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Court News Ohio
Court News Ohio

Attorney Suspended for Draining Funds During Disputed Bankruptcy

The Ohio Supreme Court suspended a Hinckley attorney today for engaging in a pattern of dishonesty to conceal his siphoning of nearly $51,000 entrusted to him pending the resolution of an ownership dispute between his client and his client’s bankruptcy trustee.

In a unanimous per curiam opinion, the Court suspended John W. Gold for two years, with one year stayed with conditions, for committing multiple violations of the rules governing the conduct of Ohio attorneys. Gold admitted to some of the misconduct and argued for a fully stayed suspension. The Court responded by noting the presumed sanction for misappropriating clients funds is disbarment, and that his behavior was “sufficiently egregious to support a finding” that he engaged in conduct that adversely reflects on his fitness to practice law.

The decision had the support of six justices and Tenth District Court of Appeals Judge Lisa Sadler, sitting for former Justice William M. O’Neill, who had resigned.

Attorney Depleted Settlement Funds
In May 2012, George Daher hired Gold to assist him in recovering about $51,000 in unclaimed funds from the state. Daher had filed for bankruptcy, and his debts in bankruptcy were discharged in 2010. The unclaimed funds were proceeds from an insurance claim that preceded his bankruptcy.

Gold filed a lawsuit in Cuyahoga County Common Pleas Court seeking a declaratory judgment that Daher was entitled to the unclaimed funds. Daher’s bankruptcy trustee asked the trial court to be added as a party to the case to dispute Daher’s entitlement to the funds. The trustee also returned to federal bankruptcy court to make further claims to the $51,000.

Gold and the trustee reached an agreement that Gold would collect the money from the state and hold it in his client trust account until the bankruptcy court determined how to divide the funds.

Almost immediately after depositing the money, Gold began disbursing it without obtaining the bankruptcy court’s approval. Gold and the bankruptcy trustee continued to litigate the matter, with Gold filing several motions in state and federal court to claim that Daher was entitled to the money. Gold also claimed he was entitled to receive legal fees from the funds based on an hourly rate even though he had signed a contingent fee contract with Daher.

In April 2014, the bankruptcy court determined that all the funds were to go to the trustee, and ordered Gold to turn over the money. He appealed the ruling, and by the end of May 2014, he had misappropriated more than $32,000 from the fund. By the time the federal appeals court affirmed the bankruptcy’s court decision in December 2014, Gold had taken $49,000 from the fund.

In January 2015, Daher and the trustee reached a settlement that permitted Daher to receive $18,300 with the remainder of the funds going to his bankruptcy debts. Gold refused to sign the settlement because it did not address his attorney fees. The bankruptcy court approved the settlement.

Attorney Argues Funds Should Pay His Fee
Gold then deposited $8,000 into his trust account and gave Daher a check for $6,000, and another $6,000 in cash. Gold kept $6,300, arguing it was a discounted fee. He did not comply with the court’s order to turn over the remaining $32,000 to the bankruptcy trustee.

The bankruptcy court sought to hold Gold in contempt, and he argued that he was entitled to $49,000 from the fund because he performed more than 240 hours of work at a rate of $200 per hour. Gold took several actions to delay and dismiss the contempt charges, and in the meantime, filed for bankruptcy himself. Gold was found to be in contempt. More than a year later, he reached a settlement in which he agreed to pay $32,000 to the trustee.

The Office of the Disciplinary Counsel filed a complaint against Gold with the Board of Professional Conduct in December 2016, charging him with violating several professional conduct rules. At the time of his disciplinary hearing, Gold had only paid the trustee $20,000.

Board Finds Rule Violations
Gold and the disciplinary counsel stipulated that the lawyer committed several rule violations, including failing to properly hold client funds in a trust account separate from his own personal account; failing to maintain adequate client trust account records; engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation; and engaging in conduct that adversely reflects on his fitness to practice law. The board ruled that Gold committed the violations.

When considering a proposed sanction, the board examines aggravating circumstances that could increase the punishment it recommends for a lawyer and mitigating factors, which could lead the board to recommend a reduced penalty.

The board found Gold acted with a dishonest and selfish motive and engaged in multiple offenses. It also found he had no prior discipline, made a good-faith effort to pay restitution to his client, and cooperated during the disciplinary proceedings. The board also accepted as a mitigating factor the parties’ stipulation that Gold suffered from several mental disorders and a substance-use disorder for which he entered a contract with the Ohio Lawyers Assistance Program (OLAP).

The board recommended the Court impose a two-year suspension with the second year stayed on the conditions that he comply with his OLAP contract, make full restitution to the bankruptcy trustee, pay all other sanctions against him in bankruptcy court, and commit no further misconduct. If Gold is reinstated, he must serve one year of monitored probation.

Attorney Seeks Reduced Sanction
Gold noted that the recommended sanction is based on a similar penalty imposed on a lawyer by the Supreme Court in 2014. The lawyer in Disciplinary Counsel v. Marshall also misappropriated client trust funds and engaged in a lengthy contempt of court dispute.

Gold argued his behavior was less egregious than that of the attorney in Marshall.  The Court examined Gold’s mitigating factors and noted that while he was credited for making restitution to Daher, it was tempered by the fact that he made false statements and submitted  “numerous frivolous filings in multiple courts in an effort to conceal his misconduct and delay making restitution” to the bankruptcy trustee. Although the court acknowledged that Gold had mental and substance-use disorders that qualified as a mitigating factor, it noted that he also testified that he was not fully in compliance with his OLAP contract that managed his treatment.

“Moreover, his failure to comply with that contract raises significant concerns about his ability to abide by the terms of other agreements and court orders, and consequently, his ability to practice law in a competent, ethical, and professional manner going forward,” the Court stated.

The Court agreed with the board’s recommended sanction and suspended Gold for two years with the second year stayed on the recommended conditions.

2017-1411. Disciplinary Counsel v. Gold, Slip Opinion No. 2018-Ohio-3238.

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