January 29, 2007
History of Theft Puts LI Lawyers Under Scrutiny As Bar Associations Seek to Fix Problem
By Ann Givens, Newsday, Melville, N.Y.
Jan. 29--Kenneth Carnesi is the kind of guy who gives Long Island lawyers a bad name, prosecutors said.
When he was supposed to be helping his clients buy new homes, he was instead pocketing their escrow money -- a quarter million dollars of it. It was a scheme he ran until 2005, when checks he was writing finally started to bounce, prosecutors said.
Nassau Assistant District Attorney Peter Mancuso, who put away Carnesi and more than two dozen corrupt lawyers over the last decade, said it's a story he knows all too well.
"Handling a lot of real estate transactions, being a solo practitioner so you're unscrutinized, and living beyond your means. ... It's all part of the pattern," he said.
Over the past 25 years, Long Island's lawyers have been responsible for about $31 million in theft -- more than a quarter of the money stolen across the state that has been reimbursed by the New York Lawyers Fund For Client Protection, which reimburses people who are cheated, according to fund reports. They also account for 19 percent of the lawyers who have been caught stealing statewide. Because Long Island's 19,348 registered lawyers make up only about 13 percent of the 144,599 who live in the state, that means lawyers here steal at a more voracious rate than their peers statewide.
"It's kind of like your doctor," said Michael Corby, 48, of Stowe, Ohio, whose former lawyer, James Clarke of Wantagh, pleaded guilty to stealing $405,000 from Corby's father's estate in 1992. "It's a sacred trust. When you give an attorney money to do a job, you expect the job to be done."
Clarke was sentenced to 2 1/3 to 7 years in prison after pleading guilty to larceny.
In recent years, as Long Island's numbers have continued to be high, the Lawyers Fund for Client Protection has for the first time put pressure on local bar associations to find a solution to the problem.
But Long Island lawyers have resisted, saying that numbers that make Long Island look like a hotbed of legal corruption are deceptive. They say there are more lawyers here than in other places, and that most of them work for themselves or for small firms, where skimming money is more likely to happen. Moreover, they say Long Island is home to many real estate transactions -- and high-ticket ones at that -- where most escrow theft occurs. Finally, they say that upstate, escrow money is often handled by title companies instead of lawyers -- a system that Long Island lawyers say wouldn't reduce theft here.
"To say that it's a Long Island problem is unkind, unfair and unnecessary," said Nassau Bar Association President Doug Good, who headed a task force last year to address the Lawyers Fund's concerns. "They should be touting the good things we're doing, instead of putting out reports that say Long Island lawyers are no good."
Indeed, Tim O'Sullivan, who heads the Lawyers Fund, would not directly criticize Long Island lawyers. He conceded that the fund's trustees have expressed concern about Long Island theft in recent years. But like Good, he said the large number of real estate transactions here and the fact that many upstate lawyers don't handle escrow money reasonably explain the area's high numbers.
In 2005, the most recent year for which the Lawyers Fund has records, Long Island lawyers stole $3.2 million from 79 clients -- almost 40 percent of the $8.1 million stolen statewide. That's a higher percentage than in an average year, in which Long Island lawyers are responsible for about 25 percent of the money stolen.
One solution that's being considered -- and it's a solution that local lawyers vehemently oppose -- is taking escrow out of lawyers' hands altogether.
The State Bar Association assigned a task force to explore the idea last year, and members ultimately decided there were several reasons that solution isn't ideal, according to the task force's report.
For one thing, some of the interest on lawyer escrow accounts pays for low-income legal assistance across the state, and that money would be lost if lawyers stopped managing those accounts. What's more, task force members mused in their report that banks and title companies might not be willing or able to deal with escrow transactions.
Good pointed out that there is no reason to believe that employees at banks and title companies will be any less likely to steal than lawyers are. And thefts by them might be more difficult to track since there isn't a group like the Lawyers Fund monitoring them.
He also said that, although everyone loves to hate lawyers, they are the only professional group that pays into a fund that covers for the thefts of its corrupt members. People who are scammed by plumbers or doctors, for example, are not similarly reimbursed, he said.
Legal experts likewise are quick to explain that, in the grand scheme of things, lawyer theft is not a pervasive problem. On Long Island, an average of about six lawyers a year are caught stealing, which means that 99.97 percent of the almost 20,000 lawyers here are honest. Statewide, the numbers are at least that low, O'Sullivan said.
There are already several measures in place in New York to prevent lawyers from stealing. Local lawyer grievance committees are now notified if a lawyer's escrow fund is overdrawn, a measure that can help flag a problem before too many people are hurt, said Kenneth J. Bossong, of Trenton, director-at-large of the National Client Protection Organization. Also, when insurance companies send settlement checks to lawyers, they are required to send a notice to the client, so the client can know to look for the money, Bossong said. Finally, attorney grievance committees can randomly audit trust accounts in New York, though experts say they rarely do.
Nassau District Attorney Kathleen Rice said getting lawyers to pay back the money they stole is not enough -- they also must be prosecuted. A spokesman for Suffolk District Attorney Thomas Spota did not return calls for comment.
Touro Law Center Dean Lawrence Raful, who teaches legal ethics, said lawyers -- like anyone -- can be led into temptation by alcohol, drug and gambling problems. So he said he now devotes an entire two-hour class to rules for handling client money -- a subject that a decade ago he breezed through in 20 minutes.
Local bar leaders say they support tough prosecution, better education and other preventative measures, like better funding for addiction programs for lawyers. But they say they won't budge on lawyers handling escrow. The topic is likely to return to the forefront in April, when the 2006 Lawyers Fund report on lawyer theft is due. O'Sullivan said until he sees that, he cannot say what more, if anything, needs to be done.
"I don't think it's over, and I don't think it should be," Good said, adding that any theft is too much. "We need to keep working on whatever we can to lessen the problem."
LI'S WORST OFFENDERS
These are Long Island's worst cases of lawyer theft, ranked by the dollar amount that was reimbursed by the New York Lawyers Fund For Client Protection:
Name: Jay Rosen
Amount paid: $3,359,639
Number of victims: 56
Sentence: Pleaded guilty to grand larceny and was sentenced in 2005 to serve 2 to 6 years in prison.
The Garden City real estate lawyer played a shell game with his clients' money for over a decade, prosecutors said, replacing the money he took with checks from new clients.
He was finally caught in 2004 when the checks he was writing to cover his clients' closing costs began bouncing.
Name: Frank Marino and Shirley A. Ehman
Amount paid: $3,061,535
Number of victims: 61
Sentence: Both pleaded guilty to four counts of second-degree larceny in 1997 and each was sentenced to a term of 3 to 9 years.
The husband-and-wife team stole from dozens of people over 40 years of handling wills and real estate transactions in Lake Ronkonkoma. All the while, prosecutors said, they were living large, shopping for themselves and their children at Saks Fifth Avenue and FAO Schwarz.
Name: Jack Solerwitz
Amount paid: $3,008,734
Number of victims: 99
Sentence: Got 5 to 15 years in state prison in 1990 for embezzling more than $3 million from clients -- at the time, the most in state history.
Thought of at the time as the "golden boy" of the Long Island legal community, Solerwitz traveled by private plane or limousine and hosted lavish parties at his waterfront estate in Oyster Bay Cove.
Name: Perry Ferrara
Amount paid: $1,645,861
Number of victims: 58
Sentence: In 1998 got 2 to 6 years in prison for diverting escrow funds from clients for his personal use.
Ferrara used his clients' escrow money to invest in an upstate wax museum, prosecutors said. He left a trail of financial destruction affecting at least 50 real estate transactions and more than 60 parties including banks, mortgage companies, title insurance companies, real estate agents, and commercial and residential buyers and sellers. Ferrara's lawyer, Felice Muraca of Mineola, said Ferrara has since repaid both his former clients and his debt to society.
Name: Michael G. Rose
Amount paid: $1,279,588
Number of victims: 40
Sentence: Got 60 days in Nassau County jail and 5 years' probation in 1998.
The Plainview attorney stole escrow money from dozens of his clients. But while he could have faced 5 to 15 years in prison on the charge of second-degree grand larceny, three of his victims showed up to defend him at his sentencing. The victims told the judge that their one-time attorney was an alcoholic and had a gambling problem. -- ANN GIVENS
How to keep your money safe
Never give your attorney cash. Always pay by check, made out to the attorney, with a notation as to what the payment is for.
Always get written documentation from your attorney reflecting the reason for the payment and the payment's purpose.
Check out the status of an attorney before hiring him or giving him money. You can check whether the attorney is suspended or disbarred at courts.state.ny.us. Click the link first for attorneys and then attorney directory. You then can enter his name and get his status.
Source: Nassau district attorney's office
LAWYERS behaving badly
Corrupt lawyers in the 10th Judicial District, comprising Nassau and Suffolk counties, accounted for nearly 40 percent of all money stolen from clients in New York State in 2005. Statewide percentages by judicial district are at left.
JUDICIAL % OF STOLEN
Total amount of money awarded by the New York Lawyers Fund For Client Protection to cheated clients in 2005:
DISTRICT COUNTIES AMOUNT STOLEN
10th Nassau, Suffolk $3,213,826
2nd Brooklyn, Staten Island $1,428,790
9th Westchester, Rockland, Putnam, etc. $1,117,062
7th Cayuga, Livingston, Monroe, etc. $998,391
1st Manhattan $972,636
3rd Albany area $222,769
11th Queens $127,550
8th Allegany, Erie, Genesee, Niagara, etc. $28,096
5th Herkimer, Jefferson, Oneida, Oswego, etc.$6,215
4th Clinton, Essex, Fulton, Saratoga, etc. $0
6th Broome, Chemung, Cortland, Madison, etc.$0
12th Bronx $0
SOURCE: THE NEW YORK LAWYERS FUND FOR CLIENT PROTECTION
Copyright 2007 Newsday Inc.
Copyright (c) 2007, Newsday, Melville, N.Y.
Distributed by McClatchy-Tribune Business News.
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