Mass.gov
   
Mass.Gov home Mass.gov  home get things done agencies Search Mass.Gov


Commonwealth of Massachusetts

NO. BD-2002-062

IN RE: MICHAEL G. MCDONALD

S.J.C. Judgment of Disbarment entered by Justice Greaney on May 13, 2004.1

SUMMARY2

This matter came to Bar Counselís attention as the result of the receipt on March 6, 2002, of a notice of a dishonored check from the bank in which the respondentís IOLTA account was maintained. The respondent was admitted to the Bar of the Commonwealth on December 17, 1973. This matter came before the Court on the respondentís affidavit of resignation pursuant to S.J.C. Rule 4:01, ß 15. The respondent admitted in the affidavit that sufficient evidence existed to warrant findings that the facts and the violations of the Rules of Professional Conduct alleged in the second amended petition for discipline, comprising six counts, could be proved by a preponderance of the evidence.

In 2001, the respondent represented a seller of real estate. The buyerís down payment of $36,900 was deposited to the respondentís IOLTA account in October 2001. By February of 2002, the respondent had withdrawn all of the deposit in the IOLTA account, commingled the funds with his own funds, and intentionally applied these funds to pay unrelated business or personal obligations of the respondent or to replace funds due to clients or others. The buyer requested that the respondent return his deposit in September of 2002. The respondent disclosed to the buyer that he no longer held the deposit funds and did not account for his use of the funds. The respondent has not made any restitution and still owes at least $36,900 to the buyer or his own client.

The respondentís failure to safeguard the deposit and to account for his receipt, handling, maintenance and disposition of the funds violated Mass. R. Prof. C. 1.15(a) and (b). The respondentís conduct in commingling the escrow funds with his own funds, in intentionally misappropriating the buyerís escrow funds, and in failing promptly to turn the funds over when due violated Mass. R. Prof. C. 1.15(a), (b), and (d), and 8.4(c) and (h).

The second matter involved the respondentís representation of another seller of real estate in the fall of 2001. In October of 2001, the seller and buyers executed a purchase and sale agreement for the property and delivered two checks to the respondent, totaling $56,250, as the deposit. These funds were deposited in the respondentís IOLTA account instead of in an interest-bearing escrow account. Between October 2001 and February 2002, the respondent withdrew or caused to be withdrawn all of the buyersí funds from the IOLTA account, commingled these funds with his own funds, and intentionally applied these funds to pay unrelated business or personal obligations of the respondent or to replace funds due to clients or others.

In September of 2002, the buyers demanded that the respondent provide an accounting of all funds held in escrow and return the funds to them. To date, the respondent has not provided an accounting to the buyers or made any payment to them or on their behalf. The buyers or the respondentís clients remain deprived of the funds deposited with the respondent.

The respondentís failure to deposit the funds to an individual interest-bearing account violated Mass. R. Prof. C. 1.2(a), 1.3, and 1.15(e). The respondentís failure to safeguard his clientsí funds and to account for his receipt, maintenance, and disposition of the funds violated Mass. R. Prof. C. 1.15(a) and (b). The respondentís conduct in commingling the escrow funds with his own funds, in intentionally misappropriating the buyersí escrow funds, and in failing promptly to turn the funds over when due violated Mass. R. Prof. C. 1.15(a), (b), and (d), and 8.4(c) and (h).

In the third matter, the respondent represented a debtor in a Chapter 13 proceeding before the bankruptcy court. The client owned property subject to a mortgage. The bankruptcy court authorized the respondentís client to borrow $175,000 from a new lender and use the proceeds of the loan to pay the mortgage-holder and other creditors. The existing mortgage-holder agreed to accept $71,000 to fully satisfy the mortgage that it held on the property provided that it receive a first mortgage and that all existing liens or mortgages on the property be discharged.

In October of 2001, the client borrowed funds from the new lender, and gave a new mortgage on the property. The proceeds of the loan were to be used to pay the original lender and other creditors of the respondentís client. The respondent acted as settlement agent for the new lender in the transaction involving the new loan. The new lender entrusted the respondent with in excess of $71,000 to pay the existing mortgage-holder and others. The funds were deposited in the respondentís IOLTA account. The respondent never made any payment to the existing mortgage holder.

In April of 2002, the respondent mailed a check for $71,000 written on his business checking account, payable to the original mortgage-holder. When he did so, he knew that there were insufficient funds in the account for the check to be honored. In May of 2002, the respondent, knowing that the check would be dishonored, filed a motion to vacate relief from automatic stay based upon the delivery of the check for $71,000 to counsel for the original lender. .

The original lender was notified that this check was returned unpaid because there were insufficient funds in the account. In August of 2002, the respondent mailed another check for $71,000 written on his business checking account payable to the original lender. This check was also returned unpaid because there were insufficient funds in the account. To date, the respondent has made no payment to the original lender.

On November 14, 2002, the bankruptcy court conducted a hearing in connection with a motion by the original mortgage-holder. The respondent appeared for his client at this hearing; his client was not present. The respondent disclosed to the court that he had not paid the original lender and that he did not have the funds to do so in his possession. He intentionally misrepresented to the court that he had notified his client of this problem.

On November 14, 2002, the attorney for the original lender filed a motion to enjoin the client from encumbering his property and to vacate the discharge order regarding the original lenderís interest. The respondent never told his client that the obligation to the original lender was not paid and that the original lender was seeking to enjoin further encumbrances and vacate the discharge. A hearing on the motion was scheduled for November 20, 2002. The night before the hearing, with the respondentís consent, the attorney for the original lender faxed to the court a stipulation signed by the respondent and himself agreeing to enjoin any further encumbrance and vacate the discharge. The respondent had no authority from his client to enter into the stipulation.

The respondentís conduct in failing to promptly pay the original lender violated Mass. R. Prof. C. 1.2(a), 1.3, and 1.15(b). The respondentís conduct in signing the stipulation without authority from his client violated Mass. R. Prof. C. 1.2(a) and 1.4(a) and (b). The respondentís conduct in failing to communicate to his client that the respondent had never paid the obligation to the original lender and that the original lender was seeking to enjoin further encumbrances and vacate the discharge violated Mass. R. Prof. C. 1.4(a) and (b) and 8.4(h).

The respondentís conduct in commingling his clientís funds, in intentionally misappropriating the funds that were to be paid to the first lender, and in failing promptly to pay the first lender the funds to which it was entitled violated Mass. R. Prof. C. 1.15(a), (b), and (d), and 8.4(c) and (h). The respondentís conduct in intentionally misrepresenting to counsel for the first lender and the bankruptcy court that payment was made to the first lender by check on his business account when he knew that the funds in that account were insufficient violated Mass. R. Prof. C. 3.3(a)(1), (2), and (4), 4.1(a), and 8.4(c), (d), and (h). The respondentís conduct in intentionally misrepresenting to the bankruptcy court that he had notified his client of his failure to pay the first lender violated Mass. R. Prof. C. 3.3(a)(1), (2), and (4), and 8.4(c) and (d).

In the fourth matter, the respondent represented another debtor in a Chapter 13 proceeding before the bankruptcy court, which also resulted in the sale of his clientís condominium to the owner of an adjacent unit. In January of 2002, the respondent received $70,000 from the buyer of the condominium to be held in escrow as an earnest money deposit until the sale of the property. The respondent deposited the funds to his IOLTA account.

Meanwhile, the respondent had told his client that it would be necessary to employ a real estate broker in order to obtain the approval of the bankruptcy court to sell the condominium. He told her that he would hire the broker, and she did not object. He did not tell his client the identity of the broker, that he was in fact the broker, or the terms of the listing agreement.

In February of 2002, the respondent filed a motion in the bankruptcy court to employ a real estate brokerage company to sell the condominium. The respondent knew that the brokerage company identified in the motion did not exist. Before the court took action on the motion, the respondent withdrew it.

In March of 2002, the respondent represented the client at the closing on the sale of the condominium. The proceeds due to the client were paid to the respondent as her attorney. The respondent deposited from these proceeds $238,768.49 to his IOLTA account. At the time of this deposit, the respondentís IOLTA account was overdrawn in the amount of $98,243.16. The bank applied the deposit to the overdrawn balance, leaving a balance of $140,525.33. From the remaining proceeds, the respondent paid himself a legal fee of $22,900 and a brokerís commission of $35,000.

The respondent was required to report to the bankruptcy court payments to himself of legal and brokerage fees, but he intentionally concealed from the bankruptcy court that he paid himself fees from the closing. He presented his client with an invoice from a non-existent realty company for $35,000 for brokerage services, but never disclosed to his client that there was no real estate broker and that he would receive the entire payment. The payment to the respondent was not fair and reasonable to his client, the client was not given a reasonable opportunity to seek the advice of independent counsel, and the respondent never obtained his clientís written consent to pay himself any brokerage commission.

Prior to the closing on the sale of the condominium and for several weeks thereafter, the respondent made proposals to his client that she should lend the remainder of the proceeds from the sale of the condominium to a realty trust that was another of his clients. He did not disclose to his client that he owned 50% of the beneficial interest in this realty trust. The terms of the loan that the respondent proposed that his client make to the realty trust were not fair and reasonable to his client, and he never obtained her written or oral consent to lend the funds to the realty trust or anyone else. After consulting with independent counsel, the client told the respondent that she rejected the proposals.

In March of 2002, the respondent paid his client $10,000 of the closing proceeds due to her. He thereafter intentionally used or withdrew the remainder of this clientís funds from his IOLTA account, commingled those funds with his own funds, and intentionally applied those funds to pay unrelated business or personal obligations or to replace funds due to clients or others.

In May of 2002, the client demanded that the respondent immediately pay her all of the proceeds that were due to her from the sale. The respondent intentionally misrepresented to her that she had agreed to lend the proceeds to the realty trust. Thereafter, the respondent made additional payments to the client totaling $250,850.15, which he funded in part by payments from the client involved in the fifth matter.

The respondentís conduct in failing to promptly pay his client the funds that were due to her, commingling her funds with his funds, and in intentionally misappropriating his clientís funds violated Mass. R. Prof. C. 1.2(a), 1.15(a), (b), and (d) and 8.4(c) and (h). The respondentís conduct in concealing his connection to the realty company from his client violated Mass. R. Prof. C. 4.1(a) and (b) and 8.4(c) and (h). His conduct in paying himself a brokerage commission for the sale of the condominium upon terms that were not fair and reasonable to his client and without her written consent violated Mass. R. Prof. C. 1.8(a). His conduct in deliberately concealing the payments from the sale of the condominium to himself for legal services and brokerís commission from the bankruptcy court violated Mass. R. Prof. C. 3.3(a)(1), 3.4(c), and 8.4(c), (d), and (h).

The fifth matter involved the representation of a husband and wife who were debtors in a Chapter 13 proceeding before the bankruptcy court. The wife had won a prize from the Massachusetts State Lottery in 1986. By June of 2001, four future annual payments remained to be paid to the wife, each in the amount of $31,748.

In December of 2001, the respondent filed a motion in the bankruptcy court seeking authority to sell the wifeís interest in the future lottery payments. In March of 2002, a buyer submitted an offer to the bankruptcy court to buy the wifeís interest in the future lottery payments. Along with the offer, he delivered a check for $1000 payable to the respondent as debtorís counsel. The respondent deposited the check to his IOLTA account instead of to an interest-bearing account with interest payable to his client.

In April of 2002, the bankruptcy court authorized and approved the sale of the future lottery payments to the buyer for $100,251. In May of 2002, three checks totaling $99,251 payable to the respondent were delivered to him and deposited to his business checking account. The same day, the respondent intentionally withdrew the deposit and other funds from his business checking account by means of a check he wrote to ďcashĒ in the amount of $118,244.15. The balance remaining in the business checking account was $4,338.60.

The next day, the respondent intentionally used the check for $118,244.15 to pay obligations owed to the client involved in the fourth matter described above. The respondent misused and converted these funds with the intent to deprive his client of the benefit of the funds and with actual deprivation resulting.

The respondent made payments in the amount of $31,700.51 to or for the benefit of his client or her family. Despite demands to do so, the respondent has failed to account to his client or any representative of her bankruptcy estate for the remainder of the funds received on her behalf and has failed to remit the remainder of the funds due her or her bankruptcy estate.

The respondentís conduct in commingling this clientís funds, failing to distribute the funds when due, failing to segregate the funds and hold them at interest for the benefit of his client or her bankruptcy estate, and failing to account adequately for the funds violated Mass. R. Prof. C. 1.2(a), 1.15(a), (b), (d) and (e) and Mass. R. Prof. C. 8.4(c) and (h). The respondentís conduct in intentionally misappropriating the clientís funds and in failing promptly to turn the funds over to his client when due violated Mass. R. Prof. C. 1.15(a), (b), and (d), and 8.4(c) and (h).

The final matter involved an unauthorized mortgage on the home of the respondentís elderly in-laws. The respondentís wifeís parents owned their home free and clear of any mortgage. The respondent represented his wifeís parents in the preparation of various trust documents executed in June of 1999. Among the documents that they executed were a realty trust and a deed transferring their home to themselves as trustees of the trust.

The respondentís wife died in July 2001. Sometime before November of 2001, the respondent prepared a deed purporting to transfer title to the home from the respondentís son as trustee of the trust that held title to the wifeís parentsí home to the respondentís son, individually. The respondent knew that his son was not a trustee of the realty trust, but he nevertheless had his son sign the deed as trustee of the realty trust. The respondentís wifeís parents did not know of or authorize this transaction. The deed wrongfully purporting to transfer title to the respondentís son individually was recorded.

In January of 2002, the respondent represented his son in applying for a mortgage loan in the amount of $75,000 from a lender, to be secured by a mortgage on the in-lawsí home. The respondent arranged this transaction in order to receive personally the proceeds of the closing. He fabricated and forged several documents needed to obtain the loan and delivered them to counsel for the lender.

In February of 2002, with the respondentís assistance and participation, the respondentís son closed on the loan of $75,000, secured by a mortgage and other security on the home, all given by the respondentís son as purported trustee of the realty trust. This transaction was conducted without the knowledge or consent of the respondentís wifeís parents or any beneficiary of the realty trust. The respondent issued a lenderís title insurance policy as agent for the title insurance company and recorded the mortgage and other documents at the registry of deeds.

Soon after, at the respondentís direction, counsel for the lender wired the net proceeds of the loan to an account opened by the respondent in the name of the realty trust on which he was the sole signatory. The respondent immediately withdrew $71,500 from this account by a bank check and deposited the check to his IOLTA account. He then intentionally withdrew or caused to be withdrawn all of the realty trustís funds from his IOLTA account, and applied these funds to pay unrelated business or personal obligations of the respondent or to make restitution to clients or others.

The respondent also caused to be fabricated certificates of resignation by his late wifeís parents as trustees and also by his late wife as trustee and an appointment of the respondentís son as trustee of the realty trust. The respondent also caused the name of his late wife and her brother to be signed to the documents as ďtrustee.Ē

Both of the respondentís wifeís parents died in October 2003. At some time after the closing, questions were raised concerning irregularities in the closing documents. The respondent caused fabricated documents to be delivered to counsel for the lender. These documents included a false schedule of beneficiaries, false direction of the holders of a majority of the interest of beneficiaries, and false certificates of resignation and appointment.

The respondentís conduct in recording the declaration of trust and deed which he knew to be false violated Mass. R. Prof. C. 4.1(a) and (b) and 8.4(c), (d), and (h).

The respondentís conduct in fabricating or causing to be fabricated a false schedule of beneficiaries, false direction of the holders of a majority of the interest of beneficiaries, and false certificates of resignation and appointment and in delivering them to counsel for the lender violated Mass. R. Prof. C. 3.4(a), 4.1(a) and (b) and 8.4 (c), (d) and (h).

The respondentís conduct in representing his son at a closing when he knew that his son did not have authority to grant a mortgage on the property while also serving as an agent for the title insurance company violated Mass. R. Prof. C. 1.2(d), 1.7(b), and 8.4(c) and (h).

The respondentís conduct in assisting his son in obtaining a loan on the property for the respondentís own benefit when his son was not entitled to convey or mortgage the property violated Mass. R. Prof. C. 1.2(d), 1.7 and 8.4(c) and (h).

The respondentís conduct in commingling the proceeds of the closing with his own funds and in intentionally converting the funds lent to the realty trust violated Mass. R. Prof. C. 1.15(a), (b), (c), and (d), and 8.4(c) and (h).

The respondentís conduct in using confidential information gained in representing his in-laws to benefit himself without their consent violated Mass. R. Prof. C. 1.8(b) and 1.9(c)(1).

In aggravation of this misconduct, the respondent had received an admonition in 1994 for endorsing a check delivered to him payable to a client for a workerís compensation claim without authorization and failing to promptly deliver the proceeds of the check to the clientís estate. Admonition 94-20, 10 Mass. Attíy Disc. R 362.

On April 12, 2004, the Board of Bar Overseers voted to accept the respondentís resignation and recommend disbarment retroactive to the respondentís temporary suspension. On May 13, 2004, the Court entered an order of disbarment, retroactive to December 3, 2002, the date of the respondentís temporary suspension.

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

2 Compiled by the Board of Bar Overseers based on the record before the Court.



BBO/OBC Privacy Policy. Please direct all questions to webmaster@massbbo.org.
© 2004. Board of Bar Overseers. Office of Bar Counsel. All rights reserved.