A financially distressed lawyer who did business through his secretary’s personal account has been suspended for three months, but he avoided a longer punishment because disciplinarians were convinced he was applying a stop-gap measure to preserve his practice.
Hugo Moras, a South Orange solo, closed his business account after mounting medical bills and tax delinquencies left it encumbered by $1 million in liens and levies.
But he “did so not to permanently defraud his creditors, but to be able to continue to represent clients, to pay office expenses such as court filing fees and vendors, to earn a living, and hopefully to work out a solution to his financial woes,” the Disciplinary Review Board said in Matter of Moras, DRB 12-194.
The Supreme Court concurred with the three-month suspension recommendation on Feb. 15.
In 2007, Moras suffered a heart attack and underwent a quintuple bypass. He says he believed his ex-wife had continued paying his health insurance premiums after his divorce, but later discovered she had let his coverage lapse.
More medical issues ensued: a severe left foot infection requiring partial amputation of a toe, gall bladder removal, kidney failure and retinopathy linked to diabetes that required at least five laser treatments.
In 2009, Saint Barnabas Medical Center, where the hospitalizations and treatments occurred, obtained a $227,713 judgment against Moras and a writ of execution authorizing a levy.
In addition, the Internal Revenue Service placed a levy on Moras’ accounts in connection with $71,389 in back taxes owed.
The debts were in addition to those owed to other creditors.
Moras’ attempts to settle with the hospital and individual doctors were largely unsuccessful, though the IRS apparently quit pursuing the tax debt after an agent deemed it uncollectable.
After closing his business account, Moras opened a checking account in the name of Frances DeBeau, his secretary and girlfriend. He used that account to deposit fees and pay vendors.
The Office of Attorney Ethics conducted an audit in 2010, which turned up evidence of record-keeping deficiencies. In the process, Moras acknowledged that he did not maintain a business account.
During a hearing before the District V-B Ethics Committee, Moras claimed that judgments against him amounted to $1 million and that maintaining a business account, though required, had become impossible because checks issued in the course of normal business routinely bounced.
He admitted violating Rule 1:21-6 by failing to maintain the account, perform monthly reconciliations of trust account records, promptly disburse client balances or keep receipts.
Moras said he intended to borrow money from his father and file for Chapter 7 bankruptcy, after which he would open a business account.
The district ethics committee found Moras’ conduct dishonest and willful, and did not count his illnesses as mitigating factors, citing a “disdain for the rules” and “lack of remorse” because his failure to maintain a business account was continual. The committee recommended an 18-month suspension.
The OAE wanted more, pushing for a suspension of at least two to three years.
But the DRB, in a Nov. 27 opinion, called those proposals “exceedingly harsh” and instead urged a suspension term of three months.
The record “does not afford a conviction that respondent was bent on defrauding or deceiving his creditors,” Chairman Louis Pashman wrote.
He said Moras’ action, “borne out of desperation,” was “an interim expedient that would allow him to continue with his law practice until his huge financial problems could be worked out.”
“As respondent told us at oral argument, he was between a rock and a hard place,” Pashman said.
Moras violated Rule of Professional Conduct 1.15(d) by drawing his legal fees directly from his trust account into a personal account without the “necessary step” of routing them through a firm business account, Pashman said.
The DRB also said he violated RPC 8.4(c), for conduct involving dishonesty, fraud, deceit or misrepresentation.
Pashman said comparable conduct had been met with a censure, but a three-month suspension was called for based on Moras’ ethics history.
The DRB also recommended conditioning Moras’ reinstatement on attestation of fitness to practice by a medical professional, proof of completing an accounting course and commitment to file quarterly certifications, for three years, confirming adherence to record-keeping rules.
The court adopted all the recommendations, ordering suspension to begin March 13.
Moras told the DRB, during the September hearing, that he had resolved all his debts except for those owed to Saint Barnabas, and recently had opened a business account and filed for bankruptcy.
This matter was not Moras’ first related to accounting missteps.
Moras, admitted in 1975, received a six-month suspension in 1993 for issuing a trust account check to a friend seeking to avoid foreclosure. The friend was unable to immediately reimburse Moras, who covered the trust account shortage with his own money, but not until four years later.
Moras was reprimanded in 1997 for issuing a business account check to pay a client’s medical bill that bounced, and in 2005, for failing to keep a client informed about a case and failing to put his fee in writing.
Moras, who was pro se, says, “I think they were pretty fair and certainly very understanding. Quite candidly … I’m content with how they disposed of it.”
He says he has been practicing part time, his bankruptcy matter is completed with all debts resolved and he will receive health coverage through Medicare as of April when he turns 65.
First Assistant Ethics Counsel Michael Sweeney did not return a call.