Font Size: 
Disbarment Sought for Law Firm Partner Who Secreted $50,000 Payment
New Jersey Law Journal
July 09, 2009
A New Jersey special master has recommended disbarment for David Gross -- who for 20 years was Budd Larner's managing partner -- for pocketing $50,000 from a client instead of depositing the money into the firm account.
Gross knowingly violated a partnership agreement requiring that "all gains from the work of the partnership shall be the assets of the partnership," Special Master David Cramp said in an opinion forwarded to the state Disciplinary Review Board last month. [See full text of decision (pdf)]
Though Gross insisted the money was a gift from a satisfied client, Cramp was persuaded by testimony from Gross's former secretary at the Short Hills, N.J., firm that he instructed her to delete from the firm's computer system a letter he sent to the client about the payment.
"Since the Special Master has made findings clearly and convincingly that there was intent to do harm to the firm, and there was a disregard of standards of ethics, the only recommendation is disbarment," Cramp said in his April 16 decision in Office of Attorney Ethics v. Gross, XIV-06-67E.
Gross's problems began in 1998 when a client, Keene Creditors Trust, offered to pay him $100,000 on top of Budd Larner's hourly rates in a Washington, D.C., insurance coverage dispute. The case had languished under representation by another firm, but Gross obtained a $7.5 million settlement shortly after he was called in, apparently prompting the client to pay him extra.
Gross sent the trust an invoice, on Budd Larner stationery, describing the payment as "special consideration" and asking that it be split with his co-counsel, Stanley Levy of the firm now known as Levy, Philips & Konigsberg in New York. The client complied and paid Levy and Gross $50,000 each, but the Office of Attorney Ethics claimed Gross was not authorized to split the fee, and Cramp concurs.
"The Special Master does not feel that Mr. Gross had the ability to enter into such a sharing agreement (because it believes the money was earned by the Firm, and should have been turned over to the Firm). It is difficult to understand Mr. Gross's apparent understanding that monies earned in settling a case for the Keene Trust does not have to be turned over to the Firm," Cramp wrote.
Cramp also characterized as hearsay a statement by a Keene trustee, Richard Lippe, that the payment to Gross was intended as "a gift."
During a DRB hearing, Gross cited testimony from Keene officials that they intended for the $100,000 to go to him personally. But in his decision, Cramp cited a Dec. 16, 2002, letter Gross wrote to the OAE, and a subsequent meeting with investigators from that office, in which Gross did not characterize the payment as a gift.
Gross also testified that the partnership agreement he signed in 1980, requiring proceeds of work for the partnership to be deposited in firm accounts, was not in effect when he received the payment from the trust in 1998. He cites the firm's conversion to a professional corporation in 1990 and maintains that other partners did not sign the partnership agreement thereafter.
Even if that were the case, Cramp wrote, that "does not dispute the fact that Mr. Gross did in fact sign a partnership agreement, and the partnership agreement was not changed in that it contained the language above quoted."
In 2005, the OAE charged Gross with violating Rule of Professional Conduct 1.15(a), failure to safeguard, and RPC 8.4(c), knowing misappropriation of firm funds and conduct involving dishonesty, fraud, deceit or misrepresentation. The OAE complaint also said Gross's conduct violated the principles of In re Siegel, 133 N.J. 162 (1993), which calls for disbarment of lawyers who misappropriate firm funds.
He also was charged with violating the same rules when he cashed a $2,437 check a vendor wrote to the firm to make up for being overpaid. When confronted, Gross repaid that amount, saying his action was inadvertent. Cramp accepted Gross's assertion and found no RPC violation in that matter.
The investigation began in March 2002 when Gross's longtime former secretary, Claudette McCarthy, disclosed the $50,000 payment. She came forward after Gross dumped her and she began working for partner Peter Frazza.
After learning about the $50,000 payment, the firm retained Paul Rowe of Greenbaum, Rowe, Smith & Davis in Woodbridge, N.J., to negotiate the terms of Gross's departure. Gross, who had been Budd Larner's managing partner for 20 years, formed his own firm but later joined the Newark firm now known as Saiber and still works there.
Gross did not return calls.
His lawyer, Justin Walder of Walder, Hayden & Brogan in Roseland, N.J., disagrees with Cramp's characterization as hearsay the statement by Lippe that the payment to Gross was intended as "a gift." Walder says strict rules of evidence don't apply in an ethics hearing.
Walder also says misappropriation cannot occur in the absence of a policy requiring gifts to be turned over to the firm and he says Gross will be cleared.
"We believe a de novo review, which we're sure will be fairly considered by the DRB, will remedy these recommendations, which are inconsistent factually and with legal precedent," says Walder.
