Appellate Division: Second Judicial Department

M42035

K/cf

A. GAIL PRUDENTI, P.J.

ANITA R. FLORIO

HOWARD MILLER

ROBERT W. SCHMIDT

THOMAS A. ADAMS, JJ.

2006-01182 In the Matter of N. Stephen Sukhdeo, admitted as Naresh Stephen Sukhdeo, an attorney and counselor-at-law. Grievance Committee for the Ninth Judicial District, petitioner; N. Stephen Sukhdeo, respondent. (Attorney Reg. # 2826931)

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 pursuant to 22 NYCRR 691.4(l)(1)(ii) and (iii), upon a finding that he is guilty of professional misconduct immediately threatening the public interest in that he has made substantial admissions under oath that he has committed acts of professional misconduct and/or there exists other uncontroverted evidence of professional misconduct; 2) authorizing the Grievance Committee to institute and prosecute a disciplinary proceeding against him; 3) directing that a hearing be held before a Special Referee with respect to the issues raised in the petition dated April 28, 2006; and 4) directing the respondent to submit an answer within 20 days after service upon him of the order deciding this motion. The respondent was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on August 20, 1997, under the name Naresh Stephen Sukhdeo.

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

ORDERED that the motion of the Grievance Committee for the Ninth Judicial District is granted; and it is further,

ORDERED that pursuant to 22 NYCRR 691.4(l)(1)(ii) and (iii), the respondent N. Stephen Sukhdeo, admitted as Naresh Stephen Sukhdeo, 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, N. Stephen Sukhdeo, admitted as Naresh Stephen Sukhdeo, 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 N. Stephen Sukhdeo, admitted as Naresh Stephen Sukhdeo, based on the petition dated April 28, 2006; and it is further,

ORDERED that Gary L. Casella, Chief Counsel to the Grievance Committee for the Ninth Judicial District, 399 Knollwood Rosd, 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 on motion, 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 the Honorable Jerome M. Becker, a former Judge of the Criminal and Family Courts, 641 Lexington Avenue, 4th floor, New York, N.Y. 10022, 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, N. Stephen Sukhdeo, admitted as Naresh Stephen Sukhdeo, 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 substantial admissions under oath, and upon other uncontroverted evidence of professional misconduct.

Complainant Jillian Lord was the attorney-in-fact for her sister who was serving in the military. On or about September 9, 2002, complainant, who resides in Maryland, retained the respondent to handle the sale of her sister's home in Queens. Complainant attended the closing on February 28, 2003, and was told that copies of the closing documents would be mailed to her. At the closing, the respondent informed complainant that he would hold some money in escrow to pay off "all outstanding utility bills, tax and water bills, as well as the mortgage." Complainant continued to receive bills from the utilities and the mortgage company. The respondent faxed copies of the closing documents to her after she filed a complaint with the Better Business Bureau. Complainant reviewed the documents and asked the respondent to explain discrepancies and to refund money she believed he owed her sister due to his tardy payoff of accounts. The respondent's failure to do so led to this grievance. Complainant also asserted a claim with the Lawyers' Fund for Client Protection seeking payment of approximately $16,307 she believed was due her sister from the sale proceeds.

As part of its investigation, the Grievance Committee for the Ninth Judicial District deposed the respondent in the presence of his counsel on June 28, 2005, audited the respondent's escrow account records at North Fork Bank for the period during which he held funds relating to the Lord matter (August 1, 2002 through February 29, 2004), and prepared a "Quicken" accounting based upon bank records and information provided by the respondent. The initial accounting was provided to the respondent in advance of his deposition. An updated accounting, based upon additional bank records and information provided by the respondent subsequent to his sworn testimony, was provided to the respondent's attorney on February 27, 2006. Although the respondent was asked to review the accounting and advise the Grievance Committee of errors, none were reported. The respondent stated that he could neither confirm nor disaffirm the accuracy of the accounting because his bookkeeping records were inadequate. In correspondence to the Grievance Committee, the respondent reiterated that his records "were not kept perfectly as required."

The Grievance Committee's investigation revealed that the respondent settled the Lord matter in February 2004 by wiring the sum of $94,796.77 into her bank account. The settlement was improperly conditioned upon complainant's withdrawal of her pending complaint and any further complaints with bar associations and related agencies.

On November 7, 2003, Flagstar Bank wired $273,239.83 into the respondent's escrow account in connection with the Montalvo real estate matter. The bank assessed a $15.00 wire fee. Before the matter closed, the account balance fell below zero, thereby converting Montalvo funds for the benefit of others. On November 13, 2003, the bank paid two checks totaling $209,586.24 and relating to the Montalvo matter, which were drawn against funds wired into the account on November 13, 2003, in connection with another matter.

On November 18, 2003, Flagstar Bank wired $278,460.21 into the respondent's escrow account in connection with the Malave real estate matter. Before that matter closed, the account balance fell below zero. When an escrow check in the amount of $231,461.41 was presented for payment on November 26, 2003, in connection with the Malave matter, the bank returned it unpaid. When the check was re-presented and paid by the bank on December 2, 2003, it was drawn against funds which were on deposit in connection with several other matters.

The escrow account balance fell below zero on four separate occasions during the audit period. At the close of business on September 11, 2002, the escrow account balance was $68,649.39. The next day, two checks in the amounts of $81,383.50 and $9,978.09 relating to the respective matters of DeCruz and Munoz, were presented for payment. The bank honored the checks, although the balance was insufficient to cover them, resulting in an overdraft by $22,712.20. The following day, the respondent deposited $155,631.46 into the escrow account to cure the negative balance. A portion of those funds related to the Munoz matter but none related to DeCruz.

At the close of business on November 10, 2003, the escrow account balance was $638,104.30. On November 12, 2003, the account was debited $5,010.00 for an unpaid deposit and eleven checks relating to separate matters were presented for payment. The bank honored the checks, although there were insufficient funds to cover them, resulting in an overdraft of $27,032.72. The following day, $319,638.46 was wired into the account by Argent Mortgage Company to cure the negative balance. The respondent's records do not identify the client to whom the deposit was attributed.

At the close of business on November 20, 2003, the escrow account balance was $856,088.65. The next day, $346,047.86 was wired into the account in connection with an unidentified matter and a $15.00 wire fee was debited. The resulting balance was $1,202,121.51. Twenty-one checks were presented for payment on November 21, 2003, in the total amount of $1,274,847.86. The bank honored the checks despite the insufficient balance. The account was overdrawn by $72,726.35. On November 22, 2003, two deposits totaling $348,000 were made to cure the negative balance. Only $15,000 of that deposit related to one of the checks which the bank had paid the day before. One or more of the checks paid on November 21, 2003, were drawn against funds deposited into the account in connection with other matters.

At the close of business on November 25, 2003, the escrow account balance was $24,420.20. Between November 26 and November 28, 2003, 15 checks totaling $596,084.38 were presented for payment, dropping the balance to -$383,829.60. The bank returned eleven unpaid checks for a total of $408,249.80. The remaining checks were honored despite insufficient funds. On December 1, 2003, three deposits were made into the account in the amount of $1,311,930.30 to cure the negative balance. None of the deposited funds related to matters for which checks were presented for payment during that interval. One or more of the four checks paid by the bank were drawn against funds deposited in connection with other matters.

The respondent testified that he allowed earned fees to remain on deposit in his escrow account. Despite periodic transfers of some earned fees to his business account, the respondent allowed $150,745.10 of earned fees to accumulate in the escrow account during that period. These earned fees were insufficient to cover the negative balances. Undisbursed funds to which the respondent admitted, excluding claimed fees, ranged from $8 to $2,850.73 in various matters and totaled $76,586.52 for the 19 months of the Grievance Committee's audit.

The respondent's handwritten notes contain admissions that during the period of the Grievance Committee's audit, he "overwrote" 22 matters by disbursing more funds that were on deposit in a total amount of $17,200. When asked to explain his actions, the respondent provided copies of the fronts of nine checks dated within the audit period which were allegedly deposited into the escrow account to offset the questioned disbursements. The respondent did not provide copies of the backs of the checks or deposit slips. Bank records do not reveal corresponding deposits into the escrow account although six of the nine checks were payable to the respondent "as attorney."

On December 29, 2003, $192,967 was wired from the respondent's escrow account to the Bank of America for an unidentified matter and a $25 wire fee was debited. The wired funds were returned to the respondent's escrow account on January 6, 2004, because the transfer lacked any identifying information. A $15 wire fee was debited. On January 7, 2004, the funds were again wired to the Bank of America with an appropriate notation. A $25 was debited. There were insufficient funds on deposit relative to the subject matter to cover the disbursement. Throughout the duration of the audit period, no further funds were deposited relative to that matter. All or part of the funds wired to the Bank of America were drawn against funds on deposit in connection with other matters.

On July 2, 2003, the respondent withdrew $250,000 from the escrow account via cashier's check payable to Allen Amonte. On July 30, 2003, the respondent transferred $1,200 to his business account as his fee in the Amonte matter. At the time, there were insufficient funds on deposit relative to that matter to cover the disbursements.

Between September 26, 2003, and February 11, 2004, the respondent disbursed approximately $274,813.55 from his escrow account in connection with the Ashley matter. At the time, there were insufficient funds on deposit relative to that matter to cover the disbursements.

On approximately 25 occasions during the audit period, the respondent disbursed escrow checks totaling $786,016 before making corresponding deposits. During the audit period, the respondent failed to disburse all the funds he had on deposit in the escrow account in connection with approximately 19 matters, totaling approximately $183,066.27.

The respondent admitted that his "records were not kept in the best of ways." He was unable to account for $83,706.36 of the $320,046.17 opening balance in the escrow account on the first day of the Grievance Committee's audit or for $509,627.91 that he transferred into the account on August 2, 2002, when he closed a prior escrow account at North Fork Bank.

The Grievance Committee submits that the respondent's conduct is of the very type that this court has deemed unacceptable and for which it has seen fit to promulgate 22 NYCRR 691.4(l)(1)(ii) and (iii). A petition dated April 28, 2006, and containing 18 charges of professional misconduct based on the foregoing allegations, is annexed to the Grievance Committee's Order to Show Cause.

The respondent has submitted an affidavit in opposition to the Grievance Committee's motion and requests that the motion be denied and a hearing be conducted on an expedited basis. The respondent asks the court to recognize that the lives of all of his real estate clients will be traumatically affected by his suspension. He submits that the public will not be at risk

as a result of his continued practice inasmuch as he has learned from past mistakes, has remedied his defective procedures and represents that his books and records will be open for court inspection.

When the respondent was informed that his escrow balance was deficient, he borrowed funds, without knowing the reason for the deficiencies, and deposited sufficient sums to cover any possible outstanding checks. Per the respondent, all of the monies which have been deposited were repaid.

Notwithstanding the respondent's opposition, we find that he constitutes an immediate threat to the public interest and that his pervasive breach of his fiduciary responsibilities warrants his immediate suspension from the practice of law irrespective of his remedial efforts undertaken in the fact of the Grievance Committee's investigation.

Accordingly, the Grievance Committee's motion is granted, the respondent is suspended pursuant to 22 NYCRR 691.4(l)(1)(ii) and (iii) upon a finding that he is guilty of professional misconduct immediately threatening the public interest, the Grievance Committee is authorized to institute and prosecute a disciplinary proceeding against the respondent based upon the petition dated April 28, 2006; the respondent is directed to submit an answer within 20 days; and the matter is referred to a Special Referee to expeditiously hear and report.

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

ENTER:

James Edward Pelzer

Clerk of the Court