Willful ignorance, unreasonable credulity, and misappropriation

Two recent judicial discipline cases involved misappropriation of money – over $11,000 by a judge from a DWI fund in 1 case and over $265,000 by a judge’s friend from an estate in the second.

The New Jersey Supreme Court censured a former judge for directing that money from a municipal DWI fund be disbursed to himself without the required pre-approval from his assignment judge; the Court also permanently barred him from judicial office and ordered that he pay restitution of $11,995.85 to the state.  In the Matter of Corradino (June 5, 2019).  The Court’s order does not describe the judge’s misconduct; this summary is based on the presentment of the Advisory Committee on Judicial Conduct.

To help municipal courts promptly dispose of DWI matters, a state statute creates a fund to defray the costs of additional court sessions needed to expeditiously address pending and backlogged DWI cases.  Acceptable expenditures include “payments to municipal court judges, municipal prosecutors and other municipal court personnel for work performed in addition to regular employment hours.”  Guidelines require written approval from the assignment judge of the vicinage in which a municipality is located prior to any disbursements from the DWI fund.

From 2009 through 2013 and in 2015, the judge, without advising his assignment judge, verbally directed the township treasurer to disburse funds “mostly to himself and, for a few years, to the municipal prosecutor and other municipal court personnel.”  The judge received between $647 to $3,001 from the DWI fund in each of those years.

The Committee noted that the judge “has asserted, at various times, inconsistent defenses,” for example, that he did not receive the annual memorandum about the DWI fund or the related guidelines, that he received them but failed to read them, and that he started reading but stopped because he “mistakenly believed he was already sufficiently educated.”  The judge also claimed that “the checks and balances of the court system should have earlier detected and more explicitly alerted him to his procedural noncompliance. . . .”  The Committee rejected those  defenses.

The Committee also concluded that the judge’s “assertion that he would have been entitled to receive at least some of the DWI Fund monies if he had filled out the appropriate form is not supported by the evidence,” noting that there was no evidence that the judge held special sessions or that his court had a backlog requiring special sessions.  The Committee also stated that the extra work the judge claimed he performed outside of court, such as legal research and drafting opinions, would not qualify as an acceptable expenditures from the DWI fund.  “More importantly,” the Committee stated, the judge should not have “usurped” the assignment judge’s role in determining “what would qualify as a compensable event under the DWI Fund Guidelines.”

The Committee concluded that the judge’s “purported lack of willfulness or intentionality” was not a sufficient basis to withhold discipline.

Respondent, by virtue of his judicial office, was duty-bound to know and adhere his conduct to the rules and statutes that govern the municipal court, including the strictures pertaining to the operation of the DWI Fund and the attendant requirements for receipt of expenditures from same. . . .  Willful ignorance of these strictures cannot reasonably serve as a defense to Respondent’s unauthorized receipt of state funds.

* * *
Based on a joint statement of circumstances and conditional agreement for discipline, the Indiana Supreme Court suspended a judge without pay for 45 days for appointing an unqualified friend as trustee of a trust and personal representative of a related estate, failing to disclose their friendship and financial relationship, and “failing to act promptly when faced with mounting evidence of the friend’s mismanagement and embezzlement of the funds entrusted to him.”  In the Matter of Freese, Per curiam opinion (Indiana Supreme Court June 4, 2019).

The judge has known Stephen Scott since about 1990, having worked with him in the county prosecutor’s office where Scott supervised adult protective services.  The judge lunched regularly with Scott and considered him one of his closest friends.

In 2004, Scott needed $122,400 to buy a home but had poor credit after a bankruptcy.  The judge used his line of credit to lend Scott the funds.  On January 13, 2005, they executed and recorded a mortgage in that amount, and Scott gave the judge a promissory note.

17 days later, the judge appointed Scott as trustee over the Herbert Hochreiter Living Trust.  None of the parties objected; the judge never disclosed his financial arrangement with Scott.

Later in 2005, Hochreiter died, and an estate was opened with an estimated $2.3 million in real and personal property.  On October 24, the judge appointed Scott as personal representative of the estate.  None of the parties objected; the judge did not disclose his financial arrangement with Scott.

On June 12, 2007, when the estate had been pending for nearly 2 years, the judge advised Scott that a final report and accounting was due.  Although the judge granted Scott’s request for a 180-day extension, Scott never filed a final report and accounting.  Through 2009, Scott repeatedly disregarded the judge’s directives to file accountings in the 2 cases.  In December 2009, Scott filed a partial, defective trust accounting and then sought an extension to January 29, 2010.  The judge granted the extension over the objection of a beneficiary who was concerned that gold bars might be missing from the trust and that Scott had disregarded accounting requirements from the beginning.

In January 2010, Scott asked to withdraw as trustee.  The beneficiaries objected to Scott resigning without submitting a complete accounting and filing tax returns and other legal documents.  The judge gave Scott 30 days to respond to the objection.

Scott relocated to Florida and never responded.

The Court found that, from August 2010 through July 2012, the judge “had multiple indications of Scott’s poor performance:  summonses sent to Scott were returned to sender;” Scott’s counsel reported that Scott was unresponsive and that the trust checking account contained only $8.27 and its savings account had been closed when it should have $50,000 to $60,000 in cash; and a beneficiary “filed a detailed objection and multiple rules to show cause or contempt citations against Scott.”  The Court also found that the judge “‘took no action or minimal action’ on those reports.”  The judge did leave Scott a phone message when Scott was living in Florida that stated “he was concerned that Scott was behaving bizarrely, and that he ‘would never have thought [Scott] would have stolen anything.’”

On July 31, 2012, when the cases had been pending nearly 7 years, the judge ordered Scott to appear in person and bring all financial records to a show cause hearing in September.  The hearing was later rescheduled to November, but Scott failed to appear.  The judge held him in contempt and found that he had permitted substantial amounts of money to be removed from the trust for non-trust purposes.

In January 2013, after a damages hearing, the judge entered judgment against Scott for nearly $580,000, finding that (1) between September 2007 and August 2011, there were disbursements totaling $140,550 from trust accounts to Scott’s personal accounts, plus another $101,217 in wire transfers or cash withdrawals not corresponding to legitimate disbursements and (2) in January 2010, $16,800 was transferred from estate accounts to Scott’s personal account, and the estate’s remaining bank balance of $6,517.08 was taken by unexplained cash withdrawal.  The Court also held that the amounts directed to Scott’s accounts should be trebled as punitive damages, for a total judgment, including the remaining un-trebled sums, of $579,784.08.

The judge never referred those findings to the local prosecutor or to the U.S. Attorney.  However, in 2017, Scott pleaded guilty to federal charges related to his embezzlement.  The stolen funds remain unrecovered.

The Court noted that the judge’s misconduct was mostly negligent, not willful, and involved 1 case, not “systemic neglect.”  However, it emphasized that the judge’s “misconduct ultimately enabled a massive theft.”  It held that the judge violated the duty to make “appointments . . . impartially and on the basis of merit” because Scott “lacked fiduciary experience and had been bankrupt recently enough to have poor credit.”  The Court noted that, although, “subjectively, the Judge trusted Scott, as his loan shows,” “objectively, Scott was utterly unqualified to be entrusted with a third party’s money; appointing him seems to have been driven by friendship, not merit.”  In addition, the Court concluded, “that friendship clouded the Judge’s objectivity through seven years of warning signs—making him unreasonably credulous of, and lenient towards, Scott in the face of growing evidence of serious financial misconduct.  If not for the Judge’s inaction, Scott’s theft likely could have been largely prevented.”

 

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s