Appellate Division: Second Judicial Department

M40994

S/nal

A. GAIL PRUDENTI, P.J.

ANITA R. FLORIO

HOWARD MILLER

ROBERT W. SCHMIDT

THOMAS A. ADAMS, JJ.

2006-00316 In the Matter of David B. Cohen, an attorney and counselor-at-law. Grievance Committee for the Ninth Judicial District, petitioner; David B. Cohen, respondent. (Attorney Registration No. 1884089)

DECISION & ORDER ON MOTION

Motion by the Grievance Committee for the Ninth Judicial District for an order: 1) suspending the respondent from the practice of law on an interim basis pursuant to 22 NYCRR 691.4(l)(1)(i), (ii), and (iii), upon a finding that he is guilty of professional misconduct immediately threatening the public interest in that he has failed to comply with lawful demands for the Grievance Committee in connection with an investigation into complaints of professional misconduct and based upon his substantial admissions under oath and other uncontroverted evidence of professional misconduct; 2) authorizing the institution of a disciplinary proceeding against respondent based upon the petition dated December 15, 2005, which is annexed to the Order to Show Cause; 3) directing the respondent to submit an answer to the petition within 20 days; and 4) referring the matter to a Special Referee to hear and report. The respondent was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on January 29, 1964, under the name David B. Cohen.

Upon the papers submitted in support of the motion and the papers submitted in response thereto, it is

ORDERED that the motion is granted; and it is further,

ORDERED that pursuant to 22 NYCRR 691.4(l)(1)(i),(ii) and (iii), the respondent, David B. Cohen, is immediately suspended from the practice of law in the State of New York, pending further order of the court; and it is further,

ORDERED that the respondent shall promptly comply with this court's rules governing the conduct of disbarred, suspended, and resigned attorneys (see 22 NYCRR 691.10); and it is further,

ORDERED that pursuant to Judiciary Law § 90, during the period of suspension and until further order of this court, the respondent, David B. Cohen, is commanded to desist and refrain from (1) practicing law in any form, either as principal or agent, clerk, or employee of another, (2) appearing as an attorney or counselor-at-law before any court, Judge, Justice, board, commission, or other public authority, (3) giving to another an opinion as to the law of its application or any advice in relation thereto, and (4) holding himself out in any way as an attorney and counselor-at-law; and it is further,

ORDERED that the Grievance Committee for the Ninth Judicial District is hereby authorized to institute and prosecute a disciplinary proceeding in this court against David B. Cohen, based on the petition dated December 15, 2005; and it is further,

ORDERED that Gary L. Casella, Chief Counsel to the Grievance Committee for the Ninth Judicial District, 399 Knollwood Road, Suite 200, White Plains, N.Y. 10603, is hereby appointed as attorney for the petitioner in such proceeding; and it is further,

ORDERED that within 20 days after service upon him of a copy of this decision and order, the respondent shall serve an answer upon the petitioner and the Special Referee, and shall file the original answer in the office of the Clerk of this court; and it is further,

ORDERED that the issues raised by the petition and any answer thereto are referred to Frank M. Headley, Jr., Esq., c/o Bertine, Hufnagel & Headley, 700 White Plains Road, Scarsdale, N.Y. 10583, as Special Referee to hear and report within 60 days after the conclusion of the hearing or the submission of post-hearing memoranda; and it is further,

ORDERED that if the respondent, David B. Cohen, admitted under the name David B.S. Cohen, has been issued a secure pass by the Office of Court Administration, it shall be returned forthwith to the issuing agency and the respondent shall certify to the same in his affidavit of compliance pursuant to 22 NYCRR 691.10(f).

We find, prima facie, that the respondent is guilty of professional misconduct immediately threatening the public interest based upon his failure to cooperate with the Grievance Committee, his substantial admissions under oath, and upon other uncontroverted evidence of professional misconduct. The proposed charges emanate from an investigation of five separate complaints of professional misconduct received by the Grievance Committee between approximately July 2003 and July 2004. The respondent asserted his own answers to the two earliest complaints but is now represented by counsel in all pending matters.

Respondent testified under oath on July 27, 2005. Based on its investigation, the Grievance Committee submits that the respondent engaged in a pattern of serious professional misconduct involving deceit and abusive litigation practice, misappropriated funds entrusted to him as a fiduciary for his own personal gain, and failed to comply with the Disciplinary Rules with respect to the handling of his escrow account.

The respondent contacted Grievance Counsel prior to his second scheduled deposition and revealed that he had been diagnosed with a serious illness and would have to postpone the followup session indefinitely due to complications with his treatment. Although mindful of respondent's need to address his medical issues, the Grievance Committee decided to proceed with this motion in light of the serious misconduct revealed by its investigation.

The first three charges, which involve the respondent's breach of fiduciary duty and misappropriation of funds entrusted to him in accordance with an escrow agreement, were brought to the Grievance Committee's attention by the Honorable Louis A. Barone. The ownership of $17,500.00 held by the respondent in escrow was the subject of litigation. The respondent failed to comply with a court order directing him to deposit the funds with the Westchester County Clerk pending the outcome of the dispute. A money judgment was ultimately entered against the respondent in the sum of $17,500.00.

The Grievance Committee forwarded a sua sponte complaint to the respondent on or about July 9, 2004, alleging that the respondent engaged in conduct involving fraud, deceit, dishonesty, or misrepresentation and conduct prejudicial to the administration of justice. By letter dated July 9, 2004, the Grievance Committee requested that the respondent submit an answer within 10 days and furnish all records relating to his escrow account from the date of deposit to the date of his submission.

The respondent provided copies of what he represented to be all bank records in his custody and submitted an answer denying all allegations except his failure to pay the sum of $17,500.00 into court. Contrary to the representations made in his answer, the escrow agreement indicates that the respondent was acting as both escrow agent and attorney for Ms. Travis. The funds at issue involved a prior sale by Ms. Travis of real estate to the respondent's former client, Mario Chiulli. The funds were held in escrow pending Ms. Travis' production of a satisfaction of mortgage. The documentation was never provided and subsequently, a foreclosure action was brought against Chiulli. Title to the property was transferred by Chiulli and/or his successors to Hanford's, Inc., in settlement of the foreclosure action. In the Hanford's matter, Ms. Travis claimed that she was entitled to receive the amount held in escrow based on promises made by Chiulli. The respondent claimed that he was merely a stakeholder and that he was advised by his then counsel to request a conference rather than pay the contested funds into court. Although the conference never occurred, Hanford 's made a motion for summary judgment awarding it the $17, 500. That motion was granted. Before entry of the order granting summary judgment the respondent acceded to Ms. Travis' demands for the return of the $17,500.00, with deductions to himself for fees for prior unrelated services, disbursements, and court fees. The respondent asked that the sua sponte complaint be dismissed or suspended pending resolution of the litigation between Hanford's and himself and Travis, in which he became a stakeholder.

The March 26, 2003, escrow agreement provides that the funds entrusted to respondent as fiduciary were to be released to Hanford's in the event that Travis did not provide the required documentation within a six month deadline. During his examination under oath, the respondent admitted that at the insistence of Hanford's attorney he signed the agreement as Travis' attorney, even though he was not representing her in this matter. He admitted that he issued a check for $2,500.00 to himself from the escrow funds.

In view of the respondent's admissions, both in his answer to the verified complaint and during the Question and Answer session, that he disbursed the bulk of the $17,500.00 entrusted to him as a fiduciary in contravention of the March 26, 2003, escrow agreement and, further, that he disbursed a portion of those funds to himself, the Grievance Committee submits that the respondent violated DR 9-102(a). The Committee reached that conclusion irrespective of the respondent's expressed belief in the merits of Ms. Travis' claim to such funds. The Grievance Committee also submits that the respondent's conduct reflects adversely on his fitness to practice law.

In addition, the respondent's prior representation of Mario Chiulli created a conflict of interest that precluded his involvement in the dispute between Travis and Hanford's absent full disclosure and consent from both clients. The respondent testified that he was hopelessly conflicted. His testimony that he refused to provide formal representation for Ms. Travis is belied by the written escrow agreement that he signed as her attorney and the escrow checks written on her behalf to commence a separate action on Travis' behalf against M & R Realty. According to the Grievance Committee, the respondent violated the spirit of DR 5-105.

The respondent admittedly failed to advise Hanford's or Mr. Driven, the attorney for Hanford's, when the funds were disbursed in April 2003, notwithstanding his duty as a fiduciary to do so under DR 9-102(c)(3). He acknowledged that he never informed the court of this critical information. Hanford's pursued its claim against the respondent in the belief that he still had possession of the funds entrusted to him pursuant to the escrow agreement. Despite his argument that Travis was a necessary party in Hanford's action against him, the respondent failed to disclose that Travis had already received the bulk of the funds. Hanford's ultimately obtained a money judgment against the respondent which he has neither appealed nor moved to vacate.

The Grievance Committee maintains that the escrow records provided by the respondent were incomplete and did not satisfy the bookkeeping mandates of DR 9-102(d). The Grievance Committee generated a proposed accounting which was forwarded to respondent's counsel to review with the respondent for accuracy. The most glaring impropriety was the "Bleakley deposit" of $89,418.00 in or about June 2003, followed by a series of disbursements for what appeared to be primarily personal purposes. There was a $30,000.00 disbursement to the respondent's wife as well as disbursements for personal credit card bills and real estate taxes. Of all bank statements submitted by the respondent, only the June 2003 statement lacked copies of the cancelled checks.

In response to the Grievance Committee's request for production of the June 2003 cancelled checks and other documents, the respondent's counsel eventually acknowledged that he did not have the originals or copies. The Grievance Committee was compelled to subpoena these records directly from the bank. The records were not produced in time for the respondent's examination under oath on July 27, 2005.

The respondent testified that the Bleakley deposit represented legal fees, disbursements, and sanctions awarded against the Town of Cortlandt. Mr. Bleakley retained the respondent to commence an action against Metro North and the Town of Cortlandt but refused to sign a retainer agreement. Instead, they had a "handshake deal" for the respondent to receive a third of any recovery. After a deal was struck with the Town to purchase the Bleakley property for $400,000.00, Mr. Bleakley allegedly reneged on his deal with the respondent. They ultimately agreed upon a fee of $89,000.00. The respondent deposited that sum into his attorney escrow account because he was allegedly told "to hold the check for a few days, or a day." He did not draw on the sum until advised by the Town Controller that the matter was concluded.

Mr. Bleakley disputed the respondent's claim that the entire sum received by the respondent represented legal fees and disbursements incident to the lawsuit against the Town and denied that he ever received all of the settlement funds to which he was entitled. Although the respondent testified that he reported the entire sum as income, received a 1099 from the Town verifying that amount, and borrowed money to pay the taxes, the 1099 actually sent to the respondent by the Town reported non-employee compensation of only $20,000.00.

In addition, the Grievance Committee charges that the respondent failed to notify Mr. Bleakley of his receipt of settlement funds from the Town and failed to render an appropriate accounting. Its investigation reveals that the respondent treats his escrow account as a personal checking account and that he routinely writes escrow checks for personal expenses, including a check to cash so he would have money to play poker. Respondent admitted that in a number of instances, he deposited money which constituted his own funds, including dividend checks, into the escrow account to maintain a respectable balance.

The respondent failed to comply with a subpoena duces tecum issued by the Clerk of the Court to compel the production of certain bank records. The Grievance Committee ultimately had to obtain those records directly from the bank pursuant to subpoena. The Grievance Committee's, analysis of those records warrants an inference that the respondent's failure to produce the requested cancelled checks was intentional and designed to conceal other fraudulent conduct which was not apparent from the monthly bank statements or the check register previously provided by the respondent. The Grievance Committee learned that three disbursements from the escrow account in the total amount of $24,000.00, which ostensibly involved a loan to Ms. Travis for the purchase of certain real estate in Putnam County, were endorsed by the respondent rather than the named payees. These checks were negotiated by the respondent at his local bank branch, along with a $400.00 check payable to cash.

The respondent's involvement in two related civil actions in Supreme Court, New York County, emanating from a mortgage foreclosure action brought by Chase Manhattan Mortgage Corporation against the respondent's former client, Anthony DeRosa, and an action by Seymon Pesochinsky, the successful bidder in the foreclosure action, resulted in adverse publicity for Supreme Court Justices Marilyn Diamond and Shirley W. Kornreich. Justice Diamond's involvement in the underlying litigation involving Chase and other alleged conflicts in high profile divorce cases became the subject of complaints before the Commission on Judicial Conduct. DeRosa and his attorneys were cited as sources of the information reported in the news articles. During the pendency of the Chase appeal, Justice Kornreich granted summary judgment and awarded a money judgment in favor of Seymor Pesochinsky in the action entitled Pesochinsky v DeRosa. The respondent began representing DeRosa in that action as well. An article in the New York Post reported that Justice Kornreich was also the subject of investigations by the FBI and the Commission on Judicial Conduct. DeRosa was quoted as the source of that information. This resulted in Justice Kornreich 's recusal from further proceedings and a series of reassignments to different justices to handle Pesochinsky's applications to compel DeRosa to comply with discovery demands and to hold the respondent and DeRosa in contempt for their willful refusal to comply with subpoenas. The respondent argued that DeRosa could not obtain a fair hearing in Supreme Court, New York County, because of his campaign against some "rotten apples" on the bench. During a settlement conference after DeRosa's examination under oath, the respondent allegedly became enraged, began cursing loudly, and threatened to have Pesochinsky's attorney taken care of in a dark alley. The respondent allegedly threatened to bring a lawsuit against Pesochinsky's attorney and members of his firm in retaliation for filing a grievance against him.

The Appellate Division, First Department, affirmed Justice Diamond's determination denying DeRosa's application to vacate the judgment in the foreclosure litigation and rejected the argument that Justice Diamond was statutorily disqualified from hearing any motions in the case. The Clerk of the First Department, Catherine O'Hagan Wolfe, notified the respondent, by letter dated August 26, 2004, that the court was considering the imposition of sanctions against him and his co-counsel for engaging in frivolous conduct in connection with the DeRosa appeal. The conduct complained of included the respondent's alteration of the caption of the action "without leave of court, to substitute "JP Morgan Chase, sued herein as Chase Manhattan Mortgage Corp.' for Chase Manhattan Mortgage Corp., for the express purpose of pressing an appellate argument that the motion court was statutorily disqualified from presiding over this case due to its undisclosed ownership of stock in JP Morgan Chase (see Judiciary Law § 14). Further, [the respondent] supplemented the appellate record with portions of the motion court 's personal financial disclosure statements, which were not part of the record before the motion court. Finally, [the respondent] filed an inaccurate certification, pursuant to CPLR 2105, that the record on appeal constituted a true and complete copy of the record before the motion court" (see DeRosa v Chase Manhattan Mortg. Corp., 15 AD3d 249).

In his reply to Ms. Wolfe, the respondent accused the justices of distorting the law for nefarious ends and labeled their threat of sanctions as "a shamelessly and transparently devious plan to shield Judge Diamond from criticism."

The respondent was sanctioned in the sum of $2,000.00 while his co-counsel was only sanctioned $250.00. The court noted that instead of taking responsibility and expressing remorse, the respondent made derogatory and undignified statements about the judiciary.

The Grievance Committee submits that the respondent should be precluded by the doctrine of collateral estoppel from relitigating the finding by the Appellate Division, First Department, that he engaged in deceitful behavior while prosecuting the DeRosa appeal.

The respondent engaged in similar misconduct while representing the defendants in Shomron v Fuks in the Supreme Court, New York County. The plaintiff's attorney filed a complaint alleging that the respondent knowingly made a series of false statements of fact during the course of representing his clients in order to harass and maliciously injure his adversaries and to impede the progress of discovery. The respondent made the false representation to his adversary counsel that he had been awarded sanctions. He exceeded the bounds of legitimate zealous advocacy and engaged in obstructive behavior to avoid appearing for court-ordered depositions.

The Grievance Committee's investigation further reveals that the respondent improperly failed to refund the unused portion of a fee paid in advance and submitted a retainer executed by a client which fails to comply with the Court Rules pertaining to attorneys handling Domestic Relations matters.

In his reply, the respondent claimed that severe health considerations preclude him from opposing the Grievance Committee's motion in sufficient detail at this time yet seeks the court's leave to complete his representation of a client in two pending matters. He submits that most of the charges can be rebutted at a full hearing after his health has recovered sufficiently. He admits to poor record keeping during his illness but submits that it was not his intent to force the Grievance Committee to subpoena the bank directly. The respondent denies ever knowingly misappropriating client funds.

We conclude that the Grievance Committee has set forth a prima facie case that the respondent is guilty of professional misconduct immediately threatening the public interest. Accordingly, the motion is granted, the respondent is suspended, pending further order of this court, the Grievance Committee is authorized to institute and prosecute a disciplinary proceeding against respondent based on the petition dated December 15, 2005; the respondent is directed to submit an answer within 20 days of service upon him of this decision and order; and the issues raised by the petition and answer are referred to Frank M. Headley, Jr., Esq., as Special Referee to hear and report.

PRUDENTI, P.J., FLORIO, MILLER, SCHMIDT and ADAMS, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court