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Commonwealth of Massachusetts

SJC-BD-1997-011

IN RE: JOHN SILVIA, JR.

S.J.C. Judgment of Disbarment entered by Justice Spina on December 5, 2003.1
MEMORANDUM AND JUDGMENT2

The Board of Bar Overseers voted on May 12, 2003 to file an Information pursuant to Supreme Judicial Court Rule 4:01, § 8 (4), recommending that Attorney John Silvia, Jr. be disbarred. The board adopted and incorporated by reference the findings of fact made by a majority of the hearing committee, and concluded that the respondent had violated the Canons of Ethics and Disciplinary Rules. In particular, the board found that by intentionally commingling and misappropriating client funds, the respondent violated Canon One, DR1-102(A)(4) (dishonesty, fraud, deceit or misrepresentation) and (6) (conduct adversely reflecting on fitness to practice) and Canon Nine, DR 9-102(A) (client funds shall be segregated from other funds and deposited into client accounts), (B)(3) (lawyer shall maintain complete records of the handling, maintenance and disposition of all client funds and property, and render appropriate accounts to the client), and (4) (lawyer shall promptly pay or deliver as requested or otherwise due funds which client is entitled to receive). The Board also found that the respondent, in opposition to Bar Counsel's petition for temporary suspension, filed false and fraudulent affidavits with this Court, in violation of Canon One, DR1-102(A)(4) (dishonesty, fraud, deceit or misrepresentation), (5) conduct prejudicial to the administration of justice), and (6) (conduct adversely reflecting on fitness to practice).

1. Misappropriation. The misappropriation case against the respondent stemmed from two instances of misuse of a client's settlement funds. First, in 1991, the respondent (after deducting his fee) induced his client to sign over to him $65,000 of a $100,000 insurance settlement check under the pretext of holding the funds to satisfy outstanding medical bills and an unrelated legal obligation of the client, but instead used the money for his own purposes. He repaid the client $64,646 approximately one month later by a check drawn from a joint personal account the respondent shared with his wife. Second, in 1993 the respondent, again after deducting his fee, induced the client to turn over to him $60,000 and $240,000 of another $700,000 settlement under a similar pretext. These funds were never repaid in full (although the record is unclear as to how much was still owed.)

The findings of the hearing committee majority are summarized as follows. In March of 1989, the client retained the respondent to represent him and his son in a lawsuit following a car accident in which the client's wife and unborn child were killed and the son was seriously and permanently disabled. The respondent and the client executed a standard contingency fee agreement under which the respondent would receive one-third of any recovery. Approximately one year later, the respondent received $100,000 from the client's insurer on behalf of the injured son, which the respondent deposited into his firm's client funds account ("clients account"). The respondent deducted his one-third fee and expenses, and issued a check to the client for $66,496.88.

In late summer of 1991, the respondent settled another claim with the insurer for $100,000, on behalf of the unborn child's estate. On September 3, 1991, the respondent deposited the settlement check into his firm's clients account, deducted his fee and expenses, and made out a check to the client for $65,000. He then instructed the client to endorse the $65,000 check and give it back to him. The client testified he could not remember exactly what the respondent told him at the time, except that there were medical bills to be paid and that the money had to be wired from the respondent's bank to the other bank to cash the check. After the client endorsed the check, the respondent wrote "Pay to Atty. John Silvia, Jr. for Recycling Associates," a business of which he was the managing partner. The respondent then endorsed the check and deposited it into a personal checking account he held jointly with his wife. That same day (September 3, 1991), he used the client's funds to purchase a cashier's check for $100,000, payable to the Marquette Credit Union for Caside Associates, another business of which he was the managing partner. On October 2, 1991, the respondent gave the client a check for $64,645.67, drawn from a different personal account. The check initially bounced, but then cleared on October 8, 1991.

The respondent claimed the client had agreed to lend the $65,000 to Caside Associates. He also claimed that he paid the client $5,000 in interest sometime before paying him the above-referenced $64,645.67. The majority rejected the respondent's claims, based on its findings that: the respondent did not present any evidence to support his claim that the $65,000 payment was a loan until six months after Bar Counsel filed the petition for discipline; the respondent's testimony concerning the alleged loan and interest payment was inconsistent, and contradicted statements in his own affidavit; there was no other evidence (such as a note, receipt, or accounting) to corroborate the purported loan agreement; and the respondent denied that he had deposited the $65,000 into his personal checking account. The majority determined that the respondent intentionally misused the 1991 insurance proceeds owed to the client with intent to temporarily deprive him of those funds, causing at least temporary, actual deprivation.

On September 11, 1991, the respondent filed a civil suit in federal court on behalf of the client and his son against the driver and owner of the other car involved in the accident. In January of 1993, while the suit was pending, the respondent filed an appearance on the client's behalf in an unrelated personal-injury action against the client. Default judgment had previously entered against him in that matter, and the client owed nearly $38,000 of the judgment plus twelve percent interest. Accordingly, the respondent and the client executed an assignment agreement with the plaintiff's attorney in the personal-injury action, providing that the judgment would be paid from any recovery in the client's tort case in federal district court. The plaintiff's attorney understood that the respondent would notify her as soon as there was a recovery.

In December, 1993, the client's federal lawsuit was settled for $700,000. On December 28, 1993, the respondent received three checks: one for $300,000 payable to the respondent and the client as trustee for the trust of the client's disabled son; one for $200,000, payable to the respondent and the client as administrator of the estate of the client's late wife; and one for $200,000, payable to the respondent and the client as administrator of the estate of the client's unborn child. The respondent directed the client to endorse each check, and he deposited them that day into his firm's clients account. He paid himself $200,000 for his fee, and gave the client three checks totaling $440,000 from the firm's clients account: $200,00 for the client's disabled son, $140,000 for his late wife's estate, and $100,000 for the estate of his unborn child. Also on December 28, 1993, the two agreed that the respondent would hold $60,000 of the client's share in escrow to pay the outstanding personal-injury judgment against the client, as well as a $10,000 medical lien.

The respondent had the client endorse all three checks written on the firm's clients account, and instructed him to give him back the checks for $100,000 and $140,000. The majority of the hearing committee credited the client's testimony that the respondent claimed he needed to pay outstanding medical bills and would pay the balance to the client after they were satisfied. In fact, the respondent did not use the funds to pay medical bills but rather used them for his own personal and business purposes. He deposited the $100,000 check into a business checking account for Caside Associates, and cashed the $140,000 check to buy a cashier's check in the same amount. That check was deposited into the Caside Associates account on December 29, 1993. Nearly the entire $240,000 was spent within the next week on checks to the respondent and other business associates. Moreover, the respondent never placed the $60,000 in escrow or used it to pay his client's outstanding obligations; instead, he spent almost all the money by the end of January, 1994. In the meantime, on the respondent's advice, the client (who had no funds available to him) had taken out a ninety-day loan for $180,000 secured by his disabled son's trust funds.

On or about January 4, 1994, the respondent asked the client if he wanted to invest the $240,000 in Caside Associates, and gave him a document entitled "Option Agreement" and a promissory note. The majority credited the client's testimony that he refused to sign the agreement and requested payment of his money. The majority rejected the respondent's claim that the client had in fact signed the option agreement, finding that the client's signature on a copy of the agreement provided by the respondent could have been "otherwise added" to the document. Notwithstanding the respondent's claim, in late January or early February of 1994 he gave the client a check drawn on his clients account for $240,000. After the client twice tried unsuccessfully to deposit the check, which was returned both times for insufficient funds, the respondent told him he would wire the money to the client's account. He did not wire the money or send the client another check.

In March of 1994, the client consulted another attorney about recovering his money from the respondent. When the three met sometime that spring, the respondent told the other attorney that he was holding the funds to pay medical bills and would disburse the remainder to the client. He did not claim that the client had loaned or invested the $240,000, or disclose that it had been deposited into the Caside Associates bank account and was already spent. In May, 1994, the attorney for the plaintiff in the personal-injury case against the client learned of the settlement of the client's federal case, and demanded payment in accordance with the assignment agreement. After she received no response, she requested that a capias be served on the client. On June 14, 1994, the respondent gave the plaintiff's attorney a check for $30,000, funded by a deposit of personal funds into his firm's clients account. He did not pay the remaining $21,167.09 due until September 15, 1994, following several additional demands and the threat of another capias.

Also in 1994, the client sought the services of a third attorney in an unrelated legal matter. In June of that year, that attorney asked the respondent about his disbursement of the client's settlement funds. After he received no response, the attorney sent a copy of interrogatories and a request for production, and asked the respondent to provide him with a full accounting of the proceeds. The respondent replied in September, 1994 that he continued to hold the $60,000 in escrow, and enclosed three "Settlement Memoranda" purporting to show the distribution of funds. He also claimed that the remaining funds had been used to pay medical bills and other costs, omitting any mention of a loan or investment by the client or a copy of the option agreement. Upon reviewing the letter and memoranda, the client disputed their accuracy.

Between January 1994 and June 1995, the respondent made numerous payments to or on behalf of the client by checks drawn on various accounts - including the firm's clients account, business accounts, and personal checking accounts - some of which were returned for insufficient funds. In May of 1995, the client retained yet another attorney to help him obtain an accounting and any money still due from the respondent. That attorney made a formal demand on the respondent for all information regarding the disbursement and an accounting of all funds received in the settlement. In response, the respondent again sent the "Settlement Memoranda" sent to the previous attorney, plus copies of the three insurance checks totaling $700,000, copies of three checks from the clients account payable to the client, and a document entitled "Distribution of Funds Held in Escrow." Again the respondent did not include a copy of the purported option agreement, although he referenced "certain loan matters in which [the client] was involved after distribution of the settlement proceeds." The majority rejected the respondent's testimony that the client had agreed to loan to Caside Associates $50,000 of the $60,000 supposedly held in escrow, noting the respondent provided no documentation to support his claim. Indeed, the majority found that the entire $60,000 was spent within a few weeks of its deposit and was never held in escrow.

On or about June 13, 1995, the client's new attorney filed with Bar Counsel a request for investigation of the respondent, alleging that the client had received only about $65,000 of the $240,000 he was owed from the settlement proceeds. In a letter to the attorney, the respondent claimed the option agreement was signed and executed by the client, although he did not enclose a copy. Only in his response to Bar Counsel did the respondent, for the first time, produce a copy of the option agreement with the client's purported signature. He also sent to Bar Counsel a document entitled "[The client] - Caside Associates Loan," with a repayment schedule covering only the $240,000 (not the other $60,000) and including a number of checks returned for insufficient funds, as well as cash payments or checks for which the respondent provided no documentation. The majority of the hearing committee credited the client's testimony that he recalled no cash payments from the respondent.

The repayment schedule also contained references to other purported payments to the client, specifically an undated payment of $17,618.42 by check, plus $20,000 on January 20, 1994, and $15,000 on February 22, 1995. The respondent claimed he was in the process of verifying the payments. The majority found his testimony not credible, noting the respondent had a duty to maintain accurate and complete records of client funds. "It is implausible that if the Respondent were, in fact, repaying a loan or an investment, that he would make payments in cash and fail to keep contemporaneous business records verifying the source of the cash as well as the receipt of the repayment."

The majority found that respondent's responses to requests for information and accountings from the client, his attorneys, and Bar Counsel were "inaccurate, inconsistent and evasive," and concluded that the respondent intentionally misused his client's settlement money for his own personal and business purposes, with intent to deprive him at least temporarily of those funds and with actual deprivation resulting.

2. False affidavits. A majority of the hearing committee also found the respondent knowingly filed three false and fraudulent affidavits in court. Two of the affidavits contained statements that supported the respondent's contention that the client had loaned him money, and that were later disavowed by the affiants. The third was the respondent's own affidavit in which he falsely claimed he used the $100,000 settlement to pay medical bills. The affidavit contradicted his subsequent claims to the client and the other attorneys that he was still holding the client's money to pay outstanding medical bills.

The findings of the majority of the hearing committee on this issue are summarized as follows. On February 14, 1996, Bar Counsel filed a petition seeking temporary suspension of the respondent. In March, 1997, the respondent filed his answer to the petition along with affidavits from himself and two witnesses, one a former employee of the client's doughnut shop and the other a man who stated he met the client at the respondent's law office. The respondent drafted both affidavits.

The former employee of the client stated that the client told her in late 1993 that he was going "to loan a large sum of money to Caside Associates." It further stated that every month starting in January, 1994, the client indicated he was going to the respondent's law office to retrieve his monthly interest payment, that he often stated he was receiving "good interest" on the loan, and he would ask her to keep an eye on the shop while he was gone. The affidavit also detailed the client's use of the monthly interest payment to pay off another loan.

At the hearing, the former employee testified that she stopped working for the client in August, 1993 and had no real contact with him for the next year. She returned to work in August, 1994 but quit after three days due to a disagreement with the client over her work schedule. She denied that the client had told her any of the information contained in the affidavit, and the majority of the hearing committee credited her testimony. The majority found that the respondent had drafted the affidavit, knowing it was false, to support his claim that the client had loaned him the settlement funds, and that the former employee had signed it in retaliation against the client.

The second witness stated he saw the client in the respondent's office on December 29, 1993, and that the client indicated the respondent was holding money in escrow for him. He further stated that the client said he loaned his money to Caside Associates to "earn good interest." The affidavit stated that the client agreed to allow the respondent to use the client's funds to repay a loan from the witness, and that the client and respondent left the office together that day, presumably to go to the bank. According to the affidavit, the respondent, in the presence of the client, repaid the witness the next day using the client's money, and the client stated he was happy to help the witness out while also earning more interest than the bank paid.

The witness testified at the hearing that he did not recall anyone offering to lend money to the respondent or Caside Associates so that he, the witness, could be repaid, and that he had never seen the respondent before the disciplinary hearing. He further testified that he first heard of the client when the respondent had brought the affidavit to him; that the respondent told him the facts in the affidavit were true, although the witness had no first-hand knowledge of them; and that he signed the affidavit as a favor to the respondent. The majority credited the witness's testimony, and found that the respondent drafted the affidavit for the witness to sign knowing that the statements were false.

The respondent filed his own affidavit with this court on March 26, 1997. In it he stated that the proceeds of the $100,000 insurance settlement received in 1991 were used to pay his one-third fee and "all known outstanding medical bills," as well as to reimburse him for medical bills he claimed were paid out of his own pocket. The respondent further stated that after the funds were disbursed in August and September 1991, he "knew of no outstanding medical bills owed by [the client]." As previously set forth, the respondent actually used the client's $65,000 share for his own personal or business purposes and later claimed that the money was a loan to Caside Associates. Thus, the majority of the hearing committee found that he knowingly filed false statements to the court.

3. Discussion. In appealing his recommended disbarment, the respondent asked the board to set aside the factual findings of the majority of the hearing committee and dismiss the petition for discipline. He argued that Bar Counsel failed to show by a preponderance of the evidence either that the client did not agree to loan funds to the respondent's business, or that the respondent filed affidavits with this court knowing or having reason to know they were false. The board denied the respondent's appeal.

The board agreed with the majority that Bar Counsel had sustained his burden of proving that the respondent misappropriated client funds, deeming the respondent's contention that it fell to Bar Counsel to disprove that the transactions in question were loans "a misstatement of the burden of proof." The board correctly held that the majority of the committee, as the sole judge of the credibility of testimony at the hearing, did not err by crediting the testimony of the client and rejecting that of the respondent. See Matter of Saab, 406 Mass. 315, 328 (1989). See also Matter of Tobin, 417 Mass. 92, 99 (1994). It also noted that the majority did not base its findings and conclusions solely on its assessment of the witnesses' credibility, but that additional evidence, such as bank records and documents provided by the respondent purporting to show distribution of the settlement proceeds, supported the findings and conclusions. The board determined that "[t]he facts amply support not only intentional commingling and misuse of client funds, but a course of fraudulent and deceptive conduct undertaken for the respondent's own pecuniary benefit." Even without taking into account the respondent's failure to make full restitution to his client, the board agreed with the majority that the respondent's actions warranted disbarment.

The standard of review is whether there was substantial evidence to support the board's findings. S.J.C. Rule 4:01, § 8 (4), as appearing in 425 Mass. 1309 (1997); Matter of Wise, 433 Mass. 80, 87 (2000), Matter of Segal, 430 Mass. 359, 364 (1999). The board's findings and decision are supported by substantial evidence. There is substantial evidence to support the findings that (1) the respondent had commingled $65,000 from the 1991 settlement and used the money for his personal and business reasons, then later claimed he had used it to pay his client's medical bills; (2) the respondent never claimed the client funds were loans until the client's new lawyer made inquiry and then filed a complaint with the board; (3) the respondent's testimony concerning the purported "option agreement" was inconsistent with his statements to this court, and conflicted with both testimony by another lawyer that the respondent claimed the client had consulted in the matter, and with evidence that within a month after execution of the purported six-month loan, the respondent gave his client a check for $240,000 (that, incidentally, bounced twice); and (4) the respondent misrepresented to his client's new lawyers that he retained $60,000 of the $700,000 settlement to pay his client's outstanding debts, when in fact he had spent it for his own personal use, and that although he claimed monies were retained to pay medical bills, he averred in his affidavit to this court that he knew of no medical bills that were outstanding after September, 1991. Moreover, contrary to the respondent's claim that the board failed to make an explicit analysis of credibility and the evidence bearing on it," Morris v. Board of Registration in Medicine, 405 Mass. 103, 107 (1989), the board detailed the respondent's numerous inaccurate, inconsistent and evasive responses to requests for information and accountings from the client, his attorneys, and Bar Counsel.

The respondent is hereby disbarred. A judgment shall enter in accordance with this memorandum of decision.

By the Court,

Francis X. Spina
Associate Justice
Supreme Judicial Court

ENTERED: December 5, 2003

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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