Attorney Grievance Commission v. Obi

GREENE, J. Pursuant to Maryland Rule 16-751 1 of the Maryland Lawyers’ Rules of Professional Conduct (MRPC), the Attorney Grievance Commission (the “Commission” or “Bar Counsel”), acting through Bar Counsel, filed a petition for disciplinary or remedial action against Uzoma C. Obi, Esquire (“Respondent”), charging him with violations arising out of his handling of his client trust account, particularly his commingling of personal funds within the account. The Commission alleged violations of MRPC 1.15 (Safekeeping Property), 2 8.1(b) (Bar Admission and Disciplinary Matters), 3 8.4(d) (Misconduct), ⁶⁴⁷ 4 and Maryland Rules of Procedure (MRP) 16-607 (Commingling of Funds) 5 and 16-609 (Prohibited Transactions). 6 Pursuant to Maryland Rule 16-752(a), we referred the petition to Judge Michele D. Hotten of the Circuit Court for Prince George’s County to conduct an evidentiary hearing and ⁶⁴⁸ submit to this Court her proposed findings of fact and conclusions of law. Pursuant to Maryland Rule 16-757(c), Judge Hotten conducted a hearing on September 7, 2005, and submitted her findings and conclusions on October 6, 2005. She found, by clear and convincing evidence, that Respondent had violated MRPC 1.15 and 8.1(b), as well as MRP 16-607 and 16-609.

Respondent filed exceptions to Judge Hotten’s findings of fact and conclusions of law. Petitioner filed no exceptions. BACKGROUND The commingling of funds by Respondent first came to Bar Counsel’s attention when Chevy Chase Bank notified Bar Counsel that Respondent’s client trust account was overdrawn. Subsequently, Bar Counsel informed Respondent of the overdraft, to which Respondent replied that the check in question was used to pay the tuition of one of his children.

Respondent admitted that this constituted commingling and said that he appreciated the severity and possible consequences of his conduct. He further assured Bar Counsel that the funds in the account were not client funds, but were his personal funds for services rendered. Bar Counsel’s subsequent investigation uncovered other instances of such commingling. In the course of the investigation Respondent failed to provide certain documents that were requested by Bar Counsel.

Following an investigation, Respondent was charged with violating the MRPC. Wé now summarize the pertinent findings of fact and conclusions of law of the hearing judge with respect to the complaint of Bar Counsel. Respondent, Uzoma C. Obi, age 35, received his law degree from the University of Maryland School of Law in May of 1998 and was admitted to the Maryland Bar on December 16, 1998. He has never taken any course on the handling of escrow accounts.

Respondent has been a sole practitioner, based in Prince George’s County, Maryland, since August of 2000. Respondent’s areas of practice include family law, criminal law, and personal injury. Prior to August of 2000, Respon ⁶⁴⁹ dent worked for a business consulting firm in the District of Columbia. On January 14, 2004, Chevy Chase Bank informed Bar Counsel that an IOLTA account in the name of Respondent (“the account”) was overdrawn in the amount of $1,600.00 as a result of a check presented on November 17, 2003.

Consequently, Bar Counsel contacted Respondent requesting a full explanation and an examination of Respondent’s escrow account from the period between July 2003 and December 2003. Bar Counsel also requested “copies of [Respondent’s] client ledger cards, deposit slips, cancelled checks, and monthly bank statements for each month of the pertinent period of time stated.” According to the testimony of John DeBone (“Mr. DeBone”), a paralegal employed by the Office of Bar Counsel, the client ledger accounts were requested in order to determine the extent of any client funds in the account. Respondent replied on January 20, 2004, and explained that the overdraft was the result of a check he wrote to pay his children’s private school tuition. He admitted that this constituted commingling of personal funds and assured Bar Counsel that he fully understood the severity and potentially dire consequences of his conduct.

Respondent attributed his conduct to a “temporary lapse in professional judgment” resulting from his wife’s ill health and corresponding financial consequences and the impact of a “slow economy” on his law practice. He further stated that the funds in the account represented his own earned revenue. Attached to the letter Respondent provided: a copy of the front and back of a $1,600 check to the St. Mark’s School dated November 14, 2003; a page from Respondent’s “cash receipt journal” for the period between July 1, 2003, and December 12, 2003; a page from a “check register” for the same period; and six pages representing copies of a “statement of account” from Chevy Chase Bank for the account dated July 15, 2003, August 14, 2003, September 15, 2003, November 15, 2003, December 12, 2003, and January 15, 2004. Respondent submitted no client ledger cards or deposit slips, no copy of the October 2003 bank ⁶⁵⁰ statement, nor did he submit copies of checks drawn on his escrow account for the relevant period provided.

Subsequently, by letter dated April 12, 2004, Bar Counsel contacted Respondent. Bar Counsel requested: a copy of the October 2003 bank statement; statements for the earlier part of 2003, including “copies of all checks and transactions drawn against the account”; and “copies of all deposit slips and deposited items and credits to the account” within twenty days. Bar Counsel further advised Respondent that “the gravamen” of the investigation related to the $1,600.00 overdraft and that the analysis of the bank records then available revealed, “commingling and suspected misuse of fiduciary funds.” On April 28, 2004, Respondent requested an extension of the twenty-day response deadline, which Bar Counsel granted, extending the deadline to May 17, 2004. Respondent replied by letter, with attachments, dated May 18, 2004.

The attachments included: a single page copy of Respondent’s “Cash Receipts Journal;” copies of sixteen checks from the account payable to Respondent in various amounts between January 18, 2003 and February 20, 2004; a check from the account payable to Abeba Zegata dated February 20, 2004; and copies of Chevy Chase Bank statements for the account representing numerous dates. 7 Respondent was not asked to provide specific files for the account. No supporting documentation was provided with the cash receipts journal pages by which its entries could be verified. Bar Counsel issued a subpoena to the custodian of records for Chevy Chase Bank and to Respondent seeking copies of “bank statements, deposit slips, deposited items, front and back of all checks and any and all transactions into and out” of the account. On or about July 30, 2004, Bar Counsel received ⁶⁵¹ from Chevy Chase Bank copies of its records of the account.

As reflected by these records, Respondent drew eighteen checks against the account, one payable to a client, and the rest payable to Respondent. About seventy-three transactions were reflected, including a cash withdrawal of twenty thousand dollars. Mr. DeBone compiled and analyzed the records of the account received from Chevy Chase Bank, which included: checks payable to Respondent; deposits for client Richard Chambers; deposits for client Nwaogu; a withdrawal from the account to Wells Fargo; and deposits and disbursement activity regarding client Zegata. Mr. DeBone was unable to resolve the balances of the trust account as reflected in the Chevy Chase Bank statements versus the balances reflected in his analysis.

Mr. DeBone ultimately could not unequivocally conclude that the funds in the account during the relevant period belonged to clients. Sixteen checks were posted against Respondent’s account, none of which were payable to a client. Mr. DeBone did not request specific client files to coincide with transactions related to the account during the relevant period and did not initiate contact with specific clients which may have been identified in the documents received. Mr. DeBone did not have personal knowledge regarding the fee arrangements between Respondent and any client identified in the available documents.

On September 16, 2004, Bar Counsel sent Respondent a letter alleging that he had “failed to account and to ... respond to a lawful request for information in connection with the disciplinary investigation of [his] handling of fiduciary funds” and that a statement of charges would be forwarded to a Peer Review Panel for consideration of the relevant Rules of Professional Conduct regarding the commingling of funds. Respondent replied on September 22, 2004, challenging Bar Counsel’s decision. Respondent attached to the letter the front and back of checks from the account between January 18, 2003, and February 20, 2004. Sixteen of the seventeen copies of checks were payable to Respondent and one was payable to Zegata.

No client ledger sheets were ever provid ⁶⁵² ed. Respondent did not know what a “client ledger card” was and thus submitted pages from his personal business ledger. He also later explained that his Wells Fargo transaction was a mortgage payment. CONCLUSIONS OF LAW The hearing judge made the following conclusions of law: 1.

Mr. Obi knowingly commingled personal funds in the client trust account, and utilized the trust account for personal matters, in violation of Maryland Rule of Professional Conduct 1.15 (Safekeeping of Property), and Maryland Rule 16-607. In this regard, the Court relies upon Petitioner’s Exhibit 3 (the December 31, 2003 letter from Chevy Chase Bank), which advised Bar Counsel that Mr. Obi’s IOLTA account was overdrawn in the amount of $1,600.00 as a result of a personal check presented on November 17, 2003 by Mr. Obi for payment of his children’s school tuition, for which a non-sufficient fund fee of $32.00 was assessed. Mr. Obi admitted the account was overdrawn as a result of the personal check. Mr. Obi drew eighteen checks against the client trust account between December, 2003 and June, 2004, seventeen of which were payable to him.

Mr. Obi admitted that he had commingled personal funds in the client trust account but claimed ignorance of the rules prohibiting such conduct. He failed to keep personal funds separate from the trust account. He also failed to maintain “complete records” as required by Rule 1.15 to ensure that client funds were appropriately identified and safeguarded to avoid even the appearance of commingling. 2. Maryland Rule 16-607 provides that “[A]n attorney ... may deposit in an attorney trust account only those funds required to be deposited in that account by Rule 16-604 or permitted to be so deposited by section b of this Rule[.]” Mr. Obi violated this Rule by depositing and maintaining his personal funds in the client trust account, as reflected by his own testimony and the Chevy Chase Bank records. ⁶⁵³ 3.

Mr. Obi violated Maryland Rule 16-609(Prohibited Transactions) which provides, inter alia, that “[A]n instrument drawn on an attorney trust account may not be drawn payable to cash or to bearer[.]” Mr. Obi drew seventeen of eighteen checks between December, 2003 and June, 2004 to himself. As reflected in the October and November, 2003 bank statements from Chevy Chase Bank, Mr. Obi electronically transferred funds on two occasions from the client trust account in addition to a withdrawal of $7,836.05 to a Wells Fargo Bank account, which Mr. Obi testified were related to the payment of his mortgage. Since there is no apparent nexus between the funds disbursed from the client trust account and identifiable client purposes, Mr. Obi’s electronic transfers amount to personal use, not client business, and thus violate Rule 16-609. 4. Mr. Obi violated Maryland Rule of Professional Conduct 8.1(b) by failing to provide the front and back of deposit slips and ledger cards as requested by the Office of Bar Counsel ... which could have enabled Bar Counsel to clearly identify transactions in and out of the client trust account in order to completely address the propriety of Mr. Obi’s use of the account and its fiduciary funds.

Mr. Obi did not deny the allegation that he failed to comply with Bar Counsel’s request. DISCUSSION Bar Counsel filed no exceptions to the Circuit Court’s findings of fact and conclusions of law. Respondent took exception to the following factual findings: (1) that “per testimony of ... [Mr.] DeBone[,] ... client ledger accounts were requested to determine the extent of any client funds in [Respondent’s] account; (2) that no supporting documentation was provided with the cash receipts journal pages by which Mr. DeBone could verify the entries; and (3) that no client ledger sheets were provided. Respondent further took exception to the legal conclusions that he violated Rule 16-609 and MRPC Rules 8.1(b) and 1.15(b). ⁶⁵⁴ In attorney discipline proceedings, “this Court has original and complete jurisdiction and conducts an independent review of the record____[T]he hearing judge’s findings of fact generally will be accepted unless they are clearly erroneous.” Attorney Griev.

Comm’n v. Kapoor, 391 Md. 505, 529-30 , 894 A.2d 502, 517 (2006) (quoting Attorney Griev. Comm’n v. Cherry-Mahoi, 388 Md. 124, 152-53 , 879 A.2d 58, 76 (2005)). The factual findings of a hearing judge will not be disturbed if based on clear and convincing evidence. Attorney Griev.

Comm’n v. West, 378 Md. 395, 409-10 , 836 A.2d 588, 596 (2003) (citing Attorney Griev. Comm’n v. Monfried, 368 Md. 373, 388 , 794 A.2d 92, 100 (2002)). The proposed conclusions of law of the hearing judge are reviewed de novo. Id. at 410, 836 A.2d at 596 (citing Attorney Griev.

Comm’n v. McLaughlin, 372 Md. 467, 493 , 813 A.2d 1145, 1160 (2002)). Bar Counsel has the burden of establishing the allegations by clear and convincing evidence and Respondent has the burden of proving the existence of mitigating circumstances by a preponderance of the evidence. Md. Rule 16-757(b). RESPONDENT’S EXCEPTIONS TO FINDINGS OF FACT Respondent objects to the factual finding that Mr. DeBone requested client ledger cards in order to determine the extent of client funds in Respondent’s account, arguing that the evidence does not demonstrate that the client ledger cards were necessary to Mr. DeBone’s analysis.

We overrule this exception. Respondent’s assertion that there was no evidence that the materials requested by Bar Counsel were necessary to the investigation is immaterial, as Respondent has an obligation to provide Bar Counsel with any relevant material requested in the course of an investigation. Md. Rule 16-731(c)(1) (“As part of the notice [that Bar Counsel is undertaking an investigation to determine whether the attorney has engaged in professional misconduct], Bar Counsel may demand that the attorney provide information and records that Bar Counsel deems appropriate and relevant to the investigation.”). ⁶⁵⁵ Respondent’s second exception asserts that there is no evidence that Bar Counsel requested supporting documentation along with the cash receipt journal pages. We disagree.

It is clear that Bar Counsel’s initial letter to Respondent asked for such supporting documentation as: “copies of [Respondent’s] client ledger cards, deposit slips, cancelled checks, and monthly bank statements for each month of the pertinent period of time stated.” Moreover, in a subsequent letter to Respondent, Bar Counsel requested additional bank statements, including “copies of all checks and transactions drawn against the account” and “copies of all deposit slips and deposited items and credits to the account” within twenty days. Therefore, Respondent’s exception is without merit. Respondent also filed exceptions to the finding that no client ledger sheets were provided, asserting that such a finding “presupposes that [Respondent] prepared and maintained client ledger sheets but failed to provided it to Bar Counsel.” Respondent’s exception is immaterial as it is his obligation to maintain such records. See infra 393 Md. at 656-57, 904 A.2d at 430.

RESPONDENT’S EXCEPTION TO CONCLUSIONS OF LAW RULE 16-609 In denying that he violated Rule 16-609, Respondent first notes that the purpose of the prohibition on drawing an instrument on a trust account payable to cash or bearer is to ensure that escrow funds are dispersed to identifiable receivers. Respondent argues that he did not issue any check or instrument on the account to cash or bearer but only to himself and to an identifiable Wells Fargo account, neither of which violate the letter or spirit of Rule 16-609. We hold that Respondent