STEPHEN RONALD DIAMOND [#183617], 61, of Joshua Tree was disbarred Oct. 10, 2008, and was ordered to comply with rule 9.20.Ibid.
In a default proceeding, Diamond was charged with 28 counts of misconduct, including forming a partnership with a non-lawyer whom he assisted in the unauthorized practice of law, failing to notify clients of receipt of settlement funds, maintain client funds in a trust account, communicate with clients and return client files, and he committed acts of moral turpitude involving at least $182,000 in client funds and lent his name to be used by a non-lawyer.
In 2004, Jae Bum Kim, a non-lawyer, took over the lease of an attorney for whom he had worked as the office manager. He hired at least five case managers and eventually entered into an agreement with Diamond to form a personal injury law practice. Kim and his staff signed up clients, worked on their files, settled cases, endorsed and deposited settlement checks into Diamond’s client trust account and made withdrawals from the account.
More than 200 matters were settled over the course of a year, when Diamond worked part time in the office. Kim paid him approximately $5,000 a month in cash. During that year, more than $1.33 million was deposited and withdrawn from Diamond’s client trust account. The money was withdrawn in the form of checks that were either negotiated at a check cashing service or deposited into the general account.
As stated, the case's gravamen is aiding and abetting the unauthorized practice of law. Gestures toward misappropriation stop short of accusation and hint at a respondeat-superior theory. The following two paragraphs come from the October 28, 2008, judgment. In both fact and purport, they determine the overall severity of the charges:
In this matter, respondent had abused his clients’ trust and allowed Kim and staff to abscond thousands of dollars from settlement funds. Their taking of the funds is tantamount to misappropriation and respondent is responsible for their acts. The misappropriation of client funds is a grievous breach of an attorney’s ethical responsibilities, violates basic notions of honesty and endangers public confidence in the legal profession. In all but the most exceptional cases, it requires the imposition of the harshest discipline – disbarment. [Citation.]Id., at p. 26.
Moreover, respondent’s misuse of his CTA involving client funds of $182,777 and act of money laundering when he issued the $6,000 for himself were acts of dishonesty which “manifest an abiding disregard of the fundamental rule of ethics – that of common honesty – without which the profession is worse than valueless in the place it holds in the administration of justice. [Citation.]
The first reason the State Bar prefers releasing court judgments to supplying summaries is to avoid complying with a standard of care in its discipline publications. The State Bar Court based the misappropriation charge on the discredited and potentially defamatory theory of strict ethical liability. The State Bar, seeking the most punitive outcome, prefers the unrestrained original judgment — containing charges known false, such as money laundering — to the abridged version edited for supportability. The bizarre money-laundering allegation appeared in the draft Notice of Disciplinary Charges, was abandoned in the NDC, and reappeared in the October 2008 judgment, despite being uncharged. Transferring funds from trust account to business account isn’t plausibly a way to disguise the funds’ source, but a serious criminal charge expedites plea bargaining and justifies the outcome. The State Bar had only the flimsiest evidence that I allowed the unauthorized practice of law — a self-serving statement by Kim, the perpetrator, that I provided minimal supervision — but no evidence of misappropriation or money laundering. When facing potential consequences for its case summary, the State Bar retreated to the ground it could support. Unsupportable charges remain vital to the State Bar’s ability to coerce concessions without trial, and the State Bar’s accelerating reliance on aggressively released official allegations means knowingly false charges will often set the offenses’ severity.
The State Bar's recalcitrance to disclosing exculpatory evidence provides its second reason to release court documents, not extrajudicial summaries. Nondisclosure of evidence may render defamatory any conclusion the State Bar publishes extrajudicially. Long before the judgment or even the default, Kim compensated the person defrauded of the largest sum according to a notice defrauded person’s attorney served on the State Bar and me. Yet, this settlement was never noted by the State Bar in the default proceeding. A misappropriation charge against one party loses credibility when someone else returns the funds.