In the Matter of Glen R. Vasa

BOARD MEMORANDUM

By a two-to-one vote, a hearing committee recommended that the respondent be suspended for three years, with conditions. The dissent recommended disbarment. Neither bar counsel nor the respondent appealed. We adopt the committee's findings of fact and conclusions of law but modify the proposed sanction. For the reasons discussed below, we recommend a four-year suspension.

The Committee's Findings

We summarize the hearing committee's findings of fact and conclusions of law. The respondent, Glen R. Vasa, was admitted to the Massachusetts bar on December 12, 2003. Beginning in 2006, he and Daniel M. Hutton, Esq., became partners in the law firm of Vasa & Hutton, P.C. (V &H). The bulk of the firm's practice involved personal injury cases, and the firm charged a one-third contingent fee on all personal injury settlements.

The IOLTA and Operating Accounts

At all relevant times, the firm maintained IOLTA and operating accounts to which the respondent and Hutton had equal access. Both were signatories. The office manager, Jenny Rosa, could and did write checks but required authorization from Hutton or the respondent to sign them.¹  

The firm's checkbooks, related records and check registers were kept in a safe in the respondent's office. Most of the time, both the safe and the office were unlocked. While the respondent had primary responsibility for the IOLTA and operating account registers, Hutton made entries in both. While the respondent wrote the majority of firm checks, Hutton wrote checks on both accounts.

The respondent was the person mainly in charge of making deposits to the IOLTA account, including the firm's personal injury settlement checks. He typically logged the deposit in the IOLTA check register, and then caused the deposit to be made, either in person or through a staff member at the bank, or through a mobile phone application. In his sworn statement given to bar counsel before the hearing, he acknowledged that most of the deposits in the IOLTA ledger appeared to be in his handwriting. He also admitted that not all the deposits were recorded in the register.

The IOLTA and operating accounts had a single username and password for online access. Rosa did not have access to the online account. Although Hutton could have used the username and password if he had wanted to, the respondent agreed that he never did. Accordingly, Hutton, who did not access the accounts online but was not prevented by the respondent from obtaining such access, never made online transfers. The respondent was the only person at the firm who did.

From November 2010 through June 2014, the respondent made online transfers of funds from the firm's IOLTA account to the operating account over 250 times, sometimes several times in a single week, typically in large round amounts and always without any attribution to a client matter. These transfers were the only payments made to the firm from the IOLTA account, and they comprised the bulk of the deposits of funds to the operating account. The respondent made transfers whenever the operating account needed money to fund the business. In his sworn statement, the respondent admitted specifically that there was no formal reconciliation between the accounts and that there were no individual client ledgers. While at one point the respondent kept track on a legal pad of client proceeds and office proceeds, this practice stopped at an unspecified time. Subsequently, no record was kept to show that fees from a particular client had been transferred to the operating account. Often the transfers preceded large payments made to the U.S. Treasury, to vendors, or to payroll.

The Settlement Process

The committee credited the respondent's testimony that he handled more cases than the firm's other attorneys. He explained this process in his sworn statement (he did not appear for the disciplinary hearing), stating that if a case went into litigation, Hutton or associate attorney William Serwetman would handle it, but he stayed involved in strategizing and moving cases forward, sometimes distributing files among the lawyers or reserving them for himself. Once a case was settled and the firm was waiting for the settlement check, the file would be kept in a filing cabinet beside Rosa. The settlement checks were typically made out to the firm and the client. Once the check was received, the client would come in and sign the check, after which the respondent would endorse it for the firm and deposit it. Some clients would not want to come in but instead would authorize one of the attorneys to sign on their behalf.

After a settlement check had cleared, there should have been a check written to the client and to any medical provider that was owed part of the money. Any costs incurred would be withdrawn from the settlement funds. Rosa often prepared a handwritten settlement statement for a case, listing a breakdown of where all the money went. Except for those clients discussed below who asked the firm to negotiate outstanding provider bills, once a client had received a check, the file would go into a pile next to Rosa's desk and then into a box that would be put in storage.

Most of the clients would get their entire settlement in one check. Once in a while, a client would ask the firm to try to negotiate with a third party to get a bill or lien reduced. If that happened, the attorney or Rosa would try to resolve the debt. The committee found that there was no formal system in place to make sure that any client who was owed money beyond the initial settlement funds actually received it.

Misuse of the Money of Particular Clients

Marie Astride Baptiste

Baptiste hired V&H after an accident on April 23, 2010. Serwetman--the only attorney at V&H with whom Baptiste spoke--eventually settled the case for the insurance policy limit of $20,000. On or about March 11, 2011, the respondent caused to be deposited into the firm's IOLTA account a settlement check for Baptiste in the amount of $20,000. The firm's fee amounted to $6,666.67, and some bills were paid on Baptiste's behalf, totaling $439.16. Baptiste bad outstanding medical bills of $9,713.

Serwetman gave the file to Rosa to resolve the liens. Baptiste later contacted him to complain that she had not received her funds. She spoke only with Serwetman, never with the respondent. The committee found that Baptiste never received any payments, and that no medical bills were paid on her behalf after May 9, 2011. It concluded that the firm should have been holding not less than $12,894.17 of her funds.

William Bleakney

William Bleakney was struck by a car in January 2012. Hutton did the initial intake and some further work; Bleakney never spoke with the respondent. The case settled for $20,000 on November 19, 2012. Serwetman spoke to the client regarding the settlement. On or about November 30, 2012, the respondent signed and caused to be deposited into the firm's IOLTA account a settlement check for Bleakney in the amount of $20,000. The firm made a payment of $1,731.45 on December 3, 2012 to the Commonwealth on Bleakney's behalf. Assuming an attorney's fee of one third of the gross proceeds, Bleakney was owed approximately $11,601.88.

The committee found a record in the IOLTA check register of a check for $11,423.62² written to Bleakney on December 6, 2012, and found that this check was sent to Bleakney. However, the check was never negotiated. The committee found that the firm should still be holding $11,601.88 of Bleakney's money.

Stephanie Gelin

Serwetman was involved in the negotiation of the settlement of Gelin's case. On or about February 25, 2013, the respondent caused to be deposited into the firm's IOLTA account a settlement check for Gelin in the amount of $1,200. In the settlement sheet in the client file, the firm claimed attorney's fees of $400, and claimed to have paid expenses of $261.62, leaving a balance owed to Gelin of $538.38. In fact, payments were made for Gelin of only $229.00. Using this figure, the net amount due Gelin after fees and expenses was $571.00. The firm failed to pay $571.00 to Gelin or to anyone else on her behalf or for her benefit, and should still be holding it.

Marise Lopes

Marise Lopes was a V&H client whose case settled for $12,000. Serwetman spoke to her once, made a few calls about her claim, and settled it on June 27, 2012. The respondent recorded a $12,000 deposit on her behalf in the IOLTA check register on August 2, 2012, and deposited the check on August 2 or 3, 2012. Lopes was sent a settlement sheet along with a check for $4,736.48. This reflects that the film's fee was $4,000, the costs incurred on Lopes's behalf were $263.52, and that $3,000 was being withheld to pay a medical provider.

The fee to the medical provider was never paid. Also, a check including $32.33 attributable to Lopes had previously been sent to a medical provider for records, but the check was never negotiated. Accordingly, Lopes is owed, and the firm should be holding for her, $3,032.33: the $3,000 purportedly withheld for medical bills that were never paid, and the $32.33 for the uncashed check to the medical provider.

David Lubwama

David Lubwama hired Hutton after an April 2006 accident. Hutton filed suit and then mediated the case, which settled for $30,000. For reasons not made clear at the hearing, the settlement check for $26,072, dated November 22, 2010 and payable to David Lubwama and Vasa & Hutton, was not endorsed and deposited until April 26, 2011. On or about April 26, 2011, Hutton-with Lubwama's permission-signed Lubwama's name, and the respondent signed on the firm's behalf. The respondent caused the check to be deposited into the firm's IOLTA account. The firm's fees and costs amounted to $12,485 and Lubwama was owed approximately $13,587.

After the settlement, Lubwama and Hutton were in contact until, upset about the size of the settlement, Lubwama stopped returning Hutton's phone calls. No funds were paid to Lubwama. The committee found that after accounting for fees and expenses paid to V&H and third parties, the firm should still be holding $13,587.17 of Lubwama's money.

Rafael Martinez

After Rafael Martinez was injured in July 2011, Hutton settled his claim for $13,500. On or about July 13 and July 27, 2012, the respondent caused to be deposited into the firm's IOLTA account two settlement checks for Rafael Martinez totaling $12,889.14. The firm's fee was $4,024.39. It issued a check to Martinez in the amount of $4,704.80, and held back $4,159.95 for outstanding medical bills. The check to Martinez was written by Rosa and signed by the respondent. No further payments were made to or on behalf of Martinez, and the committee found that the firm should still be holding $4,159.95 for him.

Melissa Meskell

After Melissa Meskell was injured in a car accident in June 2009, she sought the help of Serwetman, whom she knew personally. Serwetman settled her claim for $17,000. On or about November 24, 2010, the respondent deposited a check in that amount into the firm's IOLTA account. The firm paid a number of bills on Meskell's behalf, including a November 30, 2010 payment to Harvard Pilgrim Health Care via check #3677 in the amount of $1,051.34. This and two other checks for bills were written by the respondent. Also on November 30, 2010, the firm paid Meskell $8,153.39, her share of the settlement.

On December 16, either Nicole DaSilva or Rosa took a phone message indicating that 'Janet," of "Cambridge Public Health Comis[s]ion (Harvard Pilgrim Health Care)" would forward a refund check to the office relating to "M. Meskel" and check #3677. On January 11, 2011, the respondent made a deposit entry in the IOLTA register; writing "Returned Cambridge Hospital check" and noting the amount. On the same day, he deposited into the firm's IOLTA account a check from the Cambridge Public Health Commission/The Cambridge Hospital in the amount of $1,051.34, representing a refund of the prior payment to Harvard Pilgrim. The check did not have Meskell's name on it. Although the $1,051.34 had been deducted from Meskell's settlement proceeds, the firm made no further payments to Meskell. The committee found that the firm should still be holding these funds on her behalf.

Marie Valerius

Marie Valerius hired V&H after she fell and suffered injuries. Serwetman settled the case against the property owner for $3,000. Valerius signed a release dated April 26, 2013. On or about May 6, 2013, the respondent caused to be deposited into the firm's IOLTA account a settlement check for Marie Valerius in the amount of $3,000. After payment of bills on Valerius's behalf totaling $370.74, and deduction of the firm's one-third fee of $1,000, Valerius was entitled to $1,629.26. The committee found that no further payments were made to Valerius or to others for her benefit, and that the firm should still be holding $1,629.26 of Valerius's money.

Further Findings

The committee observed that at all times, the IOLTA account should have had in it at least enough money to pay the full amount of client funds owed. Once the Valerius case settled in May 2013, this figure totaled $48,527.10. The respondent filed for personal bankruptcy protection in May 2014. The firm dissolved in June 2014. By August 22, 2014, despite the firm's failure to pay any of the clients identified above the amounts owed to them or their providers, the balance in the IOLTA account had fallen to under $200.

The Committee's Conclusions

The respondent admitted in his answer that the firm did not promptly pay clients and third parties, and that he misused client funds.³ The main issue over which the committee divided was the respondent's state of mind when he misused client funds.^4,5

We agree with the majority that the respondent was negligent in misusing client funds. Bar counsel proved that V&H lacked sound and careful processes for tracking and distributing client funds, and for ensuring that all clients and third parties received what was due them. However, we note that most of the clients had never met the respondent and had no interaction with him. The committee found what it described as "a certain fluidity and overlap among the lawyers' duties, with different people handling cases at various stages," and it rejected the claim that the respondent, despite his greater familiarity with the firm's banking arrangements, was solely or exclusively responsible for making sure that client funds got disbursed.

Transferring funds in round numbers with no client identifiers, and transferring funds into an operating account in advance of paying large disbursements, are among the factors that may be relied on to find intentional misuse. E.g., Matter of Morad, 31 Mass. Att'y Disc. R. _, _, S.J.C. No. BD-2015-037, slip op. at 4 (July 30, 2015); Matter of Thalheimer, 24 Mass. Att'y Disc. R. 684, 688 (2008). The hearing committee persuasively distinguished these two cases, because it was clear that only those attorneys interacted with the clients and were ultimately responsible for the banking. Here, however, given the disorganization of the office, Hutton's testimony (which the committee did not credit), Serwetman's observations (which it found generally credible but not particularly supportive of bar counsel on this point), and deficient financial records, we cannot find fault in the majority's refusal to infer intentional conduct. We agree with the majority that bar counsel did not meet her burden of proof that the respondent intentionally misused client funds in any of the eight matters.⁶

Mitigation and Aggravation

The committee correctly rejected the respondent's arguments in mitigation, enumerated in his answer to the petition for discipline, that Hutton "forced" him to handle the recordkeeping responsibilities and duties; that the firm's business and tax adviser neglected to advise him of the proper steps to follow; that it would have been foolhardy not to pay clients the funds owed them, since the film depended on word-of-mouth referrals; and that he is currently a sole practitioner who has young children to support.⁷ See, e.g., Matter of Cobb, 445 Mass. 452, 480, 21 Mass. Att'y Disc. R. 93, 126 (2005) (blaming others is aggravating); Matter of Boyce, 25 Mass. Att'y Disc. R. 74, 77 (2009) (rejecting argument that partner had responsibility for the business side of the practice and therefore was at fault); Matter of Lupo, 447 Mass. 345, 357, 22 Mass. Att'y 10 Disc. R. 517, 531 (2006) (reliance on advice of counsel not mitigating); Matter of Neitlich, 413 Mass. 416, 425, 8 Mass. Att'y Disc. R. 167, 177 (1992) (solo practice not mitigating); Matter of McCarthy, 416 Mass. 423,431, 9 Mass. Att'y Disc. R. 225,233 (1993) (test of appropriate level of discipline lies not with impact on lawyer but with considerations of public welfare). It rejected bar counsel's argument that the failure to appear at the hearing was aggravating, noting that the respondent had participated in the proceedings and, earlier in the process, had given "a long and fulsome sworn statement." We accept these findings and rationale.⁸

Sanction

We begin by reviewing cases featuring negligent misuse of client funds with deprivation resulting. "[W]here... the unintentional misconduct has resulted in even temporary deprivation, a term suspension is typical." Matter of Jackman. 444 Mass. 1013, 1014, 21 Mass. Att' y Disc. R. 349, 351 (2005). Negligent misuse often warrants a suspension of at least two years. E.g., Jackman, supra; Matter of Ostrovitz, 24 Mass. Att'y Disc. R. 533 (2008) (stipulation for a two-and-a-half year suspension for unintentional misuse of client's funds totaling approximately $4,100, failure to pay third-party medical bills, failure to cooperate with bar counsel, plus other misconduct, mitigated by restitution and serious illness and aggravated by prior discipline); Matter of Kafkas, 18 Mass. Att'y Disc. R. 342 (2002) (stipulation for a two-year suspension for seven instances of negligent misuse with deprivation and inadequate recordkeeping; all clients were paid in full four to ten weeks after their settlement funds were deposited); Matter of Newton, 12 Mass. Att'y Disc. R. 351 (1996) (two-year suspension for negligent misuse with temporary deprivation and other misconduct in two matters); Matter of Zelman, 10 Mass. Att'y Disc. R. 302 (1994) (stipulation for two-year suspension for negligent misuse with temporary deprivation in two matters, plus mitigation (stress) and aggravation (two earlier admonitions)); Matter of Barnes, 8 Mass. Att'y Disc. R. 8 (1992) (three-year suspension with third year stayed for two instances of negligent misuse, with temporary deprivation, misrepresentation, and other rule violations, mitigated by volunteer work and alcohol counseling).⁹

Unlike most of the cases cited above, the respondent's clients are still waiting to be paid. The total amount owed is $48,527.10, some of which has been outstanding since early 2011. "Making restitution 'is an outward sign of the recognition of one's wrongdoing and the awareness of a moral duty to make amends to the best of one's ability.'" Matter of Murray, 29 Mass. Att'y Disc. R. 465, 480 (2013) (citation omitted). By contrast, the failure to make restitution constitutes continuing injury to the client, and is considered an aggravating factor. Matter of Jackman, 444 Mass. at 1014, 21 Mass. Att'y Disc. R. at 352-353. In this case, the negligent, unintentional misuse of client funds deprived eight clients of funds for periods ranging from three to almost six years.

After the hearing committee issued its report but before the matter came before us, a single justice suspended the respondent for misconduct in an unrelated matter. Matter of Vasa, S.J.C. No. BD-2016-015 (August 19, 2016). Past misconduct must be considered in deciding a sanction. Matter of Saab, 406 Mass. 315, 327, 6 Mass. Att'y Disc. R. 278, 291 (1989) (describing as "essential" the use of past misconduct in determining the appropriate level of discipline); Matter of Chambers, 421 Mass. 256,260, 11 Mass. Att'y Disc. R. 31, 36 (1995) ("in the absence of mitigating factors, discipline should proceed in increments of escalating severity"). See Matter of Karahalis, 429 Mass. 121, 124, n. 5, 15 Mass. Att'y Disc. R. 290,294, n. 5 (1999) (Court finds it "appropriate to consider the respondent's disciplinary record in determining the appropriate sanction to be imposed without regard to when the infractions occurred"); Matter of Diamond, 16 Mass. Att'y Disc. R. 100, 109, n. 1 (1999) (rejecting contention "that it would be unfair to increase the sanction on account of discipline imposed after the date of the misconduct in question here").

We believe a four-year suspension is an appropriate sanction for the respondent's pervasive and long-standing misconduct. We ground our recommendation on many factors: the cases cited above, the respondent's intervening suspension for misconduct, and the extent and breadth of his misuse of client funds, which affected eight clients who are still owed money after many years. Such a pattern of misuse constitutes grave misconduct and demands a correspondingly severe sanction, Saab, supra, 406 Mass. at 325-326, 6 Mass. Att'y Disc. R. at 288-289,

Respectfully submitted,

THE BOARD OF BAR OVERSEERS

 

¹ The committee generally did not credit Hutton's testimony that he was not responsible for the firm's client funds account or for cases he settled. We have no reason to disturb these credibility findings. See generally S.J.C. Rule 4:01, § 8(5)(a). In addition to its credibility determination, the committee also found the following: Hutton admitted he did not like the respondent; Hutton was the one who brought the respondent's conduct to bar counsel's attention; and at the time of the hearing, Hutton has pending a civil action against the respondent, which had been stayed due to a bankruptcy issue.

² It is not clear why the check to Bleakney was for $11,423.62, not $11,601.88.

³ Also admitted was that the firm did not keep formal records, In violation of both Rule 1.15(f)(l) (detailing requirements for IOLTA account records and reconciliation) and Rule 8.4(h) (conduct adversely reflecting on fitness to practice). The committee was unanimous in finding a Rule 1.15(b) violation (hold trust property separate from lawyer's own).

⁴ The committee was not unanimous on the questions whether the respondent's conduct violated Rule 1.2(a) (lawyer to seek the lawful objectives of his client through reasonably available means), 1.3 (act with diligence in representing a client), and 8.4(c) (no dishonesty, fraud, deceit, or misrepresentation). The majority reasoned that Rules 1.2(a) and 1.3 apply only to duties owed clients, and that bar counsel had failed to prove that any of the individuals described above was actually the respondent's client. Rejecting bar counsel's argument that the respondent's misuse was knowing, the majority concomitantly rejected the 8.4(c) charge. The dissent maintained that the respondent's fiduciary duties ran to all the firm's clients, even those he did not deal with exclusively. Finding the respondent's misuse to be knowing under the willful blindness doctrine, the dissent also concluded that bar counsel had proved an 8.4(c) violation.

⁵ The respondent was not conscientious in responding to bar counsel once her investigation got underway. His failure to respond in a timely manner resulted in an administrative suspension, which was lifted once he filed an affidavit of compliance. Although the committee found that the failure to respond to bar counsel violated Rule 8.4(g) (failure without good cause to cooperate with bar counsel), it did not find a violation of 8.1(b) (knowingly fail to respond to lawful demand for information from disciplinary authority) or 8.4(d) (conduct prejudicial to the administration of justice). Noting the earlier-imposed administrative suspension, the committee declined to recommend any additional sanction.

⁶ We do not agree with the dissent's position that, under Matter of Zimmerman, 17 Mass. Att'y Disc. R. 633,647 (2001), willful blindness-the equivalent of actual knowledge-should be inferred from the respondent's conduct. We defer to the majority's assessment of the credibility of the testifying witnesses, and we see no reason to disturb its factual findings regarding the office structure and division of labor. We reject the dissent's argument that the respondent's deposit of the Meskell refund check, combined with his status as a fiduciary, president of the V&H professional corporation and the lawyer with primary responsibility for the accounts, constitutes "' studied ignorance of a readily accessible fact by consciously avoiding it."' Id.

⁷ That it would be irrational to misuse funds is an argument in support of a rejected finding, not a mitigating factor.

⁸ We observe that while, in some cases, failure to appear at the disciplinary hearing might be a legitimate matter in aggravation, nothing critical turns on it here, where the sanction recommended is appropriate, substantial and would not likely be increased by treating this as an aggravating factor.

⁹ See also Matter of Landolphi, 20 Mass. Att'y Disc. R. 295 (2004) (stipulation for three-year suspension for three instances of negligent misuse with deprivation of client funds, resulting in failure to pay client and third parties, plus other misconduct); Matter of Paris, 17 Mass. Att'y Disc. R. 450 (2001) (stipulation for one-year suspension plus reinstatement conditions, for two instances of negligent misuse, one resulting in deprivation, and other records violations). Cf. Matter of Pudlo, 28 Mass. Att'y Disc. R. 712, 720-721 (2012) (year-and-a-day suspension for negligent misuse, with three-month deprivation, and other misconduct, mitigated by serious family medical emergencies; Matter of Cronin, 19 Mass. Att'y Disc. R. 101, 103-104 (2003) (stipulation for one-year suspension for negligent misuse with deprivation, mitigated by major depression and separation from wife).