Court: Appellate Division of the Supreme Court of the State of New York; January 6, 1997; New York; State Appellate Court
Steven P. Rapoport, admitted to practice law in New York since 1979, was suspended from practicing law in 1995 pending charges from the Departmental Disciplinary Committee. The Committee now seeks his disbarment based on a Hearing Panel's report. The initial charges against Rapoport involve his handling of escrow funds for Palace Realty Corp. Evidence reveals that in 1992, he improperly withdrew $29,300.55 from the escrow account, which was meant for property repairs, to cover unrelated legal fees owed by a shareholder, despite being instructed not to do so. This action constituted dishonesty, violating the Code of Professional Responsibility. Additionally, he failed to maintain the escrow funds intact, which further violated ethics rules and reflected adversely on his legal fitness.
Further charges (Four through Fifteen) relate to Rapoport's representation of Francis Allen in estate planning. In 1990, he represented Eric Landau in a corporate purchase, and later advised Allen, a majority shareholder wishing to retire, on estate modifications involving approximately $4 million in assets.
Allen had an existing estate plan from a Boston law firm before hiring respondent in 1992, who modified it by creating five trusts and transferring all of Allen's assets into them. Respondent drafted all relevant documents, which Allen executed in New York, and was appointed trustee, granting respondent total control over Allen’s finances. Additionally, respondent established the Yaiza Foundation in Liechtenstein, with Allen executing various documents related to it. Although Allen signed documents indicating beneficiaries as IRS-recognized tax-exempt entities, documents filed by respondent in Liechtenstein stated that beneficiaries would be determined by the foundation's board.
At respondent's direction, Allen transferred approximately $2,781,000 into the trusts and an additional $450,000 to separate accounts. Subsequently, $2,325,000 was moved from the trusts to a Yaiza account in Liechtenstein, and $250,000 was wire transferred from that account to respondent’s personal account without accounting for the transfer. After concerns arose regarding the trusts, Allen sought a review from Eric Menoyo, a Boston attorney. Despite requests for an accounting from respondent, none was provided.
Respondent’s actions, including the unauthorized transfer of funds and failure to maintain accurate accounting, led to charges of dishonesty, misappropriation of client funds, and conduct reflecting adversely on his fitness to practice law. Allen, who suffered a head injury in June 1992 and exhibited signs of mental confusion and possible Alzheimer’s symptoms, had further funds withdrawn by respondent from his Schwab account totaling $170,000 between July and September 1992.
Respondent failed to properly account for Allen's funds following Allen's injury, prompting Allen, his wife, and accountant to seek the appointment of a conservator. On October 12, 1992, Edmund Dennehy, Jr. was appointed by the Norfolk County Probate Court. Edward Bartlett, Allen's former attorney, demanded an accounting from respondent on October 29, 1992, but respondent's reply lacked details about the funds. A meeting on December 4, 1992, between Bartlett, Dennehy, and respondent resulted in no documentation or accounting from respondent, who claimed most assets were transferred abroad but did not disclose specifics. Respondent's actions led to Charges Seven through Nine: intentionally converting $170,000 from Allen’s accounts, failing to maintain the funds intact, and engaging in conduct reflecting poorly on his legal fitness.
In December 1992, Allen's conservator filed a civil lawsuit against respondent and others, alleging conspiracy over Allen's funds and demanding an accounting. Respondent later agreed to a restraining order preventing asset transfers and requiring a full accounting and return of funds from Liechtenstein. During discovery, respondent revealed wire transfers of $2,325,000 to a Liechtenstein account, with documentation claiming the funds were invested in European government bonds. However, his January 1993 accounting failed to list certain transfers and did not return the funds as ordered, leading to contempt allegations. At a June 4, 1993, hearing, respondent falsely testified about the safety of the funds and their investment status, while in reality, only $30,000 was invested in government bonds; the majority had been loaned to entities formed at respondent's direction, ultimately benefiting his associate, Landau.
Allen settled a civil suit, with the settlement funded by co-conspirator Landau and malpractice insurance from the respondent’s former firm, who did not contribute financially. This established Charges Ten through Fifteen against the respondent. He misrepresented to the Norfolk County Superior Court that Allen's funds were held in a Liechtenstein trust when they had actually been loaned to a corporation and Landau, constituting dishonesty and misrepresentation under DR 1-102 (A) 4. This conduct was also prejudicial to justice (Charge Eleven, DR 1-102 (A) 5) and involved knowingly false statements (Charge Twelve, DR 7-102 (A) 5, 22 NYCRR 1200.33). The respondent failed to account for Allen’s funds despite repeated requests, violating DR 9-102 (C) 3 (Charge Fourteen) and reflecting adversely on his fitness to practice law (Charge Thirteen, DR 1-102 (A) 7). The misconduct, particularly the conversion of funds from an elderly and mentally incapacitated client, warrants disbarment, as established by precedent. The respondent did not provide mitigating evidence and defaulted at the hearing, citing unsupported claims of physical incapacity. His lack of cooperation in disciplinary proceedings also justified disbarment. The petition for confirmation of the Hearing Panel’s report was granted, resulting in the respondent’s disbarment effective January 7, 1997, with an amendment reflecting a legal name change dated October 18, 1979.
