On July 31, 2024, the Appellate Division, Second Judicial Department suspended an attorney for one year based on three charges of professional misconduct: (1) that he misappropriated escrow funds in violation of Rule 1.15 (a); (2) that he failed to properly title his escrow account; and (3) that he practiced under a misleading firm name.
Charge One was based on two different matters. In the Abramovic matter, the $4,000 settlement check was deposited into Felix Kozak’s (another attorney) account (respondent shared office space, nonlawyer support staff, and an accountant with Kozak). Notably, the Abramovic settlement check was made payable to “Law Office of Felix Kozak PC as Attorney and Ilona Abramovic). Respondent thereafter issued two checks totaling $4,000 from his escrow account in connection with the Abramovic matter. As the Abramovic funds were not on deposit in respondent’s escrow account, the $4,000 in disbursements cleared against other client funds in the account.
In the White matter, the same underlying error occurred when a $20,000 settlement check was deposited in the other attorney’s escrow account. Once again, respondent issued $19,998 in connection with the White matter (the Court’s decision does not elaborate on the $2 discrepancy). As the White funds were not on deposit, the $19,998 cleared against other client funds in respondent’s escrow account.
Charge Two alleged that respondent failed to properly title his escrow account and checks in violation of rules 1.15 (b) (2) and 8.4 (a). Rule 1.15 (b) (2) requires escrow accounts as “Attorney Special Account,” “Attorney Trust Account,” or “Attorney Escrow Account.” Respondent’s escrow account was titled “NWELE AND ASSOCIATES, LLC IOLA A/C” and his checks were titled “NWELE AND ASSOCIATES LLC IOLTA ACCOUNT.”
Charge Three alleged that respondent practiced under a misleading firm name, in violation of rule 7.5 (b), as he was a solo practitioner and his firm’s name was “Nwele and Associates, LLC.”
At his hearing, respondent testified that he maintained a solo law practice as a side job, and that in addition to his legal education he had obtained an MBA and was a licensed CPA and held a Charter Global Management Accountant license. The Special Referee sustained all three charges, and found that respondent expressed remorse for his actions, fully cooperated with the Committee, had no venal intent, and that he instituted remedial measures. Respondent also asked the Court to consider his mitigation, which the Court noted “includes, inter alia, the respondent’s remedial efforts to ensure that his escrow account and associated checks as well as his firm name [being now properly titled] and evidence of his good character, pro bono activities, and community service.” The Court also noted that respondent had received a personally-delivered admonition in April 2006, for “inter alia, failing to adequately supervise non-lawyers in his office; failing to maintain requisite bookkeeping records for his escrow account; and practicing under a name that falsely suggest that he was associated with other attorneys.”
The Court sustained all the charges and imposed a one-year suspension on respondent.
Regarding the misappropriation charge, the major takeaway is that—from the decision—it does not appear that any of respondent’s clients were permanently deprived of their funds. Both Abramovic and White had their settlement checks deposited into the Kozak’s escrow account, but when respondent issued checks relating to those matters, he did so from his own escrow account. According to the decision, these checks cleared against other client funds that respondent was holding in his escrow account at the time, and thus, the other client funds were misappropriated. It is possible that once respondent learned of the errors that Abramovic and White’s funds were transferred to respondent’s escrow account, since the Court did not note in its opinion that any parties were owed money. This case reinforces the rule that even misappropriations that lack venal intent can warrant public discipline.
Respondent’s failure to properly title his escrow account and checks is an all-too-common mistake attorneys make. As explained in my prior blog post, a title that indicates the account is an escrow or IOLA account is not sufficient: the title must include the language from rule 1.15 (b) (2).
In a similar vein, the title of respondent’s law firm violated rule 7.5 (b), because his firm name included “Associates” when respondent was a solo practitioner. Interestingly, Charge Two alleged a violation of rule 7.5 (b) as a whole, when it appears that respondent’s firm name more narrowly violated rule 7.5 (b) (i) and (iii) (a lawyer in private practice shall not practice under a false, deceptive, or misleading trade name or a name that is misleading as to the identity of the lawyer or lawyers practicing under such name).
This case also demonstrates the importance an attorney’s prior history can play in determining sanction. Respondent received an admonition in 2006, nearly 18 years ago. Although the admonition was distant in time, it likely influenced the Court’s decision, as respondent was admonished for both similar conduct (bookkeeping records for his escrow account) and the same conduct (misleading firm name). If an attorney receives an admonition or letter of advisement, it is crucial to address the findings and take immediate remedial action. The Court may also have held respondent to a higher standard, as it found under the totality of the circumstances, including “respondent’s financial experience . . .” that a one-year suspension was warranted.
Cases such as this highlight the complexities of legal ethics, and the serious consequences attorneys can face. Navigating these issues requires both attention to detail and a deep understanding of the Rules of Professional Conduct. My practice focuses on helping attorneys and law firms protect their professional reputations by providing guidance on ethical compliance and representing attorneys in disciplinary proceedings. My goal is to ensure that my clients can practice with confidence and focus on meeting their own clients’ needs.