STATEWIDE GRIEVANCE COMMITTEE

Martin L. Blaustein, Complainant vs. Herbert Blake, III, Respondent

Grievance Complaint #95-0708

PROPOSED DECISION

Pursuant to Practice Book '27J, the undersigned, duly- appointed reviewing committee of the Statewide Grievance Committee, conducted a hearing at the Superior Court, 1061 Main Street, Bridgeport, Connecticut, on March 12, 1997 and March 24, 1997. The hearing addressed the record of the complaint filed on March 6, 1996, and the determination filed by the Stamford/Norwalk Judicial District Grievance Panel on May 7, 1996, finding probable cause that the Respondent violated Rules 1.15(a), 1.15(b) and 1.15(c) of the Rules of Professional Conduct.

Notice of the March 12, 1997 hearing was mailed to the Complainant and to the Respondent on February 4, 1997. Notice of the March 24, 1997 hearing was mailed to the Complainant and Respondent on March 13, 1997. The Respondent appeared and testified before this reviewing committee, represented by Attorney John J. Evans. The Complainant was represented by Attorney Peter J. Mutino. This reviewing committee also heard testimony from a number of witnesses, including Attorney Jonathan Friedmann, Attorney Walter Kipp, and Mr. Werner Albrecht. A number of exhibits were received by this reviewing committee.

This reviewing committee finds the following by clear and convincing evidence:

On or about July 18, 1995, the Complainant and his partner, Robert E. Berwick, entered into an agreement to purchase certain real property known as 35 River Road, Cos Cob, Connecticut, from Independence Marine Corporation. Independence Marine Corporation was represented in the sale by the Respondent. Pursuant to the terms of a purchase agreement signed by the parties, the Respondent was to hold a deposit of one hundred and twenty two thousand, five hundred dollars ($122,500) in escrow, in an interest bearing account, until the closing of title or until the termination of the contract by one of the parties. This deposit was paid by the Complainant and Mr. Berwick to the Respondent, and the Respondent placed the deposit into a trust account on or about July 31, 1995.

After placing the deposit funds in the escrow account, the Respondent made three unauthorized withdrawals from the deposit. On August 11, 1995, the Respondent withdrew twenty two thousand five hundred dollars ($22,500). On September 1, 1995, the Respondent withdrew an additional seven thousand five hundred dollars ($7,500). On September 22, 1995, the Respondent again withdrew five thousand dollars ($5,000) from the escrow deposit. The Complainant was not made aware that these withdrawals took place. The money that was withdrawn by the Respondent was used for personal purposes.

In November of 1995, the Complainant and Robert E. Berwick advised the Respondent that they wished to terminate the real estate purchase agreement. On November 6, 1995, the buyers, through counsel, requested a return of the deposit. Another demand for the return of the deposit, and a copy of the most recent trust account statement, was made by correspondence dated November 28, 1995 from the Complainant's attorney. On December 5, 1995, the Complainant's attorney sent the Respondent a demand for the deposit, as well as for proof that the deposit remained intact in an escrow account. On February 2, 1996, the Complainant's attorney again sent the Respondent correspondence requesting proof that the deposit continued to be held in escrow. In spite of these letters, the Respondent failed to produce documentation to the Complainant or his attorney regarding the escrow deposit. No written accounting was provided to the Complainant or his attorney. The remaining deposit funds have not been returned to the Complainant or Mr. Berwick. The majority of the remaining deposit funds have been transferred to other attorneys for Independence Marine Corporation. A portion of the deposit appears to have been taken as a fee by the Respondent.

This reviewing committee also considered the following testimony and evidence:

The Respondent claims that his withdrawals from the escrow account were inadvertent. He testified that he believed his clients had wired funds into one of his trust accounts for his fee. The withdrawals were thereafter mistakenly made from the wrong account. He indicated that after learning of his mistake he attempted to replenish the escrow account by obtaining additional funds from his client. The Respondent's testimony was rebutted, however, by testimony from Attorney Jonathan Friedmann, who currently represents the principal owner of Independence Marine Corporation. Attorney Friedmann indicated that funds provided to the Respondent were for the payment of outstanding mortgage obligations owed by Independence Marine Corporation, and not to replenish the escrow account. There remains a question as to whether in fact the escrow account has been made whole, and to whom, ultimately, the escrow deposit belongs. The Respondent claims that he paid the amount of the escrow deposit to Independence Marine Corporation, although it is not clear that any lump sum payment as such was made to Independence Marine. Assuming he did pay Independence Marine Corporation the remaining escrow funds, he did so without advising the Complainant of his intention to disburse the escrow deposit. It also appears that in civil litigation involving the escrow deposit, the Respondent's former client, Independence Marine Corporation, has admitted that the Complainant and Mr. Berwick are entitled to the escrow deposit.

This reviewing committee finds by clear and convincing evidence that the Respondent has violated Rules 1.15(a) and 1.15(b) of the Rules of Professional Conduct. By making three withdrawals from the escrow account in question, and appropriating the money to himself, the Respondent failed to keep property held in connection with a representation separate from his own, in violation of Rule 1.15(a) of the Rules of Professional Conduct. This reviewing committee also notes that the Respondent's conduct violated Section 27A(a) of the Connecticut Rules of Court, which also requires an attorney to keep funds held as a fiduciary separate from the attorney's property, and prohibits an attorney from utilizing funds held as a fiduciary for any unauthorized purpose. We do not find credible the Respondent's claim that the withdrawals were inadvertent. The Respondent also failed to render an accounting of the escrow funds to the Complainant, in spite of the Complainant's numerous requests through his attorney for documentation regarding the escrow account, in violation of Rule 1.15(b) of the Rules of Professional Conduct. Prior to the filing of this complaint the Respondent did not advise the Complainant of the withdrawals from the account. Finally, to the extent that the Respondent took any portion of the deposit as a fee, as it is clear the question of entitlement to the deposit was in dispute, and the Respondent failed to keep the portion purportedly representing his fee separate, we find that the Respondent also violated Rule 1.15(c) of the Rules of Professional Conduct.

Based on the foregoing, and because of the serious nature of the misconduct at issue, it is our recommendation that the Respondent be presented to the Superior Court for whatever discipline the court deems appropriate.

Mr. Thomas J. McKiernan

Attorney Salvatore C. DePiano