Appellate Division: Second Judicial Department

M54138

K/nl

A. GAIL PRUDENTI, P.J.

HOWARD MILLER

ROBERT W. SCHMIDT

STEPHEN G. CRANE

WILLIAM F. MASTRO, JJ.

2007-01881 In the Matter of Peter J. Schmerge, an attorney and counselor-at-law. Grievance Committee for the Ninth Judicial District, petitioner; Peter J. Schmerge, respondent. (Attorney Registration No. 1629799)

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 misconduct immediately threatening the public interest; (2) authorizing it to institute and prosecute a disciplinary proceeding against him; (3) directing the respondent to answer the petition annexed to the Grievance Committee's Order to Show Cause within 20 days after service of the order determining this motion; and 4) appointing 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 First Judicial Department on February 14, 1972.

Upon the papers submitted with respect to the motion and 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)(i), (ii) and (iii), the respondent, Peter J. Schmerge, 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, Peter J. Schmerge, 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, Peter J. Schmerge, 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 Peter J. Schmerge, based on the petition dated February 26, 2007; 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 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 Richard Greenblatt, Esq., Rutberg & Associates, P.C., 3657 Albany Post Road, Poughkeepsie, N.Y. 12601, as Special Referee to hear and report within 60 days after the conclusion of the hearing on the submission of post-hearing memoranda; and it is further,

ORDERED that if the respondent, Peter J. Schmerge, 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's lawful investigations, his substantial admissions under oath, and other uncontroverted evidence of his professional misconduct.

This matter emanates from complaints by the respondent's former client, Leslie Smouha, and her attorney, A. Charles D'Agostino; and, the resultant discovery of the respondent's apparent mishandling of his attorney trust account funds related to client Smouha and the matter of the Estate of Marianna Corrieri.

Failure to CooperateIn connection with the complaints of Leslie Smouha and Mr. D'Agostino, by letter dated March 3, 2006, the Grievance Committee requested that on or before March 20, 2006, the respondent produce the following:

"All bank statements, deposit items, cancelled checks (front & back), deposit slips, ledgers, checkbooks, check stubs, wire transfers, and debit/credit memos for your Attorney Trust account at Hudson Valley bank from the date that you first deposited $6,450 (from Rosa Santos) in that account to the time all money related to the Smouha matter were disbursed."

Following an adjournment granted upon the respondent's request, by letter dated April 7, 2006, he provided two bank statements from his attorney trust account for the period of December 1, 2004, through January 31, 2005. Grievance Counsel states that these records reflected that on December 22, 2004, the respondent deposited the sum of $6,450 relating to client Smouha into his trust account. On that date, no other funds were on deposit. Also, on January 3, 2005, the sum of $1,700 was transferred into his account, but the respondent did not provide the transfer advice for that transaction. Additionally, the only other funds deposited into the respondent's trust account during January 2005, related to the Estate of Corrieri.

By letter dated April 19, 2006, the Grievance Committee requested that the respondent provide specific information and documentation, including the following, within 10 days of his receipt of the letter:

1. Why he deposited $44,000 into his attorney trust account on December 24, 2004, relating to the Estate of Marianna Corrieri.

2. Documentation establishing that he was entitled to take $1,450 from funds on deposit in the trust account for the Marianna Corrieri Estate as of January 3, 2005.

3. Documentation of the source of the $1,500 deposit clearing his trust account on January 24, 2005, and an explanation as to why those funds were deposited into his account.

The respondent failed to respond to the Grievance Committee's request. By certified letter dated May 5, 2006, he was again requested to provide the specified information and documentation. The Grievance Committee granted the respondent's subsequent request for an extension of time to June 5, 2006. However, on that same date, June 5, 2006, the respondent requested a further extension of time, which was granted by the Grievance Committee, and extended his deadline to July 6, 2006. Again, the respondent failed to respond.

On July 10, 2006, the respondent contacted the Grievance Committee and advised that he was experiencing health problems. The Grievance Committee informed him that it required either his answer to the April 19, 2006, request for information and documentation, or proof from his physician regarding his inability to work. By letter dated August 8, 2006, the Grievance Committee memorialized its repeated requests to the respondent and directed him to immediately respond to the inquiries.

By letter dated August 11, 2006, the respondent advised the Grievance Committee that he had been occupied preparing for trial. He also forwarded a letter from a physician stating that it was anticipated that the respondent would undergo surgery within the next several weeks. No mention was made of the respondent being unable to work. Nor did the respondent respond to the Grievance Committee's April 19, 2006, requests. The respondent hand-delivered his August 11, 2006, letter to the Grievance Committee on August 16, 2006, at which time he also accepted service of a Judicial Subpoena.

By letter dated September 5, 2006, the respondent responded to the Grievance Committee's April 19, 2006, request for information and documentation.

On September 7, 2006, the respondent appeared pro se pursuant to subpoena, at the Grievance Committee's office, and testified under oath. At that time, the Grievance Committee further requested that the respondent produce various documents and information within one month, on October 7, 2006. The respondent failed to produce the requested documents and information by the October 7, 2006, deadline.

By letter dated November 3, 2006, the Grievance Committee reminded the respondent of the outstanding requests and directed that he produce any and all documents relating to the Corrieri Estate. He was to produce the requested information immediately, or provide medical documentation that he was unable to practice law. The respondent failed to provide the requested information and documentation.

By letter dated November 13, 2006, the Grievance Committee was notified that the respondent was now represented by an attorney. By letter dated November 15, 2006, the Grievance Committee advised the respondent's counsel of the respondent's failure to timely respond to its lawful requests, and that such conduct constitutes professional misconduct. It further advised that, based upon information received from Anthony Corrieri, between January 2005, and April 2005, the respondent improperly disbursed to himself approximately $14,909.69, of which $9,909.69 was due to Anthony Corrieri and the remaining $5,000 was to be held by the respondent. The Grievance Committee directed the respondent to respond within 10 days to these allegations and provide proof that he was authorized to disburse funds to himself that he was holding in escrow for the Corrieri Estate. The respondent's attorney requested and was granted an extension of time to respond until December 18, 2006. However, the respondent failed to submit a response.

By letter dated December 4, 2006, the respondent's counsel was directed to provide a date, for the respondent to appear at the Grievance Committee's office to give sworn testimony. Upon receiving no response, the Grievance Committee advised the respondent's attorney by letter dated December 28, 2006, that if a date was not selected by him as previously requested, the respondent was to appear to give sworn testimony on January 4, 2007.

On January 4, 2007, the respondent's attorney requested and was granted an adjournment until January 10, 2007. However, on January 9, 2007, the respondent's attorney advised the Grievance Committee that his client would not appear on January 10, 2007. The Grievance Committee responded by letter dated January 9, 2007, advising that the respondent had numerous outstanding requests and his failure to comply with the lawful demands constituted grounds for his immediate suspension. The respondent failed to appear to give sworn testimony and produce all outstanding documents on January 10, 2007. However, he submitted a letter of engagement indicating that he was on trial in a Supreme Court matter.

By letter dated January 19, 2007, the respondent's attorney advised that the respondent was willing to re-schedule his appearance. He also provided a written response to some of the outstanding requests.

The Grievance Committee states that the respondent never provided all the documents requested on September 7, 2006, and November 3, 2006. Additionally, although the respondent did provide a response to the Grievance Committee's November 15, 2006, letter, albeit untimely, he never provided his file, bank records, billing records, proof of how fees were paid, etc., relating to the Estate of Corrieri.

Substantial Admissions Under Oath

The Grievance Committee points out that the respondent admitted that he represented client Leslie Smouha in a litigated estate matter in Surrogate's Court, that he had been discharged by Ms. Smouha in or about February 2005, and that the matter was taken over by an attorney named D'Agostino. The respondent conceded that he did not make a formal application to the court to be relieved as counsel and he did not recall if he executed a consent to change attorney form. However, he claims that he advised the court that he was no longer handling the matter. He also conceded that he sent Ms. Smouha e-mail communications concerning the outstanding balance of legal fees at a time he knew that she was represented by new counsel.

Other Uncontroverted Evidence of Professional Misconduct

The Grievance Committee advised the respondent's counsel by letter dated November 15, 2006, that the respondent's trust account records reflected deposits totaling $422,605.19 with respect to the Corrieri estate, and that approximately $14,909.69 was improperly disbursed to the respondent between January 2005, and April 2005. The Grievance Committee concluded that pursuant to a Stipulation and Order of the Surrogate's Court, Westchester County, dated March 31, 2005, in Matter of the Proceeding for the Revocation of Letters of Administration and Appointment of Administrator dbn in the Estate of Marianna Corrieri, aside from the disbursement of funds to the beneficiaries, the sum of $9,909.69 was due to Anthony Corrieri in March 2005, and the $5,000 balance was to be held in escrow to cover costs associated with filing fiduciary income tax returns.

By letter dated January 19, 2007, the respondent admitted the he had erroneously disbursed $9,909.69 to himself between January 2005, and April 2005, and that this money was to have been held in escrow. He claims that he disbursed the funds to himself in error and that when the mistake was pointed out to him in November 2006, he repaid Mr. Corrieri with interest ($11,000).

Although the Stipulation required that the respondent hold the sum of $5,000 in escrow, as of May 2005, the balance in the respondent's escrow account was zero. The documentary evidence supporting this includes the respondent's bank records, the Stipulation, and the respondent's communications with the attorney representing Mr. Corrieri's sister.

Further, the documentary evidence indicates that on January 3, 2005, when the respondent disbursed the sum of $1,700 to himself, the only funds in his account were $1,700 relating to client Smouha, and $44,000 relating to the Corrieri estate. His bank records indicate that the $6,450 deposit relating to Smouha cleared the respondent's escrow account on December 22, 2004, at a time when there were no other funds in the account. The next day, December 23, 2004, the respondent received instructions from his client, Ms. Smouha, to disburse those funds by sending her a check in the amount of $1,450 and apply the remainder to her legal bill. By e-mail dated January 5, 2005, Ms. Smouha again instructed the respondent to mail her a check in the amount of $1,450. Ms. Smouha in her complaint alleged that the respondent misled her with respect to the $1,450 payment. While he made disbursement of $6,450 to himself between December 2004 and January 3, 2005, he did not send her the payment until on or about January 14, 2005.

Grievance Counsel states that: "[I]n an effort to determine the veracity of respondent's position, the respondent was asked to provide proof that he was entitled to a $1,450 legal fees on the Corrieri matter. In response, the respondent provided a letter from Anthony Corrieri dated August 24, 2006, stating that as of January 1, 2005, the amount of $1,975 was due to the respondent for services rendered. The respondent did not advise the Committee that Mr. Corrieri had paid the $1,975 legal bill by personal check. Instead, the respondent misled the Committee." Subsequently, when the respondent was confronted with a copy of Mr. Corrieri's personal check to him in the amount of $1,975, the respondent changed his position and stated that he had made an apparent error in concluding that the monies were part of his fees.

Attached to the Grievance Committee's order to show cause is a proposed petition dated February 26, 2007, setting forth 12 charges of misconduct against the respondent.

The respondent's repeated failure to comply with the lawful requests of the Grievance Committee and his admissions and substantial other evidence, establish that his misconduct immediately threatens the public interest and that his immediate suspension is warranted pursuant to the standards set forth in 22 NYCRR 691.4(l)(1)(I), (ii) and (iii).

Accordingly, the Grievance Committee's motion is granted, the respondent is immediately suspended from the practice of law, pursuant to 22 NYCRR 691.4(l)(1)(i),(ii) and (iii); and the Grievance Committee is authorized to institute and prosecute a disciplinary proceeding against him.

PRUDENTI, P.J., MILLER, SCHMIDT, CRANE and MASTRO, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court