November 2007

Lawyers’ Fund for Client Protection Report

by Robert Welden

The Lawyers’ Fund for Client Protection Committee meets quarterly to review applications for gifts from the Fund. The Committee is authorized to make gifts of up to $25,000 to eligible applicants. On applications for more than $25,000, the Committee makes recommendations to the Board of Governors, who are the Fund’s trustees. At their meeting on August 24, 2007, the Committee took the following actions:

Michael A. Clarke —WSBA No. 815 of Everett — Deceased 10/28/06. (Michael A. Clarke is to be distinguished from Michael Steven Clark of Tacoma.)

Clarke represented the applicant on a personal-injury claim. A settlement was agreed to for $8,750, which was paid to Clarke. Clarke disbursed the funds and withheld $900, which he agreed to pay to the applicant’s medical provider. Clarke never paid the medical bill, and never accounted for the $900. The Committee approved payment of $300 in addition to $600 previously paid to the applicant.

Terry L. Deglow —WSBA No. 13357 of Spokane — Disbarred 9/9/02.

Deglow was given $10,420 by the applicant’s former lawyer when the former lawyer transferred to inactive status. The former lawyer was unable to locate his client to pay her the funds. The funds were the proceeds from an insurance payment following a jury trial in 1998. The applicant was unaware that her lawyer had retired and that he had transferred the funds to Deglow. She believed that they were being held safely in trust earning interest. In late 2006, she contacted her former lawyer who advised her that Deglow had the funds, and that he had been disbarred. The Committee approved payment of $10,420 to the applicant.

Barry A. Hammer —WSBA No. 6444 of Everett — Resigned in lieu of disbarment 6/20/05.

The applicants are wife and husband (husband is deceased). The wife had used Hammer to prepare her tax returns since the 1970s and she considered him her “tax account attorney.” He represented the wife and her then-husband in an IRS audit in the mid-1980s, and he also represented the wife in the probate of her mother’s estate. He began preparing the husband’s tax returns prior to his marriage to the wife in 1998. He continued preparing the applicants’ taxes after marriage.

These applications concern promissory notes entered into between Hammer and the applicants individually with their separate property. They did this to supplement their income and to provide savings for retirement. Because Hammer was their tax attorney, he knew that they had substantial savings that were earning low interest rates.

Part of Hammer’s debt to the applicants was secured by real property, and they received full compensation for Hammer’s bankruptcy.

Unsecured debts: The husband gave Hammer $50,000 in November 1998, and received a promissory note originally secured by a deed of trust on property in Lake Stevens. Hammer told the husband that he was selling the Lake Stevens property, but would place the deed of trust on different property. He never did.

Hammer learned that the wife received $75,000 in income in one matter. When meeting with Hammer about preparing her tax return, Hammer recommended that she invest those funds through him. On April 13, 2000, she gave Hammer $75,000 and received a promissory note in that amount. It was unsecured.

In September 2004, the interest payments from Hammer stopped. He filed his bankruptcy petition on September 17, 2004. In the bankruptcy proceeding, the applicants received $8,065.41 as their apportioned share of payments to unsecured creditors.

The Committee recommended, and the trustees approved, payment to the wife of $70,160.75 ($75,000 less 3/5 of $8,065.14 or $4,839.25) and to the estate of the husband of $46,773.84 ($50,000 less 2/5 of $8,065.14 or $3,226.16).

Michael Johnson-Ortiz — WSBA No. 23580 of Seattle — Disbarred 9/15/04. (Johnson-Ortiz abandoned his high-volume immigration practice in January 2004 and left more than 300 open files. The Committee has reviewed 112 applications and approved 70, with payments totaling $122,421.91.)

The applicant hired Johnson-Ortiz for representation following his marriage dissolution. Johnson-Ortiz agreed to file a Petition to Remove the Conditions of Residence, which the USCIS website describes as “for a conditional resident who obtained status through marriage to apply to remove the conditions on his or her residence.” The applicant needed to convince USCIS that, although divorced, his marriage had been entered into in good faith. The work order set the total fee at $3,500. The applicant documented payments to Johnson-Ortiz totaling $2,500. Johnson-Ortiz filed the Petition to Remove the Conditions of Residence, but abandoned his practice before any hearing was held on the petition. The applicant employed new counsel who completed the work. Based on its extensive familiarity with Johnson-Ortiz’s practice, the Committee determined that he had performed approximately 60 percent of the work for which he was employed, and that based upon the total documented payments in comparison to the entire agreed upon fee, the applicant should receive payment of $600 from the Fund.

Bernie W. Potter — WSBA No. 23076 of Seattle — Disbarred 9/15/04; Deceased. (The Committee has previously paid $62,670 regarding Potter.)

Potter represented the applicant on an insurance claim that was settled for $18,799.20. The disbursement statement prepared by Potter shows that after the settlement was disbursed, he withheld $5,415 to pay subrogation to the applicant’s insurer. However, Potter paid nothing to the insurer. The applicant received a letter from the insurer stating that they had not received their funds and demanding payment. The applicant signed a promissory note to pay $5,415 to the insurer, and he has been making payments on the note. The Committee approved payment to the applicant of $5,415.

Other Business

The Committee reviewed eight additional applications that were denied for lack of evidence of dishonest conduct, as fee disputes or claims for malpractice, as civil disputes, or because restitution was made, or were continued to seek further information.

Annual Report

The Committee prepared the annual report, which was approved by the WSBA Board of Governors for submission to the Washington State Supreme Court. This year, the Committee and trustees acted on 93 applications concerning 47 lawyers. The total amount in approved payments is $539,789.44 regarding 16 lawyers. The 2007 annual report is available on the WSBA website at www.wsba.org/-lawyers/groups/lawyersfund/default1.htm or by contacting the WSBA Service Center at 800-945-9722 (WSBA) or 206-443-9722 (WSBA) or questions@wsba.org.

Restitution

Before payment is made to an applicant, the applicant must sign a subrogation agreement with the Fund, and the Fund seeks restitution from the lawyers. 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. As of August 2007, eight lawyers were making regular restitution payments to the Fund totaling $30,018 since October 1, 2006.  

The Committee chair is Bainbridge Island attorney Judy Massong. WSBA General Counsel Robert Welden is the staff liaison to the Committee.