Appellate Division: Second Judicial Department

M90452

E/nl

A. GAIL PRUDENTI, P.J.

WILLIAM F. MASTRO

REINALDO E. RIVERA

ROBERT A. SPOLZINO

DANIEL D. ANGIOLILLO, JJ.

2009-04251 In the Matter of William R. Kelly, an attorney and counselor-at-law. Grievance Committee for the Tenth Judicial District, petitioner; William R. Kelly, respondent. (Attorney Registration No. 1427012)

DECISION & ORDER ON MOTION

Motion by the Grievance Committee for the Tenth Judicial District for an order: 1) suspending the respondent from the practice of law pending further order of the court, pursuant to 22 NYCRR 691.4(l)(1)(ii) and (iii), based on substantial admissions under oath and other uncontroverted evidence which allegedly establish, inter alia, that he has wrongfully converted escrow funds entrusted to him as a fiduciary for his own use and benefit; and 2) authorizing the institution of a disciplinary proceeding against the respondent based on a verified petition dated April 23, 2009. The respondent was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on December 14, 1966.

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

ORDERED that the motion is granted, and pursuant to 22 NYCRR 691.4(l)(1)(ii) and (iii), the respondent, William R. Kelly, 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, William R. Kelly, 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, William R. Kelly, 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 or 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 Tenth Judicial District is hereby authorized to institute and prosecute a disciplinary proceeding in this court against William R. Kelly, based on the verified petition dated April 23, 2009; and it is further,

ORDERED that Rita E. Adler, Chief Counsel to the Grievance Committee for the Tenth Judicial District, 150 Motor Parkway, Suite 102, Hauppauge, N.Y. 11788, 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, William R. Kelly, shall serve an answer upon the petitioner and the Special Referee, and shall file the original answer with this court; and it is further,

ORDERED that the issues raised by the petition and any answer thereto are referred to John P. Clarke, Esq., 35 Broad St., Williston Park, N.Y. 11596, 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, William R. Kelly, 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 on his substantial admissions under oath and other uncontroverted evidence.

By letter dated April 18, 2008, the Grievance Committee advised the respondent that he was the subject of a sua sponte investigation based on a notice from the Lawyers' Fund for Client Protection that a check in the amount of $1,250, drawn on the respondent's escrow account, was dishonored for insufficient funds and that the account was overdrawn by $690.93 on March 19, 2008. The Grievance Committee asked the respondent for a written explanation for the deficiency and bank and bookkeeping records for the escrow account for the six month period preceding the dishonored check. The respondent offered the explanation of inadvertent failure to deposit a corresponding $1,500 check into the escrow account on March 18, 2008, before issuing the subject check. Upon discovering his mistake, the respondent claimed to have rectified the matter by depositing corresponding funds. However, the record did not support his explanation inasmuch as he failed to preserve funds entrusted to him as a fiduciary well before he issued the subject check.

On October 25, 2007, the respondent deposited into his escrow account a down payment of $70,000 in connection with a real estate transaction in which he represented the seller, Hublitz. When that transaction closed on January 29, 2008, the respondent disbursed the entire $70,000 down payment.

On November 29, 2007, the respondent received and deposited into the escrow account a $100,000 down payment in connection with a real estate transaction in which he represented the seller, Perlin. The Perlin transaction was not consummated. On or about February 11, 2008, the respondent drew a $100,000 check against the escrow account payable to Joseph Aronne to refund the down payment.

Although the respondent should have maintained and preserved at least $170,000 on account in his escrow account between November 29, 2007, and January 29, 2008, the balance fell below that amount on four occasions during that interval. On January 1, 2008, the escrow deficiency was $74,951.81. Throughout the period, the balance fluctuated as new deposits and disbursements, unrelated to the Hublitz and Perlin matters, were made.

At his examination under oath on February 24, 2009, the respondent admitted that he had, without authorization, advanced funds entrusted to him as a fiduciary to his law office disbursement account as fees on future matters. Although the respondent testified that he had fully replenished the escrow account by depositing subsequently earned fees therein, he could not provide specifics as to the sources of those funds or the amounts he deposited for such purpose.

The respondent's bank and bookkeeping records for the period April 1, 2008, through February 28, 2009, the eleven month period subsequent to the dishonored check, reflect that on or about October 27, 2008, and January 21, 2009, the respondent deposited checks of $80,000 and $33,000, drawn against a personal account of his wife and himself, in an apparent effort to replenish the escrow account. Those deposits were made by the respondent prior to his examination under oath on February 24, 2009.

The respondent's bank and bookkeeping records reflect that as of October 23, 2008, four days before making the first of two deposits totaling $113,000, the escrow balance was $291,973 when it should have been at least $411,000 on behalf of client matters. The resultant deficiency of $119,000 on October 23, 2008, was at least $41,000 more than previously believed and more than the respondent subsequently deposited into the escrow account to replenish that deficiency.

In opposition to the Grievance Committee's motion, the respondent contends that the Grievance Committee has failed to demonstrate that an interim suspension is warranted or necessary under the circumstances. The respondent notes that he has been practicing law for approximately 43 years without any prior involvement with the Grievance Committee. He charges that the Grievance Committee's application is "rife with misstatements" and "devoid of documentation supporting its statements."

The respondent asserts that, contrary to the Grievance Committee's contentions, the escrow balance is currently equal to the escrow liability in connection with all of his own files due to his three deposits from his and his wife's personal account. In support of his statement, he has submitted copies of escrow balance sheets relating to his open files and claims a current balance of $229,201.34.

The respondent has not denied that he wrongfully withdrew fiduciary funds or that the balance in his escrow account remained significantly deficient subsequent to January 2008 due to his improper removal of funds. Instead, the respondent seeks denial of the motion for his interim suspension based upon his replacement of the misappropriated funds approximately one year later when confronted with the Grievance Committee's investigation and the Grievance Committee's initial miscalculation concerning the full amount of the escrow deficiency.

Notwithstanding the respondent's opposition, the Grievance Committee's motion is granted, the respondent is immediately suspended on the grounds that he constitutes an immediate threat to the public interest and the Grievance Committee is authorized to institute and prosecute a disciplinary proceeding against respondent.

PRUDENTI, P.J., MASTRO, RIVERA, SPOLZINO and ANGIOLILLO, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court