In the Matter of Frank J. Cozzarelli (074742)

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)
In the Matter of Frank J. Cozzarelli, An Attorney at Law (D-151-13) (074742)
Argued October 21, 2014 -- Remanded October 30, 2014 -- Reargued November 10, 2015 -- Decided May 2,
2016
PER CURIAM
In this attorney disciplinary matter, the Court considers the appropriate level of discipline for respondent
Frank J. Cozzarelli, who committed misconduct involving the misappropriation of client and escrow funds.
Since 1998, respondent had been intermittently under investigation by the United States Attorney’s Office
for income tax evasion. In connection with his role as treasurer of a fraudulent investment fund, respondent was
indicted on September 21, 2004, after which he suffered a breakdown. On September 26, he was voluntarily
admitted to an inpatient psychiatric unit, from which he was discharged on October 4, the day of his arraignment. In
January 2005, respondent pled guilty to income tax evasion and was sentenced to four months in jail, followed by
four months of house arrest and a probationary term. He was incarcerated from June through October 2005.
Shortly before the indictment, on August 2, 2004, Office of Attorney Ethics (OAE) Auditor Mimi Lakind
notified respondent that a random audit would occur at his office at the end of that month, encompassing a two-year
period prior to the audit date. The audit ultimately commenced in November 2004, after respondent had been
released from inpatient care and while he remained under psychiatric care. According to Lakind, respondent
maintained an active practice, including many real estate transactions per month and an active chancery docket. She
asserted that respondent initially did not provide her with any recordkeeping documents, other than some records
prepared by a family member who was a certified public accountant. In light of the criminal matter, Lakind
postponed the audit. Although she requested additional documents, she never received them. Respondent was
temporarily suspended in February 2005 following his guilty plea, at which time Lakind proceeded to reconstruct
respondent’s records based on subpoenaed bank records and other documents.
A demand audit ultimately resumed on December 18, 2008, at which time respondent presented Lakind
with “new records” he had prepared on an Excel spreadsheet. According to Lakind, these materials were not
reflective of the records of which she was aware in November 2004. Significantly, Lakind explained that, in
addition to respondent’s recordkeeping issues, she had uncovered “a systematic and continuing invasion of client
trust funds for respondent’s law office and personal expenditures.” Respondent was charged with several counts of
knowing misappropriation for: (1) misappropriating $112,728.93 in client funds for personal purposes; (2)
improperly transferring funds from one client’s trust account to the account of another unrelated client; and (3)
repeated occurrences of borrowing against trust accounts for personal purposes and to replenish other accounts.
At the disciplinary hearing, respondent, citing In re Jacob, 95 N.J. 132 (1984), maintained that, in light of
his debilitating depression, he should be absolved of improprieties or granted mitigation in terms of the quantum of
discipline imposed. Respondent’s psychiatrist testified that, at the time of the audit, respondent was not functioning
efficiently and was not competent to manage the trust funds. The OAE’s expert disagreed, asserting that
respondent’s mental state did not support a finding of legal insanity, or any of the other conditions that would satisfy
the Jacob standard. The special master rejected respondent’s Jacob defense, concluded that he knowingly
misappropriated client funds, and recommended disbarment. Following a de novo review, the DRB concurred that
the proofs were sufficient to establish knowing misappropriation on four of the nine charges. Like the special
master, the DRB rejected respondent’s Jacob defense, concluding that his major depression did not satisfy the
requisite standard for legal insanity and noting that he continued to function both personally and professionally
during the time he misappropriated funds. Consequently, the DRB determined that respondent should be disbarred.
The Court ordered respondent to show cause on the disbarment recommendation and, following argument
on the matter, remanded to the DRB for a more full analysis of the evidence submitted in connection with
respondent’s Jacob defense. The Court retained jurisdiction.
On April 20, 2015, the DRB reaffirmed its recommendation that respondent be disbarred for the knowing
misappropriation of escrow and client funds. The DRB explained that the Jacob standard has been reiterated and
applied by the Court, in In re Greenberg, 155 N.J. 138, 156-59 (1998), and other matters, functioning as the
equivalent of the M’Naghten standard, the standard for legal insanity under criminal law. The DRB further
explained that the Court has often referred to the Jacob standard as the inability to distinguish between right and
wrong or to understand the nature and quality of one’s acts, and not as an impairment of judgment. With respect to
respondent’s misconduct, the DRB noted that there was considerable evidence demonstrating that he had not
suffered a loss of competency or will such that his knowing misconduct could be excused. Specifically, he handled
numerous professional and personal matters while managing to conceal the federal criminal investigation from his
wife. The DRB explained that depression does not satisfy the Jacob standard unless it deprived the attorney of the
knowledge that he was taking funds that did not belong to him and that he was not authorized to take.
HELD: There is clear and convincing evidence the respondent knowingly misappropriated client funds, and that his
mental illness did not cause him to suffer a loss of competency, comprehension or will that excused his misconduct
when it occurred. Respondent is not entitled to mitigation and shall be disbarred.
1. In New Jersey, disbarment is permanent. R. 1:20-15A(a)(1). An attorney who knowingly misappropriates funds
from a client is subject to disbarment without any practical prospect of consideration of mitigating factors or
restoration upon a showing of reformation. In re Wilson, 81 N.J. 451 (1979). Misappropriating attorneys claiming
to be afflicted with identifiable disorders, such as mental illness, have not swayed the Court from imposing
disbarment. (pp. 18-19)
2. In Jacob, supra, the Court rejected the argument that an attorney’s medical condition exculpated his
misappropriations, emphasizing that it was looking for a causal connection between the condition and the financial
misdeed. The Court further stated that the attorney had not demonstrated that he had suffered a loss of competency,
comprehension, or will of a magnitude that could excuse his knowing egregious misconduct. Although these
comments reference a standard that traces language used in diminished capacity cases, several subsequent cases in
which a so-called Jacob defense was advanced collapsed the standard into shorthand in which it is described
essentially as an ability to discern right from wrong. In Greenberg, supra, the Court rejected an attorney’s asserted
defense that his depression caused an impairment of judgment that should allow him to avoid disbarment for stealing
law firm funds. The Court explained that the attorney failed to demonstrate that he could not appreciate the
difference between right and wrong or understand the nature and quality of his acts. (pp. 19-22)
3. The DRB applied Jacob, Greenberg, and other cases to the matter at hand, concluding that the Jacob standard
requires either an inability to distinguish between right and wrong or to understand the nature and quality of one’s
acts. Those two expressions of understanding can be likened to the standard for legal insanity, under the M’Naghten
test, and the standard for diminished legal responsibility under principles of diminished capacity or the statutory
defense of intoxication. While the Jacob standard may not be a model of clarity, it nevertheless expresses the
Court’s willingness to consider defenses that would negate the mental state to act purposely. Thus, a mental illness
that impairs the mind and deprives the attorney of the ability to act purposely or knowingly, or to appreciate the
nature and quality of the act he was doing, or to distinguish between right and wrong, will serve as a defense to
attorney misconduct and should be considered in connection with excusing wrongful conduct by an attorney, or
when mitigation of a disciplinary penalty is appropriate to consider under New Jersey’s disciplinary jurisprudence.
(pp. 22-23)
4. Here, the experts agreed that respondent did not have a mental illness that met any of the aforesaid three defenses
that negate the mental state to act knowingly. While the Court agrees with respondent that the Jacob standard is not
restricted to making a showing that is equivalent to the M’Naghten standard for legal insanity under criminal law, it
rejects respondent’s contention that the DRB’s decision is undermined by its focus on the legal insanity standard.
The DRB correctly concluded that the OAE has proven knowing misappropriation by clear and convincing
evidence, and the Court concludes that respondent’s misdeeds were not aberrational. Respondent has not proven a
causal connection between his mental illness and his acts of misappropriation, and the Court is not persuaded that he
is entitled to mitigation of the normal penalty of disbarment due to his severe depression. On this record, as
amplified by the supplemental decision of the DRB, respondent committed knowing misappropriation.
Consequently, respondent is disbarred. (pp. 23-26)
So Ordered.
JUSTICES LaVECCHIA, ALBIN, and PATTERSON, and JUDGES CUFF and FUENTES (both
temporarily assigned) join in this PER CURIAM opinion. CHIEF JUSTICE RABNER and JUSTICES
FERNANDEZ-VINA and SOLOMON did not participate.
2
SUPREME COURT OF NEW JERSEY
D-151 September Term 2013
074742
IN THE MATTER OF
FRANK J. COZZARELLI,
An Attorney at Law
Argued October 21, 2014 – Remanded October
30, 2014 - Reargued November 10, 2015 –
Decided May 2, 2016
On an Order to show cause why respondent
should not be disbarred or otherwise
disciplined.
Maureen G. Bauman, Deputy Ethics Counsel,
argued the cause on behalf of the Office of
Attorney Ethics.
S.M. Chris Franzblau argued the cause for
respondent (Franzblau Dratch, attorneys; Mr.
Franzblau, Stephen N. Dratch and Frank J.
Cozzarelli, on the briefs).
PER CURIAM
Respondent, Frank J. Cozzarelli, was recommended for
disbarment in a decision by the Disciplinary Review Board (DRB).
On the return date of an Order to Show Cause issued by this
Court as to why he should not be disbarred for the knowing
misappropriation of client and escrow funds, respondent
contended that he presented mental illness evidence that had not
received proper consideration by the DRB, under In re Jacob, 95
1
N.J. 132 (1984). Because we were concerned about respondent’s
assertion that his Jacob defense was not properly considered and
addressed by the DRB, we extended these already lengthy
proceedings by remanding the matter to the DRB for fuller
examination and explanation, including but not requiring the
possibility of further evidentiary proceedings. We retained
jurisdiction.
This matter is presently back before us following the DRB’s
issuance of a supplemental decision that, in greater detail,
explains its adherence to its recommendation that respondent
should be disbarred. We have had re-briefing and re-argument
following issuance of the DRB’s supplemental decision.
Before this Court, respondent continues to maintain that
the DRB has misapplied Jacob. Respondent argues that he was
entitled to have his Jacob defense of mental illness considered
in connection with mitigation of penalty as well as for purposes
of providing a defense to the charged misconduct. For the
reasons expressed herein, we conclude that respondent’s
arguments have received full and fair consideration.
Based on the proofs, we agree with the DRB that there is
clear and convincing evidence of knowing misappropriation of
client funds, that respondent’s mental illness of depression did
not cause him to suffer a loss of competency, comprehension or
will that excused the acts of misappropriation when they
2
occurred, and that he is not entitled to mitigation of our
almost-invariable penalty of disbarment for such egregious
misconduct based on the depression he undoubtedly suffered in
connection with his federal investigation, indictment, plea, and
sentence. We therefore accept the DRB’s recommendations and
hold that respondent shall be disbarred based on the proof of
knowing misappropriation of client and escrow funds.
I.
In light of the extended history to this matter, we will
summarize the salient procedural and factual aspects to this
misappropriation-based disciplinary action.
Following a full hearing culminating in a recommendation of
disbarment by an appointed special master, the DRB unanimously
recommended respondent’s disbarment for the knowing
misappropriation of client and escrow funds charged in counts
three, four, eight, and nine of the Office of Attorney Ethics’s
(OAE) complaint, and for violation of RPC 8.4(c) (conduct
involving dishonesty, fraud, deceit or misrepresentation) and
RPC 8.4(d) (conduct that is prejudicial to the administration of
justice). The charges arose out of audit irregularities,
including trust account shortages that were uncovered during a
random audit, which turned into a demand audit, conducted by the
OAE between November 22, 2004 and December 18, 2008. The
lengthy duration of that audit needs to be placed in context.
3
On August 2, 2004, OAE Auditor Mimi Lakind notified
respondent that a random audit would occur at his office at the
end of that month and would encompass a two-year period prior to
the audit date. The audit was rescheduled twice at respondent’s
request. The audit did not commence until November 2004 and
took a long time to bring to conclusion.1
According to respondent, when the audit began in November
2004, he was “not functioning very well” and was under
psychiatric care. In fact, when respondent learned that an
attorney ethics audit would take place, he was weeks away from
being indicted by the United States Attorney’s Office for income
tax evasion, for which he had been intermittently under
investigation from 1998 until his indictment on September 21,
2004 in connection with his role as treasurer of a fraudulent
investment fund.
1 In the midst of responding to the OAE auditor’s requests for
documents and information in connection with the audit,
respondent was temporarily suspended on September 24, 2005, and
the audit was indefinitely postponed. That suspension from the
practice of law was due to respondent’s entry of a guilty plea
to one count of income tax evasion, in violation of 26 U.S.C. §
7201. In re Cozzarelli, 182 N.J. 387 (2005). On March 9, 2006,
well before the audit was brought to conclusion, the thirteen-
month temporary suspension from active practice that respondent
had served was determined to constitute sufficient attorney
discipline for the federal tax evasion offense, In re
Cozzarelli, 186 N.J. 156 (2006); thereafter, respondent was
reinstated to practice in January 2007. See In re Cozzarelli,
189 N.J. 209 (2007). He has remained in active status
throughout these proceedings.
4
Although not squarely germane to this matter, a brief
history on what has been referred to by the DRB as “the Mallet
Investment” is necessary. The special master report described
the Mallet Investment venture succinctly as follows:
Through various persons, Respondent was
contacted by an Edward Mallet, with whom
Respondent developed a friendship. Mr. Mallet
involved the Respondent in the development of
schemes to create an Investment venture, and
to that end ultimately [provided] Respondent
with more than $10,000,000.00 ostensibly in
order to obtain a fixed place of business for
an “investment company” and to establish
banking connections in the United States and
Europe to attract investors and establish a
“hedge fund.” Other parties to the scheme
were introduced by Mr. Mallet, and it is
reasonable to infer that Mr. Mallet intended,
and did in fact use the Respondent as a “fall
guy” by convincing Respondent to accept and
handle monies, the source of which has not
been established, and to transfer those funds
to persons designated by Mr. Mallet, in some
way to cause their disappearance.
Although the special master’s report noted that it was “clear . .
. that Respondent had neither the knowledge [n]or experience to
have concocted whatever scheme Mr. Mallet was engaged in,”
respondent’s income tax evasion conviction arose from his
failure to pay taxes on profits generated by those investments.
Based on the record as presented by respondent and as
supplemented by his medical expert, by September 2004,
respondent had known of the potential indictment for several
months, was in a state of anxiety, and ultimately suffered a
5
breakdown when he was informed that a federal grand jury had
indicted him. During the days spanning September 21 through
September 26, 2004, respondent formulated a suicide plan and
absented himself from family and friends to execute it,
travelling in and around New Jersey, stopping in New York City,
Atlantic City, and Philadelphia. Eventually he abandoned his
suicide plan, reconnected with family and an attorney, and
determined to face the criminal charges. Respondent had not
told his family about the potential criminal charges beforehand.
With familial, legal, and medical assistance,2 on September
26, 2004, respondent was voluntarily admitted to an inpatient
psychiatric unit in Valley Hospital. He was discharged on
October 4, 2004. On the day of his discharge, respondent was
arraigned in the United States District Court for the District
of New Jersey. He pleaded guilty in January 2005 to income tax
evasion and was sentenced to four months in jail, followed by
four months of house arrest and a probationary term. He was
incarcerated from June through October 2005.3
2 Respondent’s admitting and treating psychiatrist, Dr. Steven S.
Simring, testified in this matter as a fact witness and as
respondent’s expert.
3 In sentencing respondent, the federal district court commented
on the number of supportive letters that were submitted on
respondent’s behalf and recounted respondent’s professional
success and contributions to the community. The court expressed
hope that respondent would be restored to the practice of law
where he could continue to contribute. Those comments were
6
The audit that OAE Auditor Lakind attempted to perform in
November 2004 was therefore conducted after respondent had been
released from inpatient care and while he remained under
psychiatric care. According to respondent, he had counsel for
some period during audit preparations but was unable to pay for
ongoing representation. Assistance came from family members and
others who helped to secure documents that had been requested by
the OAE in advance of the audit. In Lakind’s testimony at the
hearing before the special master, she said that respondent
initially did not provide her with any recordkeeping documents
other than some records prepared by a family member who was a
certified public accountant; those did not detail whose money
was whose among the various clients and accounts for which
respondent was responsible. According to Lakind, respondent had
maintained an active practice that involved many real estate
relied upon by respondent in this matter and we give them
favorable acknowledgment. However, they were expressed based on
knowledge of only the federal conviction for tax evasion, which
more likely than not results in suspensions from practice, not
disbarment. See, e.g., In re Rakov, 155 N.J. 593 (1998)
(imposing two-year suspension for attempted income tax
evasion); In re Gillespie, 124 N.J. 81 (1991) (three-year
suspension for aiding and assisting in presentation of false
corporate tax returns); In re Nedick, 122 N.J. 96 (1991)
(imposing two-year suspension for tax evasion mitigated by
cooperation with federal authorities); cf. In re Turco, 66 N.J.
50 (1974) (imposing disbarment for tax fraud). The
misappropriation charges were not yet in the picture as the
audit had been postponed while respondent addressed his federal
criminal charges.
7
transactions per month and included an active chancery docket.
We also note that respondent held numerous court appointments as
a fiduciary.4 Lakind testified that she also was provided with a
disc that included a voluminous list purporting to identify all
of the files in respondent’s office.
Concerned about the level of stress that respondent was
exhibiting during the November 2004 audit proceeding, Lakind
informed respondent that the audit would be postponed so that
respondent could focus on his federal criminal matter. On
December 10, 2004, respondent was notified that the audit would
resume in February 2005. Lakind testified that she requested
additional records but never received them. Respondent was
temporarily suspended by February 2005 as a result of the guilty
plea in federal district court. Lakind testified that she
proceeded to reconstruct respondent’s records, preparing
spreadsheets based on subpoenaed bank records and documents
received from succeeding trustees on respondent’s former
fiduciary accounts, information listed on checks, and other
documents. Lakind added that, following respondent’s
4 In connection with respondent’s inability to provide Lakind
with any recordkeeping documents in November 2004, we note that
shortly after his arraignment in federal court, respondent was
removed from his many court-appointed fiduciary positions and
was faced with the obligation to turn over and account for the
contents of funds that he had held as a fiduciary. The absence
of respondent’s recordkeeping files is sorely troubling and is
discussed later.
8
reinstatement to the practice of law, she received a Quickbooks
form from respondent’s accountant, Samuel Fisher, which
substantially agreed with her reconstructed figures. Respondent
himself informed Lakind that he could not produce any additional
records due to the disarray of his professional belongings while
he was incarcerated.5
When a demand audit resumed on the substantially later date
of December 18, 2008, respondent presented Lakind with “new
records” he had prepared on an Excel spreadsheet; however,
according to Lakind, those materials were not reflective of the
records she was aware of in November 2004.
More problematic for respondent, Lakind testified that in
addition to the recordkeeping issues uncovered during the audit,
she uncovered “a systematic and continuing invasion of client
trust funds for respondent’s law office and personal
expenditures.” Those patterns, she testified, revealed
shortages in his accounts. According to Lakind’s testimony,
beginning with his own accountant’s
reconciliation as of December 31st, 2003,
there were shortages in the account. And then
I found that money from the fiduciary accounts
went into the Trust Account and were used to
pay other clients.
5 Respondent testified that his brother, who was his landlord,
took back his office space to lease it to a new tenant.
Respondent’s belongings were removed to accomplish the re-
leasing. Although respondent had packed and stored his records
in an onsite trailer, he claimed the records became disarrayed
or destroyed following the demolition work that took place.
9
The critical time came when Mr.
Cozzarelli had to turn over a number of
fiduciary accounts to other attorneys or
successor trustees or administrators, and so
the amounts that were held in the Trust
Account had to be paid out and there was
insufficient money to pay them.
And I found that just before the payment
of each matter deposits were made from
personal funds of Respondent equal to clear
the checks. In all that time, and with all
those shortages, not a single check, not one,
was presented on insufficient funds and either
paid or dishonored by the bank, none.
When asked if she would have expected no check to bounce if
respondent’s records were in such poor condition that he could
not keep track of financial matters, Lakind explained that she
would have expected the opposite of what she in fact found.
That’s usually the best indication where
an attorney has no idea what’s in there, will
write a check thinking he’s probably got the
money in there. That’s why we have the
overdraft notification program, it’s exactly
why it was put into effect, so that where an
attorney, either through negligence or through
design, does not have enough money and a check
is presented, whether it’s paid or not, even
if it’s paid, we are notified by the bank that
a Trust Account was presented against
insufficient funds and we immediately contact
the attorney and we ask for proof of what
happened and why that happened.
And in all this time I never found a
single Trust Account bank statement in which
there was an overdraft balance or [that a
check written for an amount in excess of the
account’s balance was returned]. . . . There
was always sufficient funds at the moment a
check was presented for the check to clear.
10
Following the conclusion of the demand audit, on December
18, 2008, respondent was charged with several counts of knowing
misappropriation for: (1) misappropriation of $112,728.93 in
client funds for personal purposes; (2) improper transfer of
funds from one client’s trust account to the account of another
unrelated client; and (3) repeated occurrences of borrowing
against trust accounts for personal purposes, including for fees
he believed he was owed and to replenish other trust accounts.
At the disciplinary hearing, respondent maintained that,
because he suffered from the debilitating mental illness of
severe depression, he should be absolved of improprieties or at
the least granted mitigation in terms of the quantum of
discipline to be imposed, citing Jacob, supra, 95 N.J. 132. Dr.
Simring, a board-certified psychiatrist, testified on
respondent’s behalf as an expert and as his treating physician.
Dr. Simring opined that respondent was not functioning
efficiently or rationally and was not competent to manage the
trust funds at the time of the audit. The OAE’s expert, board-
certified psychiatrist Daniel Paul Greenfield, M.D., testified
that, during 2003-2005, respondent’s mental state did not
support a finding of legal insanity, or any of the other
conditions that would satisfy the Jacob standard (mentioning
also intoxication or diminished capacity as among those other
conditions that could provide a form of Jacob defense but that
11
were inapplicable to the present matter). Dr. Greenfield
expressed his opinion that respondent’s depression was
situational and that he was functional at the time when he
engaged in the unethical conduct that formed the basis for the
disciplinary charges against him.
The special master found that respondent knowingly
misappropriated client funds. He rejected respondent’s Jacob
defense, finding that there was no medical evidence that
respondent suffered from a mental illness sufficient to excuse
his misappropriating conduct. As noted earlier, the special
master’s report recommended respondent’s disbarment as the only
appropriate discipline for his misappropriation of client funds.
Following a de novo review, the DRB determined that the
evidence clearly and convincingly established that respondent
was guilty of knowing misappropriation, although not on all
counts. It found the proofs sufficient, under the clear and
convincing standard, on four out of nine of the charges.
The DRB’s August 8, 2014, decision recounts the basis for
its findings in full but, in sum, the DRB found as follows.
With respect to count three, involving the Arthur R. Haberman
Irrevocable Trust, the DRB concluded that the proofs established
that respondent knowingly misappropriated $100,000 from that
trust on November 3, 2004, to cover a shortage in another trust
that respondent had been managing until he was removed,
12
following his arraignment, from his court-appointed position of
fiscal agent and replaced by another attorney. Similarly, with
respect to count four, involving the Barrillas-to-Gencarelli
real estate transaction, the DRB found that respondent failed to
maintain the necessary funds in his trust account following the
closing, having used $100,000 of the funds to reimburse the
Haberman trust on February, 11, 2005. With respect to count
eight, involving the Boyko Trust, the DRB determined that the
evidence showed that respondent was not authorized to transfer,
on May 5, 2004, $50,000 from the trust to his business account
to pay legal fees in his criminal case. Finally, on count nine
involving the Sciarrillo estate, the DRB determined that
respondent provided no evidence to support his claim that the
estate owed him $200,000, which he took from the estate between
September 27, 2004 and November 1, 2005.
The DRB also rejected respondent’s Jacob defense,
concluding that respondent’s diagnosis of major depression did
not satisfy the requisite standard for legal insanity to obtain
relief under Jacob. To the DRB it was significant that, despite
his depression, respondent continued to function personally and
professionally and that, during that time, he systematically
engaged in “lapping,” or taking one client’s funds to pay
obligations owed to another, while ensuring that the funds were
replenished when it came time to repay the first client.
13
Consequently, the DRB determined that respondent should be
disbarred.
We issued an Order to Show Cause on the disbarment
recommendation and, following argument on the matter, remanded
to the DRB
with instruction that the Board more fully
assess the evidence submitted in connection
with respondent’s proffered defense pursuant
to In re Jacob, 95 N.J. 132 (1984), and provide
a detailed explanation of whether or not
respondent has met the standard set forth in
Jacob. The Disciplinary Review Board retains
the authority to remand the matter to a
special ethics master if it deems such a
course warranted.
We also retained jurisdiction.
In a decision dated April 20, 2015, the DRB reaffirmed its
recommendation that respondent be disbarred for the knowing
misappropriation of escrow and client funds. The DRB addressed
in detail its reasons for rejecting respondent’s argument that,
under Jacob, he should be excused or have his penalty mitigated
due to his mental illness.
First, the DRB addressed the Jacob standard. The DRB
quoted the standard first articulated in Jacob and noted that it
has been reiterated and applied by this Court, in In re
Greenberg, 155 N.J. 138, 156-59 (1998), and other matters,
14
functioning as the equivalent of “the M’Naghten standard.”6 The
DRB decision recited numerous occasions on which this Court has
“referred to the Jacob standard as the inability to distinguish
between right and wrong or to understand the nature and quality
of one’s acts.” The DRB commented that neither the Jacob
standard nor the M’Naghten standard “is satisfied by a
demonstration of an ‘impairment of judgment.’”
Second, the DRB detailed why the evidence offered by
respondent failed the Jacob test as the DRB understood it.
Critically important, that analysis bears repeating in
full:
[N]either respondent nor [Dr.] Simring,
his expert, offered any evidence to support
the conclusion that, at the time of the
knowing misappropriations, respondent
“suffered a loss of competency, comprehension
or will of a magnitude that could excuse or
mitigate egregious misconduct that was clearly
knowing, volitional and purposeful.” Jacob,
supra, 95 N.J. at 137. In respondent’s only
instance of knowing misappropriation that
preceded the September 2004 indictment, no
evidence established that, at the time (May 5,
2004), he was anything more than depressed.
Respondent claimed that he was “in such a deep
depression that [he] couldn’t figure out what
was going on.” We note that there is
considerable evidence to the contrary. He
6 M’Naghten’s Case, 8 Eng. Rep. 718 (H.L. 1843); see also State
v. Breakiron, 108 N.J. 591, 616 (1987) (“[T]he insanity defense
as modified in New Jersey is strictly limited to the M’Naghten
principle of whether or not the defendant was either unable to
know the nature and quality of the act he was doing . . . or, if
he did know it, that he did not know that what he was doing was
wrong.”).
15
handled quite a few personal and professional
matters, during that time, and he was able to
conduct himself in such a fashion that his
wife had no suspicion that he was under a
federal criminal investigation. Moreover, the
inability to figure out “what is going on” is
a far cry from not being able to distinguish
between right and wrong.
As stated previously, depression,
“however severe,” is insufficient to satisfy
the Jacob standard, unless the condition
deprived the attorney of the knowledge that he
was taking funds that did not belong to him
and that he was not authorized to do so.
Greenberg, supra, 155 N.J. at 158-59. No such
showing was established in this case.
. . . .
Finally, we note that, despite
respondent’s insistence that his conduct was
an aberration and that he has since reformed,
the record shows otherwise. As we found, as
late as September 2008, respondent gave the
OAE a ledger that he had prepared for [a]
trust, after the fact. That ledger falsely
showed that the $50,000 that respondent had
paid to his lawyer in the federal criminal
matter had gone to a beneficiary of the trust
instead. Thus, nearly four years after
respondent’s so-called breakdown, three years
after his release from incarceration for
having committed a felony, and despite his
successful treatment with [Dr.] Simring,
respondent was still engaging in dishonest
conduct designed to conceal the fact that he
deliberately and intentionally took monies
that did not belong to him and used them to
fund his defense in the federal criminal
matter.
II.
Respondent argues that the DRB’s analysis on remand
erroneously perpetuated an interpretation of the Jacob standard
16
that requires a showing that meets the criminal law standard for
the defense of legal insanity. He maintains that Dr.
Greenfield, the OAE’s expert, applied only the M’Naghten
standard to assess respondent and opine on whether respondent
could avail himself of a Jacob excuse to knowing
misappropriation and disbarment. On the other hand, respondent
maintains that his expert, Dr. Simring, opined on his mental
illness and reasons why his mental condition merited mitigating
consideration, which is also permitted under Jacob. In that
regard, respondent argues that Dr. Simring’s opinion is
unopposed.
The OAE argues that the DRB properly considered the mental
health circumstances that had been advanced by respondent and
correctly concluded that proof of knowing misappropriation was
demonstrated clearly and convincingly. It emphasizes the timing
of the four incidents of misappropriation and that respondent’s
expert, Dr. Simring, does not contend that respondent could not
appreciate the wrongfulness of his actions at those times. In
essence, the OAE maintains that respondent did not show
impairment at the time of those misappropriations that deprived
him of the ability to know that he was taking funds that did not
belong to him and that he was not authorized to do so.
Moreover, in arguing against allowing mitigating effect to
be afforded to respondent in this disciplinary matter due to his
17
diagnosis of severe depression by Dr. Simring, the OAE contends,
and the DRB concluded, that three of the misappropriations took
place after respondent had been discharged from the hospital,
was under Dr. Simring’s care and responding well to medication,
and was participating in the handling of his criminal matter.
Thus, the OAE maintains that respondent’s misdeeds were not
aberrational and, as further proof of that, adds one more
incident to the mix. Four years after his hospitalization,
three years after his incarceration, and still while under Dr.
Simring’s care, respondent, according to the OAE, and as found
by the DRB, submitted false information in financial records to
hide evidence of misappropriation from another trust for which
respondent was responsible.
III.
In this State, two rules in attorney misconduct matters are
applied, virtually without exception. First, disbarment is
permanent. R. 1:20-15A(a)(1); see also In re Breslin, 171 N.J.
235, 237 (2002) (noting that “in New Jersey disbarment
invariably is permanent”). Second, an attorney who knowingly
misappropriates funds from a client is subject to disbarment, In
re Wilson, 81 N.J. 451, 453 (1979), without any practical
prospect of consideration of mitigating factors, id. at 457-60,
or restoration upon a showing of reformation, id. at 460 n.5
(noting that “research reveals only three orders of
18
reinstatement following disbarment over the past hundred
years”); see also Greenberg, supra, 155 N.J. at 151 (“We accept
as an inevitable consequence of the application of th[e Wilson]
rule that rarely will an attorney evade disbarment in such
cases.”).
Misappropriating attorneys claiming to be afflicted with
identifiable disorders, including mental illness or related
conditions, have not swayed the Court from imposing the grave
discipline of disbarment. See Greenberg, supra, at 150, 157-58.
In Jacob, supra, the Court considered, as part of the
defense to a knowing-misappropriation-of-client-funds case, a
medical report by the physician of the respondent that addressed
certain physical and mental health conditions, including
depression, suffered by the attorney. 95 N.J. at 134-35, 137.
The Court spoke sympathetically to the lawyer’s plight but
nevertheless rejected the argument that the medical evidence
served to “exculpate [the] misappropriations.” Id. at 136. The
Court explained that the medical proofs did not demonstrate that
the condition from which the respondent suffered “was an
exclusive or major cause of his ethical derelictions.” Id. at
137. The Court emphasized that it was looking for a
demonstration of a causal connection between the medical
condition and the financial misdeed. Ibid. The Court closed
19
with the following restatement of its reasons for rejecting the
proffered defense:
The report does not furnish any basis grounded
in firmly established medical facts for a
legal excuse or justification for respondent’s
misappropriations. There has been no
demonstration by competent medical proofs that
respondent suffered a loss of competency,
comprehension or will of a magnitude that
could excuse egregious misconduct that was
clearly knowing, volitional and purposeful.
[Ibid.]
Although the Court’s closing comments referred to legal
excuse or justification, and mentioned “loss of competency,
comprehension or will,” a standard that traces language used in
diminished capacity analyses, several subsequent cases in which
a so-called Jacob defense was advanced collapsed the standard
into shorthand in which it is described essentially as an
ability to discern right from wrong. See In re Hein, 104 N.J.
297, 302 (1986); see also In re Romano, 104 N.J. 306, 311 (1986)
(concluding that “respondent has failed to demonstrate that a
disease of the mind rendered him unable to tell right from wrong
or to understand the nature and quality of his acts”). The DRB
decision in this matter discusses subsequent cases that have
attempted to argue for mitigation of penalty based on “loss of
competency, comprehension or will” language that was used in
Hein, explaining that the language actually originated from
Jacob and requires loss of competency, comprehension or will of
20
a magnitude that would excuse conduct that is otherwise knowing
or purposeful. (Citing In re Steinhoff, 114 N.J. 268, (1989)).
Most specifically, the Court in In re Roth, 140 N.J. 430, 448
(1995), addressed mental illness in the context of whether an
attorney lacked volitional capacity to perform his duties. The
Court equated the loss of competency, comprehension or will as
requiring an inability to distinguish right from wrong and
concluded that the depression from which the respondent was
suffering did not suffice to excuse his conduct under that
standard. Ibid.In another case, Greenberg, supra, 155 N.J. 138, our Court
was asked to consider whether depression caused the respondent
to suffer a substantial impairment of judgment that, when
combined with other mitigating factors, should permit the
attorney to avoid disbarment for stealing law firm funds. In
rejecting the defense, our Court tied its rationale again to the
lawyer’s failure to demonstrate that “he was unable to
appreciate the difference between right and wrong or the nature
and quality of his acts.” Id. at 157. The lawyer’s mental
illness, although severe, did not eviscerate the lawyer’s
knowledge that he was taking the firm’s funds and that his firm
had not authorized the taking. Id. at 158-59; see also In re
Tonzola, 162 N.J. 296, 307 (2000) (noting “the debilitating and
overpowering effects of respondent’s illnesses,” but
21
acknowledging respondent’s expert’s opinion that respondent “may
have been aware” that clients’ funds were being
misappropriated).
The DRB applied those cases to the matter at hand and
concluded that the Jacob standard requires an inability to
distinguish between right and wrong or to understand the nature
and quality of one’s acts. Those two expressions of
understanding can be likened to the standard for legal insanity,
under the M’Naghten test, and the standard for diminished legal
responsibility under principles of diminished capacity or the
statutory defense of intoxication. See N.J.S.A. 2C:4-1
(insanity); see, e.g., State v. Worlock, 117 N.J. 596, 603
(1990) (“Directed at defendant’s ability to ‘know,’ the
M’Naghten test is essentially one of cognitive impairment.
Sometimes described as the ‘right and wrong’ test, its purpose
is to determine whether the defendant had sufficient mental
capacity to understand what he was doing when he committed the
crime.”); N.J.S.A. 2C:4-2 (diminished capacity); see, e.g.,
State v. Taylor, 387 N.J. Super. 55, 61-62 (App. Div. 2006)
(stating that, once affirmative defense of diminished capacity
is raised, State must prove beyond reasonable doubt that,
despite evidence of defendant’s mental disease or defect, she
nonetheless “knew” that she was committing the relevant
offense); N.J.S.A. 2C:2-8 (intoxication); see, e.g., State v.
22
Mauricio, 117 N.J. 402, 418 (1990) (stating that “self-induced
intoxication is a defense to a purposeful or knowing crime”).
The Jacob standard may not be a model of clarity, but the point
to Jacob is that it expressed the Court’s willingness to
consider defenses that would negate the mental state to act
purposely. A mental illness that impairs the mind and deprives
the attorney of the ability to act purposely or knowingly, or to
appreciate the nature and quality of the act he was doing, or to
distinguish between right and wrong, will serve as a defense to
attorney misconduct. The aforesaid defenses are ones that can
and should be considered in connection with excusing wrongful
conduct by an attorney, or when mitigation of the disciplinary
penalty is appropriate to consider under our disciplinary
jurisprudence addressing the quantum of punishment.
Indeed, Dr. Greenfield noted the same defenses in his
testimony, identifying all three as potential bases for avoiding
legal responsibility under the attorney disciplinary system. In
his testimony, Dr. Greenfield did not limit his understanding of
a Jacob defense to legal insanity, as respondent argues,
although respondent’s ability to distinguish right from wrong
was the only one of the three possibilities that could apply to
respondent’s mental condition and behavior. Dr. Greenfield
stated that point more than once, and even Dr. Simring testified
that respondent did not meet any of those three criteria for
23
non-responsibility. There was no expert disagreement on the
fact that respondent did not have a mental illness that met any
of the aforesaid three defenses that negate the mental state to
act knowingly.
Respondent persists in maintaining that the DRB and the OAE
mistakenly limit the Jacob standard to presentation of a
successful insanity defense in a criminal matter and that
nothing more will be considered. While we agree that the Jacob
standard is not restricted to making a showing that is
equivalent to the M’Naghten standard for legal insanity under
criminal law, we reject respondent’s contention that the DRB’s
decision in this matter is undermined by its focus on the legal
insanity standard as that was the only one of the three possible
defenses that pertained in respondent’s situation.
The DRB properly analyzed the record presented by
respondent and his expert as well as the testimony provided by
the OAE’s expert. In our view, the DRB correctly concluded that
the OAE has proven knowing misappropriation by clear and
convincing evidence. Respondent did not demonstrate legal
excuse for his misappropriations. Moreover, in light of the
pattern and timing of respondent’s misappropriations and
concealment well after having received care and ongoing
treatment, we conclude that his misdeeds were not aberrational.
This Court has previously noted the importance of establishing a
24
causal connection between mental illness and the acts of
misappropriation. See Jacob, supra, 95 N.J. at 137. Respondent
has not proven an excusing causal connection.
Nor are we persuaded that he is entitled to mitigation of
the normal penalty of disbarment for his knowing, volitional,
and purposeful acts of misappropriation of client and escrow
funds. We reach that conclusion, notwithstanding Dr. Simring’s
testimony urging that mitigation consideration be given to
respondent due to his severe depression. In our disciplinary
cases, we have not allowed mitigation from disbarment in
misappropriation cases. This case does not present reason for
us to start here. In Wilson, supra, we explicitly stated that
“maintenance of public confidence in this Court and in the bar
as a whole requires the strictest discipline in misappropriation
cases. That confidence is so important that mitigating factors
will rarely override the requirement of disbarment.” 81 N.J. at
461. We also have been unswayed by the assertion that a
respondent is unlikely to continue to misappropriate funds in
the future. “[T]he unlikelihood of subsequent misappropriation
[is] irrelevant in these cases.” Id. at 460 n. 4. This Court
has not suggested that a low risk of re-offense is, in itself,
“sufficient to warrant lesser discipline,” because it is “almost
universally present in these matters.” Ibid.25
We are satisfied that, on this record, as amplified by the
supplemental decision of the DRB, respondent committed knowing
misappropriation. We adopt the recommendation of the DRB that
respondent be disbarred.
IV.
In the end, notwithstanding his being allowed to practice
after his tax evasion conviction, respondent’s misappropriation
has been proven by clear and convincing evidence. The penalty
for that misconduct is disbarment.
JUSTICES LaVECCHIA, ALBIN, and PATTERSON, and JUDGES CUFF
and FUENTES (both temporarily assigned) join in this PER CURIAM
opinion. CHIEF JUSTICE RABNER and JUSTICES FERNANDEZ-VINA and
SOLOMON did not participate.
26
SUPREME COURT OF NEW JERSEY
NO. D-151 SEPTEMBER TERM 2013
APPLICATION FOR
Order to Show Cause Why Respondent Should
DISPOSITION
Not be Disbarred or Otherwise Disciplined
IN THE MATTER OF
FRANK J. COZZARELLI,
An Attorney at Law
DECIDED May 2, 2016
OPINION BY Per Curiam
CONCURRING OPINION BY
DISSENTING OPINION BY
CHECKLIST DISBAR
CHIEF JUSTICE RABNER -----------------
JUSTICE LaVECCHIA X
JUSTICE ALBIN X
JUSTICE PATTERSON X
JUSTICE FERNANDEZ-VINA -----------------
JUSTICE SOLOMON -----------------
JUDGE CUFF (t/a) X
JUDGE FUENTES (t/a) X
TOTALS
5
2