In re Salo
Alan W. Friedberg, Chief Counsel, Departmental Disciplinary Committee, New York City (Stephen P. McGoldrick of counsel), for petitioner.
OPINION OF THE COURT
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 The six charges at issue (two others having been withdrawn) are summarized below.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 one alleges that respondent misappropriated third-party funds from his escrow account in violation of
Charge two alleges that respondent, by intentionally converting third-party funds to his personal use as alleged in charge one, engaged in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of
Charge five alleges that respondent commingled funds by transferring funds from his personal bank account to his IOLA
Charge six 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
Charge seven 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
Charge eight 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
Respondent admits the factual allegations underlying the above charges, and does not contest charges five, six and seven. He does, however, dispute the contention that he acted with venal intent, and therefore does contest charge two, as well as charge one to the extent it incorporates allegations of venal intent. He also contests charge eight.
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 the conduct at issue (December 2001 through April 2005).1 Respondent argues that there was no intentional conversion of funds; rather, he unknowingly and inadvertently used
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 until
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, hyperarousal, 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] affidavit. He appears to have been unable to function effectively. However, it is also my opinion, to a reasonable degree of medical certainty, that Mr. Salo has made significant and meaningful improvement due to his wholehearted engagement in a treatment process and that, at the present time, he is fully able to perform as an attorney.”
Notwithstanding the experts’ agreement that respondent suffered from PTSD at the time of his alleged misconduct, the DDC argued that several factors weighed against mitigation. Notwithstanding his abusive upbringing, respondent was able to achieve academically and professionally before 9/11. After 9/11, he was able to negotiate the settlement of several matters (including the Orellana matter underlying charges one and two) and was able to prepare proper closing statements and to disburse the correct amounts of proceeds in each matter. It was only the proceeds of the Orellana settlement subject to the Reliance lien that respondent failed to safeguard properly; such funds were available for misappropriation until 2005 because of the delay in resolution of the lien due to Reliance‘s insolvency and pending liquidation. Further, respondent prepared and filed his own personal income tax forms and renewed his biennial attorney registration for the years 2002 through 2005.
The Referee found, based on the expert reports of Drs. Levitt and Hoffman, that respondent‘s PTSD played a substantial role in bringing about the misconduct underlying the most serious charges (i.e., those concerning the misappropriation of the Reliance lien funds from the Orellana settlement proceeds). However, he found that respondent, despite his somewhat diminished capacity, still was “aware on some cognitive level that he was using third party funds to pay for personal expenses.” The Referee noted that the experts did not
“specifically address the question as to why Respondent from August 23, 2003 until May 2005 did not, or could not, realize from observing his monthly
statements that the amount necessary for the Reliance lien fund was not in the account and at times well below the amount which was required. This is especially so since Respondent, during the years 2003-2005, was able to settle other actions, place the proceeds in the IOLA account and properly disburse the proceeds . . . I do not credit Respondent‘s testimony that it was not until April 2005 that he was feeling well enough to be able to reconcile his IOLA account and only then first realized that the Reliance lien funds were invaded.” “My difficulty with reaching the conclusion which Respondent advances, i.e., that he was unaware due to severe PTSD that he was using third party funds to pay personal expenses since he believed that he had a ‘cushion’ of earned legal fees, also stems from Respondent‘s actions both before and after 9/11. Upon the opening of the IOLA account in 1998 Respondent failed to use the special designation legend of escrow funds required by the rules. Prior to 9/11, Respondent readily admits to commingling his earned fees to provide a ‘cushion’ which is also a violation of the escrow account rules. Following 9/11, Respondent was able to negotiate a settlement of the Orellana action; to disburse payment to his client; to pay himself his fee of $66,000.00; and to hold back $40,000.00 to satisfy the Reliance lien. Respondent also performed other tasks, maybe not as well as earlier but nonetheless sufficiently enough, during the time the Reliance proceeds were invaded by him to pay personal expenses . . .”
“I believe that the seed for the Reliance lien fee misappropriation was sown from the day in 1998 when Respondent opened the IOLA account with the improprieties concerning the account admitted to as noted above, especially the concept of a ‘cushion’ representing the legal fees. After 9/11 and the onset of severe PTSD, and resort to alcohol to cope with its effects, Respondent was still able to perform many tasks as noted above, and the symptoms abated over the years but Respondent continued to invade the Reliance lien funds in 2004-2005.”
“Accordingly, I find that the DDC has established
by a preponderance of the evidence that Respondent knowingly converted third party funds for his own use at various times between 2003 and 2005 and . . . therefore I sustain all of the charges” (citations and emphases omitted).
The Referee recommended, by reason of the “extremely unusual mitigating circumstances” of respondent‘s psychological condition at the relevant time, that he be suspended for only one year, rather than disbarred or suspended for at least three years, as sought by the DDC.
The Hearing Panel, over a dissent by one member, adopted the Referee‘s determinations and recommendation. The dissenting Panel member recommended that charges two and eight be dismissed, that charges one, five, six, and seven be sustained, and that the sanction be limited to a public censure.
The DDC now moves for an order pursuant to
As noted, respondent does not contest charges five, six and seven, and such charges are sustained. With regard to charge one, concerning the misappropriation of third-party funds, respondent does not deny that he invaded (whether intentionally or not) proceeds of the Orellana settlement in his IOLA account subject to the Reliance lien; accordingly, charge one is also sustained. Charge two—alleging that respondent‘s invasion of funds subject to the Reliance lien constituted conduct involving dishonesty, fraud, deceit or misrepresentation in violation of
Charge eight, which alleges that respondent‘s conduct underlying the other sustained charges constituted conduct adversely reflecting on his fitness to practice law in violation of
As to the matter of the sanction to be imposed, there are cases in which suspension from the practice of law for a substantial period of time is the appropriate sanction for even nonvenal misappropriation of funds. For example, in Matter of Tepper, (286 AD2d 79 [2001]), we imposed a two-year suspension for misconduct including “careless and nonvenal invasions of client funds for personal or business uses” (id. at 81) where, although “there was no evidence of venality and no losses were suffered by any of the parties affected by respondent‘s actions,
Accordingly, the motion of the DDC is granted to the extent of sustaining charges one, five, six, seven and eight, and to the extent of suspending respondent from the practice of law for a period of one year, effective 30 days after the date hereof and until further order of this Court, the motion is otherwise denied, and respondent‘s cross motion for imposition of the sanction of public censure is denied.
Gonzalez, P.J., Andrias, Saxe, Friedman and Catterson, JJ., concur.
Respondent suspended from the practice of law in the State of New York for a period of one year, effective August 25, 2010. Cross motion denied.