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Commonwealth of Massachusetts

NO. BD-2000-010


S.J.C. Order of Indefinite Suspension entered by Justice Ireland on June 2, 2000, with an effective date of July 2, 2000.*
(S.J.C. Judgment of Reinstatement with Conditions entered by Justice Ireland on January 24, 2007.)


A hearing committee has recommended that the respondent, Bernard D. Pemstein, be indefinitely suspended for intentionally misappropriating $7,000 in escrow funds, with intent to deprive and with actual deprivation resulting. The respondent has appealed, contending that he was only careless in overcharging fees due him. He asks that we set aside the committee’s findings that his client did not consent to the withdrawals and that he intended to deprive the client of the funds. He also argues that the committee failed to give sufficient weight to certain mitigating evidence and proposed an unduly harsh and disparate sanction. Bar Counsel defends the committee’s findings and recommendation. Oral argument was held before the full Board on December 13, 1999. We deny the respondent’s appeal.

The Hearing Committee’s Report

For the reasons set out later in this memorandum, we adopt and incorporate by reference the hearing committee’s findings of fact and conclusions of law. What follows is a precis sufficient for purposes of this appeal.

In October 1993, Lauravia Simmons consulted the respondent, an experienced practitioner with a concentration in estate planning and probate practice, on how to preserve the assets and Medicaid eligibility of her husband, who was eighty-four and suffering from dementia. She did not retain the respondent at that time.

Mr. Simmons was hospitalized about two months later and, in January 1994, his sister and daughter successfully moved their appointment as his temporary guardians. Mrs. Simmons then retained the respondent to assist her in opposing the guardianship and in securing long-term care for her husband. The hearing committee determined that the parties did not reach agreement on the hourly rate the respondent would charge for his services.

On January 17, 1994, the respondent recorded the receipt of Mrs. Simmons’ $1,000 retainer, and two days later he filed a motion to vacate the temporary guardians’ appointment. In mid-February he advised Mrs. Simmons to set aside $15,000 for her husband’s nursing home care and to spend down any joint savings she had with her husband so that he would be eligible for Medicaid. On February 23, 1994, Mrs. Simmons cashed out a certificate of deposit and gave the respondent a $15,000 treasurer’s check to hold in escrow for the particular purpose of providing for her husband’s nursing care costs.

The respondent deposited the check to his IOLTA account and immediately transferred the funds to an interest-bearing escrow account in Mrs. Simmons’ name. Mrs. Simmons proceeded to spend down the couple’s joint savings, prepaying their funeral expenses and paying Mr. Simmons’ hospital bill.

In April 1994, Mr. Simmons entered a nursing home. The home never required any payments for his care. The respondent negotiated an agreement with the temporary guardians to permit Mrs. Simmons to visit her husband in the nursing home. In May 1994, Mrs. Simmons moved to Virginia.

Without prior notice to or authorization by Mrs. Simmons, the respondent on June 14, 1994, closed her escrow account and transferred the funds to his IOLTA account. On the same day, he drew a $3,000 check on the transferred funds and deposited it in his office account. He claimed the $3,000 was a fee for services rendered on Mrs. Simmons’ behalf. Over the next two days he used $2,000 of the funds to reduce the overdrawn credit line on his personal bank account and $1,000 to meet office payroll and other business needs. Crediting Mrs. Simmons’ testimony over the respondent’s, the committee found that Mrs. Simmons had not authorized the withdrawal. The committee noted that the amount taken was approximately $1,000 more than fees owed the respondent even by his own reckoning,1 that he never billed her, and that he had no written evidence of the claimed authorization.

By letter dated September 19, 1994, Mrs. Simmons requested the return of her escrowed funds. The respondent stipulated that he received this letter.2 Instead of complying with her request, he withdrew another $2,000 of Mrs. Simmons’ funds on September 27th and $2,000 more on September 29th. He deposited these funds into his office account and used them to pay his payroll. The committee found that, but for these two deposits, the respondent would not have been able to meet his payroll. The committee expressly rejected his claims that the September 27th withdrawal had been authorized by Mrs. Simmons and that the September 29th withdrawal was a “sloppy” mistake occasioned by his forgetting the withdrawal made two days earlier.

On October 5, 1994, the respondent sent Mrs. Simmons a check in the amount of $5,000 and wrote her that he was retaining the balance for future costs. His letter did not advise her that the escrow account had been closed or that he had withdrawn $7,000 for his own use, whether as fees or otherwise. Mrs. Simmons requested the balance of her funds by letter dated November 16, 1994. On November 24th, the respondent sent her a check in the amount of $3,104.43, which he said represented “the balance of the account.” Again, he did not supply an accounting of the remaining funds or disclose that he had taken $7,000.

In January 1995, Mrs. Simmons’ husband died. She asked the respondent to return the balance of her funds. When she received no response to a written request dated December 11, 1995, she sent a copy of the request to the Office of Bar Counsel. In response to Bar Counsel’s inquiry, the respondent claimed he was “authorized and directed” by his client to take the $7,000 as fees, but that $3,716.30 was due her as she had overpaid him. The $3,716.30 was not remitted until July 17, 1996. He finally paid her the balance, $3,505.45, in February 1998.

The hearing committee found that the respondent had intentionally taken his client’s funds without authorization, with intent to deprive her of the use of those funds, and with actual deprivation resulting. It concluded that this conduct violated Canon One, DR 1-102(A)(4) and (6), and Canon Nine, DR 9-102(A)-(C). The committee rejected Bar Counsel’s allegations that the takings also violated Canon Seven, and it found insufficient evidence to establish that the respondent had failed to maintain reasonable communications with his client in violation of Canon Six, DR 6-101(A)(3).

In aggravation, the committee found the respondent had substantial experience, particularly in estate planning and Medicaid work, that he took advantage of a vulnerable elderly woman who had limited resources and had moved out of state, and that he gave “misleading, deceptive or evasive testimony and/or accountings, and otherwise evinced a lack of candor during the disciplinary proceeding.”

In mitigation, the respondent claimed he was suffering from major depression at the time of the misconduct. The hearing committee found that he had been treated since 1970 by a psychiatrist for various problems, including irritability, depressed mood, and difficulty with concentration. The committee also found, however, that the respondent seldom saw the psychiatrist during period in which the misconduct took place, that the doctor did not have medical records for any period before July 1997, and that he considered the respondent to be mildly depressed in late 1998. The committee rejected the psychiatrist’s contention that the respondent suffered from major depression sometime in 1994, and was not persuaded, in any event, that the illness was a cause of his misconduct.

Citing Matter of Schoepfer, 426 Mass. 183, 187, 13 Mass. Att’y Disc. R. 679, 684 (1997), the committee concluded that the respondent had not met his burden of demonstrating why the presumptive sanction of disbarment or indefinite suspension should not be imposed. Because complete restitution was eventually made, the committee recommended an indefinite suspension.

Issues on Appeal

On appeal the respondent attacks the hearing committee’s report on four separate grounds: (1) it erred in finding he had intended to deprive his client of her funds, (2) it erred in finding Mrs. Simmons had not consented to his withdrawals of her funds, (3) it should have credited his psychiatrist’s testimony in mitigation of his misconduct, and (4) the sanction recommended is overly harsh and markedly disparate. We consider each below, though in a different order. None of them has merit.

1. Client Consent.

We consider first whether the committee properly determined that Mrs. Simmons did not consent to the respondent’s withdrawal of $7,000 in escrow funds. There appears to be no dispute that consent was required. The funds were escrow funds, not a retainer against which fees were to be charged. The respondent himself testified that he held the funds for the “particular purpose” of providing for her husband’s nursing care costs (Tr. 2:85), and it is settled that a lawyer may not set off against escrow funds held for a particular purpose even if he or she is owed a legitimate fee. See Torphy v. Reder, 357 Mass. 153, 156-57 (1970).

As the committee observed, there was no evidence of client consent other than the respondent’s testimony that Mrs. Simmons approved the withdrawals in a series of telephone calls. The respondent asks rhetorically what is wrong with such evidence of oral consent. The answer, of course, is nothing at all—unless the committee does not believe it. Here client and lawyer gave clashing evidence on the point, and the hearing committee chose to credit the client. The scope of our review of a committee’s credibility determinations is exceedingly narrow, for we are required to pay “due respect to the role of the hearing committee . . . as the sole judge of the credibility of the testimony presented at the hearing.” SJC Rule 4:01, § 8(3) (emphasis added). We may not disturb such findings “absent clear error.” Matter of Provanzano, 5 Mass. Att’y Disc. R. 300, 304 (1987); see also Matter of Hachey, 11 Mass. Att’y Disc. R. 102, 103 (1995) (credibility findings may not be disturbed unless “wholly inconsistent” with other findings). Nothing in our independent view of the record suggests there was any clear error here.

To the contrary, there is substantial other evidence to corroborate the committee’s credibility determination. There is no written documentation of consent. The respondent never bothered to bill her for his services, and he thus provided her with no basis on which to give her informed consent to his taking a fee out of the escrowed funds. This lends force to Mrs. Simmons’ testimony that she never gave her consent and the respondent never asked for it.

The respondent’s own testimony on this point was inconsistent with a prior statement on the issue. In his initial response to Bar Counsel’s inquiry, he insisted that Mrs. Simmons had “authorized and directed” him to withdraw the entire $7,000. At hearing, however, he testified that the last withdrawal, in the amount of $2,000, was the result of a “sloppy” mistake. Under these circumstances, we have no authority to trench on the hearing committee’s credibility determinations. The committee properly found that the respondent took the funds without his client’s consent.

The respondent makes much of the hearing committee’s unfortunate comment that he “must prove that the client’s consent was obtained.” This is an incorrect statement of the law, as the burden of proof lies with Bar Counsel. Rules of the Board of Bar Overseers, Section 3.38; see Matter of London, 427 Mass. 477, 482-83, 14 Mass. Att’y Disc. R. 431, 438 (1998). The committee immediately went on, however, to stress that its finding of a lack of consent was based on its evaluation of the credibility of the witnesses “[r]egardless of the burden of proof on the matter of consent.” Before us, the respondent dismissed this statement as “covering verbiage” that cannot save a shifting of burdens. We disagree. The committee made a mistaken assertion of law, then clearly indicated it was not relying on it. As just indicated, our own review of the record establishes that there was forceful evidence to corroborate Mrs. Simmons’ testimony on this point and virtually nothing to corroborate the respondent’s inconsistent claim to the contrary. Moreover, the nature of the evidence of his intention to deprive her of the funds, to which we turn next, fortifies the committee’s finding that there was no consent.

2. Intent to Deprive.

The hearing committee did not err in finding that the respondent intended to deprive Mrs. Simmons of the use of $7,000 in client funds. It discredited his testimony to the contrary, and there was substantial evidence to support the inference that he knowingly took the funds with such wrongful intent.

Like the hearing committee, we find it extremely unlikely that the last withdrawal (the second of the $2,000 withdrawals) could have been a “mistake.” The respondent claimed he made the last withdrawal because he had forgotten he had already taken it two days earlier. A review of his financial records strongly suggests this could not be so. We have affixed as an attachment to this report a copy of Exhibit 23A, the respondent’s client ledger that records IOLTA account transactions relating to Mrs. Simmons’ funds. Written in the respondent’s hand, the ledger shows the two $2,000 transactions, one immediately above the other. It almost defies belief that he could have entered the latter without noticing the former written immediately above it. This is not to say that the entries could not possibly have happened as the respondent claims, only that the probability is so slight as to add powerful corroboration to the committee’s credibility determination. That corroboration is made more powerful still when one considers that the respondent had to have reviewed the ledger sheet again, some two months later, in order to calculate the amount of the $3,104.43 check he told Mrs. Simmons represented the “balance of the account.”

Other damaging evidence of his intent is found in the letter he sent to Mrs. Simmons on June 14, 1994, the very day he closed the escrow account and made the first transfer, in the amount of $3,000, to his operating account. In the letter he represented to Mrs. Simmons that “the amount we deposited [into the escrow account] is $15,000.” The statement was literally true but begged the false inference that the funds were still in the account. He did not mention that he had, that day, closed out the account and transferred the balance to his IOLTA account, and he did not mention that he was paying himself a putative fee of $3,000. Instead, he enclosed copies of the March 31 and June 30, 1994 bank statements for the escrow account showing the entire $15,000 as still on deposit in the account. The effect of this correspondence was to lull Mrs. Simmons into believing her funds remained intact and in the separate escrow account—a belief the respondent knew to be false.

Finally, the committee found that the respondent had a pressing need for money at the time he made the withdrawals. He was financially stressed during this period in general. Proceeds from the first withdrawal ($3,000) went to reduce his overdrawn credit line in his personal account and to meet office payroll and other business needs. The committee found that, but for the twin $2,000 withdrawals in late September, the respondent would not have been able to pay his payroll. These facts, too, lend support to the hearing committee’s determination not to credit the respondent’s claims that his withdrawals were mistaken overcharges for fees he had earned.3

3. The Mitigating Evidence.

The respondent claims error in the hearing committee’s determination not to credit expert testimony by his psychiatrist, who opined that the respondent suffered from major depression (DSM IV Dx 296.20) when the misconduct occurred (January 1994 to February 1995) and that this disorder was a cause of actions. We find no error.

Dr. Michael I. Bennett testified that he saw the respondent on several occasions before 1994, and on more occasions beginning in 1997, after Bar Counsel commenced his investigation. There was no evidence that Dr. Bennett treated or diagnosed him for major depression before 1994, and he testified that he viewed the respondent as mildly depressed until August 1998, at the earliest. Dr. Bennett diagnosed an episode of major depression—four years after the fact—based on a history taken from the respondent and without having observed the respondent or his symptoms during the period in question. He could not be specific about the severity of these symptoms and did not know how long they had lasted. The hearing committee found that eleven progress reports, relating to treatment provided between September 1998 and December 15, 1998, were not produced at the hearing. Under these circumstances, the hearing committee was not compelled to credit Dr. Bennett’s testimony that the respondent suffered from major depression when he took Mrs. Simmons’ funds.

The respondent objects that Bar Counsel offered no expert testimony or other evidence to contradict Dr. Bennett’s evidence. This objection founders on a misapprehension of the burden of proof. Having intentionally misappropriated client funds with intent to deprive (and with deprivation resulting), the respondent bore the heavy burden of demonstrating “special” mitigation to justify a departure from the presumptive sanction of indefinite suspension. Matter of Schoepfer, 426 Mass. 183, 187-88, 13 Mass. Att’y Disc. R. 679, 694 (1997). This burden was not carried because the hearing committee did not credit his expert witness. The committee was not bound to accept Dr. Bennett’s opinion even though Bar Counsel did not introduce contradictory expert testimony. Matter of Minkel, 13 Mass. Att’y Disc. R. 548, 552-53 (1997); Matter of May, 12 Mass. Att’y Disc. R. 221, 226 (1996). The committee did not err in rejecting Dr. Bennett’s medical opinion.

Even if the respondent did suffer from major depression in 1994, the committee correctly found that there was no evidence establishing a causal nexus between this disorder and the misconduct. While the respondent has not argued on appeal that such a nexus existed, he maintains it was error to require it. The rule is plainly otherwise.

The respondent relies on cases which either do not involve a claimed disability or in which causation was not discussed. Matter of Knox, 412 Mass. 569, 8 Mass. Att’y Disc. R. 127 (1992); Matter of Karahalis, 429 Mass. 121 (1999); Matter of Worthen, 6 Mass. Att’y Disc. R. 333 (1990); Matter of Silvey, 6 Mass. Att’y Disc. R. 306 (1989). We are aware of no case in which the issue was raised where the Court has not required a causal relationship. Where a defalcating lawyer raises a disability as a mitigating circumstance, he or she bears the burden of demonstrating that the ailment was a cause of the misconduct. See, e.g., Matter of Schoepfer, supra , 426 Mass. at 187-88, 13 Mass. Att’y Disc. R. at 694 (presumptive sanction should be imposed absent evidence “a disability caused a lawyer’s conduct”); Matter of Luongo, 416 Mass. 308, 311, 9 Mass. Att’y Disc. R. 199, 203 (1993) (no showing that “the attorney’s alcoholism was a cause of any of his disciplinary violations”); Matter of Gonick, S.J.C. No. BD-99-031, slip op. at 3 (July 22, 1999) (lawyer failed to show mental state “caused him to act in violation of his clear ethical obligations”); Matter of Gustafson, 6 Mass. Att’y Disc. R. 140, 143 (1990) (no showing that “‘but for’ alcoholism the respondent’s wrongdoing would not have occurred”). See also ABA Standards for Imposing Lawyer Discipline section 9.32(i) (1986). There was no error.4

4. The Appropriate Sanction.

Having disposed of the respondent’s objections to the committee’s factual findings and the legal conclusions flowing naturally from them, we confront a much simpler task in choosing the appropriate sanction. The respondent intentionally made unauthorized use of client funds, with intent to deprive and with deprivation resulting. The Court has made clear that the presumptive sanction for such actions is indefinite suspension or disbarment. Matter of Schoepfer, supra. The respondent has not demonstrated that a disability contributed to the misconduct, and he thus has failed to meet his heavy burden of showing why a lesser sanction should be imposed. Id. Because he did make belated restitution to the client, the appropriate sanction is the indefinite suspension recommended by the hearing committee.


For all of the foregoing reasons, we adopt the hearing committee’s report and its recommendation to file an Information with the Supreme Judicial Court for Suffolk County recommending that the respondent, Bernard D. Pemstein, be indefinitely suspended from the practice of law.


* The complete Order of the Court is available by contacting the Clerk of the Supreme Judicial Court for Suffolk County.

1 The committee found that, according to his own computerized billing records, his fee should have been $3,075.75 or $1,915, depending on whose testimony one believed as to the agreed-upon billing rate. That figure would then have to be reduced by $1,000, the amount of the retainer Mrs. Simmons paid. The amount taken, therefore, exceeded the amount of the fee, however calculated.

2 At hearing the respondent testified that he did not receive the letter. Although the committee “reject[ed]” this testimony, apparently on credibility grounds (see Hearing Committee Report ¶ 34), it would have been equally appropriate to hold him to the terms of his stipulation on this issue. See Rules of the Board of Bar Overseers, Section 3.38 (“[S]tipulations may be received in evidence at a hearing, and when so received shall be binding on the parties with respect to the matters therein stipulated.”).

3 The respondent claims that the hearing committee shifted the burden of proof on the issue of his intent through a misreading of Matter of Schoepfer, 426 Mass. 183, 13 Mass. Att’y Disc. R. 679 (1997). We find nothing in the committee’s report to suggest that this is the case. The committee merely noted that a lawyer who misuses client funds with intent to deprive bears a heavy burden to avoid indefinite suspension or disbarment. It then proceeded to determine whether there was such an intent.

4 There was a contretemps at argument before the Board when Bar Counsel read from the respondent’s hearing testimony, in which he confirmed a statement he made, during a subpoena meeting with Bar Counsel, to the effect that he never felt depressed during 1994. The respondent objected that the statement was admitted only for impeachment and that it was improper to treat it as substantive evidence that he did not suffer from a disability. While we are not certain the statement was offered substantively during oral argument before us, it would not have been wrong to offer it as such. This was clearly a prior inconsistent statement by a party witness, and as such was admissible for its truth as an admission as well as for inconsistency. Commonwealth v. Leo, 379 Mass. 34, 41-42 (1979). In any event, we disregard the admission, as the respondent’s own opinion as to his mental condition is of slight, if any, value. The respondent’s suggestion, in a post-argument letter, that the Board may not proceed without “rehear[ing] the appeal” is frivolous.

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