Michael Kwasnik ()
A New Jersey lawyer who bilked his clients out of millions has generated the highest total of reimbursement claims in the history of the New Jersey Lawyers’ Fund for Client Protection, necessitating a state Supreme Court order lifting the cap on repayments.
The court has approved payment of $4.5 million in claims against Michael Kwasnik of Cherry Hill, who was criminally convicted of stealing clients’ funds and money laundering after being arrested trying to flee the country.
There have been 67 claims against Kwasnik, and total claims paid could climb as high as $12.1 million, according to the fund.
Because payments are capped at $1.5 million per attorney, the fund had to ask the Supreme Court to waive those limits, which it granted last year.
“We’ve requested waivers in the past, but nothing like this,” said fund director and counsel Daniel Hendi. “This is monumental.”
Despite the relaxing of the $1.5 million cap, recoveries still are limited to $400,000 per claimant. The fund presently is paying out two to four claims per month, Hendi said.
The fund spent much of 2012 and 2013 investigating and didn’t make any promises as to how much would be reimbursed. “If you tell people they’ll get 10 cents on the dollar, I think you’ll upset them more than help them,” Hendi said.
The claims totaled more than $54 million, though the fund deemed many of them invalid—including those that were filed by bankrupt companies controlled by Kwasnik himself, Hendi said.
About $17 million worth of claims were deemed valid, though with the $400,000 per-claimant cap, maximum liability for the fund is $12.1 million.
For this year, the fund is capping payments at $200,000 per claimant while waiting to see what the Pennsylvania Lawyers’ Fund for Client Security will be able to disburse. Kwasnik, who maintained offices in Cherry Hill, Woodbury and Philadelphia, has generated claims from clients in both states.
The fund also will pursue subrogation, Hendi said.
The fund’s reserve, which currently sits at $25 million, isn’t in jeopardy, Hendi said, emphasizing the need to keep it healthy. “The reserve is there for the victims,” he said. “This is proof that…you never know when you’re going to need it.”
Kwasnik was arrested by local police in Dothan, Ala., in November 2011, days after being charged in an indictment with stealing $1.1 million from a 96-year-old Cherry Hill woman he represented in an estate matter and looting more than $100,000 from a couple’s personal injury settlement.
Carrying several thousand dollars in cash, prepaid cellphones and his passport, Kwasnik was taking a taxi to a bus station when the suspicious driver alerted local police. They stopped him at the bus station and arrested him upon discovering the outstanding warrant.
The week of the indictment, Kwasnik was named in a civil suit by the N.J. Attorney General’s office, alleging that he helped sell $8.5 million in bogus securities to elderly and retired investors and essentially executed a Ponzi scheme.
Not long before, Kwasnik settled for $134,000 a 2009 civil suit by the Federal Trade Commission, alleging that he had an arrangement with a mortgage relief company to collect clients’ fees and split them with the company in an effort to sidestep a state regulation requiring licensure as a debt adjuster to perform mortgage rescues.
In the criminal case, Kwasnik pleaded guilty in January 2013 to second- and third-degree counts of money laundering. A year ago he was sentenced to five months’ jail time—already served after his 2011 arrest and prior to his release on $1 million bail—and a five-year probationary term. He also was ordered to pay $1.2 million in restitution.
In April, Kwasnik was indicted in Delaware on charges of theft and securities fraud, according to a report by The Philadelphia Inquirer. The charges stemmed from his involvement in Liberty State Financial, which allegedly defrauded elderly investors—the same misconduct that yielded the New Jersey attorney general’s suit.
Kwasnik, whose license has been suspended pending ethics charges since December 2011, was managing partner of Kwasnik, Rodio, Kanowitz & Buckley and later practiced at Kwasnik Kanowitz and Associates.
He could not be reached at a number in the judiciary’s online attorney registry.
Richard Klineburger III, of Klineburger & Nussey in Haddonfield, who represents Kwasnik in a former client’s civil suit claiming he raided $450,000 from a relative’s life insurance policy, didn’t return a call Thursday.
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