Appellate Division: Second Judicial Department

M152670

E/ct

RANDALL T. ENG, P.J.

WILLIAM F. MASTRO

REINALDO E. RIVERA

PETER B. SKELOS

CHERYL E. CHAMBERS, JJ.

2012-09635 In the Matter of James G. Carroll, an attorney and counselor-at-law. Grievance Committee for the Tenth Judicial District, petitioner; James G. Carroll, respondent. (Attorney Registration No. 2908564)

DECISION & ORDER ON MOTION

Motion by the Grievance Committee for the Tenth Judicial District (1) to suspend the respondent from the practice of law pending the consideration of charges of professional misconduct against him 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 based upon his substantial admissions under oath and other uncontroverted evidence of professional misconduct; (2) to authorize the institution and prosecution of a disciplinary proceeding against the respondent based upon a verified petition dated October 11, 2012; and (3) to direct that a hearing be held before a Special Referee appointed to hear and report with respect to each of the issues raised by the charges set forth in the verified petition and any answer thereto. Application by the respondent pursuant to 22 NYCRR 691.4(m), for leave to participate in a diversion program based on his addiction to prescription pain killers. The respondent was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on September 16, 1998.

Upon the papers filed in support of the motion and the papers filed in opposition thereto, and upon the application and no papers having been filed in opposition or in relation thereto, it is

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

ORDERED that the application pursuant to 22 NYCRR 691.4(m) is denied; and it is further,

ORDERED that pursuant to 22 NYCRR 691.4(l)(1)(ii) and (iii), the respondent, James G. Carroll, 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, James G. Carroll, 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, James G. Carroll, 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, as the petitioner, against James G. Carroll, as the respondent, based on the verified petition dated October 11, 2012; and it is further,

ORDERED that Robert A. Green, Chief Counsel, 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, James G. Carroll, shall serve an answer upon the Grievance Committee for the Tenth Judicial District and Special Referee, and file the original with this Court; and it is further,

ORDERED that the issues raised by the verified petition and any answer thereto are referred to Norma Giffords, Randazzo and Giffords, P.C., 3000 Marcus Avenue, Suite 1E11, Lake Success, N.Y. 11042, as Special Referee to hear and report, together with her findings 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, James G. Carroll, 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 made under oath that he committed acts of professional misconduct, and other uncontroverted evidence of professional misconduct. This motion emanates from an investigation by the Grievance Committee for the Tenth Judicial District into two complaints of professional misconduct against the respondent, by Robert Rios and Nicola J. McDonald.

The Rios Complaint

On or about May 17, 2011, the Grievance Committee received a complaint dated May 9, 2011, from Robert Rios. Rios alleged that, in or about November 2010, he was contemplating the purchase of a delivery truck route from the respondent's client, Jet Provisions, LLC (hereinafter Jet Provisions). As part of the proposed transaction, Rios was granted a 21-day due diligence period to, among other things, accompany the principal of Jet Provisions on the route and review financial documents and customer lists. On or about November 17, 2010, Rios and the respondent executed an "Escrow Agreement," which provided, in part, as follows:

Upon completion of Purchasers [sic] due diligence, not to exceed 21 days, and in the event Purchaser wishes to proceed with the purchase of the Route, the parties shall negotiate the purchase agreement and enter into a formal contract.

In the event the Purchaser does not wish to proceed with the purchase of the Route, the Down Payment will be promptly refunded and neither party will have any obligation to the other, except as described above."

On November 17, 2010, Rios delivered a $10,000 check to the respondent, representing the "Down Payment" under the Escrow Agreement. That same day, the respondent deposited the $10,000 check into his escrow account at Citibank.

By letter dated March 3, 2011, Rios's counsel advised the respondent that Rios would be unable to purchase the route and requested that his $10,000 Down Payment be returned, pursuant to the Escrow Agreement. The respondent failed to respond to the letter and failed to answer repeated telephone calls. On or about March 30, 2011, a further letter was sent to the respondent by certified mail, return receipt requested, demanding the return of the $10,000 down payment. On April 21, 2011, the respondent sent a fax to Rios's counsel, stating that he was mailing a $10,000 check to counsel's office. However, the respondent did not return the funds at that time.

Following the Rios complaint, the respondent commenced a breach of contract action against Rios in Suffolk County District Court on behalf of his client. The action was quickly resolved in Rios's favor when, by decision dated December 19, 2011, the Honorable Philip Goglas determined that Jet Provisions had not established any entitlement to damages under the Escrow Agreement. Judge Goglas specifically cited the paragraph of the Escrow Agreement, as set fort above, requiring the respondent to refund the Down Payment if Rios decided not to consummate the purchase.

On or about January 5, 2012, the respondent drew a $10,000 check on his escrow account, payable to Rios, referenced "Jet w/Rios (Return of Escrow)," and delivered the check to Rios.

The McDonald/Alexander Complaint

On or about May 26, 2011, a week after receiving the Rios complaint, the Grievance Committee received a second complaint, dated May 25, 2011, from Nicole J. McDonald, on behalf of herself and her husband, Stephen Alexander. In or about May 2010, McDonald and Alexander retained the respondent to represent them in the purchase of a home. The seller was facing foreclosure, and was trying to work out a "short sale." As a result, it was expected that the closing would be delayed for some time. In connection with the contract of sale, McDonald and Alexander delivered a down payment check, in the amount of $8,000, to the seller's attorney, Craig H. Augi. In or about January 2011, McDonald and Alexander decided to withdraw from the transaction. The respondent notified Augi of his clients decision, and requested return of the $8,000 down payment. On February 17, 2011, the respondent received an $8,000 check from Augi, payable to the order of Nicole McDonald and referenced " Return of Down Payment Russo to Alexander and McDonald" and deposited it into his escrow account. McDonald's name was endorsed on the back of the check, and a stamp was affixed denoting the respondent's "Escrow Agreement." Thereafter, the respondent failed to remit the McDonald/Alexander funds to his clients until May 6, 2011, despite repeated requests for return of the funds and repeated promises by the respondent that he would remit them.

Between on or about February 18, 2011, and May 6, 2011, the respondent sent numerous e-mails to McDonald and/or Alexander purportedly explaining why he was unable to remit the funds to them. A review of the e-mails revealed that the respondent made a number of promises to deliver the funds to his clients, as well as excuses and apologies for his failure to do so. Among the excuses the respondent made to McDonald and Alexander were the following:

(A) the post office inexplicably returned the envelope containing the check he had mailed to them;

(B)the returned envelope and check were inadvertently shredded by the respondent's office, and he was awaiting a replacement check from Mr. Augi;

(C) Mr. Augi's office was delaying issuing a replacement check;

(D) the respondent was out-of-town and his mail was being held at the post office; and

(E) the respondent had deposited the replacement check and was waiting for it to clear before issuing a check to McDonald and Alexander.

The foregoing explanations were false.

On or about May 6, 2011, McDonald and Alexander visited the respondent's residence to secure the return of their money. Finding him unavailable, they advised that they were going to the police to file a complaint. Only then did the respondent finally arrange to refund the McDonald /Alexander funds, by leaving an $8,000 cashier's check for them at their local bank.

Respondent's Bank Records

The Grievance Committee subpoenaed records for any and all accounts in the respondent's name at Citibank, for the period from March 1, 2010, through April 30, 2012. Citibank provided the Grievance Committee with bank statements, cancelled checks, deposit slips, and deposit items for a number of active and inactive accounts, including the respondent's escrow and operating accounts, as well as a personal account in the names of the respondent and his wife.

Respondent's Escrow Account

A review of the respondent's escrow account records revealed that the $10,000 Down Payment check for the Rios transaction was deposited on November 17, 2010, and that the $8,000 check for the McDonald /Alexander transaction was deposited on February 17, 2011. Almost immediately after each deposit, the balance in the respondent's escrow account fell below the amount he was required to maintain on behalf of Rios and McDonald/Alexander. The records reflect that the respondent drew checks unrelated to the foregoing matters to himself, and either deposited them into his operating account or cashed them. The respondent also made cash withdrawals from his escrow account.

After depositing the $10,000 Rios check on or about November 17, 2010, the balance in the respondent's escrow account fell to $7,232.84 on November 30, 2010. On February 1, 2011, the balance on deposit in the respondent's escrow account was only $3,323.28. On April 2, 2011, when the respondent's escrow account should have contained both the Rios and McDonald/Alexander funds, totaling $18,000, the balance on deposit in the account was only $203.78. While the respondent paid McDonald and Alexander $8,000 on or about May 6, 2011, via cashier's check, the transaction is not reflected in the respondent's escrow records. Moreover, the respondent's delivery of $10,000 to Rios, by check drawn from his escrow account on or about January 4, 2012, was done in conjunction with a $10,000 cash deposit on January 5, 2012.

Respondent's Operating and Personal Accounts

A review of the respondent's operating and personal account records revealed a disturbing pattern of debit card purchases, in relatively small denominations, on an almost daily basis, frequently eight or nine times per day. These purchases were made at food establishments and gas stations throughout Long Island and the tri-state area. Interspersed with these small purchases were numerous larger debit card purchases at pharmacies, as well as repeated debit card usage at various doctors' offices.

Respondent's Examination Under Oath

On July 18, 2012, the respondent was examined under oath at the Grievance Committee's office. At that time, the respondent admitted that he had converted his clients' funds for his own use and benefit. The respondent explained that, for the first ten years his practice had consisted mostly of representing lenders in mortgage loan transactions and that, he strictly maintained, and regularly balanced, his escrow and other accounts. However, control over his practice ended in December 2008, when the respondent fell off his car while clearing snow from its roof, injuring his neck, and he became addicted to prescription pain killers. From that point, the respondent's life and practice "unraveled." The respondent described his struggles, including, inter alia, the "doctor-shopping " he engaged in.

Response to the Motion

The respondent concedes that he "cannot justify or defend [his] actions" and describes his actions as "unprofessional" as well as "in violation of the Rules of Professional Conduct." According to the respondent, "[m]y actions, or inactions, stem[ed] from a drug addiction that took control of every aspect of my life and my failure to recognize this addiction and to take control of it before it took control of me." Admittedly, the respondent was neither "truthful" nor "honest" with his clients, failed to "live up to the standards which they rightfully expected" and the complaints were "justified."

Based upon the foregoing, the motion is granted, the application is denied, the respondent is immediately suspended from the practice of law, pursuant to 22 NYCRR 691.4(l)(1)(ii) and (iii), pending further order of this Court, the Grievance Committee is authorized to institute and prosecute a disciplinary proceeding against the respondent, and the matter is referred to a Special Referee to hear and report.

ENG, P.J., MASTRO, RIVERA, SKELOS and CHAMBERS, JJ., concur.

ENTER:

Aprilanne Agostino

Clerk of the Court