A real estate lawyer has been suspended for 12 months for doctoring real estate closing papers in a shady sale-and-leaseback scheme, a year after his censure for similar conduct.
The state Supreme Court on Jan. 23 followed the recommendation of the Disciplinary Review Board, which rejected Wyckoff solo William Gahwyler’s excuse that he was duped by the mortgage broker who arranged the transaction.
“If we were to make a leap of faith and accept that respondent did not know that an elderly woman was being swindled out of her own home, the circumstances of the transaction had to inform respondent that something was ‘up,’” DRB chairman Louis Pashman wrote.
In December 2006, the broker, Otis Duffy, asked Gahwyler to represent Erika Brown, who was purchasing a three-family Newark property for $210,000 from Mary Bryant McCutchen.
There was no written sales contract but the transaction apparently included a leaseback provision. McCutchen’s grandson Ronald Thompson, who had her power of attorney, planned to use the sale proceeds to make repairs and modifications to the home so he could live there.
Before closing, Gahwyler’s trust account was wired $211,841 in loan proceeds.
Gahwyler falsified the settlement statement, which reflected a $950 legal fee even though Gahwyler, at Duffy’s direction, took a $6,000 fee.
Gahwyler listed attorney Raymond Murphy as the seller’s attorney, though Murphy later testified that he knew Gahwyler but not about the transaction and didn’t handle closings.
The statement reflected a $9,579 payment by Brown, though she paid nothing.
It also reflected a $200,220 payment to McCutchen, though she received only $35,000, and not until the next month.
Gahwyler made four other disbursements not noted on the statement, including two payments totaling $118,976 to Infinite Investment, a company owned by Almone Little, Thompson’s longtime friend who claimed he was trying to help Thompson finance the home renovations.
Gahwyler failed to disburse $4,126, which he attempted to pay to McCutchen in 2011, after the Office of Attorney Ethics began investigating the matter. McCutchen, however, had died the year before.
Gahwyler claimed ignorance of the sale-and-leaseback transaction and said he was directed by Thompson to make the payments to Infinite.
Thompson said he, too, was unaware of the nature of the transaction, was told by Little that it was akin to a loan and didn’t know Brown was buying the property.
Brown, who had received rent payments on the property through Little, claimed she was unaware McCutchen had the right to buy back the property.
Little said Thompson knew the house was being sold, and explained that Infinite received the funds because he was using the equity from the home to pay for the renovations Thompson wanted.
The renovations never were made and McCutchen, through a Chancery Division action, ultimately retook title and obtained a reverse mortgage.
Gahwyler was charged with violating a long list of rules of professional conduct.
Melinda Singer, a special master, discredited Gahwyler’s testimony and urged a three-year suspension.
“Most alarming,” Singer said, was Gahwyler’s concealment of the excessive legal fee and his use of Murphy’s name.
She said Gahwyler “created a fictitious document that glaringly omitted $152,641.15 of the entire purchase price.” He was “for lack of a better word, the key man” and “the gatekeeper at the closing” who “let the gate swing wide open to allow this devastating fraud to occur,” she added.
The OAE recommended a one- to two-year suspension.
On Dec. 5, the DRB dismissed some charges but found Gahwyler in violation of several strictures “regardless of whether he was … the ‘key man’ in the transaction, simply a player, or an innocent bystander.”
Gahwyler’s conduct flouted Rules of Professional Conduct 1.5(a) and (b) (charging an unreasonable fee that wasn’t reduced to writing); 1.7(a)(1) and (2) (conflict of interest); 1.15(b) (failure to safeguard and promptly deliver client property); 4.1(a) (false statement of material fact to a third person); 8.4(b) (criminal act reflecting adversely on the attorney’s honesty, trustworthiness or fitness); and 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation).
The disbursements, even if directed by someone else, should have been reflected in the statement, the DRB said.
His withholding of the $4,126 in settlement proceeds from McCutchen — possibly inadvertently, judging from his incomprehensible trust fund records — violated his duty to deliver client property but did not amount to misappropriation, the DRB noted.
The panel also noted that the nature of the transaction as a sale and leaseback was irrelevant, and Gahwyler’s dual representation would have been permissible if he had obtained a waiver.
The DRB recommended a one-year suspension, calling Gahwyler’s conduct similar to that in his prior case.
Gahwyler’s October 2011 censure, while the complaint in this matter was pending, stemmed from his preparation of phony closing papers in a 2007 transaction, which turned out to be a scam and led to a $690,000 bankruptcy judgment against him.
On Jan. 23, the Supreme Court agreed.
Deputy Ethics Counsel Janice Richter, who prosecuted the case, has since retired and could not be reached.
Gahwyler’s counsel, Andrew Cevasco of Archer & Greiner in Hackensack, did not return a call. A listed number for Gahwyler was not in service.