Appellate Division: Second Judicial Department

M111460

E/ct

REINALDO E. RIVERA, J.P.

PETER B. SKELOS

STEVEN W. FISHER

MARK C. DILLON

DANIEL D. ANGIOLILLO, JJ.

2010-07821 In the Matter of Joseph K. LoBue, admitted as Joseph Kimball LoBue, an attorney and counselor-at-law. Grievance Committee for the Second, Eleventh, and Thirteenth Judicial Districts, petitioner; Joseph K. LoBue, respondent. (Attorney Registration No. 2080786)

DECISION & ORDER ON MOTION

Motion by the Grievance Committee for the Second, Eleventh, and Thirteenth Judicial Districts for an order: (1) suspending the respondent from the practice of law 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 failed to comply with the lawful demands of the Grievance Committee in connection with an investigation into complaints of professional misconduct, made substantial admissions under oath that he committed acts of professional misconduct in that he admitted that he wrongfully converted funds entrusted to him as a fiduciary, and upon other uncontroverted evidence of professional misconduct in that he ignored court orders and that his escrow account records reflect that he used client funds to pay office expenses; (2) authorizing it to institute and prosecute a disciplinary proceeding against the respondent based on a petition dated August 12, 2010; (3) directing the respondent to submit an answer to the petition; and (4) referring any issues raised in the petition and any answer thereto 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 March 3, 1987, under the name Joseph Kimball LoBue.

Upon the papers submitted in support of the motion and no papers having been submitted in opposition or in relation 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, Joseph K. LoBue, admitted as Joseph Kimbal LoBue, 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, Joseph K. LoBue, admitted as Joseph Kimbal LoBue, 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, Joseph K. LoBue, admitted as Joseph Kimbal LoBue, 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 Second, Eleventh, and Thirteenth Judicial Districts is hereby authorized to institute and prosecute a disciplinary proceeding in this Court against Joseph K. LoBue, admitted as Joseph Kimbal LoBue, based on the petition dated August 12, 2010; and it is further,

ORDERED that the Grievance Committee shall serve the petition upon the Special Referee and file the original petition in the office of the Clerk of this Court within 20 days after receipt of a copy of this order; and it is further,

ORDERED that Diana Maxfield Kearse, Chief Counsel, Grievance Committee for the Second, Eleventh, and Thirteenth Judicial Districts, Renaissance Plaza, 335 Adams Street, Suite 2400, Brooklyn, N.Y., 11201-3745, 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 order, the respondent, Joseph K. LoBue, admitted as Joseph Kimbal LoBue, 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 the Honorable Stella Schindler, a former New York City Family Court Judge, 63 East Ninth Street, #8J, New York, N.Y. 10003, as Special Referee to hear and report, together with her finding on the issues, and to submit a 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, Joseph K. LoBue, admitted as Joseph Kimbal LoBue, 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 for the Second, Eleventh, and Thirteenth Judicial Districts, his substantial admissions under oath that he wrongfully converted funds entrusted to him as a fiduciary, and upon other uncontroverted evidence of professional misconduct in that he ignored court orders and used client funds to pay office expenses.

Complaint of Harjit Singh

On April 29, 2008, the Grievance Committee received the Singh complaint, emanating from an escrow agreement between Mr. Singh and his wife, as purchasers, and the respondent's client, as the seller. The respondent was required to hold $50,000.00 from the sale proceeds in escrow until the seller cured outstanding violations on the property. If the violations were not cured, the respondent was to forward the funds held in escrow to the purchasers.

The purchasers entrusted the $50,000 to the respondent in two separate checks. The respondent deposited their bank check for $30,900 into his operating account on May 12, 2005. The respondent first opened his escrow account on June 17, 2005. It did not contain the $50,000 entrusted to him by Mr. Singh and his wife. After the seller failed to cure the outstanding violations within 120 days as mandated by the escrow agreement, Mr. Singh demanded release of the escrow funds. On December 6, 2007, the Singhs' motion for a default judgment against the respondent and his client was granted, and they were directed to pay the Singhs the sum of $50,000 plus interest from January 3, 2006. The respondent failed to pay the Singhs, and did not appeal the order or move to vacate it.

At his investigative appearance on March 16, 2010, the respondent admitted that the funds entrusted to him were not intact and that he had used part of them for his office expenses. He further admitted that he had received a copy of the order granting the motion for a default judgment but did not release the funds or move to vacate the judgment. The respondent thereby allegedly converted funds, in violation of DR 9-102(a)[now Rule 1.15(a)], failed to promptly deliver funds entrusted to him upon request of a third party entitled to them, in violation of DR 9-102(c)(4) [now Rule 1.15(c)(4)], and engaged in conduct prejudicial to the administration of justice, in violation of DR 1-102(a)(5)[now Rule 8.4(d)].

Complaint of Norman Paul Weiss, Esq.

On April 28, 2009, the Grievance Committee received the Weiss complaint on behalf of the respondent's former client, Dr. Burton Miller, who retained him in June 2008 to represent him in divorce proceedings. By court-ordered stipulation dated June 20, 2008, Dr. Miller was directed to pay $2,250 per week to the respondent in escrow to be remitted to the IRS in satisfaction of past tax liability.

By letter dated May 11, 2009, the respondent provided a list showing his receipt between July 2008 and January 2009 of $44,000 in 22 installments of $2,000 each from Dr. Miller for disbursement to the IRS. Of that sum, only $32,000 was remitted to the IRS, after substantial lag times. Upon being substituted by Mr. Weiss, the respondent refunded $12,000 to Dr. Miller from his escrow account. Although the respondent paid $32,000 out of his escrow account on behalf of Dr. Miller, he had only deposited $14,000 of his checks into that account. Records indicate that the respondent deposited $22,000 of Dr. Miller's funds into his operating account instead of the escrow account.

At his investigative appearance on March 16, 2010, the respondent admitted using the funds received from Dr. Miller to pay his office expenses and to pay other clients. In addition, he admitted that the long lag times resulted from his misuse of Dr. Miller's funds and his need to rely on the receipt of funds from other clients to replenish those funds. The respondent further admitted failing to timely remit the remaining $12,000 received from Dr. Miller to the IRS and eventually returning those funds to Dr. Miller. By virtue of allegedly converting funds entrusted to him as fiduciary, using other clients' funds to pay his office expenses, failing to immediately remit payments to the IRS on behalf of Dr. Miller, in violation of the court-ordered stipulation, the respondent is charged with violating DRs 9-102(a) [now Rule 1.15(a)], 9-102(c)(4) [now Rule 1.15(c)(4)] and 1-102(a)(5) [now Rule 8.4(d)].

Complaint of Bennie Beck

On November 5, 2009, the Grievance Committee received the Beck complaint alleging that the respondent obtained a power of attorney for Mr. Beck's 95 year old aunt, Ferris Malloy, withdrew approximately $70,000 from an annuity belonging to her, placed those funds in escrow and failed to return telephone calls regarding use of those funds. At his investigative appearance on March 16, 2010, the respondent admitted receiving $6,000 from Ms. Malloy's bank account and approximately $61,900 from an annuity which she owned. Although those funds were deposited into his escrow account, the respondent admittedly used part of them to pay his office expenses. Further investigation revealed that on March 3, 2009, $15,032 was transferred from the checking account of Ms. Malloy and Mr. Beck to the respondent's operating account. By using Ms. Malloy's funds to pay his office expenses, the respondent is charged with converting funds entrusted to him as a fiduciary, in violation of DR 9-102(a) [now Rule 1.15(a)].

Failure to Maintain Ledger and Proper Escrow Records

At his investigative appearance on March 16, 2010, the respondent admitted that he did not maintain a separate ledger record for each client with respect to his escrow account. He relied on notations in a check register to account for each client's funds. His deposit and withdrawal slips do not identify the source of the funds, a description of each item, the payee of each transaction and the purpose of each transaction. The respondent is thereby charged with violating DR 9-102(d)(1) and (2) [now Rules 1.15(d)(1)(i)and (ii)].

Failure to Cooperate

By letter dated May 28, 2009, sent to the respondent's Staten Island business address, the Grievance Committee directed the respondent to submit a written answer to the Weiss complaint within 10 days and informed him that an unexcused failure to respond constituted professional misconduct independent of the merits of the complaint. The respondent failed to answer. By certified letter dated October 26, 2009, the Grievance Committee again directed the respondent to submit an answer within 10 days. The respondent again failed to answer. By letter dated November 19, 2009, sent via regular and certified mail, the Grievance Committee again directed the respondent to submit an answer within 10 days and advised that his failure to cooperate could result in his immediate suspension. The respondent still failed to answer.

By letter dated November 24, 2009, sent to the respondent's Staten Island business address, the Grievance Committee directed the respondent to submit an answer to the Beck complaint within 10 days and informed him that an unexcused failure to respond constituted professional misconduct independent of the merits of the complaint. The respondent failed to answer. By letter dated January 7, 2010, sent via regular and certified mail, the Grievance Committee again directed the respondent to submit an answer to the Beck complaint within 10 days and informed him that continued failure to cooperate could result in a motion for his immediate suspension. The respondent still failed to answer.

By letter dated February 23, 2010, hand delivered to the respondent at his business address, the Grievance Committee noted that the respondent had been personally served with a subpoena on December 14, 2009, requiring him to appear for an examination under oath and that he had failed to appear on the adjourned date or to request a further adjournment. The Grievance Committee afforded the respondent a final opportunity to appear on March 4, 2010, and informed him that his failure to appear would result in a motion for his interim suspension. The Grievance Committee further informed the respondent that his continued failure to respond to the Beck complaint constituted professional misconduct and an independent basis for discipline. At his investigative appearance on March 16, 2010, the Grievance Committee directed the respondent to submit a written answer to the Beck complaint and supporting documentation. The respondent failed to comply. As a result of his failure to cooperate with the Grievance Committee, he is charged with violating Rules 8.4(d) and (h).

Conclusion

A petition dated August 12, 2010, and containing eight charges of professional misconduct based on the foregoing, is annexed to the Grievance Committee's order to show cause.

Although personally served with the Grievance Committee's motion and the petition on August 18, 2010, the respondent has failed to reply or to request additional time in which to do so. Accordingly, the Grievance Committee's motion is granted without opposition, the respondent is suspended 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 the respondent.

RIVERA, J.P., SKELOS, FISHER, DILLON and ANGIOLILLO, JJ., concur.

ENTER:

Matthew G. Kiernan

Clerk of the Court