Attorney May Not Use Trust Account as Improper Shield
Muldoon & Getz
The Code of Professional Responsibility bars commingling of funds. DR 9-102, 22 NYCRR 1200.46. The prohibition works two ways: the concern is not just of commingling client funds with attorney funds, but also of commingling attorney funds with client funds.
Where an attorney is entitled to be paid for services performed, the attorney should promptly withdraw that amount from the trust account. The monies should not be continued to be held in trust.
Part of the rationale for this rule is that client funds are held in trust, and therefore exempt from execution by creditors. An attorney whose own funds are in an account that is exempt from creditors could be using that account as a shield, a misuse of a trust account. Several disciplinary decisions address this situation.
In a First Department case, the attorney placed personal funds in a trust account after his personal account was levied upon by the IRS. Suspension from the practice of law resulted. Matter of Silva, 28 AD3d 11, 811 NYS2d 22 (1st Dept 2006); see also, Matter of Goldstein, 10 AD3d 174, 780 NYS2d 348 (1st Dept 2004); Matter of Betancourt, 232 AD2d 9, 661 NYS2d 208 (1st Dept 1997).
In a Second Department case, an attorney who deposited personal funds in his attorney trust account was found to have done so in order to evade a creditor. For this and other misconduct, the attorney was suspended for one year. Matter of Jean-Baptiste, 33 AD3d 191, 819 NYS2d 571 (2d Dept 2006). Similarly, depositing personal funds into an escrow account to prevent creditors from locating assets and executing judgments against the attorney, and drawing checks upon the escrow account payable to cash, resulted in suspension. Matter of Liedy, 276 AD2d 100, 716 NYS2d 678 (2d Dept 2000); see also, Matter of Rose, 286 AD2d, 730 NYS2d 161 (2d Dept 2001); Matter of Goldsmith, 43 AD3d 158, 839 NYS2d 30 (1st Dept 2007) (disbarment where attorney failed to defend against charges of improperly shielding personal funds, and issued more than $100,000 in trust checks for his personal use).
In another case, an attorney used his trust account for personal transactions, and failed to use the account for client funds. Additionally, the checks were dishonored for insufficient funds. In mitigation, the misconduct was not related to client funds. Censure resulted. Matter of Fisher, 29 AD3d 71, 810 NYS2d 690 (4th Dept 2006).
An attorney was permitted to resign from the bar where he admitted, among other ethics violations, to placing personal funds in a corporate account to shield from lienholders. Matter of Kelligrew, 40 AD3d 66, 831 NYS2d 471 (2d Dept 2007).
© 2008 by Gary Muldoon