BEFORE THE VIRGINIA STATE BAR DISCIPLINARY BOARD
IN THE MATTER
VSB DOCKET NO. 01-010-2981
A duly convened panel of the Virginia State Bar Disciplinary Board consisting of Bruce T. Clark, Esq., Robert L. Freed, Esq., Ann Nicole Kathan, Esq., Chester J. Cahoon, Lay Member, and, Roscoe B. Stephenson, III, Esq., 1st Vice Chair, presiding, considered the matter by telephone conference. The Respondent, David Redden, participated in the conference, pro se. Edward L. Davis, Assistant Bar Counsel, appeared on behalf of the Virginia State Bar.
It is the decision of the Virginia
State Bar Disciplinary Board to accept the Agreed Disposition. The Stipulations
of Fact, Disciplinary Rule Violations, and Disposition agreed to by the Virginia
State Bar and the Respondent are incorporated herein as follows:
I. STIPULATIONS OF
2. In April 2001, Mr. Redden's bank,
Wachovia, reported to the Virginia State Bar that he had overdrawn his trust
account on two occasions. Each overdraft was caused by his presenting checks
for payment against insufficient funds. The first check was in the amount of
$117.50, and the second was for $17.
3. During October 2001, Mr. Redden met with a Virginia State Bar investigator. He explained that the overdrafts in his trust account were caused by his failure to keep a running balance in his check register as he should have. He said that he simply estimated how much money was in the account before making a check, and that in this instance, he miscalculated. He said that prior to April 2001, he was not reconciling his trust account every month.
4. Mr. Redden explained further that he did not have a cash receipts or cash disbursements journal, and that he did not have any client subsidiary ledgers prior to April 2001.
The parties agree that the aforementioned facts give rise to violations of the following Disciplinary Rules:
RULE 1.15 Safekeeping Property
(c) A lawyer shall:
(2) identify and label securities and properties of a client promptly upon receipt and place them in a safe deposit box or other place of safekeeping as soon as practicable;
(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 the client regarding them; and
RULE 1.15 Safekeeping Property
(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 and 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 bound, 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.
RULE 1.15 Safekeeping Property
(f) Required Escrow Accounting Procedures. The following minimum escrow accounting procedures are applicable to all escrow accounts subject to Rule 1.15(a) and (c) by lawyers practicing in Virginia.
(2) Deposits. All receipts of escrow money shall be deposited intact and a retained duplicate deposit slip or other such record shall be sufficiently detailed to show the identity of each item;
(4 (4) Periodic trial balance. A regular periodic trial balance of the subsidiary ledger shall be made at least quarter annually, within 30 days after the close of the period and shall show the escrow account balance of the client or other person at the end of each period.
The total of the trial balance must agree with the control figure computed by taking the beginning balance, adding the total of monies received in escrow for the period and deducting the total of escrow monies disbursed for the period; and
(ii) The trial balance shall identify the preparer and be approved by the lawyer or one of the lawyers in the law firm.
A monthly reconciliation shall be made at month end of the cash balance derived from the cash receipts journal and cash disbursements journal total, the escrow account checkbook balance, and the escrow account bank statement balance;
(ii) A periodic reconciliation shall be made at least quarter annually, within 30 days after the close of the period, reconciling cash balances to the subsidiary ledger trial balance;(iii) Reconciliations shall identify the preparer and be approved by the lawyer or one of the lawyers in the law firm.
Receipts and disbursements explained. The purpose of all receipts and disbursements of escrow funds reported in the escrow journals and subsidiary ledgers shall be fully explained and supported by adequate records.
1. The Respondent, David Redden, is placed on probation for a period of one (1) year, said period to begin the date that the Board enters this Order. Mr. Redden will engage in no professional misconduct as defined by the Virginia Rules of Professional Conduct during such probationary period. Any final determination of misconduct determined by any District Committee of the Virginia State Bar, the Disciplinary Board, or a three-judge court to have occurred during such period will be deemed a violation of the terms and conditions of this Agreed Disposition and will result in the imposition of a one-year suspension of his license to practice law as an alternate sanction. The alternate sanction will not be imposed while Mr. Redden is appealing any adverse decision that might result in a probation violation.
The imposition of the alternate sanction will not require a hearing before the Board on the underlying charges of misconduct stipulated herein if the Virginia State Bar discovers that the Respondent has violated any of the foregoing terms and conditions. Instead, the Virginia State Bar shall issue and serve upon the Respondent a Notice of Hearing to Show Cause why the alternate sanction should not be imposed. The sole factual issue will be whether the Respondent has violated the terms of this Agreed Disposition without legal justification or excuse. The imposition of the alternate sanction shall be in addition to any other sanctions imposed for misconduct during the probationary period.
Pursuant to Part Six, Section IV, Paragraph 13.B.8.c., of the Rules of the Supreme Court, the Clerk of the Disciplinary System shall assess costs.
The court reporter who transcribed this proceeding is Donna Chandler, Chandler & Halasz, P.O. Box 9349, Richmond, Virginia 23227, (804) 730-1222.
A copy teste of this Order shall be served upon the Respondent, David Redden, by Certified Mail, Return Receipt Requested, at Suite 203, 6022 Jefferson Avenue, Newport News, Virginia 23605, his address of record with the Virginia State Bar, and hand-delivered to Edward L. Davis, Assistant Bar Counsel, Virginia State Bar, 707 East Main Street, Suite 1500, Richmond, Virginia 23219.