. He also pled guilty in the Superior Court to obtaining controlled dangerous substances by fraud or misrepresentation, in violation of N.J.S.A. 24:21-22a(3), and to forgery, in violation of N.J.S.A. 2C:21-1a(2).

On motion of the Office of Attorney Ethics (OAE), the Disciplinary Review Board (DRB) unanimously recommended that respondent be disbarred. Respondent did not appeal his criminal convictions and asserts that he does not seek to impugn them in this proceeding. Instead, he argues that he should receive a less severe penalty or that the matter should be remanded to a District Ethics Committee to develop mitigating evidence about his drug dependency. We adopt the recommendation of the DRB.

I

Early in his career, respondent, who was admitted to the practice of law in 1965, distinguished himself as an Assistant United States Attorney, counsel to the State Commission of Investigation, chief of the trial section in the Criminal Justice Division of the Department of Law and Public Safety, and municipal court judge for Hamilton Township. Even before the convictions that bring him before us, however, respondent ran afoul of the disciplinary system. In 1979, when he was a deputy attorney general, respondent was privately reprimanded for impropriety in soliciting an endorsement to support his quest for a judicial appointment. The person so solicited was the defendant in a civil action instituted by the Attorney General, an action in which respondent had assisted in drafting the complaint.

The DRB summarized the relevant facts about respondent's criminal convictions:

I-STATE CONVICTION

On September 18, 1984, respondent attempted to fill prescriptions for Schedule II controlled dangerous substances (tylox and ritalin) at two separate pharmacies, by using forged prescription blanks. Both pharmacists refused to fill the prescriptions.

Subsequent investigation revealed that respondent had fraudulently obtained, on approximately 100 occasions, certain pain killers, percodan and tylox, both of which are controlled dangerous substances, by means of forged prescription blanks. Respondent was then charged, via a two-count accusation, with obtaining controlled dangerous substances by fraud and misrepresentation, in violation of N.J.S.A. 24:21-22a(3). He was also charged with forgery, in violation of N.J.S.A. 2C:21-1a(2). He entered a guilty plea to both counts of the accusation on September 4, 1985. He was later sentenced, on December 13, 1985, to probation for two years and was ordered to perform 150 hours of community service.

On January 8, 1986, pursuant to R. 1:20-6(a) and because of this conviction, respondent was temporarily suspended from the practice of law. That suspension remains in effect.

II-FEDERAL CONVICTION

In 1979, while in private practice, respondent became general counsel to the employee pension benefit plan of Local 701 of the International Brotherhood of Teamsters ("pension fund"), replacing his childhood friend, David Friedland. [Footnote omitted.]

Thereafter, in late 1986, respondent was convicted of mail fraud, in violation of 18 U.S.C.A. § 1341; RICO (Racketeer Influenced and Corrupt Organizations Act) conspiracy, in violation of 18 U.S.C.A. § 1962(d); and soliciting kickbacks in connection with an employee pension benefit plan, in violation of 18 U.S.C.A. § 1954. Respondent was sentenced, on April 24, 1987, to four years' imprisonment and fined $25,000. By decision issued on August 31, 1988, the United States Court of Appeals for the Third Circuit affirmed respondent's conviction of RICO conspiracy and solicitation of kickbacks. United States v. Zauber, 857 F.2d 137 (3d Cir.1988). At the same time, the court reversed his conviction of mail fraud and remanded his case for resentencing. Respondent's petition for certiorari was denied by the United States Supreme Court on March 6, 1989. 57 U.S.L.W. 3588. [489 U.S. 1066, 109 S.Ct. 1340, 103 L.Ed.2d 810 (1989) ].

On May 12, 1989, respondent was resentenced to the same term and fine previously imposed, i.e., four years' imprisonment and a fine of $25,000. At the time of the Board hearings, respondent was incarcerated.

Respondent's criminal conduct and that of his co-conspirators were set forth fully in the opinion of the Third Circuit, as follows:

In the spring of 1982, Friedland and Joseph Higgins (footnote omitted) agreed to try to obtain money from the pension fund to invest in Higgins's Omni Funding Group ("Omni") a Florida-based mortgage company (footnote omitted). Because of his earlier conviction, Friedland was to be a hidden partner in Omni. Friedland told Higgins that he would discuss the matter with Coar and Scotto [trustees of the pension fund], who trusted him. Friedland later reported back to Higgins they would have to pay kickbacks to Coar and Scotto to obtain the money.

Higgins mailed an investment proposal to the pension fund in June, 1982. His letter was the basis for a mail fraud count against Friedland, Coar and Scotto. After a formal presentation, Higgins and the trustees entered into negotiations. Zauber conducted a superficial "due diligence" investigation into Higgins and Omni, and reported favorably on them. At some point pension fund manager Alfred Piperata became suspicious of Higgins and conducted his own investigation. His inquiry revealed Higgins' prior bankruptcy, IRS and repossession problems, as well as his longtime friendship with David Friedland. When Piperata expressed concern to the appellants, he was told not to worry about it.

Higgins testified that sometime after the presentation, he, Friedland, Coar and Scotto had a meeting at a New York restaurant called "Paul and Jimmy's." The purpose of this meeting was to give Coar and Scotto an opportunity to "look over" Higgins and discuss the Omni investment in general.

In October, 1982, Higgins and the pension fund entered into a formal contract. The pension fund agreed to transfer $20,000,000, presently invested with the Magten Asset Management Corporation ("Magten"), to Omni for a thirty-year period. On this investment the pension fund was to set a return 1% higher than the six-month treasury bill rate on residential mortgages and 2% over the treasury rate on commercial mortgages. Omni was to retain any profit above those rates. Commercial loans using pension funds could not exceed 10% of the corpus. Residential loans were to require 100% insurance, and commercial loans 15% insurance. The contract also contained express provisions barring individuals with prior convictions, like David Friedland from any involvement in Omni. Zauber's fiance, an associate at a Wall Street law firm, "independently" reviewed the contract.

The $20,000,000 was transferred to Omni in two separate transactions, $15,000,000 by wire and $5,000,000 by mail. These transactions formed the basis for mail and wire fraud counts against Friedland, Coar and Scotto.

In late November, 1982, Omni was having trouble obtaining insurance on the loans. Higgins proposed changing the investment contract to allow for a 15% holdback on each loan in lieu of insurance or a letter of credit.

By letter of December 6, 1982, Zauber approved Higgins's proposed interpretation of the contract. This letter was the basis of a mail fraud count against Zauber and Friedland.

Higgins testified that he, Coar, Scotto and Friedland had a second lunch meeting at "Paul and Jimmy's" sometime in late 1982. At that meeting, Friedland requested that all communications between Omni and Coar and Scotto be made through him, rather than Higgins. Friedland also discussed kickbacks and told Coar and Scotto that their share would come from his half of Omni's profits.

At trial, Higgins testified that Zauber approached him for money on at least six separate occasions beginning in late 1982. 5

Higgins repeatedly directed Zauber to Friedland and gave Friedland money to pay off Zauber, Coar and Scotto. 6

In January of 1983, four new trustees joined Coar and Scotto on the board of the pension fund (footnote omitted). The new trustees were told that the "old" trustees would be solely responsible for any liability on prior investments and would continue to monitor them. In late 1983, however, the new trustees learned this was incorrect and became aware of their own responsibility, as fiduciaries, for continuing investments made by the fund. They also learned that the Magten investment was paying 17% while Omni was paying approximately 9% overall. The new trustees began their own investigation into Omni. After a trip to Florida to learn more about Omni, they discovered that Omni had been violating the investment contract by making loans in excess of the 10% corpus limit. Higgins, Friedland and Zauber attempted to cover up these loans by backdating a letter from Zauber authorizing loans in excess of that 10% limit. The new trustees also discovered that many of Omni's loans were in default, and that Omni was making interest payments to the pension fund from the 15% holdback accounts in violation of the investment contract. After the Department of Labor initiated an investigation, Coar and Scotto resigned from that board, Zauber was fired, and the new trustees terminated the pension fund's investment with Omni.

At his resentencing...

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6 cases
  • Hasbrouck, Matter of
    • United States
    • New Jersey Supreme Court
    • January 30, 1998
    ...of a continuing pattern of illegal conduct that demands stronger discipline than would an isolated criminal incident. See Zauber, supra, 122 N.J. at 94, 583 A.2d 1140. III Respondent once again asks this Court to consider her drug addiction in mitigation of the discipline to be imposed. How......
  • Hasbrouck, Matter of
    • United States
    • New Jersey Supreme Court
    • May 12, 1995
    ...the integrity of the legal system' and destroys 'public trust and confidence' in the law and the legal system.' " In re Zauber, 122 N.J. 87, 93, 583 A.2d 1140 (1991) (citation omitted). Such conduct "places in question the lawyer's integrity and respect for the law." In re Kaufman, supra, 1......
  • Schaffer, Matter of
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    ...serious ethical infractions such as misappropriation or crimes involving dishonesty, fraud, deceit or misrepresentation. [122 N.J. 87, 94, 583 A.2d 1140 (1991) (citations The OAE requested that respondent be suspended for a period of three months, relying on In re Nixon, 122 N.J. 290, 585 A......
  • LaVigne, Matter of
    • United States
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    ...attorney who engaged in forgery of public documents and encouraged former client to present false testimony); In re Zauber, 122 N.J. 87, 583 A.2d 1140 (1991) disbarring attorney convicted of RICO conspiracy, soliciting kickbacks in connection with employee benefit plan, forgery, and obtaini......
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