VIRGINIA:

BEFORE THE VIRGINIA STATE BAR DISCIPLINARY BOARD



IN THE MATTER OF VSB Docket # 01-061-0890

RICHARD HOWARD LAIBSTAIN



OPINION AND ORDER OF REVOCATION

This matter came to be heard on November 16, 2001 in the matter of Richard Howard Laibstain, VSB Docket No. 01-061-0890 before a panel of the Virginia State Bar Disciplinary Board convened in the United States Court of Appeals for the Fourth Circuit, Green Courtroom, Tenth and Main Streets, Second Floor, Richmond, Virginia and composed of Randy Ira Bellows, Chair, presiding, Bruce T. Clark, Werner H. Quasebarth, Anthony J. Trenga and H. Taylor Williams, IV. The Virginia State Bar appeared through Assistant Bar Counsel, Charlotte P. Hodges. The Respondent, Richard Howard Laibstain, appeared pro se. The matter was presented to the Disciplinary Board by way of a Certification of the Sixth District - Section One Subcommittee.

In response to the allegations of fact and rule violations certified to the Board by the Sixth District, the Respondent, Richard Howard Laibstain stipulated to the following facts and rule violations.

At all times relevant hereto, the Respondent, Richard Howard Laibstain (hereinafter "Laibstain" or "Respondent") has been an attorney licensed to practice law in the Commonwealth of Virginia.

Laibstain was a partner in the two member law firm of Ganey & Laibstain. He was one of three people who had access to an escrow account which was used for non-real estate transactions. Only one signature was required on checks written from the account.

Laibstain's partner, Bruce Ganey (hereinafter "Ganey") rarely used the account. It was primarily used by Laibstain for clients and uses for which he was responsible.

On October 13, 2000, Ganey received information from his banking representative that "another check had cleared the above account which resulted in insufficient funds."

Neither Ganey nor the other authorized signature on the account knew why there was an overdraft. They both believed there should have been in excess of $33,000 in the account.

Ganey was informed by the bank that they had spoken with Laibstain the previous day about another check which created an overdraft.

The bank representative sent a "snapshot" of the activity in the account. Upon review of it, Ganey discovered checks and deposits for which he had no knowledge.

Ganey attempted to review the bank statements for the account to determine what the problem was. However, he was unable to locate any bank statements except one.

Ganey had office personnel go through the client files and confirm that there should have been in excess of $33,000 in the account. Almost all of the monies in the account were matters handled by Laibstain.

After some investigation, Ganey discovered an unexplained check made payable to Laibstain in the amount of $5,250.00.

When confronted, Laibstain admitted that he had stolen approximately $50,000 over a year and a half period from the account. Laibstain also admitted to removing the records of the account from the office and destroying them.

On October 16, 2000, Laibstain borrowed $60,000 and deposited it into the escrow account.

The investigation into this matter revealed that Laibstain had actually taken money from this account for a period of three years. He advised he used the money for personal living expenses.

Laibstain indicated he borrowed the funds with the intent to pay them back, and that no client was ever denied funds they were entitled to as a result of his theft.

Laibstain indicated that if he needed to disburse funds from the account and there were not sufficient funds available, he would borrow enough from a friend to cover the request.

Laibstain admitted to knowing the Rules of Professional Conduct with regard to using escrow funds for personal business and co-mingling his personal and borrowed funds with client funds.

Laibstain borrowed the money to repay the account from a friend who is also a client.



The above facts, if proven, would show a violation of the following Disciplinary Rules of the revised Virginia Code of Professional Responsibility:



DR 1-102 Misconduct



(A) A lawyer shall not:



(1) Violate a Disciplinary Rule or knowingly aid another to do so.



(3) Commit a crime or other deliberately wrongful act that reflects adversely on the lawyer's fitness to practice law.



(4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation which reflects adversely on a lawyer's fitness to practice law.



DR 5-104 Limiting Business Relations with a Client



(A) A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full and adequate disclosure under the circumstances and provided that the transaction was not unconscionable, unfair or inequitable when made.



DR 9-102 Preserving Identity of Funds and Property of a Client



(A) All funds received or held by a lawyer or law firm on behalf of a client, estate or a ward, residing in this State or from a transaction arising in this State, other than reimbursement of advances for costs and expenses, shall be deposited in one or more identifiable trust accounts and, as to client funds, maintained at a financial institution in a state in which the lawyer maintains a law office, and no funds belonging to the lawyer or law firm shall be deposited therein except as follows:



(1) Funds reasonably sufficient to pay service or other charges or fees imposed by the financial institution may be deposited therein.



(2) Funds belonging in part to a client and in part presently or potentially to the lawyer or law firm must be deposited therein, and the portion belonging to the lawyer or law firm must be withdrawn promptly after they are due unless the right of the lawyer or law firm to receive it is disputed by the client, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved.



(B) A lawyer shall:



(3) Maintain complete records of all funds, securities, and other properties of a client coming into the possession of the lawyer and render appropriate accounts to his client regarding them.



(4) Promptly pay or deliver to the client or another as requested by such person the funds, securities, or other properties in the possession of the lawyer which such person is entitled to receive.



DR 9-103 Record Keeping Requirements



(A) Required Books and Records: As a minimum requirement, every attorney engaged in the private practice of law in Virginia, hereinafter called "attorney," shall maintain or cause to be maintained, on a current basis, books and records which establish his compliance with Disciplinary Rule 9-102. These records including all the reconciliations and supporting records required under Section (B) hereof shall be preserved for at least five years following completion of the fiduciary obligation and accounting period. For this purpose, the following books and records, or their equivalent, are required.



(2) A cash disbursements journal listing and identifying all disbursements from the fiduciary account. Checkbook entries of disbursements, if adequately detailed and bound, may constitute a journal for this purpose. If separate disbursements journals are not maintained for fiduciary and nonfiduciary disbursements then the consolidated disbursements journal shall contain separate columns for fiduciary and nonfiduciary disbursements.



(3) Subsidiary ledger: A subsidiary ledger containing a separate account for each client and for every other person or entity from whom money has been received in trust shall be maintained. The ledger account shall by separate columns or otherwise clearly identify fiduciary funds disbursed, and fiduciary funds balance on hand. The ledger account for a client or a separate subsidiary ledger account for a client shall clearly indicate all fees paid from trust accounts.



The above facts, if proven, would show a violation of the following Rules of Professional Conduct:



RULE 1.8 Conflict of Interest: Prohibited Transactions



(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:



(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;



(2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and



(3) the client consents in writing thereto.



RULE 1.15 Safekeeping Property



(a) All funds received or held by a lawyer or law firm on behalf of a client, other than reimbursement of advances for costs and expenses, shall be deposited in one or more identifiable escrow accounts maintained at a financial institution in the state in which the law office is situated and no funds belonging to the lawyer or law firm shall be deposited therein except as follows:



(1) funds reasonably sufficient to pay service or other charges or fees imposed by the financial institution may be deposited therein; or



(2) funds belonging in part to a client and in part presently or potentially to the lawyer or law firm must be deposited therein, and the portion belonging to the lawyer or law firm must be withdrawn promptly after it is due unless the right of the lawyer or law firm to receive it is disputed by the client, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved.



(d) Funds, securities or other properties held by a lawyer or law firm as a fiduciary shall be maintained in separate fiduciary accounts, and the lawyer or law firm shall not commingle the assets of such fiduciary accounts in a common account (including a book-entry custody account), except in the following cases:



(1) funds may be maintained in a common escrow account subject to the provisions of Rule 1.15(a) and (c) in the following cases:



(i) funds that will likely be disbursed or distributed within thirty (30) days of deposit or receipt;



(ii) funds of $5,000.00 or less with respect to each trust or other fiduciary relationship;



(iii) funds held temporarily for the purposes of paying insurance premiums or held for appropriate administration of trusts otherwise funded solely by life insurance policies; or



(iv) trusts established pursuant to deeds of trust to which the provisions of Code of Virginia Section 55-58 through 55-67 are applicable;



(2) funds, securities, or other properties may be maintained in a common account:



(i) where a common account is authorized by a will or trust instrument;



(ii) where authorized by applicable state or federal laws or regulations or by order of a supervising court of competent jurisdiction; or



(iii) where (a) a computerized or manual accounting system is established with record-keeping, accounting, clerical and administrative procedures to compute and credit or charge to each fiduciary interest its pro-rata share of common account income, expenses, receipts and disbursements and investment activities (requiring monthly balancing and reconciliation of such common accounts), (b) the fiduciary at all times shows upon its records the interests of each separate fiduciary interest in each fund, security or other property held in the common account, the totals of which assets reconcile with the totals of the common account, (c) all the assets comprising the common account are titled or held in the name of the common account, and (d) no funds or property of the lawyer or law firm or funds or property held by the lawyer or the law firm other than as a fiduciary are held in the common account.



For purposes of this Rule, the term "fiduciary" includes only personal representative, trustee, receiver, guardian, committee, custodian and attorney-in-fact.



(e) Record-Keeping Requirements, Required Books and Records. As a minimum requirement every lawyer engaged in the private practice of law in Virginia, hereinafter called "lawyer," shall maintain or cause to be maintained, on a current basis, books and records which establish compliance with Rule 1.15(a) and (c). Whether a lawyer or law firm maintains computerized records or a manual accounting system, such system must produce the records and information required by this Rule.



(1) In the case of funds held in an escrow account subject to this Rule, the required books and records include:



(i) a cash receipts journal or journals listing all funds received, the sources of the receipts and the date of receipts. Checkbook entries of receipts and deposits, if adequately detailed and bound, may constitute a journal for this purpose. If separate cash receipts journals are not maintained for escrow and non-escrow funds, then the consolidated cash receipts journal shall contain separate columns for escrow ad non-escrow receipts;



(ii) a cash disbursements journal listing and identifying all disbursements from the escrow account. Checkbook entries of disbursements, if adequately detailed and found, may constitute a journal for this purpose. If separate disbursements journals are not maintained for escrow and non-escrow disbursements then the consolidated disbursements journal shall contain separate columns for escrow and non-escrow disbursements;



(iii) subsidiary ledger. A subsidiary ledger containing a separate account for each client and for every other person or entity from whom money has been received in escrow shall be maintained. The ledger account shall by separate columns or otherwise clearly identify escrow funds disbursed, and escrow funds balance on hand. The ledger account for a client or a separate subsidiary ledger account for a client shall clearly indicate all fees paid from trust accounts;



(iv) reconciliations and supporting records required under this Rule;



(v) the records required under this paragraph shall be preserved for at least five full calendar years following the termination of the fiduciary relationship.



(2) in the case of funds or property held by a lawyer or law firm as a fiduciary subject to Rule 1.15(d), the required books and records include:



(i) an annual summary of all receipts and disbursements and changes in assets comparable to an accounting that would be required of a court supervised fiduciary in the same or similar capacity. Such annual summary shall be in sufficient detail as to allow a reasonable person to determine whether the lawyer is properly discharging the obligations of the fiduciary relationship;



(ii) original source documents sufficient to substantiate and, when necessary, to explain the annual summary required under (i), above;



(iii) the records required under this paragraph shall be preserved for at least five full calendar years following the termination of the fiduciary relationship.



RULE 8.4 Misconduct



It is professional misconduct for a lawyer to:



(a) violate or attempt to violate the rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another;



(b) commit a criminal or deliberately wrongful act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer;



(c) engage in professional conduct involving dishonesty, fraud, deceit or misrepresentation.



Following the presentation of evidence and stipulations concerning the above factual allegations and rule violations, the Board deliberated and determined that the Bar had proven by clear and convincing evidence that Respondent had violated DR1-102, DR5-104, DR9-102, DR9-103, Rule 1.8, Rule 1.15, and Rule 8.4. The Board then entertained argument and presentation of evidence as to an appropriate sanction, following which the Board adjourned again and after deliberations, re-convened to announce its decision that Respondent's license to practice law be revoked effective immediately.

In evaluating an appropriate sanction, the Board is of the opinion that under the circumstances of this case it has no latitude but to impose a sanction of revocation. The amount of misappropriations is significant. Respondent engaged in a pattern of conduct on a consistent basis over a period of years. It is reasonable to infer that he would have continued to misappropriate funds from his trust account had his conduct not come to light. He engaged in deliberate and systematic conduct intended to conceal his activities, which were successful for an extended period of time. He candidly admitted that he knew what he was doing was wrong, although with the intent to pay back those amounts that he had embezzled. In mitigation, Respondent pointed out that no client had been harmed or would have been harmed since he borrowed or would have borrowed or made other arrangements to cover any amount owed to any particular client. Even accepting as true Respondent's contention, the Board views that factor as clearly insufficient to justify any penalty less than revocation.

The Board does recognize that once his conduct came to light the Respondent engaged in candid and forthright admissions of his conduct and took immediate steps to provide full and complete restitution to his trust account in the amount of $60,0000, an amount reasonably thought by Respondent to be sufficient for that purpose. The Board confirmed on the record that the Respondent at all times has been very cooperative with the Bar and has facilitated the Bar's investigation. While Respondent's actions after the discovery of his conduct, including his providing immediately restitution, do not mitigate sufficiently to justify a sanction less than revocation, the Board does view these facts as appropriate for consideration in connection with any application for reinstatement that the Respondent may make at some future point.

The status of respondent's trust account is unclear from the record. The evidence established that the Respondent has had no control over the account since discovery of his embezzlements in October, 2000, following which control passed exclusively to Respondent's former partner. However, there is no evidence concerning who controls that account at the present time, the current status of that account, the use of the funds in that account since October, 2000, or whether any former or current clients of the Respondent are due funds. Nor is there evidence as to the precise amount that was needed to effect respondent's full and complete restitution, with the record showing total defalcations ranging variously anywhere from between $33,000 and $74,000. For these reasons, the Board recommends that the Bar appoint a receiver for the purposes of determining the location and status of respondent's former trust account, auditing Respondent's former trust account and establishing whether any additional restitution is necessary or whether the Respondent has deposited amounts in excess of what was required to effect complete restitution.

Whereupon it is:

ORDERED that pursuant to Part 6, IV, 13C.(3) of the Rules of the Virginia Supreme Court that the license of Respondent, Richard Howard Laibstain, to practice law in Virginia be, and the same hereby is, revoked effective November 16, 2001 as set forth in the Board's Order dated and entered November 16, 2001, attached hereto; it is

FURTHER ORDERED pursuant to provisions of Part 6, IV, 13(K)(1) of the Rules of the Supreme Court of Virginia, that Respondent shall forthwith give notice by certified mail, return receipt requested, of his revocation of his license to practice law in the Commonwealth of Virginia, to all clients for whom he is currently handling matters and to all opposing attorneys and presiding judges in pending litigation. Respondent shall also make appropriate arrangements for the disposition of matters then in his care in conformity with the wishes of his clients. Respondent shall give such notice within fourteen (14) days of the effective date of the revocation order, and make such arrangements as are required herein within forty-five (45) days of the effective date of the revocation order. Respondent shall furnish proof to the Bar within sixty (60) days of the effective date of the revocation order that such notices have been timely given and such arrangement for the disposition of matters made; all issues concerning the adequacy of the notice and arrangements required herein shall be determined by the Board; it is

FURTHER ORDERED that Respondent, Richard Howard Laibstain, shall furnish true copies of all of the notice letters sent to all persons notified of the revocation, with the original return receipts for said notice letters, to the Clerk of the Disciplinary System, on or before January 16, 2002; it is

FURTHER ORDERED that the Clerk of the Disciplinary System send an attested and true copy of this Opinion and Order to Respondent, Richard Howard Laibstain, by Certified Mail, Return Receipt Requested at his address of record with the Virginia State Bar, 210 South Railroad Avenue, Suite 1, P.O. Box 646, Ashford, VA 23005-0646 and to Charlotte P. Hodges, Assistant Bar Counsel, Virginia State Bar, 707 East Main Street, Suite 1500, Richmond, VA 23219-2800.

Tracy Stroh, RPR, RMR, Chandler and Halasz, Inc., P.O. Box 9349, Richmond, Virginia 23227, (804) 730-1222, was the reporter for the hearing and transcribed the proceedings.

The Clerk of the Disciplinary System shall assess costs pursuant to Part 6, IV, 13(K)(10) of the Rules of the Virginia Supreme Court.



ENTER THIS ORDER THIS ____ DAY OF

__________________, 2001





VIRGINIA STATE BAR DISCIPLINARY BOARD





By ___________________________________

Randy Ira Bellows, Second Vice Chair