July 2004

Lawyers' Fund for Client Protection

The Lawyers' Fund for Client Protection Committee meets quarterly to review applications for gifts from the fund. The committee met February 20 and May 21, 2004. It is authorized to make gifts of up to $10,000 to eligible applicants. On applications for more than $10,000, the committee makes recommendations to the Board of Governors, who are the fund's trustees. At the February 20 and May 21 meetings, the committee took the following actions:

Armando Cobos (WSBA No. 27006; Seattle; disbarred): Cobos represented the applicant to enforce certain provisions in her dissolution settlement agreement relating to costs of her daughter's education. She paid Cobos a fee of $500. Cobos did nothing on her case after accepting payment. She left messages but could not reach him. Then his phone was disconnected. She contacted the Bar Association and was told that Cobos had disappeared. The committee found that Cobos had never performed the services for which he was hired and had failed to return the unearned fee. The committee approved payment to the applicant of $500.

Jeffrey Danzig (WSBA No. 13243; Bellingham; disbarred): Danzig initially agreed to represent applicants in a medical malpractice claim on a one-third contingent fee. Their fee agreement specified that Danzig would not advance costs. Periodically, Danzig would call the applicants to have them make additional payments, although he provided no invoices or billing statements. They paid him $49,436.15. Eventually, they exhausted their resources, and Danzig arranged to associate co-counsel who would advance costs.

The applicants' claim was settled for $600,000. The co-counsel accounted for his costs, but Danzig never did so. The hearing officer in Danzig's disciplinary proceeding found that Danzig's actual and legitimate costs paid on behalf of applicants totaled $13,832.39. He found that they were entitled to a refund of $35,603.76 in unused and unaccounted-for advance costs. Danzig made no refund. The committee recommended and the Board of Governors approved payment to the applicants of $35,603.76.

Rolfy DeDamm (WSBA  No. 20476; Bellevue; resigned in lieu of disbarment): The applicant hired the DeDamm law firm to represent her in a child-visitation dispute. The fee agreement provided she would be charged $180 per hour for attorney's fees and $90 per hour for legal assistants. She paid $1,500 in advance.

An associate in the DeDamm law firm handled the applicant's case, which was resolved, and the applicant was sent an invoice from the firm showing charges of $495.34, and a trust balance of $1,004.66. DeDamm never responded to the applicant's requests for return of her unearned fee. His former associate acknowledged that no services had been performed for the applicant after the invoice was sent. DeDamm never provided any accounting for the $1,004.66 he was holding in trust. The committee approved payment of that amount.

Michael Johnson-Ortiz (WSBA  No. 23580; Seattle; active): In January 2004, Johnson-Ortiz abandoned his high-volume immigration law practice. He told his staff that he was going on vacation to Chile from January 3 to February 6, 2004. The staff became increasingly alarmed by the prospect that he would not be returning. The bookkeeper discovered that the firm operating account was overdrawn by about $5,000. There was no provision to pay staff salaries in his absence. On January 9, the staff learned that Johnson-Ortiz had shipped all of his belongings, including his car, to Chile. It was subsequently learned that on December 18, 2003, he had informed his landlord that he would be vacating his offices within 30 days. He left more than 300 open files and many more closed files. The WSBA took custody of his files, and employed a former associate of Johnson-Ortiz's to contact the clients, deliver their files, and assist them in finding new counsel.

As noted below, the committee voted to defer action on most applications pending investigation by the Office of Disciplinary Counsel. However, in one case, the applicants sent a payment of $1,000 to Johnson-Ortiz after he had gone to Chile but before his staff knew that he had abandoned his practice. The funds were used by staff to pay the firm's operating expenses. The committee approved payment of $1,000.

S. Don Phelps (WSBA No. 21247; Olympia; suspended pending the outcome of discipline): On November 18, 2002, Phelps was convicted of two counts of third-degree child molestation. The committee reviewed several applications concerning Phelps and approved two.

In the first, Phelps represented the applicant on a medical malpractice claim that settled for $45,000. After learning of his conviction, she hired a private investigator to review Phelps's handling of the proceeds of her case. The initial fee agreement between the applicant and Phelps was a 45 percent contingent fee; at the time of the settlement he reduced his fee to 38 percent, or $17,100. He noted there was an additional $3,400 in costs. In an e-mail to his legal assistant, Phelps said that the applicant would receive "about $24,500." It also noted that they would have to pay outstanding medical bills, if there were any. Phelps paid the applicant $15,000. He never accounted for the $9,500 balance of the funds, nor did he provide any accounting or billing statement. There is no evidence that any medical bills were paid from the settlement. The committee approved payment of $9,500 to the applicant.

In the second, the applicant paid Phelps $500 to represent her regarding a criminal investigation and possible criminal charge relating to allegations that she had misappropriated funds from her employer. Before any action was taken by the authorities, Phelps was convicted, and never accounted for or refunded the applicant's $500. The committee approved payment of that amount.

Kenneth P. Schmidt (WSBA No. 14677; Yakima; disbarred): Schmidt was appointed trustee for a trust established on behalf of a minor following his mother's death. As trustee, Schmidt received insurance proceeds totaling $154,482.62. The applicant's stepfather was appointed legal guardian, and he requested accountings from Schmidt, but none was ever provided. Eventually, Schmidt agreed to resign as trustee.

A new trustee was appointed. He continued unsuccessfully to try to get an accounting from Schmidt. He found some account records and was able to determine that $80,000 was intact in a certificate of deposit on behalf of the minor beneficiary. The documentation for the remaining $74,482.62 was sketchy, but the trustee was able to determine that the remaining funds had been all withdrawn by Schmidt. Schmidt never accounted for the $74,482.62. He was convicted of first-degree theft and ordered to pay restitution to the beneficiary of $75,424.18.

The committee recommended and the Board of Governors approved payment to the applicant of the fund maximum gift of $50,000. With the assistance of the Office of the Yakima County Prosecuting Attorney, the WSBA was listed in Schmidt's restitution order.

John E. Wagenblast (WSBA No. 5850; Yakima; disbarred): Wagenblast stipulated to disbarment based upon his representation of the personal representative (PR) of an estate, and stipulated to pay $58,652.55 in restitution.

Wagenblast filed a probate proceeding and had the PR open two checking accounts, one for the estate and one for a testamentary trust. Wagenblast's office address was listed for the accounts. The PR was the only authorized signatory on the accounts. In February 1999, the PR wrote a check on the testamentary trust account that bounced. He contacted the bank where the account was located and learned that there had been activity on the account that he was unaware of. The PR wrote to Wagenblast discharging him as lawyer, and advising him that he had hired a new attorney. It was subsequently determined that forged and/or unauthorized checks totaling $19,260 had been negotiated through the estate account, and forged and/or unauthorized checks totaling $42,418.05 had been negotiated through the testamentary trust account.

The stipulation provides that Wagenblast's secretary forged the PR's signature on the checks, and all the checks except for six payable to the secretary were deposited into Wagenblast's business account and disbursed for business and personal expenses unrelated to representing the estate or trust. The stipulation says that Wagenblast knew what his secretary was doing on these accounts.

In June 2001, the secretary pled guilty to four counts of forgery and one count of first-degree theft. She was ordered to pay $58,652.55 in restitution. She has paid a total of $150. The PR filed suit against Wagenblast, his secretary, and the bank that honored the forged checks. The bank was subsequently dismissed from the suit because of statutes of limitation. Wagenblast is judgment-proof, and is ill and incapacitated. The committee recommended payment of $50,000 to the estate, which must be approved by the Board of Governors.

Other Business

In February, the committee reviewed nine additional applications that were denied for lack of evidence of dishonest conduct, or as fee disputes or claims for malpractice, and in May reviewed 23 additional applications that were denied for similar reasons. In May, the committee also began review of a large number of applications concerning Johnson-Ortiz, and voted to defer action until the disciplinary investigation is concluded.

Restitution

The fund seeks restitution from the lawyers who cause payments from the fund. Because in most cases those lawyers have no assets, the chief avenue of restitution is through court-ordered restitution in criminal cases. Prosecuting attorneys cooperate with the fund in getting the fund listed in restitution orders. In the past 12 months, nine lawyers were making regular restitution payments or had paid off their obligations to the fund.

The Lawyers' Fund for Client Protection Committee chair is Seattle attorney Wilda Heard. WSBA General Counsel Robert Welden is staff liaison to the committee.