In the Matter of William P. Lenahan

HEARING COMMITTEE REPORT

On July 13, 1998, Bar Counsel filed a petition for discipline against the respondent, William P. Lenahan, charging him with three counts of misconduct. The petition alleged that the respondent, as closing agent and as agent for a title insurance agency, overcharged borrowers in 1993 and 1994 for various closing-related services by misrepresenting the costs of the services, collecting the false, higher costs, paying the providers the actual costs, and keeping the difference for himself. In addition, the petition charged that the respondent failed to timely remit to a title insurance company the premiums for policies sold. It further charged that the respondent commingled personal funds and clients’ funds in a conveyancing account and failed to maintain accurate records of his handling of those and third-party funds, resulting in the negligent use of the title insurance company’s funds for his own business and personal expenses.

The respondent filed an answer on February 8, 1999, in which he admitted that he negligently used the premiums collected for title insurance for personal and business expenses and failed to timely deliver the funds to the company, deliberately overcharged borrowers for title insurance and plot plans and intentionally misinformed the title insurance company about the amount of the premiums charged for title insurance policies (Pet. 15-23, 27; Ans. 4, 5, 7).² The respondent denied any knowledge of overcharging borrowers for title examinations and rundown and recording services (Pet. 24-27; Ans. 6, 7). Before the hearing, the parties filed a stipulation as to certain facts. The hearing was held on March 25, 1999. Bar Counsel called Jean Pierre Pages, an investigator for the Office of Bar Counsel, as a witness. The respondent testified on his own behalf. Introduced into evidence were 109 exhibits.³

I. Findings of Fact

1. The respondent was admitted to the Massachusetts bar on June 8, 1977 (Pet. 2; Ans. 1; Stip. 1). From 1991 through 1994, the respondent practiced in the area of real estate conveyancing, representing lenders and borrowers (Pet. 3; Ans. 1; Stip. 2). In 1992, the respondent began experiencing financial difficulties (Tr. 129, 133, 148-151, 153). The number of closings declined substantially (Tr. 129, 149). Some of the lenders’ limitations on costs and requirements for additional forms made it difficult to make money on the closings, and, for these reasons, the respondent decided not to conduct closings for some of the lenders (Tr. 104, 110). Furthermore, if a closing did not take place, the respondent was unable to recoup his costs (Tr. 141-142, 196-197, 219). In 1996 or early 1997, the respondent stopped doing conveyances, because the lenders continued to reduce fees, limit charges for costs and add requirements, making it uneconomical (Tr. 123-124).

2. In 1993 and 1994, the preliminary work and the settlement statements for the closings were prepared by the respondent’s paralegals or secretary (Tr. 103-104, 109). The respondent’s secretary and paralegals used the software program Black Acre to prepare the HUD-1 settlement statements (Tr. 87, 109), but it was not used for check writing for the disbursements (Tr. 197-200).⁴ The respondent did not know how to use Black Acre (Tr. 108).

3. The respondent deferred most bookkeeping and accounting responsibilities to his chief paralegal, and did not keep close track of his financial situation (Tr. 130, 151, 153-156). She was a signatory on the office bank accounts (Tr. 156; see Ex. 1, p. 53) and was responsible for financial matters, including disbursements after the closings and payment of office invoices (Tr. 130, 132, 141). The respondent did not sign these checks (Tr. 141, 156). The respondent did not know whether payments for various closing-related charges were made from his conveyancing account or his real estate account (Tr. 157-158). The only documents the respondent reviewed prior to the closings were the title abstracts and the promissory note (Tr. 109-110). The respondent did not compare the costs on the HUD-1 to the invoices prior to the closings (Tr. 110).

4. Prior to each closing, lenders provided borrowers with a Good Faith Estimate listing the estimated cost of services (see Ex. 171; Tr. 57-58). Each Good Faith Estimate advised at the top of the document: The information provided below reflects estimates of the charges which you are likely to incur at the settlement of your loan. The fees listed are estimates and the actual charges may be more or less….. A HUD-1 Settlement Statement will show you the actual costs for items paid at settlement.

(Ex. 171). At each closing, the respondent knew that, under 12 U.S.C. § 2603 et seq. (RESPA), he was required to provide borrowers with a HUD-1 settlement statement stating the actual costs of services (Tr. 56, 191-192; Ex. 1, p. 77) and that, in signing the HUD-1 statements, he certified that:

The settlement statement which I have prepared is a true and accurate account of this transactions. I have caused or will cause the funds to be disbursed in accordance with the statement.

(Tr. 209-210; Ex. 67-170).

5. In determining the amount to be disclosed on the GFE by the lender, the respondent would discuss with the lender the cost of various services (see Tr. 109). Sometimes the lender would require that the respondent reduce a cost or would set a maximum limit on certain costs (Tr. 109, 111, 196-197); that maximum would also be the estimated amount listed on the GFE (Tr. 111). The respondent viewed the costs listed on the GFEs as an upper limit on his charges on the HUD-1 settlement statements (Tr. 191-192), and did not charge more than the amount shown on the GFE (Tr. 113).

Failure to Pay Title Insurance Premiums to Company

6. During the period relevant to the petition for discipline, the respondent maintained a non-interest-bearing account at BayBank, which he used as his conveyancing account to hold funds of various lenders for disbursement in connection with real estate loan transactions (Pet. 4; Ans. 1; Stip. 3). This account did not qualify as a conveyancing account as defined in Canon Nine, DR 9-102(C)(1), because it was not dedicated to one lender, nor did it qualify as an IOLTA account (Pet. 4; Ans. 1; Stip. 3). The respondent also retained earned fees in this account for more than a short period of time after the fees had been earned (Pet. 4; Ans. 1; Stip. 3; Ex. 1, p. 39).

7. Between at least 1991 and 1994, the respondent was an authorized agent for Fidelity National Title Insurance Company (Stip. 2), and, as such, was authorized to issue title insurance policies and to collect premiums from borrowers who purchased the insurance (Pet. 7; Ans. 3; Stip. 6). Under his contract, the respondent was required to remit to Fidelity, on a monthly basis, the net premium payments for the policies issued, after deduction of his own commissions, along with copies of the policies (Pet. 7; Ans. 3; Stip. 6).

8. Between July 1993 to August 1994, the respondent issued thirty title insurance policies on behalf of Fidelity and collected premiums for these policies from borrowers (Pet. 8; Ans. 3; Stip. 7). On or about August 24, 1994, in the course of an audit of policies issued by the respondent, Fidelity discovered that the respondent had failed to remit the net funds collected for title insurance premiums (Pet. 9, 16; Ans. 3, 4; Stip. 8, 14; Tr. 133). After deductions for commissions, the respondent owed Fidelity at least $3,473 (Pet. 8; Ans. 3; Stip. 7). The respondent was unable to promptly pay these funds to Fidelity (Pet. 8; Ans. 3; Stip. 7), because he had negligently used at least $1,473 of the funds to pay his own business or personal expenses, and therefore, had insufficient funds in the account (Pet. 8; Ans. 3; Stip. 7; Tr. 133-134). The respondent was not aware that the account was insufficiently funded (Tr. 133-134). As a result, Fidelity terminated its agency agreement with the respondent and demanded in writing that the respondent account for and pay over all of the funds owed the company (Pet. 9; Ans. 3; Stip. 8; Tr. 133).

9. That same day the respondent paid Fidelity $2,000 in partial payment of the amount owned for premiums collected (Pet. 10; Ans. 3; Stip. 9). On October 4, 1994, Fidelity demanded payment of the balance of $1,473 owed for premiums (Pet. 11; Ans. 3; Stip. 10). On October 31, 1994, the respondent paid Fidelity an additional $500 (Pet. 11; Ans. 3; Stip. 10). On November 23, 1994, the respondent paid Fidelity an additional $950 by a check from his conveyancing account (Pet. 11; Ans. 3; Stip. 10). The check was signed by the respondent’s chief paralegal (Ex. 1, p. 53).

10. Because the respondent failed to maintain adequate records of his handling, maintenance, and distribution of the funds deposited in his conveyancing account, he was unable to identify the source of the funds in the conveyancing account used to make the $950 payment to Fidelity (Pet. 12; Ans. 3; Stip. 11).

Overcharges for Title Insurance

11. Between at least 1991 and 1994, in addition to being an authorized policy issuing agent for Fidelity, the respondent was also an agent for Lawyers Title Insurance Company (Stip. 2; Tr. 111-112). At some point prior to mid-1993, Lawyers increased its premium by about 25 cents per thousand and Fidelity’s remained the same (Tr. 112). The respondent informed the lenders he represented about the increased rate, which they then used on the GFEs (Ex. 1, p. 79). In addition, the respondent instructed his office to place half the title insurance policies with Lawyers and half with Fidelity, because he wanted to remain an agent for both companies; throughout the period of time relevant to these charges, the respondent continued to use both companies (Tr. 112).

12. In more than thirteen closings conducted between July 26, 1993, and August 1, 1994, the respondent charged and collected from borrowers amounts for title insurance issued by Fidelity at the higher rate charged by Lawyers and therefore, in excess of the rate charged by Fidelity (Pet. 17; Ans. 4; Stip. 15; Tr. 112-113, 158-159).⁵ These charges were sometimes only for a lender’s policy and sometimes for both lender’s and owner’s policies (Pet. 17; Ans. 4; Stip. 15). In these closings, the respondent represented the lenders, and in a few cases also the borrowers (Ex. 1, pp. 4, 99-100). The respondent did not advise either the lenders or the borrowers that he intended to charge, in addition to his legal fee, a premium for obtaining title insurance above the cost of the policy (Pet. 18; Ans. 4; Stip. 16). He did not obtain the informed consent of either the lender or the borrowers to his personal financial interest in the closings over and above his stated legal fee (Pet. 18; Ans. 4; Stip. 16). The amounts of the overcharges ranged from $2.75 to $107.50 (see Pet. 17a-m; Ans. 4; Stip. 15a-m). The total of the overcharges was $605.50 (Pet. 16, 17; Ans. 4; Stip. 14, 15). In each of these thirteen closings, the respondent intentionally overstated the cost of the title insurance policies on the HUD-1 settlement statements, falsely certified that the amounts listed reflected actual costs, and kept for his own use the difference between the actual cost of the premium and the amount recorded on the HUD-1 (Stip. 4; Ex. 67-170; Tr. 112-113, 121, 195-196, 209-210). No one was ever charged more than the estimate on the GFE, which reflected Lawyers’ rate (Tr. 113).

13. In August 1994, Fidelity conducted an audit of its title insurance policies issued by the respondent (Pet. 16; Ans. 4; Stip. 14). As part of the audit, the respondent gave Fidelity log sheets which falsely reported to the company that he had charged borrowers the rate allowed by the company, when, in fact, the respondent had charged a premium above what the company charged (Pet. 16; Ans. 4; Stip. 14). The respondent retained for his own use the difference between the amounts he actually collected for title insurance and the amounts he reported to Fidelity (Pet. 16; Ans. 4; Stip. 14; Tr. 159).

14. The respondent believed that he had the right to charge the prevailing rate for title insurance and knew the borrower would be quoted the higher rate by the lender on the GFE (Ex. 1, p. 84); he believed that his overcharges were accepted practice by the lenders so long as the charges did not exceed the amount on the GFEs (Tr. 210). The respondent decided that, as a business matter, he could make more on these closings if he charged the borrowers the higher rate, which they would have paid anyway, had he placed the policy with Liberty (see Tr. 112-113, 158-159).

Overcharges for Plot Plans

15. On February 8, 1993, John A. Halnon, a professional land surveyor, sent a letter informing the respondent that Halnon had started his own company and offering to conduct surveys and prepare plot plans for $100 per plot plan (Ex. 23). This price was $40 less than the amount charged by other surveyors for similar services (Tr. 161-162). Knowing that the lenders’ GFEs listed $140 as the estimated cost of a plot plan, the respondent instructed his chief paralegal to order plot plans from Halnon and to charge borrowers $140 on the HUD-1 statements for plot plans prepared by Halnon (Tr. 56-58, 74, 111, 125-126, 161-163, 191-192; Ex. 171).

16. Between February 11, 1993 and November 18, 1994, the respondent used Halnon’s services to prepare mortgage plot plans in connection with at least sixty-six real estate closings (Pet. 22; Ans. 5; Stip. 19). Halnon charged the respondent $100 for each of these plot plans (Pet. 22; Ans. 5; Stip. 19). In more than sixty of these closings, the respondent falsely represented to lenders and borrowers that he had paid Halnon $140 by listing that amount on the HUD-1 statements he prepared for those closings (Pet. 23; Ans. 5; Stip. 20; Tr. 91). He collected from those borrowers $140 as the cost for the plot plans, paid Halnon $100 for each plan, and retained the $40 balance for his own use (Pet. 23; Ans. 5; Stip. 20). The total amount of the overcharges for plot plans for the closings conducted between February 11, 1993 and November 18, 1994 was $2,400 (Pet. 23; Ans. 5; Stip. 20; Tr. 91).

17. The respondent did not advise either the lenders or the borrowers that he intended to charge, in addition to his legal fee, a premium above the actual cost to him for plot plans (Stip. 24). He did not obtain the informed consent of either the lenders or the borrowers to his financial interest in the closings over and above his stated legal fee (Stip. 24).

18. The respondent believed that he was entitled to charge borrowers $40 more than the actual cost of Halnon’s services, because the higher amount was listed on the GFEs, and he was simply recouping for himself the benefit of having obtained these services at a lower cost (Tr. 126, 141-142, 163, 200-202). The respondent viewed the GFE as a ceiling on charges (Tr. 111, 127), and believed that his overcharges were accepted practice by the lenders so long as the charges did not exceed the amount on the GFEs (Tr. 210). The respondent also believed that, as a businessman, if he was able to obtain these same services at a lower cost, so long as he charged no more that the amount on the GFE, he should be permitted to retain the difference (Tr. 126, 162-163). The borrower would have had to pay the higher cost if the respondent did business with any of the other surveyors (Tr. 163).

Overcharges for Title Services

19. Between January 5, 1993 and July 27, 1994, the respondent used the services of Major & Erban Title Services, Inc. to perform title examinations and title rundowns and to record documents in connection with more than one hundred real estate closings he was conducting for clients (Stip. 21; Ex. 67-170; see Ex. A).⁶

A. Overcharges for Title Examinations

20. In more than seventy of the real estate closings in which the respondent retained Major & Erban to conduct title examinations during the period between January 5, 1993, and July 28, 1994, the HUD-1 statements provided to borrowers listed charges for title examinations by Major & Erban higher than the actual amounts invoiced by Major & Erban to the respondent for the title examinations (Ex. 70-74, 76-79, 81-84, 89-93, 98-99, 101, 103-104, 106-107, 109-118, 121-133, 135, 137, 139, 141-149, 151-152, 155-165, 167-170). The HUD-1 statements reflected the estimated costs on the GFEs instead of the actual costs (Tr. 84); in most cases, the GFE costs were higher than the actual costs (Ex. 67-170; see Ex. A). The higher charges on the HUD-1s for title examinations were collected from the borrowers and Major & Erban was paid the actual amount charged on its invoices (Stip. 23).

21. Of the eighty-six closings conducted during this period which showed charges for title examinations on the HUD-1, five had the correct charge for the title examination services invoiced by Major & Erban (Ex. 75, 87, 88, 97, 108) and five had undercharges (Ex. 96 ($15.00), 100 ($5.00), 138 ($15.00), 154 ($5.00), 166 ($7.00)). It is significant that, although the respondent’s office received the invoice for one of these undercharges prior to the closing, the HUD-1 was not altered to reflect the increased charges on Major & Erban’s invoice (Ex. 166). The total amount overcharged for title examinations, including undercharges, was $3,045.50 (Ex. 67-170; see Ex. A).

22. In seventeen of the seventy-six closings in which there were overcharges, there did not appear to be any separate invoices from Major & Erban for title examinations as opposed to rundowns and recordings (Ex. 82, 89, 92, 93, 98, 115, 118, 137, 142, 143, 147, 149, 151, 155-157, 164). In each of these cases, the charge on the HUD-1 for a title examination was $75, which was less than the $160 normal charge for a full title examination (see Ex. 67-170; Ex. A). The respondent testified, and we credit his testimony, that these were properties that were being refinanced and that he had conducted prior closings on these properties (Tr. 117-118, 170, 175). As a result, he had, in his files, the original title examinations, which he or Major & Erban then up-dated by running the titles from the date of the prior closing (Tr. 117-119, 164-171, 175-176). The respondent understood that Major & Erban was regularly charging a $75 fee for this type of “short” title examination or “rundown” from an earlier, full title examination (Tr. 167, 171, 173). We reject Bar Counsel’s proposed finding that, in these cases in which there was no invoice for a title examination from Major & Erban, the respondent charged borrowers for title examinations that were not performed (Proposed Findings pp. 24-25, 17-18; Tr. 71-72). This allegation was not set out in the petition and therefore the respondent lacked notice (Pet.; see Tr. 72). See Matter of Brower, 1 Mass. Att’y Disc. R. 45 (1979). Moreover, we credit the respondent’s testimony that, in each of these cases, either he or Major & Erban performed a short title search, essentially an extension of the rundown (Tr. 117-120, 164-170, 175,-176, 178; see Ex. 82, 156, 157). We find that in these cases the services paid for were provided (Tr. 130-131, 170, 178).

B. Rundown and Recording Services

23. In 1993 and the first half of 1994, the fee charged to the respondent by Major & Erban for each title run-down and recording of documents was $25 (Stip. 22; Ex. 67-170; see Ex. A).⁸ In eighty-four of the closings conducted by the respondent between January 1993 and August 1994, the HUD-1 statements listed payments of $35 to Major & Erban for run-down and recording services (Stip. 22). In these eighty-four closings, the respondent collected from the borrowers $35 for run-down and recording services, paid Major & Erban $25 (Stip. 22; Ex. 67-76, 78-81, 83, 85-98, 100-109, 111-121, 123-124, 127-128, 130-132, 134-144, 148-155, 158-159, 161-166; see Ex. A). In five other closings during this period, there was no charge on the HUD-1 for rundown and recording services and no invoice from Major & Erban (Ex. 77, 129, 145, 146, 160). In two other closings, the overcharge was less than $10: in one the overcharge was $8.00, because the invoice charge was $27.00 and the HUD-1 settlement charge was $35.00 (Ex. 82), and in the other the overcharge was $5.00 because the invoice charge was $25.00 and the HUD-1 charge was $30.00 (Ex. 125). In five other closings, there was an undercharge: one of $8.00, another of $25.00 and three others of $10.00 (Ex. 84, 99, 133, 156, 157). In four of these five closings, the invoice amount was greater than the $35.00 charged on the HUD-1 (Ex. 84, 133, 156, 157). In the other, the HUD-1 had no charges for rundown and recording, but Major & Erban billed the respondent $25.00 for the services (Ex. 99). In eight other closings the charges on the invoice and the HUD-1 were the same (Ex. 110, 122, 126, 147, 167, 168, 169, 170). The total amount overcharged, including the undercharges and the correct charges, was $790.00 (Ex. 67-170; see Ex. A).

24. Because there were undercharges and cases in which the charges were accurate, as well as overcharges, we find that the overcharges for title examinations and rundowns and recordings were not systematic (Ex. 67-170; see Ex. A). Although in most of the closings the amount invoiced by Major & Erban for rundowns and recordings was $25, there were instances in which that amount varied; nonetheless, in almost of those cases, the amount on the HUD-1 remained $35 (Ex. 67-170; see Ex. A). Thus, regardless of the actual invoice charge, the respondent’s office, in practically all cases, simply charged the same $35 amount for title rundown and recording (Ex. 67-170; see Ex. A). The respondent’s office did not receive the invoices for the rundown and recording until after to the closing (Tr. 40; Ex. 67-170; see Ex. A), and therefore, as a practical matter, they did not have the invoices at the time they prepared the HUD-1 (Tr. 41-46).⁹ In addition, the respondent was not aware of the difference between the actual charges for title services and the charges on the HUD-1s (Tr. 140), and he did not write any of the checks to Major & Erban (Tr. 140). Therefore, he had no reason to be aware of the overcharges.

25. We find credible the respondent’s testimony that his chief paralegal included the inaccurate and excessive charges for title services, both title examinations and rundowns and recordings, performed by Major & Erban on the HUD-1 settlement statements without his knowledge (Tr. 164), and further, that he was not aware of the amounts invoiced by Major & Erban or of the amounts paid by his office to Major & Erban (Tr. 164). The respondent was not aware of the discrepancies between Major & Erban invoices and the HUD-1 statements of costs for title services until Bar Counsel’s Office brought it to his attention (Tr. 164). Although the respondent was experiencing financial difficulties during this time, and regularly reviewed bills to be paid with his chief paralegal, he conducted a general review of the financial situation, and did not review individual invoices, including those of Major & Erban (Tr. 153-154). We find that the chief paralegal, in completing the HUD-1s, simply followed the respondent’s general practice regarding costs and used the costs listed in the GFEs to generate the amount for billing title rundowns and recordings. Therefore, we find that the overcharges and the respondent’s misrepresentations on the HUD-1s regarding the actual costs of title services were negligent.

II. Conclusions of Law

26. The respondent’s negligent use of Fidelity’s funds for his own business or personal expenses and failure to promptly deliver the funds to Fidelity violated Canon One, DR 1-102(A)(6) (conduct reflecting adversely on fitness to practice law) and Canon Nine, DR 9-102(B)(4) (failure to maintain adequate records of funds) (Pet. 13; Ans. 3; Stip. 12).

27. By failing to withdraw earned fees from his conveyancing account within a reasonable time after the funds were earned, the respondent negligently commingled client and personal funds in his conveyancing account, in violation of Canon Nine, DR 9-102(A) (commingling of funds prohibited). By depositing client and third-party funds in a non-interest-bearing account instead of an IOLTA account, the respondent violated Canon Nine, DR 9-102(C)(1) (pooled IOLTA or individual client interest-bearing account).¹⁰ By failing to maintain complete records of the handling, maintenance, and disposition of client and third-party funds coming into his possession, the respondent violated Canon Nine, DR 9-102(B)(3) (complete records of handling, maintenance and disposition of funds required) (Pet. 14; Ans. 3; Stip. 13).

28. By falsely certifying on HUD-1 settlement statements that the information was accurate, by intentionally misrepresenting on the settlement statements the true cost of the title insurance, by intentionally overcharging borrowers for title insurance, albeit in very small to modest amounts, by falsely reporting to the company that he had charged insureds at the rate the company allowed when he actually charged more, and by retaining for his own use the difference between the amounts charged and collected and the amounts reported to the company, the respondent violated Canon One, DR 1-102(A)(4) (dishonesty, fraud, deceit or misrepresentation), and (6) (conduct that adversely reflects on fitness to practice law) (Pet. 19; Ans. 4; Stip. 17). We reject Bar Counsel’s characterization of these overcharges as misappropriations or conversion of client or fiduciary funds. The overcharges were a result of the respondent’s ability to obtain the same services for borrowers at a lower cost, and charging them the estimated or “market” costs (which he treated as a maximum), and retaining the difference. The respondent viewed this as “good business” – a way to make some additional money on each closing. His gain was not achieved at the borrowers’ expense, in the sense that, in each case, they received the same service at the same price it would have cost them, but for the respondent’s ability to obtain the service for less. Thus, the respondent’s conduct is clearly distinguishable from Matter of Zimmerman, 9 Mass. Att’y Disc. R. 351 (1993), in which the attorney charged his clients for false expenses, that is expenses that were never incurred, for services never rendered or purchases never made. That was not the case here. The charges were reasonable. Because they were not the actual charges, as required under RESPA, the respondent engaged in intentional misrepresentations. However, we conclude that he did not misappropriate the borrowers funds.

29. By representing lenders in transactions in which, due to his overcharging for title insurance, he had an undisclosed financial interest, without their informed consent, the respondent violated Canon Five, DR 5-101(A) (except with consent after disclosure, lawyer shall not accept employment where he has personal, financial interest). (Pet. 19; Ans. 4; Stip. 18).¹¹

30. Although the respondent stipulated that, “[b]y representing lenders in transactions in which he had an undisclosed financial interest without their informed consent” (Pet. 19), he violated Canon Seven, DR 7-101(A)(3) (intentional conduct resulting in prejudice or damage to client during professional relationship) (Pet. 19; Ans. 4; Stip. 18), we reject this stipulation to a violation of the disciplinary rules. We conclude that the facts of this case do not warrant finding a violation. Bar Counsel, in his proposed findings, argues that prejudice resulted from the possibility of suit by borrowers against lenders for the overcharges (Proposed Findings 7; Memorandum of Law in Support of Recommendation for Discipline, pp. 5-6). We view this possibility as too remote to constitute a violation of DR 7-103(A)(3).¹² We note that the harm claimed by Bar Counsel here is not the type of direct prejudice or harm to the client, such as a lawsuit against a client or the dismissal of a case after the statute of limitations has run, found in other cases. See, e.g., Matter of See, e.g., Matter of Sammarco, 12 Mass. Att’y Disc. R. 513 (1996) (neglect to file incorporation, misrepresentation and fabrication to conceal neglect, causing tax penalties and other accounting costs); Matter of Sullivan, BD-99-020 (1999) (neglect resulted in dismissal of suit, attorney concealed dismissal and failed to respond to inquiries). Compare Matter of Dawkins, 412 Mass. 90, 94, 8 Mass. Att’y Disc. R. 64, 69 (1992) (conversion of PIP funds resulted in “nontrivial harm” in the form of lawsuits against client and issuance of capias) with Matter of Watt, BD-99-062 (conversion of funds to pay medical bills temporarily exposed clients to possible suit).

31. By intentionally misrepresenting on HUD-1 settlement statements the amounts he charged borrowers for plot plans, by intentionally overcharging borrowers for the costs he had incurred for the plot plans, and by retaining for his own use the difference between the amounts collected and charged to borrowers on the HUD-1 settlement statements and the costs incurred for the plot plans, the respondent violated Canon One, DR 1-102(A)(4) (dishonesty, fraud, deceit or misrepresentation), and (6) (conduct that adversely reflects on fitness to practice law). For the reasons set forth above in 28, we do not conclude that these overcharges constituted misappropriations or conversion of client or fiduciary funds.

32. By representing lenders in transactions in which he had an undisclosed financial interest without their informed consent, due to his overcharging for plot plans, the respondent violated Canon Five, DR 5-101(A) (except with consent after disclosure, lawyer shall not accept employment where he has personal, financial interest).¹³

33. For the reasons set forth in 30 above, we do not find that the respondent’s misrepresentations regarding actual costs and his overcharges for plot plans constituted a violation of Canon Seven, DR 7-101(A)(3) (intentional conduct resulting in prejudice or damage to client during professional relationship).

34. By negligently misrepresenting on HUD-1 settlement statements the actual costs for title examinations and title rundowns and recording services and by negligently overcharging borrowers for the costs he had incurred for these title services, the respondent violated Canon One, DR 1-101A)(6) (conduct adversely reflecting on fitness to practice law). Because this conduct was negligent, we do not find a violation of DR 1-102(A)(4) (dishonesty, fraud, deceit or misrepresentation), which requires intent or knowledge. For this same reason, we do not find that the respondent’s conduct with respect to title services constituted a violation of Canon Five, DR 5-101(A) (except with consent after disclosure, lawyer shall not accept employment where he has personal, financial interest) or Canon Seven, DR 7-101(A)(3) (intentional conduct resulting in prejudice or damage to client during professional relationship).

III. Factors in Mitigation or Aggravation

Aggravation

35. The respondent received a public censure with probation in 1991 for his neglect of four real estate cases, misrepresentations to his clients regarding the status of their cases and failure to cooperate with Bar Counsel. The public censure was conditioned on participation in peer monitoring for two years with reports to Bar Counsel concerning caseload management. Matter of Lenahan, 7 Mass. Att’y Disc. R. 167 (1991) (Ex. 172). Prior discipline is a matter for consideration in determining the appropriate sanction. Matter of Dawkins, 412 Mass. 90 (1992); Matter of McInerney, 389 Mass. 528, 532-533 (1983). ABA Standards for Imposing Lawyer Sanctions § 9.22(a).

Mitigation

36. The respondent presented credible testimony concerning stressful and difficult family problems, with his parents and siblings, which affected his relationship with his wife, during the period of misconduct (Tr. 136-138). In addition, he received counseling from a social worker, and then, for the past several years, has been in treatment with a psychiatrist (Ex. 173; Tr. 145-147). The psychiatrist’s affidavit opines that the respondent tends to “ignore[] and avoid[] certain details in his transactions with financial institutions” (Ex. 173). The respondent admitted that he has patterns of not dealing with problems (Tr. 194). We find that these tendencies are inconsistent with the respondent’s misconduct at least with respect to the intentional overcharges and misrepresentations regarding title insurance and plot plans. We further find no a causal connection between the family problems and stresses he experienced and his misconduct. We find that these were business decisions, motivated in part by financial pressures. Therefore, we find that there is no basis for reducing the appropriate sanction. See Matter of Schoepfer, 426 Mass. 183, 188 (1997); Matter of Luongo, 9 Mass. Att’y Disc. 199 (1993).

37. The respondent has been very involved in community activities throughout the relevant times (Tr. 99-100). However, this constitutes “typical” as opposed to “special” mitigation, and have little weight in determining the level of discipline warranted. Matter of Alter, 389 Mass. 153, 3 Mass. Att’y Disc. R. 3, 7 (1983); Matter of Norris, 12 Mass. Att’y Disc. R. 377, 384 (1996).

IV. Recommendation for Discipline

Bar Counsel contends that disbarment is the appropriate sanction for the respondent’s misconduct. We disagree. Most of the respondent’s ethical violations were relatively minor; the most serious violations were his intentional overcharges for plot plans and title insurance. Bar Counsel characterizes the latter conduct as intentional misappropriation of client or fiduciary funds, and the discipline of disbarment sought by him rests on that characterization. As set forth above, in our view, the respondent’s conduct did not constitute a misappropriation of fiduciary funds.

The respondent’s overcharges for plot plans and title insurance are distinguishable from cases in which the attorney benefited at the expense of the client. See, e.g., Matter of Zimmerman, supra (three-year suspension for deliberately charging clients for false expenses); Matter of Pike, 408 Mass. 740 (1990) (attorney for tenant was also broker for landlord and received increased commission for higher rent paid by client/tenant). Here the borrowers received the equivalent service at a reasonable cost; the respondent’s gain occurred only because he was able to obtain the same service for less. However, because the respondent knew the HUD-1s did not reflect the actual charges for the services, as required under RESPA, the respondent, in preparing and executing the HUD-1s, engaged in intentional misrepresentations.

The standard sanction for material misrepresentations to a tribunal is a one-year suspension. Matter of McCarthy, 416 Mass. 423 (1993); Matter of Neitlich, 413 Mass. 416 (1992). Material misrepresentations under oath, such as in a deposition or trial, have been treated as more serious offenses, warranting a two-year suspension. See Matter of Shaw, 427 Mass. 764 (1998) (two-year suspension for intentional misrepresentations in sworn testimony in criminal trial and sworn affidavit in civil action); Matter of Kelly, 14 Mass. Att'y Disc. R. 346 (1998) (two-year suspension for false testimony in deposition in civil action).

The respondent’s misrepresentations occurred not before a tribunal, nor in the context of testimony under oath, but rather on the HUD-1 forms. For this reason, we view other cases involving false representations on HUD-1 forms as more analogous to this case. See Matter of Segal, 430 Mass. 359 (1999); Matter of Eastwood, 10 Mass. Att'y Disc. R. 70 (1994). In Segal, at a number of closings, and Eastwood, at two closings, the attorneys, knowing secondary financing was prohibited by the lender, nonetheless signed HUD-1s and other documents falsely representing that there was no such financing, when, in fact, they knew the opposite to be true. Segal received a two-year suspension and Eastwood, a one-year suspension.

In determining an appropriate sanction, we must consider the cumulative effect of multiple violations of the disciplinary rules, Matter of Saab, 406 Mass. 315 (1989), as well as the respondent’s disciplinary history. Matter of Dawkins, 412 Mass. 90 (1992). Taking those into account, we conclude that a suspension on the order of one year would be appropriate in this case, since we view the respondent’s overcharges as significantly less serious than the misrepresentations regarding secondary financing in Eastwood and Segal. However, we also believe that, given the respondent’s disciplinary history and his misconduct in this matter, he should bear the burden of proving fitness for reinstatement at a hearing.

For the foregoing reasons and in light of the new reinstatement rules, we recommend that the respondent be suspended for one year and a day.

Respectfully submitted, 
Michael J. Zeman, Chair 
Walter E. Delaney, Member

Dissent

I agree with the Findings of Fact and Conclusions of Law. I dissent only from the length of the recommended suspension. I recommend that the respondent be suspended for one year.

Respectfully submitted, 
Philip N. Beauregard, Member

FOOTNOTES

¹ The complete Order of the Court is available by contacting the Clerk of the Supreme Judicial Court for Suffolk County.

² The stipulation filed by the parties, marked as exhibit 10B, is referred to as “Stip. __”, the exhibits are referred to as “Ex. __”, the Petition for Discipline as “Pet. __”, the respondent’s amended answer as “Ans. __”, and the transcript as “Tr. __”.

³ The exhibits admitted into evidence are numbered as follows: 1, 23, and 67-173. At the respondent’s request, the record was left open for three weeks to permit him to file additional affidavits (Tr. 148); however, no affidavits were filed.

⁴ These checks were handwritten (Tr. 197-200; see, e.g., Ex. 69, 75-78).

⁵ The policies the respondent issued on behalf of Lawyers were issued at the correct and disclosed rate (Stip. 4).

⁶ There were about ten additional closings performed during this period which were not included in Bar Counsel’s exhibits, nor in Exhibit A, the chart summarizing the exhibits, because there was no discrepancy between the amounts charged on the HUD-1 for title examinations and rundowns and recordings and the amounts invoiced by Major & Erban (Tr. 69).

⁷ In late June 1994, this fee apparently increased to $35, because in the four closings conducted after June 29, 1994, the invoices from Major & Erban were for $35.00 which were the same as the charges on the HUD-1s for those closings (Ex. 167-170; see Ex. A). These four closings were included in the eight closings referenced below in which there were no overcharges or undercharges.

⁸ This number does not include the ten closings referred to in n.5 which were not included in Bar Counsel’s exhibits.

⁹ The invoices were all dated after the date of the closing, with three exceptions: on two occasions the date of the invoice was the same as the date of the closing (Ex. 108, Ex. 111), and in the one case on Exhibit A in which the claimed invoice date was listed as prior tot he closing date, the invoice date on the exhibit is illegible (Ex. 147).

¹⁰ The committee members view this as a technical violation which does not warrant any material consideration in determining the appropriate sanction in this case.

¹¹ We conclude that this is a minor violation, since the respondent’s financial interest in the overcharges in most of these cases was small. Indeed, the respondent had a greater financial interest generally in making certain that the closings occurred, since if they did not, he had to pay all of the costs himself (Tr. 141-142, 196-197, 219).

¹² For this same reason, even if it constituted a violation, it would not affect our recommendation as to the appropriate sanction.

¹³ See n. 10, supra.

 

Related to No. BD-1999-078

• S.J.C. Order of Immediate Administrative Suspension entered by Justice Marshall, 12/20/1999
• S.J.C. Order of Term Suspension entered by Justice Greaney, 07/31/2000