Michael Kwasnik, a lawyer charged with stealing $1.5 million from clients, suffered a setback Tuesday in his effort to gain control of a bank that reported his firm to ethics authorities.

The Appellate Division upheld a decision by the Department of Banking and Insurance that denied a shareholder group, consisting largely of Kwasnik and his relatives and friends, access to Liberty Bell Bank records.

In a per curiam opinion, In the Matter of Stockholder Application … for the Inspection of the Books and Records of Liberty Bell Bank, A-1463-10, the appeals court affirmed the Feb. 24, 2010, DOBI ruling that ordered Kwasnik and his cohorts to cease and desist.

The court agreed with then-acting Banking Commissioner Thomas Considine that the group acted in concert to acquire a controlling interest in the bank, contrary to federal and state laws that require regulatory approval before reaching a certain ownership threshold.

Considine found the group — which included Kwasnik’s father, mother, brother and law partner Howard Kanowitz — was acting at Kwasnik’s “suggestion and direction … to gain control of Liberty Bell Bank” and put Kwasnik and/or his cohorts on the board.

Considine also saw a “reasonable likelihood” that Kwasnik or someone from his group intended to use bank money to repay a loan, which might further other illegal purposes.

At the time Considine ruled, Kwasnik had not been criminally charged but he and his Cherry Hill firm, Kwasnik, Rodio, Kanowitz & Buckley, had been sued by the Federal Trade Commission and faced attorney ethics complaints that Considine said bore on his “financial responsibility and trustworthiness.”

The FTC alleged that Kwasnik and Kwasnik Rodio assisted client Hope Now Modifications in deceptively marketing mortgage-relief services. They agreed last year to pay $137,656 to settle the federal court case, FTC v. Hope Now Modifications , 09-cv-1204.

The ethics matter, on hold pending resolution of the criminal cases, alleges Kwasnik knowingly misappropriated client funds from accounts at Liberty Bell Bank and used them for his firm, the bank and Liberty Bell Financial Holding Corp., which he and his father created.

Kwasnik’s ties to Liberty Bell, headquartered in Marlton, date to its founding in 2003. The original board chairman of the bank, he resigned in July 2005 but stayed on the board, seeking to replace its members with people of his own choosing, including Kanowitz.

Kanowitz requested access to the bank’s records in 2006, seeking to identify stockholders to further Kwasnik’s effort to gain control.

The bank denied the request on Feb. 24, 2006, claiming inadequate notice. The same day, bank president Kevin Kutcher wrote to the Office of Attorney Ethics, stating that the managing partner of an unnamed firm had written 24 checks on the firm’s operating account, which had insufficient funds. In each instance, the bank contacted the managing partner, who moved money from the trust account to the operating account to cover the shortfall, wrote Kutcher.

The OAE wrote back asking for more information so it could determine whether ethics rules had been breached. After Kwasnik resigned from the board, the bank supplied the OAE with details about the overdrafts.

Kwasnik then joined with his firm and other members of his stockholder group in borrowing $4.2 million secured by their bank stock and used part of the money to buy more stock.

The OAE filed a formal complaint against Kwasnik in December 2008, later tacking on additional counts.

In November 2009, a group of stockholders, including Kwasnik and his family members, asked for the list of shareholders and other documents and for a special shareholders’ meeting within 30 days, claiming they collectively owned the majority of the stock.

The bank refused, so the group turned to DOBI, which denied the request by way of Considine’s opinion.

One of the grounds for the group’s appeal was that Considine should not have relied on the suit and ethics case against Kwasnik in denying access.

In affirming, Appellate Division Judges Carmen Messano, Marianne Espinosa and John Kennedy noted that Kwasnik and his allies owned more than 40 percent of the stock at the time and now own more than half.

The lawyer for Kwasnik and the other shareholders, Cherry Hill solo Thomas Burns III, did not return a call for comment on the ruling.

Liberty Bell lawyer Ronald Glick, of Stevens & Lee in Lawrenceville, declines comment.

Kwasnik, who has been temporarily suspended from practice since Dec. 7, 2011, could not be reached. He was arrested in Alabama last November, days after being indicted on charges of stealing $1.1 million from an elderly client.

A second indictment in January charged him with taking more than $480,000 in a client’s settlement proceeds. He is out on $1 million bail.

Motions to dismiss both indictments will be heard on May 11. Haddon Heights solo Rocco Cipparone Jr., who is defending Kwasnik on the earlier one, says if it is denied, he is confident Kwasnik will be vindicated at trial.