In Re Pena

753 A.2d 633, 164 N.J. 222, 2000 N.J. LEXIS 1029

• Court: Supreme Court of New Jersey
• Decided: May 12, 2000
• Status: Published

Opinions

PER CURIAM.

Respondent Angel Pena was admitted to practice law in New Jersey in 1984. Respondents Glen M. Rocca and Michael S. Ahl were admitted to practice law in New Jersey in 1983. All three respondents were partners in a law practice at all times relevant to these disciplinary proceedings. The respondents maintain law offices in Fort Lee and Union City. Courtney Krause and Costantino Santorella, the grievants, and the trial judge who presided over a related civil ease, brought the matters to the attention of the Office of Attorney Ethics.

District VI Ethics Committee filed a complaint alleging that respondents had violated RPC 8.4(c), which prohibits “engaging] in conduct involving dishonesty, fraud, deceit or misrepresentation.” The complaint alleged that respondents concealed the interests of Santorella and Krause in a liquor license and bar business known as “Good N’Plenti” through their corporation, Hoboken Fun Place, Inc., because the New Jersey Division of Alcoholic Beverage Control (ABC) had prohibited Santorella’s and Krause’s involvement in the business based on Santorella’s prior criminal conviction.

The disciplinary hearings were conducted by a Special Master. During those proceedings, respondents stipulated that the trial transcripts and exhibits of the related non-jury civil matter conducted before Judge D’ltalia should be considered as evidence. The only witnesses to appear before the Special Master were respondent Pena and Diane Bisogni, the owner of a bar in the Osprey Hotel in Brielle, New Jersey. Respondents Rocca and AM attended with counsel, but chose not to testify or otherwise present evidence. The two grievants also elected not to testify but to rely on their trial testimony presented in the civil matter.

The Special Master found that all three respondents had violated RPC 8.4(c) and recommended that each be suspended from the practice of law for two years. The Disciplinary Review Board (DRB) sustained the Special Master’s findings, based on its independent review of the record. In addition, the DRB found that respondents had violated RPC 8.4(d), “conduct ... prejudicial to the administration of justice.” It was recommended that respondent Pena be disbarred, that respondent Rocca be suspended for three years, and that respondent AM be Suspended for two years.

Our obligation in an attorney disciplinary proceeding is to conduct an independent review of the record, R. l:20-16(c), and determine whether the ethical violations found by the DRB have been established by clear and convincing evidence. In re DiMartini, 158 N.J. 439, 441, 730 A.2d 346 (1999). Our review of the record leads us to conclude that respondents’ violations of RPC 8.4(c) and RPC 8.4(d) were clearly and convincingly established.

I.

In 1976 Constantino “Gus” Santorella was disqualified from participation in the alcohol beverage control industry by virtue of a federal conviction for conspiracy to steal from foreign shipments. Despite Santorella’s disqualification, in 1986 he acquired, through an entity known as “DGD”, the assets of a bar, Ruben’s Café, and arranged to obtain a liquor license through his son, Charles. The business was operated as Good N’Plenti, located at 99 Washington Street, Hoboken, New Jersey. Initially, the building was leased but Gus Santorella and his live-in girlfriend, Courtney Krause, purchased the 99 Washington Street property in 1989 for $375,000. Krause became the sole owner in 1991, while Santorella remained obligated on the mortgage. Following a dispute with his son in 1989, Gus Santorella arranged to have the liquor license surrendered to the City of Hoboken as abandoned. Krause then obtained a new license in 1989 in the name of 99 Washington Street, Inc. Although Krause was listed on the license as the sole shareholder of 99 Washington Street, Inc., Santorella had an equity interest in the business and made most of the business decisions. Because of Santorella’s continued involvement, the ABC suspended Krause’s license indefinitely in 1992 pending a transfer of the license to a bona fide purchaser. The order of suspension was stayed pending an appeal to the Appellate Division.

By the time Krause and Santorella placed the tavern business and the building in which the business operated on the market, Santorella’s son Charles had filed suit against his father seeking to reacquire the license to the bar business. To minimize the effect of that suit on a potential sale, the trial court entered an order permitting Krause to negotiate a sale of the license held by 99 Washington Street. The order provided that no contract could be effective without notice to Charles and the court, and that any contract had to be subject to the outcome of the litigation.

The asking price for the bar business was $350,000 with an additional price in excess of $400,000 for the real estate. When all other offers failed to materialize, respondents became involved in a purchase arrangement beginning in 1992 that spawned the present disciplinary matters.

Respondents became aware that the bar business was for sale through their patronage of Good N’Plenti and in a meeting that respondent Pena had with Gus Santorella in a federal court in late 1992. Respondents expressed an interest in the bar business but were only able or willing to spend $150,000. An agreement was finally negotiated on April 18, 1993 in respondents’ office in Union City that was attended by Santorella and respondents Pena and Rocca. Under the agreement struck, respondents would spend $150,000 for a one-half interest in the bar business. The agreement was that the parties would project to the rest of the world, through a sham contract of sale, that 100% interest in the bar business was purchased in the name of Hoboken Fun Place, Inc., a New Jersey corporation, for $110,000.

In addition, a sham lease from 99 Washington Street to Hobo-ken Fun Place also would be executed. The contract of sale and the lease forms were reused documents, prepared by someone other than the respondents, on which they had whited-out identifying language. The agreement further contemplated that Krause would continue to be involved in the business as a purported non-equity salaried manager, thereby enabling her to function as Santorella’s “eyes and ears.” To effectuate the deal, the only documents executed reflected a sham closing on a sale of the business to respondents’ new business, Hoboken Fun Place, Inc., for $110,000. The whited-out documents were designed to show a transfer of the license away from Krause and Santorella to Hoboken Fun Place, Inc., ánd a complete divestiture of their interest. In reality, respondents would pay $110,000 in checks and an undocumented $40,000 in cash to Santorella and Krause. Notwithstanding their assertion that $110,000 was paid for the legitimate purchase of 100% interest in the business, respondents performed absolutely no investigation, such as examining the books and records of the business, to attempt to ascertain the true value of the business. Notably, respondent Ahl had some experience in representing clients purchasing liquor businesses and was aware of the standard procedure in such transactions and the information typically investigated.

Although the purchase was agreed upon in April of 1993, the contract of sale was not executed until August 1993 when respondents had to produce a signed contract for the New Jersey State Police investigating the transfer of the license. When the Appellate Division on June 14, 1993 affirmed the ABC Director’s order, the stay of suspension was lifted and the need for Krause to transfer the liquor license became even more urgent. The suspension took effect when the Appellate Division rendered its decision.

When the bar business was closed in June 1993, following the affirmance by the Appellate Division, the trial judge in the litigation between Santorella and his son granted permission for the contract of sale to be executed. In July of 1993 respondents submitted to extensive interviews by the New Jersey State Police and the ABC Enforcement Unit concerning the proposed transfer. During that time respondents represented that they were the only persons who were to have any interest in the license and, inferentially, that the transfer represented a complete divestiture of Krause’s interest in the bar business. They informed the ABC that Krause’s role would be limited to managing the business for one year. Krause signed the contract of sale on August 4, 1993.

On October 12,1993, the City of Hoboken Board of Alcohol and Beverage Control transferred the license from 99 Washington Street to Hoboken Fun Place, Inc. The next day, October 13, 1993, a closing of the transaction contemplated by the contract of sale allegedly occurred at the law offices of respondents. The contract purported to require respondents, through Hoboken Fun Place, Inc., to pay $35,000 at the closing and $75,000 in thirty-six equal monthly installments reflected by a promissory note. No executed promissory note, however, was ever produced. At the closing on October 13, 1993, respondents paid the full $110,000: $36,300 to the Director of the ABC, as a compromise of the fines then due in order to lift the indefinite suspension, and the balance directly to Krause’s 99 Washington Street, Inc.

The method of payment at the closing was convoluted, in an attempt to conceal the true arrangement. Respondents claimed that they were uncomfortable paying the seller directly and disbursing the purchase price through their attorney trust account, in part because the transaction was being scrutinized. Consequently, they called in an attorney from an adjoining office who passed the checks to the ABC and 99 Washington Street, Inc. through his trust account. That attorney did not represent Krause, Santorella, or 99 Washington Street, Inc. Significantly, neither Krause nor 99 Washington Street, Inc. was listed on the bill of sale.

Because Krause still owned the real estate in which the liquor business was operated, respondents required a lease of the premises. A form of lease was provided by Krause that was prepared by an attorney for another proposed buyer. Krause gave it to respondent Roeca with the names redacted. The lease called for monthly payments of $8,000 for the first year, $3,500 per month for the second year, and thereafter an annual adjustment for the remainder of the fifteen-year term based upon cost of living increases.

On October 12, 1993, one day after the Hoboken ABC transferred the license to Hoboken Fun Place, Inc., the State ABC lifted its suspension of the license. The bar reopened for business .October 14, 1993 under the name “Good N’Plenti.” After the reopening, Krause continued to act as the general manager, assuming responsibilities that included, among other things, making deposits into the corporate bank account and issuing business cheeks using a stamp of respondent Rocca’s signature. Krause continued as the manager until a falling out occurred between her and respondents.

When problems developed regarding Krause’s management style, Santorella included an additional fax to the weekly fax sent to respondents’ Fort Lee office for the week ending May 1, 1994, which referred to the strained relationship and demanded that Krause continue to run the operation. Santorella’s fax further stated that if respondents had a problem with the original agreement, they were to call, meet or buy Santorella out. That fax, along with the weekly profits fax sent by Santorella to respondents, corroborated Santorella’s testimony that his relationship with respondents was hardly casual, but was in fact that of a partner. After receipt of that fax, respondents refused to make any more payments to Krause or Santorella. Krause was fired on August 13, 1994. That chain of events led to the filing of the litigation that resulted in a non-jury trial before Judge DTtalia, and the present disciplinary matter.

Judge DTtalia described the litigation before him in the following manner:

This is a most unusual case in that plaintiffs invoke the jurisdiction of Chancery to enforce the terms of an oral agreement which constitutes a conspiracy to violate the alcoholic beverage control laws of this state and is specifically designed to evade the terms of an order entered by the Director of the Division of Alcoholic Beverage Control. The dispute involves ownership of a bar business operated under the trade name Good N’Plenti at 99 Washington Street in Hoboken, New Jersey.

One of the issues raised in the civil trial was the amount of profit the business generated between October 19, 1993 and August of 1994. Santorella and Krause maintained that the business generated more than $200,000 in profit for the forty-four week period involved, with half of the profits being paid to respondents in cash. Respondents, on the other hand, deny that they made $100,000, contending that the bar generated relatively little profit. Santorella faxed respondents a weekly earnings statement and a calculation of the profits. He paid respondents each week in cash. Respondent Rocca testified in the civil proceeding that he did not know how much the business yielded during the relevant time, but estimated that respondents netted approximately $24,000 collectively. Judge DTtalia found that Santorella’s records were the most compelling evidence of respondents’ “complicity in a scheme to dupe the ABC.”

The trial court also found that respondents had made an oral agreement with Santorella and Krause that they would own an “undisclosed 50% equity interest in the Hoboken Fun Place, Inc. and the business it operates as Good N’Plenti____ That contract violates public policy and results in an illegal agreement____ The agreement was entered into to thwart N.J.S.A. 33:1-25, to evade the divestiture order of the Director of the ABC and perpetuate a fraud on the ABC Board of the City of Hoboken and the State of New Jersey.” That statute precludes individuals convicted of a crime involving moral turpitude from becoming a licensee or from owning more than ten percent of the stock of a corporate licensee.

The Special Master found that the District Ethics Committee had established by clear and convincing evidence that respondents had an agreement with Santorella and Krause whereby respondents represented to two governmental authorities that their entity, Hoboken Fun Place, Inc., owned 100% of the liquor and bar business located at 99 Washington Street, known as Good N’Plenti, when in fact the respondents had entered into an agreement with Santorella and Krause in which respondents held only 50% interest in the business.¹

The Special Master also found that “Respondents knowingly acted in concert from the outset of this matter to conceal their partnership arrangement with Santorella and Krause from the State ABC, State Police and City of Hoboken in order to thwart the ABC Director’s decision to compel Krause to transfer the liquor license and divest herself, and thereby also Santorella, from any interest in, or influence over, the Good N’Plenti bar business.” The Special Master concluded that “Respondents deliberately engaged in fraud, dishonesty and misrepresentations to ... thwart N.J.S.A. 33:1-25 by evading the divestiture order of the ABC Director and to perpetuate a fraud ... in violation of RPC 8.4(e).”

II.

The DRB, upon de novo review, was convinced by clear and convincing evidence that respondents were guilty of unethical conduct by their concealment, in the face of overwhelming evidence, that Santorella and Krause were their partners in the Good N’Plenti. The purpose of the concealment of Santorella’s and Krause’s interest in the partnership was to thwart N.J.S.A. 33:1-25, evade the divestiture order of the State ABC, and perpetuate a fraud on the State ABC, the Hoboken ABC, and the State of New Jersey. Although respondents were not charged with violating RPC 8.4(d) (conduct prejudicial to the administration of justice), nonetheless, the DRB found that their conduct had clearly and convincingly violated that rule.

The DRB found that the record revealed that respondents had filed a petition with the ABC in which they represented that they were bona fide purchasers. Respondents also misrepresented to the ABC Enforcement Unit of the State Police that they were purchasing the license in an arms-length transaction and that Krause would be completely divested of any interest in the license. The DRB further found that although the complaint did not specifically charge a violation of RPC 8.4(d), charging only a violation of RPC 8.4(c), the complaint generally placed respondents on sufficient notice of alleged improper conduct that was potentially also a violation of RPC 8.4(d). Indeed, respondents stipulated to the admission of evidence presented in the civil trial that was probative of conduct prejudicial to the administration of justice. Respondents testified in the civil trial; the trial judge found that they lied under oath. The DRB, therefore, amended the complaint to conform to the proofs in accordance with In re Logan, 70 N.J. 222, 232, 358 A.2d 787 (1976). We fully agree with the DRB that there is clear and convincing evidence that respondents violated RPC 8.4(c) and RPC 8.4(d).

The DRB also concluded that, although respondents lied under oath repeatedly during the trial before Judge D’ltalia, the complaint did not contain a sufficient allegation to place respondents on notice that perjury could be part of the ethics proceeding. The DRB found that respondent Pena suborned perjury when he conducted the direct examination of Rocca and Ahl, and that Rocca suborned perjury when he conducted the direct examination of Pena during the civil trial. However, the DRB concluded that such evidence of perjury and subornation of perjury could be considered as an aggravating factor.

III.

Next, we focus on the appropriate discipline to be imposed. Pena, who was the only respondent to testify in these proceedings, offered mitigation evidence. He testified that he had served as a municipal prosecutor, a township attorney, and as a member of the board of directors of a drug and alcohol rehabilitation center. He also stated that he did pro bono work for an AIDS clinic and was involved in coaching little league baseball. Rocca submitted a certification to the DRB regarding his pro bono work as a municipal prosecutor and his voluntary service in a community association. Similarly, Ahl submitted a certification and documentary evidence to the DRB regarding his volunteer service with a fee arbitration committee and early settlement panels, along with letters attesting to his good character. Ahl also argued that he should receive a lesser penalty than his partners because of his lesser involvement in running the business.

In In re Kornreich, 149 N.J. 346, 693 A.2d 877 (1997), an attorney was found guilty of obstructing justice when the attorney was involved in a minor automobile accident, she denied having been at the scene, lied to the police and the prosecutor, and implicated her babysitter as the driver of her automobile. Throughout the ethics proceeding, Komreich refused to admit that she was the driver of the automobile. The Court suspended her for three years; two members of the Court voted to disbar her. Here, unlike Komreich, there is no innocent victim whom respondents attempt to blame. Also, unlike Komreich, respondents cannot claim youth and inexperience as mitigating factors. When this conduct occurred in 1993, Rocca and Ahl had been practicing law for ten years and Pena for nine. Furthermore, Pena and Rocca received private reprimands in early 1993, within the same time frame as their initial agreement with Santorella.

Additionally, on October 22,1999 this Court suspended Pena for six months for a violation of RPC 1.7(b). In re Pena, 162 N.J. 15, 26-27, 738 A.2d 363 (1999). That suspension dealt with conduct that started in 1984 and ended in 1991, less than one year before commencement of the unethical conduct presently involved.

In re Yaccarino, 117 N.J. 175, 185-86, 564 A.2d 1184 (1989), held that it is unethical for an attorney to conceal the identity of all the owners of a corporate licensee of a bar. N.J.S.A. 33:1-25 compels disclosure concerning investments in liquor licenses. Hence, respondents had a duty to comply with the statutory disclosure requirements and not attempt to circumvent the statute through fraud, deceit, misrepresentation, concealment, or withholding information. Yaccarino, supra, 117 N.J. at 199, 564 A.2d 1184. Respondents’ concealment and actual misrepresentations are “inconsistent with the professional obligation of an attorney, who ‘should strive at all times to uphold the honor and to maintain the dignity of the profession and to improve not only the law but the administration of justice.’ ” Ibid, (quoting In re Howell, 10 N.J. 139, 140, 89 A.2d 652 (1952)). The public is entitled to protection from attorneys who have engaged in conduct that is patently offensive to the elementary standards of a lawyer’s professional duty.

We are persuaded that because Pena and Rocca are recidivists and because they have demonstrated that they have no compunction about lying to a court or a licensing agency and engaging in conduct involving fraud, deceit, dishonesty and misrepresentations before a court and licensing regulatory agency their misconduct warrants substantial sanctions. The misconduct of respondents Pena and Rocca is aggravated by perjury and the subornation of perjury in their representation of a fellow respondent during the civil trial. Their unethical conduct further demonstrates their reckless and flagrant disregard of the rules of professional conduct “and the honor and integrity demanded of a member of the bar in the practice of law.” In re Pennica, 36 N.J. 401, 423, 177 A.2d 721 (1962). Throughout the civil trial and the DRB hearing, respondents steadfastly refused to admit their wrongdoing and to show any morsel of contrition. They persisted in their dishonesty, concealment, misrepresentation, and fraud, and in so doing, have demonstrated their contempt for the administration of justice. “Because such ... transgression^] directly subvert and corrupt the administration of justice,” respondents Pena and Rocea have poisoned the well of justice. In re Verdiramo, 96 N.J. 183, 186, 475 A.2d 45 (1984). They are therefore disbarred.

As to respondent Ahl, he did not act as attorney for either respondent and therefore did not have his unethical conduct aggravated by suborning perjury. He also has no prior disciplinary history. The record also permits the conclusion that his involvement in operating the liquor business was not as extensive as that of his co-respondents. Furthermore, his mitigating evidence of volunteer service, with a fee arbitration committee and early settlement panels, persuades us that he still has some redeemable aspects left in his character. We conclude that the appropriate discipline for Ahl is a three year suspension.

Respondents are also ordered to reimburse the Disciplinary Oversight Committee for appropriate administrative costs.

1 The Special Master found that the testimony of Pena, the only respondent to testify, was lacking in credibility.