When Hackensack’s Cole, Schotz, Meisel, Forman & Leonard admitted that an attempt to meddle in an opposing lawyer’s finances was a terrible mistake, it apologized to the target and offered a package of self-sanctions to appease the angry judge.
It withdrew from the case and three companion matters. It said the offending lawyers would be sent to ethics classes. It pledged to reimburse the targeted opponent for fees and expenses.
But the judge isn’t ready to say the firm did enough.
During a hearing on Monday, U.S. District Judge Harold Ackerman reserved decision on sanctions. He said he would refer the matter to the state Office of Attorney Ethics. And without saying what struck him as criminal behavior, he said he would send the case to the U.S. Attorney’s Office.
The firm had admitted days earlier that an associate – with two partners’ knowledge – asked a bank representative whether a client, Kennedy Funding Inc. of Hackensack, could purchase the personal mortgages of the attorney suing Kennedy Funding in four federal fraud cases.
Such a purchase would have made Kennedy Funding, a commercial lender, the holder of the home and office mortgages of adversary Gregg Trautmann, who has a firm in Rockaway.
A bank lawyer alerted Trautmann, who complained to Ackerman, the judge in one of the Kennedy Funding cases, Royale Luau Resort v. Kennedy Funding Inc., Civil No. 07-1342. Trautmann represents borrowers who claim they were charged exorbitant and unwarranted fees.
Berated by Ackerman at a June 28 hearing for what appeared to be a “back alley” tactic, Cole, Schotz admitted that the inquiry to the bank was improper and said the firm was dropping out of Kennedy Funding cases in which Trautmann was the adversary.
Besides paying Trautmann’s fees and costs for the proceedings before Ackerman, the firm plans to require six hours of ethics classes for the three lawyers responsible, associate Damian Albergo and partners Michael Leighton and David Kohane.
Steven Klein, the administrative chair of the litigation department, who says the firm learned about the inquiry afterward, says the partnership will appoint a general counsel. Many firms are creating such positions so a single partner can advise on legal and ethical issues that affect the business and reputation of the firm.
Ackerman had said at the June 28 hearing that he was interested in whether Kennedy Funding was involved in the inquiry to Trautmann’s bank.
On Monday, he said Cole, Schotz’s disengagement from the cases “should not eliminate any inquiry into this state of affairs.” As for what investigators might want to look at, he said, “I don’t want to jump the gun on that. Certainly it is a legitimate avenue for any responsible body to explore.”
Michael Drewniak, a spokesman for the U.S. Attorney’s Office, declines to comment.
If the U.S. Attorney’s Office does look into the matter, investigators will find that the company did no wrong, Kennedy Funding President Jeffrey Wolfer suggests.
“We knew nothing about it, and if anybody investigated they would find that out,” Wolfer says. “We’re very disappointed in what transpired and they are no longer representing us in these cases because of that.”
“I’m not happy with what has gone on here and I am very bothered,” he says. “This is not the kind of company we are.”
He says any proposal to buy Trautmann’s mortgages would have been rejected. Indeed, the company doesn’t buy mortgages, he says. “We’re a direct lender and we don’t have that ability.”
He says he had interviewed six firms to replace Cole, Schotz in all litigation it handled for Kennedy Funding. The firm will continue to do transactional work for the company.
Ackerman said on June 28 that he was shocked at what appeared to be an ethical lapse at a firm that had a good reputation and whose name partners, Morrill Cole and Michael Meisel, he knew.
On Monday, Meisel appeared in court to say he would personally mentor the errant lawyers. Cole was there, too, and said, “We have taken this matter totally seriously.”
Also appearing was Michael Griffinger of Gibbons in Newark, a respected federal practitioner who occasionally represents law firms in trouble or in disputes. The firm retained him as an outside consultant to look into what happened and he declared he was satisfied that the firm was sincere in its efforts.
Trautmann, meanwhile, suggested the errant associate should have been fired.
“I’m actually quite shocked that Mr. Albergo is still employed by the Cole, Schotz firm, he told Ackerman.
He called the lawyers’ behavior “deceitful and malicious” and that they would have taken steps toward purchasing his mortgages if the bank lawyer hadn’t blown the whistle on their inquiry.
The firm has said such a purchase would never have been carried out.