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Commonwealth of Massachusetts

NO. BD-2009-038


S.J.C. Judgment of Disbarment entered by Justice Ireland on June 19, 2009.1


A hearing committee found that the respondent, Leo P. DeMarco, II, had intentionally misappropriated funds he controlled in his capacity as the trustee of two trusts. A majority of the committee recommended that he be indefinitely suspended for his actions, while a dissenting member recommended disbarment. Both parties appealed: the respondent asks for a new hearing or “at most” a three-month suspension, while bar counsel seeks disbarment. Oral argument was held before the full board on April 13, 2009. For the reasons set out below, we unanimously deny the respondent’s appeal. By majority vote, the board recommends disbarment; three members voted to recommend indefinite suspension.

The hearing committee’s findings of fact are predicated on findings made against the respondent by the Middlesex Probate and Family Court. On bar counsel’s motion for issue preclusion, the board chair ruled that the respondent was bound by findings essential to the judgment in the probate court action. Those findings establish that the respondent had represented an elderly Massachusetts couple, for whom he drafted two trusts for their benefit. As trustee, the respondent withdrew more than $30,000 of trust funds without the beneficiaries’ knowledge or authorization. The beneficiaries brought the probate court action to recover the missing funds and for an accounting. The probate court expressly discredited the respondent’s efforts to justify the withdrawals, and it found that he had intentionally misappropriated trust funds, found that he had charged an illegal or clearly excessive fee, removed him as trustee, and ordered him to pay $49,779 in damages. The respondent paid the damages.

The Respondent's Appeal.

The respondent’s central contention on appeal is his claim that because he took the clients’ funds with him to Florida and drafted the trusts as instruments governed by the law of Florida, the committee should have applied Florida law to his actions as their trustee. Therefore, the argument runs, issue preclusion based on a Massachusetts probate court judgment was inappropriate. His argument is wholly without merit.

The Commonwealth has jurisdiction over the conduct of any lawyer who is admitted here, see S.J.C. Rule 4:01, § 1(1), and such jurisdiction will lie “regardless of where the lawyer’s conduct occurs.” Mass. R. Prof. C. 8.5(a). Moreover, as the hearing committee observed, the clients resided in Massachusetts when the trusts were created, he drafted the instruments in his office in Massachusetts, and the funds were held in Massachusetts banks for a substantial period of time. A lawyer cannot divest the Supreme Judicial Court of its jurisdiction or his clients of the protection of Massachusetts law by the expedience of designating a foreign locus for the trusts and moving the cash to another state. In any event, when sued, he submitted to the jurisdiction of the probate court by defending the action here, and he apparently did not object to – and he certainly never appealed from – that court’s choice of law. See Matter of Goldstone, 445 Mass. 551, 560, 21 Mass. Att’y Disc. R. 288, 298 (2005) (“merely pointing” to additional steps that could have been taken in the original litigation “does not operate to avoid issue preclusion”). Finally, he has made no showing that application of Florida law to his peculations would alter the committee’s rulings of law. Florida’s rules of professional conduct do not differ from ours in any respect that could have altered the hearing committee’s conclusions of law. Compare Florida Rules 4-8.4(c) and 4-1.5(a) with Mass. R. Prof. C. 8.4(c) and 1.5(a), respectively. The board chair properly allowed the motion for issue preclusion, and the hearing committee rightly rejected the respondent’s argument that only a Florida court, applying Florida law, may discipline a Massachusetts lawyer for misappropriating the funds of Massachusetts residents.

We also reject the respondent’s contention that a lesser sanction is appropriate because he was acting outside the practice of law – that is, as a trustee, not as an attorney. The declarants of the trusts were his clients before he drafted the trust documents, and he drafted the instruments themselves as their attorney. The committee rightly refused to view his misconduct as taking place outside the practice of law. See Matter of Stern, 425 Mass. 708, 711-712, 13 Mass. Att’y Disc. R. 749, 753 (1997) (rejecting similar contention where lawyer’s role as trustee of trusts drafted for clients was “inextricably linked” to his role as their attorney).

Bar Counsel's Appeal.

We agree with bar counsel and the dissenting hearing officer that the respondent should be disbarred. Disbarment or indefinite suspension is the presumptive sanction for the intentional misuse of client funds where deprivation resulted or was intended. See Matter of the Discipline of an Attorney (and two companion cases) (Three Attorneys), 392 Mass. 827, 836-837, 4 Mass. Att’y Disc. R. 155, 166-167 (1984), reaffirmed in Matter of Schoepfer, 426 Mass. 183, 187-188, 13 Mass. Att’y Disc. R. 679, 685-686 (1997). While restitution is an important factor to be weighed in choosing between these two sanctions, see Matter of Bryan, 411 Mass. 288, 292, 7 Mass. Att’y Disc. R. 24, 29 (1992), here the respondent forced the beneficiaries to sue him in order to recover their funds.

The parties dispute whether the respondent’s compelled restitution should be treated as mitigating. There is support for bar counsel’s position that it should not. See Matter of Libassi, 449 Mass. 1014, 1017, 23 Mass. Att’y Disc. R. 397, 402-403 (2007) (discounting restitution where forced); Matter of Hollingsworth, 16 Mass. Att’y Disc. R. 227, 236 (2000) (same); ABA Standards for Imposing Lawyer Sanctions § 9.4(a) (1992) (“forced or compelled restitution” is neither mitigating nor aggravating). On the other hand, the Court has imposed indefinite suspensions even when restitution had not been completed at all, and when the attorney had engaged in additional misconduct. See Matter of Abelson, S.J.C. No. BD-2008-001 (March 26, 2008) (incomplete restitution); Matter of Collins, S.J.C. No. BD-2008-109 (December 26, 2008) (substantial but incomplete efforts at restitution).

We acknowledge the importance of providing an incentive for erring lawyers to make restitution to clients they have harmed, and if the respondent’s obstinacy about repaying his clients were the only issue at play here, we might have accepted the indefinite suspension recommended by the hearing committee’s majority. The respondent’s misappropriations, however, were deliberately undertaken for entirely selfish motives, and thus bear little resemblance to those in Abelson, which were misguided but knowing efforts to protect his clients from the consequences of the sloppy handling of his conveyancing account. Nor did the respondent suffer from a disability like the addiction at issue in Collins. Finally, no matter where one comes down on the question of compelled restitution, the respondent’s lack of candor before the committee and bar counsel, his fabrication of a receipt, and his continuing inability to acknowledge the obvious wrongfulness of his conduct weigh heavily in favor of disbarment.

For all of the foregoing reasons, we adopt the hearing committee’s findings of fact and conclusions of law, but reject the majority’s proposed disposition. An Information shall be filed with the Supreme Judicial Court recommending that the respondent, Leo P. DeMarco, II, be disbarred.


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

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