Opinion
Docket No. DRB 19-262
03-03-2020
In the Matter of Christopher Campos An Attorney at Law
Hilary K. Horton appeared on behalf of the Office of Attorney Ethics. Lee David Vartan appeared on behalf of Respondent.
Disciplinary Review Board
District Docket No. XIV-2017-0377E Decision Hilary K. Horton appeared on behalf of the Office of Attorney Ethics. Lee David Vartan appeared on behalf of Respondent.
To the Honorable Chief Justice and Associate Justices of the Supreme Court of New Jersey.
This matter was before us on a motion for final discipline filed by the Office of Attorney Ethics (OAE), pursuant to R. 1:20-13(c)(2), following respondent's conviction, in the United States District Court for the Southern District of New York (SDNY), of conspiracy to commit wire and bank fraud, in violation of Title 18 U.S.C. § 1349; bank fraud, in violation of Title 18 U.S.C. §§ 2 and 1344; and wire fraud, in violation of Title 18 U.S.C. §§ 2 and 1343. These convictions constitute violations of RPC 8.4(b) (criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects) and RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation).
For the reasons set forth below, we determine to recommend respondent's disbarment.
Respondent earned admission to the New Jersey bar in 2003. During the relevant time period, he was engaged in the practice of law in Hoboken, New Jersey. On May 3, 2018, following respondent's convictions underlying this matter, the Court temporarily suspended him from the practice of law. In re Campos, 233 N.J. 234 (2018).
We now turn to the facts of this matter.
On June 7, 2016, a SDNY grand jury indicted respondent on three counts: (1) conspiracy to commit wire and bank fraud; (2) bank fraud; and (3) wire fraud. From June 12 through June 22, 2017, the government tried respondent before a jury in the SDNY, with United States District Judge Valerie E. Caproni presiding.
Respondent's convictions involved the use of straw buyers to illegally purchase new vehicles for a livery taxi business. Based on the strength of their personal credit history, the buyers would receive up to twenty pre-approval offers from various lenders to finance the purchase of a new vehicle. Some of the information provided to the lenders about the straw buyers' work history and income was fraudulent. Rather than buy only one vehicle, as a typical buyer would, the straw buyers would purchase multiple cars in a single day. The lenders, thus, were not aware that the buyers were purchasing multiple vehicles. Rather, the lenders' pre-approval was based on the premise that the buyer was financing only one car.
The newly-purchased vehicles were then provided to one of respondent's co-conspirators, who was to make the financing payments and maintain them for the purpose of developing a livery taxi business. The goal of the scheme was to lease the vehicles to prospective livery taxi drivers and to pay off the loans on the vehicles. The co-conspirators estimated that it would take two years to pay off the vehicles, and, starting the third year, the co-conspirators would generate profits from leasing the cars.
Respondent was not an originator of the scheme, but, in February 2013, became a recruiter for straw buyers. The scheme had commenced in October 2012, when Norberto Tavarez, one of respondent's eventual co-conspirators, became interested in the prospect of buying used cars to lease to livery taxi drivers for a profit. A friend referred Tavarez, who did not know much about the taxi business, to Julio Alvarez, a person who had some knowledge and experience in the business. The two met at Alvarez's Manhattan office.
During this meeting, Tavarez outlined his interest and proposed business model. Alvarez countered that, because the taxi business was changing, used cars would no longer suffice. Instead, Alvarez discussed the prospect of buying new, more fuel-efficient cars, and then leasing them to taxi drivers to own, after several years of making payments. To advance this plan, and to determine its viability, Tavarez spoke with Ravel Mejia, a friend who managed a car dealership.
Mejia introduced Tavarez to Michael Larocca, the finance director at Mejia's car dealership. In his position, Larocca handled all financial transactions at the dealership, including securing institutional lender financing for the dealership. Larocca investigated the prospect of financing the purchase of these cars by a business, as Tavarez and Alvarez had discussed. None of the available lenders, however, were able to finance cars for a company. As an alternative, Larocca suggested another method to purchase these vehicles.
Larocca's plan involved using straw buyers to purchase vehicles under their own names and credit. The straw buyers would obtain the loans for the cars by posing as actual purchasers. Larocca explained that, when a person seeks to purchase a car for personal use, the dealership performs a credit check to determine which banks would be willing to finance the car loan. For buyers with good credit, multiple banks would return pre-approval for loans. These pre-approval loans are offered independent of each other. Larocca proposed that individual buyers could purchase multiple cars in one day, through loans obtained from various banks. The banks would not immediately be aware that a single buyer bought multiple cars in one day. After the straw buyers bought the cars, Larocca could then reregister the titles for the cars into different corporations, and Alvarez and Tavarez could lease the vehicles to taxi drivers. In essence, the straw buyers would purport to purchase the cars for personal use, and the cars would then be reregistered as taxi cabs under the control of Tavarez and Alvarez.
The straw buyers had no connection with the illicit scheme besides requesting and receiving the initial financing for the vehicles. Under the arrangement, the straw buyers would neither make payments on the loan or insurance, nor drive or store the vehicles. Armed with this information, Alvarez and Tavarez surmised that it would take three years for them to earn a financial return. They estimated that, for every car leased for which the accompanying loan was satisfied, they would receive a profit of between $15,000 and $20,000. Their goal was to buy 1,000 cars through this fraudulent scheme. Tavarez' role in the scheme was to obtain as many vehicles as possible through as many buyers as he could secure. He accompanied some of the straw buyers when they bought vehicles. He then brought the vehicles to locations owned by Alvarez. Once the plan began in earnest, Tavarez' first straw buyer financed twenty cars. During the scheme's existence, Tavarez assisted seven straw buyers, including respondent's wife, for a total purchase of about eighty cars.
Respondent first learned of the scheme in February 2013, when he met with Alvarez on an unrelated matter, and Alvarez and Tavarez began discussing their "business." Respondent showed an interest in participating and, thus, another meeting was set to discuss his potential involvement. Although Tavarez and Alvarez referred to the criminal enterprise as a "business," the business never had a name, was never incorporated, and had no employees.
Respondent's role in the scheme was to solicit straw buyers. Although he was to receive a percentage of the earnings for every person he recruited, he never made any money, because law enforcement discovered the scheme prior to the business becoming profitable. Some of the straw buyers respondent recruited were his friends and family, specifically, Krinsy Reyes, (respondent's wife); Janina Pedroza, (respondent's cousin); Maholy Vasquez; Ralph Perez, Jr., (respondent's brother); and Susan Austin (respondent's friend). After respondent solicited them as "investors," these five individuals bought fifty-two cars under their own names and credit.
The record does not make clear respondent's relationship with Vasquez.
Respondent assisted his wife, Reyes, in the purchase of four vehicles. Alvarez told Tavarez and respondent that, for the sake of expediency, the cars should initially be registered in New York. Consequently, Alvarez preferred that the straw buyers have New York addresses. Although respondent and his wife lived in New Jersey, when applying for financing to buy vehicles, respondent provided a New York address for his wife. Specifically, respondent provided a 2008 document with a New York address, despite Reyes' New Jersey domicile. The owner of the New York residence testified that Reyes did not reside at that location.
Initially, respondent and Tavarez thought respondent's wife would have sufficient credit to receive approvals for ten or eleven cars. However, respondent was later "disappointed" when she was able to finance only four cars. After Reyes bought those four vehicles, with respondent present, neither Reyes nor respondent took possession of the cars. Rather, Tavarez immediately took possession of them. After his wife bought these vehicles, respondent told Tavarez that he would solicit other straw buyers.
Respondent then solicited Perez (his brother) and Vasquez, who bought seven and eleven cars, respectively. Respondent also solicited Pedroza (his cousin) to join the scheme, even though she was unemployed and on disability. He told her that Perez, Reyes, and Vasquez also were involved in the scheme. Respondent promised Pedroza that, if she joined as an "investor," she would receive $100,000 and two cars for her personal use, and that she would not be required to pay for the cars or to invest any money. Respondent explained to her the need to check her credit history to ascertain the number of cars she could buy. He admitted to Pedroza that he expected to earn money from the criminal enterprise.
Respondent assisted Pedroza in faxing her credit history after their meeting. About a week later, respondent directed her to go to a specific car dealership. Once there, she signed about fifty forms that she did not read, which falsely stated that she was an employee with the New York Department of Education, with a monthly salary of $5,510. At the dealership, she agreed to buy seven cars at a cost of about $30,000 each, personally financing approximately $200,000 in debt. When she bought the cars, she "got kind of nervous," and believed it was "too good to be true," but, because she "believed in what [respondent] told [her] and because they were paying for it," she "just kept signing." She knew, however, that she could neither afford $200,000 in debt, nor the two cars that she and her daughter would be allowed to use.
Pedroza and her daughter drove their cars home from the dealership, while Alvarez arranged to transport the remaining five cars to locations where they would be leased as taxis. About a week later, Pedroza financed four more cars at a dealership, for a total of eleven cars. Respondent directed her to take the titles for these cars to Alvarez, so that he could register and insure them.
Shortly thereafter, banks began calling Pedroza about delinquent payments. She informed Alvarez and respondent about these calls. When Pedroza told Honda Financial that the cars were being leased as taxis, the lender replied that the cars were not supposed to be used for that purpose. After Pedroza told Alvarez about the call from Honda Financial, he stated that he no longer wanted to do business with her and directed her to return the car she was using. When respondent learned about the call from Honda Financial, he told Pedroza not to worry, and that he would return the car. Honda Financial, however, persisted in calling her. Ultimately, Pedroza was named in a lawsuit, earned no money from the scheme, and filed for bankruptcy with over $200,000 in debt, which she had incurred by financing the vehicles in her name. In addition, the vehicles that Pedroza and her daughter had been using were repossessed.
Finally, respondent introduced his friend Austin to Alvarez, telling her that he had brought his wife, brother, and cousin into the scheme. Respondent determined that Austin's credit score was sufficient to buy multiple cars, and directed her to a specific car dealership, where she purchased at least eleven cars. She later bought more vehicles at another dealership. She knew what she was doing was wrong, but she relied on respondent, as an attorney, to advise her whether their actions were illegal. In all, Austin fraudulently purchased twenty-four cars, totaling $700,000, as part of the scheme.
Eventually, Austin, too, began to receive phone calls from lenders regarding delinquent payments. In an effort to preserve her credit, she tried to make payments on some of the cars. During one of the lender calls, a loan representative told her that using the car for a livery service was illegal. On August 27, 2013, after Austin had confronted respondent, he sent a letter to a loan representative stating that Austin was his client and that he would direct her to make the car payments to ensure that she maintained possession of the vehicles. Respondent later sent similar letters to two other lenders.
At the criminal trial, respondent admitted having agreed with Alvarez to recruit potential "investors" who used their own credit to secure the vehicles that Tavarez and Alvarez would subsequently lease as livery taxis. Respondent testified that he was to receive a five-percent referral fee after three years, if the business succeeded. Respondent denied knowledge that the credit applications contained false information, or that the banks were not informed that multiple vehicles were being purchased at the same time, but admitted providing legal services to the livery business. The jury found respondent guilty on all counts.
During respondent's December 8, 2017 sentencing hearing, Judge Caproni enhanced his sentence, in light of his supervisory role in recruiting straw buyers. She characterized respondent's assertion that the scheme was a legitimate business investment as "silly," and opined that he "knew he was lying to the bank." Judge Caproni repeatedly rebuffed defense counsel's arguments that respondent did not believe his conduct was illegal. She pointed out that respondent's wife bought four or five cars, and, yet, respondent "couldn't afford one car. You had to know that that was not legal." Judge Caproni stated that "the best explanation of what happened," in this case, "and one that explains why [respondent] brought his family and friends into this, was that he saw this as a get-rich-quick-scheme. Everybody was going to get paid, no one would be hurt. It's just not the same as thinking it's legal."
In aggravation, Judge Caproni found that respondent lied, under oath, at his trial, when he claimed that he did not recruit anyone for the fraud. Specifically, she stated that there was "no question" in her mind "that [respondent] committed perjury." She added that "the entire defense, which was reiterated by him in his testimony and it's been reiterated in the sentencing submission, was that he had no idea that lies were being told to the banks. That's clearly not true." She determined that the verified loss amount was between $250,000 and $550,000 and involved more than ten victims. In mitigation, Judge Caproni found respondent came from an impoverished background and had achieved a law degree despite the odds, according him "substantial credit" for his history of good deeds.
Judge Caproni sentenced respondent to thirty months in prison on each of counts one, two, and three, to run concurrently, followed by three years of supervised release. She ordered him to pay $533,669.12 in restitution to the defrauded financial institutions. Respondent appealed both his conviction and sentence.
Alvarez was sentenced to 36 months in prison. Judge Caproni found he was "more culpable" than respondent, but he also had pleaded guilty, accepted responsibility, and "did not go to trial and commit perjury." --------
On March 6, 2019, the Second Circuit Court of Appeals affirmed respondent's conviction and sentence. United States v. Campos, 763 Fed. Appx. 97 (2d Cir. 2019). On appeal, among other arguments, respondent challenged the legal sufficiency of the evidence presented at trial. Campos, 763 Fed. Appx. at 99. He argued that the evidence presented by the government showed his innocence; however, the Second Circuit found his argument "unpersuasive given the cumulative evidence of his participation in, and attempts to cover up, the conspiracy," emphasizing that respondent "took the stand and denied knowledge of the scheme," and that the "jury rejected his testimony as well as his defense of good faith; and he has shown no basis to question the jury's findings." Id. (citations omitted).
The OAE requested that we suspend respondent for a period of two or three years. Respondent requested a two-year suspension, retroactive to May 3, 2018, the date of his temporary suspension.
In its brief, the OAE relied on In re Davis, 230 N.J. 385 (2017) (one-year suspension); In re Olewuenyi, 216 N.J. 576 (2014) (two-year suspension); and In re Ellis, 208 N.J. 350 (2011) (disbarment) to support its recommended discipline. Respondent's request is based on the OAE's cited authority, character letters, and his arguments that he did not have knowledge of the full extent of the criminal scheme.
Respondent's brief purported to acknowledge that he "cannot dispute his conviction," but proceeded to dispute the OAE's assertion that he recruited buyers for the scheme - the very basis for his criminal conviction. Respondent claimed that he did not profit from the scheme, "played no part in the formation of the conspiracy," and "was unaware of how the conspiracy worked." He contended that, on balance, he was "much closer to the investors who the government never charged than . . . the principals of the scheme." Respondent repeatedly asserted that he had limited or no knowledge of the scheme, and "[a]t worst, [ ] assisted others in providing false information to lending banks to secure car loans after having been told that the car dealerships[,] through which the false information flowed[,] were aware and approved of [the co-conspirator's] livery leasing business." Finally, respondent maintained that he should receive a two-year retroactive suspension because he is "a wonderful, heart-on-his-sleeve, good-to-his-core person," as evidenced by several character letters. During oral argument before us, respondent's counsel maintained these positions.
Following a review of the record, we determine to grant the OAE's motion for final discipline. Final discipline proceedings in New Jersey are governed by R. 1:20-13(c). Under that Rule, a criminal conviction is conclusive evidence of guilt in a disciplinary proceeding. R. 1:20-13(c)(1). Respondent's convictions of conspiracy to commit bank and wire fraud, bank fraud, and wire fraud establish violations of RPC 8.4(b) (criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer) and RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation). Hence, the sole issue is the extent of discipline to be imposed. R. 1:20-13(c)(2); In re Magid, 139 N.J. 449, 451-52 (1995); and In re Principato, 139 N.J. 546, 460 (1995).
In determining the appropriate quantum of discipline, we must consider the interests of the public, the bar, and the respondent. "The primary purpose of discipline is not to punish the attorney but to preserve the confidence of the public in the bar." Ibid. (citations omitted). Fashioning the appropriate penalty involves a consideration of many factors, including the "nature and severity of the crime, whether the crime is related to the practice of law, and any mitigating factors such as respondent's reputation, his prior trustworthy conduct, and general good conduct." In re Lunetta, 118 N.J. 443, 445-46 (1989).
The Court has noted that, although it does not conduct "an independent examination of the underlying facts to ascertain guilt," it will "consider them relevant to the nature and extent of discipline to be imposed." Magid, 139 N.J. at 452. In motions for final discipline it is acceptable to "examine the totality of the circumstances" including the "details of the offense, the background of respondent, and the pre-sentence report" before "reaching a decision as to [the] sanction to be imposed." In re Spina, 121 N.J. 378, 389 (1990). The "appropriate decision" should provide "due consideration to the interests of the attorney involved and to the protection of the public." Ibid.
The quantum of discipline for an attorney convicted of a serious criminal offense ranges from lengthy suspensions to disbarment. See, e.g., In re Mueller, 218 N.J. 3 (2014) (three-year suspension); In re Goldberg, 142 N.J. 557 (1995) (disbarment). In In re Goldberg, 142 N.J. at 567, the Court enumerated aggravating factors that normally lead to disbarment in criminal cases:
Criminal convictions for conspiracy to commit a variety of crimes, such as bribery and official misconduct, as well as an assortment of crimes related to theft by deception and fraud, ordinarily result in disbarment. We have emphasized that when a criminal conspiracy evidences "continuing and prolonged rather than episodic, involvement in crime," is "motivated by personal greed," and involved the use of the lawyer's skills "to assist in the engineering of the criminal scheme," the offense merits disbarment. (citations omitted).
Despite these factors, the Court has imposed shorter suspensions on attorneys whose crimes are less egregious. Considerations for lesser suspensions include the amount of the loss to the victims; the actions taken by the attorney to perpetuate the fraud; the length of the prison sentence, if any, imposed on the attorney; the amount of restitution ordered in the underlying criminal case, and whether the attorney took responsibility for the crime and assisted the government. Compare In re Serrano, 193 N.J. 24 (2007) (eighteen-month suspension) and In re Olewuenyi, 216 N.J. 576 (two-year suspension) with In re Noce, 179 N.J. 531 (2004) (three-year suspension). Additionally, lesser suspensions have been imposed when a lengthy delay occurs between the conviction and the filing of ethics charges. See, e.g., In re Davis, 230 N.J. 385 (one-year retroactive suspension due to lengthy delay).
In Davis, the attorney was convicted of conspiracy to commit wire and bank fraud for his involvement in a fraudulent real estate investment scheme. He and his co-conspirators recruited individual straw buyers with good credit to purchase residential real estate packaged as "investment opportunities," telling them that other investors would make the mortgage payments for the properties and that the straw buyers eventually would be removed from the title. In the Matter of Robert B. Davis, DRB 16-200 (February 7, 2017) (slip op. at 1-3). The loan applications misrepresented the straw buyers' financial information. Id. at 3. Davis served as an attorney in connection with closing some of the fraudulent real estate transactions. Id. Mortgage payments were never made to the lenders, and the straw buyers were left responsible for the mortgage payments. Id. at 4. The attorney received a $2,500-$5,000 fee per closing. Id.
Davis pleaded guilty, was sentenced to six months' imprisonment, and was ordered to pay joint and several restitution of $5,166,900. Id. at 5. The government acknowledged that the attorney had accepted responsibility, and he became a key trial witness in the prosecution of his co-conspirators. Id. at 5-6. The State of New York later indicted the attorney for a similar scheme in which he defrauded the Texas Capital Bank of $517,500. Id. at 6-7. He pleaded guilty to this offense and was sentenced to probation and restitution of $22,500. Id. at 7-8.
Relying primarily on Serrano and Noce, we determined that the appropriate quantum of discipline for Davis' misconduct was a three-year suspension. Moreover, considering the five-year passage of time since the attorney reported his convictions, we determined that the suspension should be retroactive. Id. at 25-26. However, the Court disagreed with us, and determined from its review that the attorney's conduct would "normally warrant the three-year suspension recommended" by us, but found that, "in light of the extraordinary delay in initiating disciplinary proceedings in this matter, the Court will impose only a one-year suspension from practice, retroactive to ... the date respondent reported his convictions" to the OAE. Id. at 385.
In Serrano (eighteen-month suspension), the attorney knowingly prepared materially false HUD-1 forms in order to obtain HUD insured mortgages, for unqualified borrowers. In the Matter of Linda M. Serrano, DRB 07-061 (June 29, 2007) (slip op. at 2-4). Specifically, the HUD-1 forms misrepresented that the borrowers had provided Serrano with funds, such as closing costs, at settlement. Id. at 5-7. Serrano received between $20,000 and $40,000 from her illegal conduct in approximately twenty-five closings. Id. at 7, 9. Her lawyer explained that these monies represented her legal fees for all transactions. Id. at 9.
The sentencing court granted the government's motion for a downward departure from the sentencing guidelines, based on the substantial assistance that Serrano had provided when she chose to cooperate with the government's investigation. Id. at 8-9. She was sentenced to a one-year term of probation, fined $5,000, and ordered to pay a $100 special assessment. Id. at 9. In addition, the court stated that, if Serrano paid the fine, it would "entertain a motion within six months" for an early discharge of probation. Ibid.
Our imposition of an eighteen-month retroactive suspension on Serrano was based on a comparison of her conduct to that of the attorney in Noce, who received a three-year suspension for similar misconduct. In making this comparison, we observed that Serrano was involved in approximately half the number of transactions in which Noce was involved, and over a shorter period of time. Moreover, from the standpoint of sentencing, Noce's conduct was treated much more harshly: a five-year probationary period together with nine months of home confinement, as opposed to a one-year probationary period. Although both attorneys were fined $5,000, Noce was required to reimburse HUD more than $2 million, whereas Serrano was not required to make any reimbursements. Thus, we considered Serrano's criminal conduct to be less serious than Noce's. Given these distinctions, we determined that the three-year suspension imposed in Noce was too severe for Serrano. Serrano's full cooperation with the government's investigation, including her willingness to testify against her co-conspirators, persuaded us that an eighteen-month suspension, retroactive to the date of her temporary suspension, was appropriate discipline for her offenses. The Court agreed.
In Olewuenyi (two-year retroactive suspension), the attorney prepared and submitted documents containing materially false and fraudulent information. In the Matter of Chris C. Olewuenyi, DRB 13-119 (October 30, 2013) (slip op. at 3-4). The attorney pleaded guilty to one count of conspiracy to defraud the United States, was sentenced to a thirty-three-month term of imprisonment, and was ordered to make restitution of $131,489, followed by three years of supervised release. Id. at 5-6. Later, the State of New Jersey indicted the attorney for identity theft and conspiracy to commit identity theft when he, and another attorney, served as real estate attorneys for various transactions involving straw buyers. Id. at 6-8. The attorney pleaded guilty and was sentenced to three years' imprisonment to run concurrently with his federal sentence. Id. 7-8. In imposing a two-year suspension, we considered Olewuenyi's conduct in relation to that of the attorneys in Noce and Serrano, compared the lengths of the attorneys' sentences, and took into account that respondent's misconduct was "not limited to the misrepresentation of numbers" but also included identity theft. Id. at 14-16.
In Mueller (three-year retroactive suspension), the attorney made affirmative misrepresentations to aid his co-conspirators to defraud real estate investors by obtaining funds from them for a real estate development project. Mueller wire-transferred the invested funds (approximately $ 1 million) from his trust account to the co-conspirators. The purpose for which the funds were purportedly earmarked was not fulfilled. The co-conspirators depleted almost all the funds for personal and other expenses, unrelated to the development project. In the Matter of Erik W. Mueller, DRB 13-324 (February 12, 2014) (slip op. at 3-4).
Mueller also engaged in lies to lull investors to believe that investing in the purported development project was secure. He wrote a letter misrepresenting that he was holding $834,000 in his trust account. He also faxed to an investor a false trust account statement that misrepresented that he held a balance of $612,461 in his trust account. In addition, he notarized documents although he had not witnessed their execution. The documents were a false lien and note on which the grantors' names had been forged. Id. at 4-5. Mueller pleaded guilty to the charged offenses. Id. at 1-2. His counsel asserted that, although, initially, Mueller believed that the development project was legitimate, he later clearly learned otherwise and lent his name and his position of trust to help defraud investors. Id. at 11-12. His misconduct spanned an eleven-month period. Mueller was sentenced to a five-month term of imprisonment and ordered to pay $25,500 in restitution. Id. at 8.
In Noce (three-year retroactive suspension), the attorney was convicted of conspiracy to commit mail fraud. In the Matters of Philip S. Noce, DRB 03-225 and DRB 03-169 (December 8, 2003) (slip op. at 2). The attorney and others took part in a scheme to defraud the Department of Housing and Urban Development (HUD) by assisting in the procurement of home mortgage loans for unqualified buyers, from which HUD suffered losses of more than $2.4 million. Noce was the settlement agent and closing attorney for unqualified buyers in fifty closings. He knowingly certified HUD-1 statements and gift transfer certifications that contained misrepresentations. Id. at 5-7. The attorney was paid only his regular fee and cooperated fully with the government. Id. at 9.
In In re Klein, 231 N.J. 123 (2017) (disbarred), the attorney knowingly and intentionally participated in an "advanced fee scheme" that lasted approximately eight years and defrauded twenty-one victims of more than $819,000. In the Matter of Eric Alan Klein, DRB 17-039 (July 21, 2017) (slip op. at 19). He and his co-conspirator, a previously convicted federal felon, used bogus companies to dupe clients into paying thousands of dollars in "advanced fees" in exchange for a promise of collateral that could be used to borrow much larger sums of money from well-known financial institutions. Id. at 3-6. Instead of collateral, however, the clients received worthless documents called "Notices of Availability," which were not legitimate financial instruments, and were never accepted by banks as collateral for financing. Id. at 4. Klein and his co- conspirator accepted the advanced fees, despite knowing that they would never provide the service promised to the clients. Ibid.
The attorney continued the scheme, undeterred, when federal law enforcement authorities arrested his co-conspirator. Id. at 11. His participation was motivated by personal greed. As he conceded during his federal criminal trial, he had twice filed for bankruptcy before meeting his co-conspirator, who then lined his pockets with approximately $2 million over eight years, representing roughly half of his law firm's revenue during the period of their joint criminal enterprise. Id. at 26.
Finally, Klein actively and knowingly engineered the fraud, leveraging his status as an attorney to provide "a veneer of respectability and legality" to the criminal scheme; drafting specious legal opinions that were included in false marketing materials; meeting with clients and identifying himself as a "legal advisor" and "escrow agent" to the bogus companies; and providing false assurances to clients that their advanced fees would remain, inviolate, in his escrow account until their financing transactions closed. Id. at 26-27. For his crimes, the attorney was sentenced to fifty-one months' imprisonment, followed by three years of supervised release, and ordered to pay $819,779 in restitution. Id. at 18.
In In re Marino, 217 N.J. 351 (2014) (disbarred), the attorney participated in a fraud that resulted in a loss of over $309 million to 288 investors. He affirmatively assisted his brother and another co-conspirator in the fraud, which involved, among other things, the creation of a false financial history for a failing hedge fund to induce contributions from potential investors. Marino's participation in the fraud included assisting in the concealment of the fraud perpetrated on investors by creating a fraudulent accounting firm that hid the fund's significant losses, obscuring the fund's true financial information, and drafting versions of a phony purchase and sale agreement of the non-existent accounting firm. In the Matter of Matthew A. Marino, DRB 13-135 (December 10, 2013) (slip op. at 3-8).
The sentencing judge found that Marino was aware of the fraud as it was being perpetrated on the investors, that he helped conceal it rather than report it to the authorities, and that the losses could have been either avoided or significantly limited if he had reported the fraudulent activity to law enforcement. Id. at 12-13. The judge pointed out that Marino's actions "left individuals, some 'in the twilight of their life, suddenly destitute.'" Id. at 13. Marino was ordered to make restitution of $60 million, jointly and severally with the other defendants involved in the fraud. That amount was the sum that investors had been induced to contribute to the failing hedge fund during the period that Marino admitted knowing about and concealing the fraud. Id. at 13- 14.
In Ellis (disbarred), the attorney was employed as a real estate attorney responsible for handling closings and distributing the proceeds of real estate transactions. In the Matter of Daniel Ellis, DRB 11-075 (August 16, 2011) (slip op. at 3). Ellis knowingly and intentionally falsely inflated purchase prices, resulting in loan amounts that greatly exceeded the actual sale price of the properties. Id. at 3-4. After the sale price was paid to the seller, the attorney distributed the remaining monies to several others. Ibid. For his part, Ellis pocketed $80,400, and received a $30,000 Volkswagen Passat. Id. at 4. We determined disbarment was appropriate because the loss were substantial and the attorney used his status as a lawyer to facilitate the fraud, was motivated by greed, and had an extensive disciplinary history. Id. 11-13. For his crime, the attorney pleaded guilty to conspiracy to commit bank fraud and bank fraud, was sentenced to prison for twenty-four months, and was ordered to pay $12,487,227.51 in restitution. Id. at 4.
In our view, the record clearly establishes that respondent's misconduct fulfilled every aggravating factor set forth in Goldberg, and that disbarment is warranted for his criminal convictions. His misconduct is most akin to that of the attorneys in Klein, Marino, and Ellis, whom the Court disbarred. As in Klein, respondent leveraged his status as an attorney to provide "a veneer of respectability and legality," writing letters in behalf of straw buyers in an attempt to preserve the criminal fraud underpinning the scheme. As in Marino, he significantly harmed others, including his friends and family, when he left them in hundreds of thousands of dollars of personal debt.
To craft the appropriate discipline in this case, we must consider both mitigating and aggravating factors. In mitigation, we consider respondent's good reputation and character, as demonstrated by the nineteen character letters submitted in this case; his lack of prior discipline; and his service to the community.
In aggravation, we consider that Judge Caproni found that respondent perjured himself during his trial. Additionally, respondent lacks remorse and fails to accept responsibility for his crimes.
Respondent's criminal scheme involved false statements used to defraud banks, his friends, and his family. Unlike the attorneys in Davis, Olewuenyi, and Serrano, respondent does not present mitigation that clearly outweighs the aggravating factors. He did not plead guilty, take responsibility for his actions, or assist the government in testifying against his co-conspirators. Instead, he did the opposite - he perjured himself, lacks remorse, and continues to refuse to take responsibility for his actions. His decision to proceed to trial, rather than plead guilty, is not an aggravating factor, but he is not entitled to the same mitigation applied to attorneys who have received lengthy suspensions instead of disbarment.
On balance, because substantial mitigation is not present in respondent's case, and based on the Goldberg factors, respondent's perjury, and refusal to accept responsibility, disbarment is the appropriate quantum of discipline to protect the public and to preserve confidence in the bar.
Chair Clark and Members Boyer, Petrou, and Singer voted for a three-year retroactive suspension and filed a separate dissent.
We further determine to require respondent to reimburse the Disciplinary Oversight Committee for administrative costs and actual expenses incurred in the prosecution of this matter, as provided in R. 1:20-17.
Disciplinary Review Board
Bruce W. Clark, Chair
By:/s/_________
Ellen A. Brodsky
Chief Counsel
VOTING RECORD
Argued: November 21, 2019 Decided: March 3, 2020 Disposition: Disbar
| Members | Disbar | Three-Year Suspension,Retroactive | Recused | Did NotParticipate |
|---|---|---|---|---|
| Clark | X | |||
| Boyer | X | |||
| Gallipoli | X | |||
| Hoberman | X | |||
| Joseph | X | |||
| Petrou | X | |||
| Rivera | X | |||
| Singer | X | |||
| Zmirich | X | |||
| Total: | 5 | 4 | 0 | 0 |
/s/_________
Ellen A. Brodsky
Chief Counsel