Argued April 7, 2014.
[Copyrighted Material Omitted]
Circuit Court for Baltimore City. Case No. 24-C-13-001934. Christopher L. Panos, JUDGE.
ARGUED BY: Lydia E. Lawless, Assistant Bar Counsel (Glenn M. Grossman, Bar Counsel, Attorney Grievance Commission of Maryland) FOR PETITIONER.
ARGUED BY: Gregory P. Johnson, Esq. (Offit Kurman, P.A. of Bethesda, MD) FOR RESPONDENT.
ARGUED BEFORE: Barbera, C.J., Harrell, Battaglia, Greene, Adkins, McDonald, Watts, JJ.
[438 Md. 177] Greene, J.
The Attorney Grievance Commission of Maryland (" Petitioner" or " Bar Counsel" ), acting pursuant to Maryland Rule 16-751(a), filed a " Petition For Disciplinary Or Remedial Action" against Michael David Fraidin (" Respondent" or " Fraidin" ), on March 25, 2013. Petitioner charged Respondent with violating various Maryland Lawyers' Rules of Professional Conduct (" MLRPC" or " Rule" ), specifically Rule 1.15 (Safekeeping Property), Rule 8.1 (Bar Admission and Disciplinary Matters), and Rule 8.4(a), (b), (c) and (d) (Misconduct). In addition, Petitioner charged Respondent with violating Maryland Rules 16-606.1 (Attorney Trust Account Record-Keeping), 16-607 (Commingling of Funds), and 16-609 [438 Md. 178] (Prohibited Transactions). The alleged violations
stemmed primarily from two courses of conduct: (1) improper use and maintenance of Respondent's attorney trust account, and (2) engaging and assisting Respondent's wife in bankruptcy fraud.
This Court referred the matter to the Honorable Christopher L. Panos of the Circuit Court for Baltimore City for a hearing to issue findings of fact and conclusions of law pursuant to Md. Rule 16-757. On July 30, 2013 and August 1, 2013, Judge Panos conducted a two day evidentiary hearing, during which Respondent represented himself and elected not to testify as a witness or present any witnesses to testify on his behalf. Thereafter, the hearing judge issued Findings of Fact and Conclusions of Law, in which he found, by clear and convincing evidence, that Respondent violated MLRPC 1.15, [438 Md. 179] 8.1, 8.4(a), (b), (c) and (d), as well as Maryland Rules 16-606.1, 16-607, and 16-609.
Respondent was admitted to the practice of law on December 15, 1992, and maintains a solo practice in Baltimore, Maryland. Respondent is married to Mara Fraidin (" Ms. Fraidin" ), and they have two children. Since the Fraidins' marriage in 1999, Ms. Fraidin has at no time worked outside the home or had an independent source of income. Respondent has at all relevant times been the sole income provider for the Fraidins. In 2004, Respondent and Ms. Fraidin purchased a home, titled in their names as tenants by the entirety and encumbered by a deed of trust held by Bank of America, N.A. (" Bank of America" ). Subsequently, in 2009, the Fraidins began to struggle financially, leading to legal proceedings surrounding: (1) an outstanding debt related to a credit card held in Ms. Fraidin's name; (2) an outstanding debt related to a credit card held in Respondent's name; (3) foreclosure related to the marital home; and (4) Ms. Fraidin's filing for Chapter 13 bankruptcy relief.
Chase Bank Credit Card in Ms. Fraidin's Name
On February 5, 2010, Chase Bank USA, N.A. (" Chase Bank" ) sued Ms. Fraidin in the District Court of Maryland sitting in Baltimore County to collect on approximately $9,000.00 of outstanding debt on a credit card held by Ms. Fraidin in her name alone. On April 26, 2010, Ms. Fraidin retained Respondent to represent her in the Chase Bank litigation and executed a document titled " Attorney Fee Agreement/Contract of Employment," which stated that Respondent would represent Ms. Fraidin for a reduced hourly rate of $150.00. On April 28, 2010, Respondent entered his appearance as the attorney of record for Ms. Fraidin in the Chase Bank litigation.
On February 25, 2011, Respondent, on behalf of Ms. Fraidin, and Chase Bank negotiated a settlement for full satisfaction of Ms. Fraidin's outstanding debt. The settlement terms [438 Md. 180] required that Ms. Fraidin pay $4,150.00 through three separate installments: $1,400.00 by March 31, 2011; $1,400.00 by April 30, 2011; and $1,350.00 by May 31, 2011. Despite the terms of the
"Attorney Fee Agreement/Contract of Employment," Respondent never charged Ms. Fraidin for his representation of her in that matter. Nevertheless, Respondent made payments on behalf of Ms. Fraidin using funds from his Interest on Lawyer Trust Account (" IOLTA" ). As found by the hearing judge:
Specifically, Respondent purchased, on March 31, 2011, three money orders [made out to the law firm representing Chase Bank in its action against Ms. Fraidin] from 7-Eleven totaling $1,400.00 On May 2, 2011, Respondent purchased a Bank of America cashier's check in the amount of $1,400.00. On June 2, 2011, Respondent purchased a final Bank of America cashier's check in the amount of $1,350.00 after executing a $1,350.00 " Cash Withdrawal" from his IOLTA account also on the same day. Funds in Respondent's IOLTA account, held in trust for Ms. Fraidin, were insufficient to support the payments made by Respondent. In order to purchase the foregoing money orders and cashier's checks, Respondent withdrew monies in his IOLTA account held on behalf of other clients.
Respondent maintained no client ledger detailing the deposits, disbursements, or other exchanges associated with the legal services provided to Ms. Fraidin relating to this matter.
Bank of America Credit Card in Respondent's Name
In December 2010, Respondent settled a $25,000.00 outstanding credit card debt with Bank of America arising out of a credit card account held for personal use in his name alone. The settlement included a payment plan requiring an initial payment of $7,000.00 by March 28, 2011, followed by twelve consecutive monthly payments of $1,500.00. On March 28, 2011, Respondent made a " Cash Withdrawal" of $7,000.00 from his IOLTA account, which Respondent then used to purchase a Bank of America cashier's check to make the initial [438 Md. 181] payment to Bank of America. With regard to Respondent's explanation of this action, the hearing judge found:
Respondent asserted in his defense that he was representing Ms. Fraidin in the legal settlement with Bank of America and the money he withdrew and used from his IOLTA account was money held in trust on Ms. Fraidin's behalf. Respondent thus contends that the money he withdrew from his IOLTA account was properly accountable and attributable to his legal representation of Ms. Fraidin. However, this defense is factually implausible in light of the fact that the Bank of America settlement stemmed from debt he incurred personally with a credit card issued in his name alone, which resulted in a legal settlement between him and Bank of America. As a result, this [c]ourt finds Respondent's defense to be wholly without merit. [Moreover, t]he explanation Respondent made to Bar Counsel in a July 6, 2012 letter, [stating that the cash deposits " on 2/11/11 ($1,300), 2/14/11 ($1,000) and 3/28/11 ($5,000) were monies being held on behalf of Mara Fraidin with a disbursement on 3/28/11 ($7,000)," ] and similar arguments made in filings and statements before this [c]ourt regarding his purported representation of Ms. Fraidin's legal interests in the matter concerning the Bank of America credit card debt in his name alone, were knowingly and intentionally falsely made.
Liquidation of Respondent's IRA/Retirement Assets
On June 14, 2011, Respondent liquidated his personal IRA account in the amount of $15,000.00, and wire-transferred the
$15,000.00 into his IOLTA account. The hearing judge found that " Respondent's claim that this money . . . was being held for the benefit of and in the course of his representation of Ms. Fraidin, to pay the debt owed on Respondent's personal credit card, is implausible." Rather, the $15,000.00 wire transfer from Respondent's personal IRA constituted personal funds, which Respondent deposited into his IOLTA account.
Foreclosure Action and Bankruptcy Proceedings
On June 1, 2010, Bank of America initiated a foreclosure action against Respondent and Ms. Fraidin relating to their [438 Md. 182] marital home. A public auction of the home was scheduled for September 16, 2011. On September 14, 2011, two days prior to the scheduled public auction, Ms. Fraidin filed a Chapter 13 Voluntary Petition for Bankruptcy, naming Bank of America, as mortgage holder of the marital residence, as sole creditor. On September 16, 2011, Ms. Ellen W. Crosby (" Ms. Crosby" ) was appointed the Bankruptcy Trustee in relation to Ms. Fraidin's Petition. At that time, Ms. Crosby sent Ms. Fraidin a letter providing information about the Chapter 13 Bankruptcy process and requested copies of paychecks to substantiate Ms. Fraidin's asserted income. In response to this request, Ms. Fraidin produced copies of several checks each in the amount of $3,000.00 and drawn on Respondent's IOLTA account, which purported to be paychecks from Ms. Fraidin's employment with Respondent's solo law practice. With regard to Respondent's participation in this process, the hearing judge found:
In her bankruptcy proceedings, Ms. Fraidin asserted that she was self-represented. Additionally, Respondent denied having served as Ms. Fraidin's attorney during the bankruptcy proceedings. In the course of Ms. Fraidin's purported self-representation in the bankruptcy proceeding, Respondent " participated" in the collection of information, provided legal templates to Ms. Fraidin, and communicated with Christina M. Williamson, Esquire, counsel for Bank of America, toward the end of requesting a postponement for Ms. Fraidin, thus conveying to Ms. Williamson the perception that Respondent was acting as Ms. Fraidin's " agent." Additionally, Ms. Fraidin had, at best, a rudimentary understanding of the bankruptcy process as she did not comprehend the difference between the paychecks submitted in order to substantiate her source of income and checks sent to Ms. Crosby as the Trustee for the benefit of the creditors. Nor did Ms. Fraidin have any recollection as to where she purportedly obtained the form petition required to initiate the Chapter 13 Bankruptcy process. Despite never having formally entered his appearance on behalf of Ms. [438 Md. 183] Fraidin, Respondent indeed served as her attorney in that matter.
On September 28, 2011, Ms. Fraidin filed with the United States Bankruptcy Court two documents relating to her financial interests and income: Schedule B -- Personal Property, and Schedule I -- Current Income of Individual Debtor(s). With regard to the filing of Schedule B, the hearing judge found:
Included in the instructions on the Schedule B form is the directive, " Except as directed below, list all personal property of the debtor of whatever kind. If the debtor is married, state whether the husband, wife, both, or the marital community own the property by placing an 'H,' 'W,' 'J,' or 'C' in the column labeled 'Husband, Wife, Joint or Community.'"
In response to request No. 12, requiring the identification of " interests in IRA, ERISA, Keogh, or other pension or profit sharing plans," Ms. Fraidin selected " None." At the time of Ms. Fraidin's filing of Schedule B, Respondent maintained two retirement accounts with a combined total balance of approximately $40,000.00. Ms. Fraidin's Schedule B did not identify or disclose Respondent's retirement accounts in her Schedule B -- Personal Property forms as required. The instructions for Schedule B also provide, inter alia, " If the property is being held for the debtor by someone else, state that person's name and address under 'Description and Location of Property.'" Ms. Fraidin did not state or disclose that between September and December 2011, Respondent was--according to him--holding money in his law firm escrow account for her benefit.
With regard to Schedule I -- Current Income of Individual Debtor(s), Ms. Fraidin stated that she received $3,000.00 as " monthly gross wages, salary, and commissions." She further stated that, as of September 2011, she had been employed by the Law Offices of Michael D. Fraidin for a period of two years and described her occupation as " marketing." In addition to Schedule I, Ms. Fraidin filed a " Chapter 13 Statement of Current Monthly Income and Calculation of Commitment [438 Md. 184] Period and Disposable Income" in which she stated that she received from " wages, salary, tips, bonuses, overtime, commissions" in the amount of $3,000.00 per month. When asked to identify " amounts paid by another person or entity, on a regular basis, for the household expenses of the debtor or the debtor's dependents, including child support paid for that purpose" or " income from all other sources," Ms. Fraidin entered " $0.00." Ms. Fraidin also filed a Statement of Financial Affairs, stating that she received income from employment by Respondent's law office in the amount of $24,000.00 for 2010 and $22,000.00 for 2011. When asked to identify " income other than from employment or operation of business," Ms. Fraidin selected " None." Despite these averments, the hearing judge found:
Ms. Fraidin has never filed an Internal Revenue Service Form W-2 or Form 1099 in connection with her asserted employment with the Law Offices of Michael D. Fraidin, nor did she believe her income was contingent upon actually doing any work. Because Ms. Fraidin neither anticipated having to perform any duties in exchange for wages nor were any W-2 or 1099 forms ever filed on her behalf, this [c]ourt finds that Ms. Fraidin was never an employee of the Law Offices of Michael D. Fraidin, and did not receive any income from such employment as claimed. Despite the fact that all of the foregoing documents were signed by Ms. Fraidin under penalty of perjury after having certified that the information contained therein was true and correct, this [c]ourt finds that the representations contained in Ms. Fraidin's bankruptcy documents, filed under oath, (that she worked for Respondent's law office in 2010 and 2011, and that she received a monthly income of $3,000.00) were knowingly and intentionally false.
The hearing judge concluded that Ms. Fraidin filed the Chapter 13 Petition for the purpose of staving off the foreclosure action and public auction. The bankruptcy filing did in fact stay the foreclosure action and ultimately resulted in dismissal of that action without prejudice.
[438 Md. 185]Bar Counsel Investigation
Ms. Crosby, the Bankruptcy Trustee, alerted the Attorney Grievance Commission of Maryland that she had received
from Ms. Fraidin copies of eight checks, four of which were purported to be paychecks substantiating her alleged income, all of which were drawn on Respondent's IOLTA account. Upon written request from Bar Counsel, Respondent explained that Ms. Fraidin was " working for him," and that the checks were compensation for the " marketing services" Ms. Fraidin provided for his law office. With regard to this explanation, the hearing judge found that " Respondent's statements to Bar Counsel, representing that he provided the four (4) checks to his wife in her capacity as an employee of his law office and in exchange for the marketing services she provided to his law office [were] intentional and knowing misrepresentations of facts." Judge Panos further found:
By letter dated February 1, 2012, Bar Counsel requested a copy of Respondent's client ledgers from August 2011 through February 2012 and copies of Respondent's IOLTA account records. Despite receiving from Bar Counsel an extension of time to compile the requested files, Respondent failed to produce a complete copy of the documents requested. Respondent's letter to Bar Counsel, dated February 27, 2012, and accompanying documents, were inadequate, and failed to fully comply with Bar Counsel's request. Bar Counsel requested complete copies of all bank records for August 2011 through February 2012, including all monthly statements, all deposited and disbursed items (front and back), and all debit and credit memos. Instead, Respondent incompletely produced copies of self-selected deposits, disbursements, and the first page of his bank statements for September 2011 and October 2011 only. Also in his response dated February 27, 2012, Respondent failed to produce a complete client ledger for the requested time period and instead only produced ledgers for two self-selected completed clients (one for R. Branton and another for Wilson Point Steel). ...