Law Firm Secretary Admits She Took Funds

Agreed she has admitted to what she did and she is taking the punishment for her crime.  She’s not making excuses.  She paid restitution and now it sounds like the attorneys are trying to look for other things to add to this case.  They are probably trying to blame every mistake ever made on her.  How can they add funds without documentation to support it.  I would like to know how she was supposed to act in court.  She smiled at friends who were there to support her.  I really don’t understand why it was so important that she smiled at her friends.  I’m confused. Everyone is acting like she’s not admitting to what she did.  Please tell me why we keep running this case into the ground.

“She told Sargent that she had hijacked money from a real estate trust account managed by her employer, the law firm Jessee & Read.“

JESSE & READ are in TROUBLE…... with a capital “T”

http://www.vsb.org/docs/Kobak_3-11-09.pdf

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VIRGINIA:BEFORE THE TENTH DISTRICT SUBCOMMITTEE, SECTION IIOF THE VIRGINIA STATE BARIN THE MATTER OFSUE ELLA EASTERLING KOBAKVSB Docket Nos. 07-102-070344,07-102-070249, 07-102-064898, 07-102-070665,and 08-102-071254SUBCOMMITTEE DETERMINATION(PUBLIC REPRIMAND WITH TERMSÌOn February 6, 2009, a meeting in this matter was held before a duly convened TenthDistrict Subcommittee, Section I) consisting of Elsey Harris, HI, Esq., chair, Stanford T. Mullins,Esq,, member and Linda F. Rasnick, lay member.Pursuant to Part 6, Section IV, Paragraph 13.0.4. of the Rules of the Virginia SupremeCourt, the Tenth District Subcommittee, Section II of the Virginia State Bar hereby serves uponthe Respondent the following Publie Reprimand with Terms:I. FINDINGS OF FACT1. Respondent was at all times relevant an attorney licensed to practice law in theCommonwealth of Virginia.2. At all times relevant, Respondent had a private law practice and drew clients from thegeneral public.3. As part of her private law practice, Respondent represented clients in the areas ofpersonal injury, decedent’s estates, and trust administration. Respondent also represented specialeducation children on a pro bono basis.4. As part of the nature of her law practice, Respondent maintained at least one escrowand trust account to handle client funds.5. Respondent also maintained a general operating account for her law practice.6. Respondent was required to perform audits, reconciliations, and periodic trial balances
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balances on her escrow and trust aocount(s), as required by Rule 1.15 of the Virginia Rules ofProfessional Conduct, and was required to perform other administrative functions in accordancewith the Virginia Rules of Professional Conduct. Respondent slowly over a seven year perioddelegated more and more responsibility for such tasks to her administrative assistant, StephanieWilliams. By trusting and in turn placing Ms. Williams in charge of reviewing and administeringRespondent’s accounts and books, Respondent gave Stephanie Williams more and more access tothese accounts and books.7. According to the Respondent and the investigation to date, it now appears thatStephanie Williams, during that seven year period and especially from the latter part of 2005,intentionally took money out of Respondent’s office and personal accounts. It further appears thatMs. Williams diverted funds Respondent was holding in Trust for a client (Client A).Specifically, it appears that Ms. Williams used forged documents to take Client A’s money out ofa Certificate of Deposit and out of Respondent’s Trust Account, Because Respondent delegatedher responsibilities under the Rules of Professional Conduct to monitor her own accounts, andbecause of what Respondent considers to be the negligence and recklessness of local banks,Respondent was unaware of the diversion of the funds from Client A.8. Beginning March 20, 2007, Ronald L. Crabtree, Senior Vice President for Lee Bank &Trust;Company notified Respondent of the following overdrafts on trust account # 392804:a. On March 14, 2007, R had an overdraft of $134.63.b. On April 5, 2007, R had an overdraft of $537.71.c. On April 11, 2007, R had an overdraft of $453.04.d. On April 12, 2007, R had an overdraft of $1,158.04.e. On May 16, 2007, R had an overdraft of $446.26.f On June 19, 2007, R had an overdraft of $63.48.9. The Virginia State Bar subsequently commenced an investigation to determine thereason for the overdrafts. Stephanie Williams prepared and submitted the initial responses to theVirginia State Bar, which she falsely represented were by and from Respondent. BecauseRespondent had delegated her responsibilities to Stephanie Williams under the Rules of
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Professional Conduct and because of the resulting conduct of Ms. Williams, Respondent wasunaware of the overdrafts or the Bank’s notifications of the overdrafts. Respondent was alsounaware of the Bar’s correspondence regarding the investigation and Ms. Williams’ responses inRespondent’s name.10. Respondent only learned of the Bar’s investigation in an August 2007 conversationwith the Bar’s investigator to schedule an interview. Respondent advised the investigator that shewas unaware of any overdrafts to her trust account and that she had not received anycorrespondence regarding the overdrafts, either from the Bank or the Bar.11. Respondent did not make the withdrawals from her trust account that caused theoverdrafts. Respondent states that all instances of insufficient or nonsufficient funds occurredbecause of fraudulent checks issued on her account.12. Respondent subsequently contacted the Virginia State Police because Respondentbelieved that Stephanie Williams had stolen from her. The Virginia State Police assigned SpecialAgent James Scott to investigate the matter.13. Respondent has fully cooperated with the Bar’s investigation since learning of it inAugust 2007. Respondent produced three computers used in her office to the Bar’s investigator.These computers were imaged. The hard drive used by Stephanie Williams had been damaged sobadly that no information can be recovered. Additionally, several bags of documents wereshredded before the investigators from the Bar and the Virginia State Police arrived atRespondent’s office. Respondent did not shred these documents and was unaware that they wereshredded. It appears that Ms. Williams destroyed all records (hard copy and computerized)pertaining to Respondent’s personal and business dealings.
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14. Because of Respondent’s failure to discover and thereby prevent Ms. Williams’actions, Respondent, during the Bar’s investigation, could provide little or no documentationregarding her bank accounts, including her Trust and operating accounts.15. Because of the nature of the defalcation and cover-up by Stephanie Williams, it isdifficult to quantify the amount of money stolen from Respondent’s accounts. The Virginia StatePolice has made an estimate of the amount taken from all of Respondent’s accounts including heroperating and personal accounts. The losses from Respondent’s non-trust accounts are notdirectly relevant to this Disposition, but they are illustrative of the nature and breadth of thedefalcation.16. Respondent maintains that only one client has been affected by the thefts.Respondent is in communication with her bonding company, her malpractice insurance carrier,and with more than one Bank and will seek restitution in criminal proceedings anticipated againstStephanie Williams, all in Respondent’s effort to reimburse Client A’s funds. Respondent willherself reimburse Client A if Respondent cannot timely recover from any of these entities and/orpersons.17. Respondent, due to poor health, was retiring her law practice when she first learnedof the defalcations. Respondent seeks to continue the practice of law in the Commonwealth ofVirginia solely to represent special education children on a pro bono basis. Respondent hasstated that she is phasing out her practice and that she only has two to three more files tocomplete. Upon completion of these files, Respondent intends to limit her practice solely to therepresentation of special needs children. As a practicing attorney in Virginia for 20years and having had a client Trust account for the past 15 years, Respondent asserts this is thefirst incident where monies that Respondent held in Trust for a client was diverted and stolen.
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Respondent regrets this incident and by the nature of her oath as a lawyer accepts her lawyerresponsibilities to address the consequences of the diversion and theft brought about by her oncetrusted long time employee, Respondent did not intentionally violate any of the Rules ofProfessional Conduct, acknowledges that she had direct supervisory authority over StephanieWilliams, and acknowledges that over the years of association with Stephanie Williams a morerigorous adherence to the record keeping requirements of Rule 1,15 of the Rules of ProfessionalConduct and delegations of fewer of Respondent’s record keeping duties to Stephanie Williamsmay have alerted Respondent earlier to the diversion of funds Respondent was holding for ClientA.18. Respondent has retained a certified public accountant to make sure that her escrowand trust account record keeping is in accordance with the requirements of Rule 1.15 of the Rulesof Professional Conduct.II. NATURE OF MISCONDUCTSuch conduct by Sue Ella Basterling Kobak constitutes misconduct in violation of thefollowing provisions of the Rules of Professional Conduct:RULE 1.15 Safekeeping Property(e) Record-Keeping Requirements, Required Books and Records. As a minimumrequirement eveiy lawyer engaged in the private practice of law in Virginia,hereinafter called “lawyer,“ shall maintain or cause to be maintained, on a currentbasis, books and records which establish compliance with Rule 1.15(a) and (c).Whether a lawyer or law firm maintains computerized records or a manualaccounting system, such system must produce the records and information requiredby this Rule.(1) In the case of funds held in an escrow account subject to this Rule, therequired books and records include:
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(i) a cash receipts journal or journals listing all funds received, thesources of the receipts and the date of receipts, Checkbook entriesof receipts and deposits, if adequately detailed and bound, mayconstitute a journal for this purpose. If separate cash receiptsjournals are not maintained for escrow and non-escrow funds, thenthe consolidated cash receipts journal shall contain separate columnsfor escrow and non-escrow receipts;(ii) a cash disbursements journal listing and identifying alldisbursements from the escrow account. Checkbook entries ofdisbursements, if adequately detailed and bound, may constitute ajournal for this purpose. If separate disbursements journals are notmaintained for escrow and non-escrow disbursements then theconsolidated disbursements journal shall contain separate columnsfor escrow and non-escrow disbursements;(iii) subsidiary ledger. A subsidiary ledger containing a separate accountfor each client and for every other person or entity from whommoney has been received in escrow shall be maintained. The ledgeraccount shall by separate columns or otherwise clearly identifyescrow funds disbursed, and escrow funds balance on hand. Theledger account for a client or a separate subsidiary ledger accountfor a client shall clearly indicate all fees paid from trust accounts;(iv) reconciliations and supporting records required under this Rule;(v) the records required under this paragraph shall be preserved for atleast five full calendar years following the termination of thefiduciary relationship.(2) in the case of funds or property held by a lawyer or law firm as a fiduciarysubject to Rule 1.15(d), the required books and records include:(i) an annual summary of all receipts and disbursements and changesin assets comparable to an accounting that would be required of acourt supervised fiduciary in the same or similar capacity. Suchannual summary shall be in sufficient detail as to allow areasonable person to determine whether the lawyer is properlydischarging the obligations of the fiduciary relationship;(ii) original source documents sufficient to substantiate and, whennecessary, to explain the annual summary required under (i),above;
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(iii) the records required under this paragraph shall be preserved for atleast five full calendar years following the termination of thefiduciary relationship.(f) Required Escrow Accounting Procedures. The following minimum escrowaccounting procedures are applicable to all escrow accounts subject to Rule 1.15(a)and (c) by lawyers practicing in Virginia.(2) Deposits. All receipts of escrow money shall be deposited intact and aretained duplicate deposit slip or other such record shall be sufficientlydetailed to show the identity of each item;(3) Deposit of mixed escrow and non-escrow funds other than fees andretainers. Mixed escrow and non-escrow funds shall be deposited intact tothe escrow account. The non-escrow portion shall be withdrawn upon theclearing of the mixed fund deposit instrument;(4) Periodic trial balance, A regular periodic trial balance of the subsidiaryledger shall be made at least quarter annually, within 30 days after the closeof the period and shall show the escrow account balance of the client orother person at the end of each period.(i) The total of the trial balance must agree with the control figurecomputed by taking the beginning balance, adding the total ofmonies received in escrow for the period and deducting the total ofescrow monies disbursed for the period; and(ii) The trial balance shall identify the preparer and be approved by thelawyer or one of the lawyers in the law firm.(5) Reconciliations.(i) A monthly reconciliation shall be made at month end of the cashbalance derived from the cash receipts journal and cashdisbursements journal total, the escrow account checkbook balance,and the escrow account bank statement balance;(iì) A periodic reconciliation shall be made at least quarter annually,within 30 days after the close of the period, reconciling cashbalances to the subsidiary ledger trial balance;(¡ii) Reconciliations shall identify the preparer and be approved by thelawyer or one of the lawyers in the law firm.
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(6) Receipts and disbursements explained. The purpose of all receipts anddisbursements of escrow funds reported in the escrow journals and subsidiary:rs shall be fully explained and supported by adequate records.Rule 5.3 Responsibilities Regarding Nonlawyer AssistantsWith respect to a nonlawyer employed or retained by or associated with a lawyer:(a) a partner in a law firm shall make reasonable efforts to ensure that the firm has ineffect measures giving reasonable assurance that the person’s conduct iscompatible with the professional obligations of the lawyer;(b) a lawyer having direct supervisory authority over the nonlawyer shall makereasonable efforts to ensure that the person’s conduct is compatible with theprofessional obligations of the lawyer; and(c) a lawyer shall be responsible for conduct of such a person that would be aviolation of the Rules of Professional Conduct if engaged in by a lawyer if:( 1 ) the lawyer orders or, with the knowledge of the specific conduct, ratifiesthe conduct involved; or(2) the lawyer is a partner in the law firm in which the person is employed, orhas direct supervisory authority over the person, and knows or should haveknown of the conduct at a time when its consequences can be avoided ormitigated but fails to take reasonable remedial action.HI. PUBLIC REPRIMAND WITH TERMSAccordingly, it is the decision of the subcommittee to offer the Respondent an opportunityto comply with certain terms and conditions, compliance with which will be a predicate for thedisposition of a Public Reprimand with Terms of this complaint. The terms and conditions are:(1) Within 30 days of the entry of the Subcommittee’s Disposition in this matter,Respondent shall provide Bar Counsel with the name of the Certified PublicAccountant (“CPA”) that will conduct the audits and inspections encompassed inthis Agreed Disposition. The CPA shall, if he/she/the firm has not done so, certifyfamiliarity with the requirements of Rule 1.15 of the Rules of ProfessionalConduct. The CPA must be pre-approved by Bar Counsel to review Respondent’sattorney trust account record-keeping, accounting, and reconciliation methods andprocedures to ensure compliance with Rule 1.15 of the Rules of ProfessionalConduct. In the event the CPA determines that Respondent is in compliance withRule 1.15, the CPA shall so certify in writing to Respondent and the Virginia StateBar. In the event the CPA determines Respondent is NOT in compliance with Rule
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with Rule 1. 15, the CPA shall notify Respondent and the Virginia State Bar, inwriting, of the measures Respondent must take to bring herself into compliancewith Rule 1.15. Respondent shall provide the CPA with a copy of the AgreedDisposition at the outset of the CPA’s engagement.(2) Respondent’s CPA shall provide as soon as practicable a report of his or her auditof all of Respondent’s operating and trust accounts, using Generally AcceptedAccounting Principles (“GAAP”) for the last seven years (the period of time duringwhich Respondent employed Ms. Williams). In order to assist the CPA,Respondent shall share with the CPA any and all information she has, and she shallrequest from the State Police any information they have been able to recreate. It isunderstood that the task will be difficult given the destruction of computer and hardcopy data. If the information cannot be audited, the CPA shall so state in writingand shall include the time period for which the information cannot be audited.(3) Respondent is obligated to pay when due the CPA’s fees and costs for services(including provision to the Virginia State Bar and to Respondent of informationconcerning the matter).(4) In the event the CPA determines that Respondent has not complied with Rule 1.15,Respondent shall have forty-five (45) days following the date the CPA issues awritten statement of the measures Respondent must take to comply with Rule 1.15within which to bring her into compliance. The CPA shall then be granted accessto Respondent’s office, books, and records, following the passage of the forty-five(45) day period to determine whether Respondent has brought herself intocompliance as required. The CPA shall thereafter certify in writing to the VirginiaState Bar and to Respondent either that Respondent has brought herself intocompliance with Rule 1,15 within the forty-five (45) day period or that she hasfailed to do so. Respondent’s failure to comply with Rule 1.15 as of the conclusionof the forty-five (45) day period shall be considered a violation of the Terms setforth herein.(5) Unless an extension is granted by the Bar for good cause shown to accommodatethe CPA’s schedule, the Terms specified in paragraphs I, 2, and 3, shall becompleted no later than June 30, 2009.(6) In June 2010, and no later than June 30, 2010, the CPA engaged pursuant toparagraph S shall reassess Respondent’s attorney’s trust account record-keeping,accounting, and reconciliation methods and procedures to ensure continuedcompliance with Rule 1.15 of the Rules of Professional Conduct. In the event theCPA determines that Respondent has NOT remained in compliance with this Rule,such non-compliance will be considered a violation of the Terms set forth herein.
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(7) Within 30 days of the entry of the Subcommittee’s Disposition in this matter,Respondent shall provide a list to Bar Counsel of all financial institutions in whichshe maintains trust, escrow, fiduciary or other account to comply with CRESPA,and shall promptly notify Bar Counsel each time she opens a new one for a periodof five years.(8) Respondent shall attend at least four hours of CLE in law office management, trustaccount compliance, or other related CLE and provide proof of attendance to BarCounsel, in addition, Respondent shall take an additional 6 hours of CLE within aone year period from the date of the Subcommittee’s Determination. Such hoursshall be in addition to Respondent’s mandatory CLE requirements.(9) Respondent warrants and represents to the Bar that to the best of her knowledgeand belief the loss identified to Client A in the approximate amount of $58,088.15constitutes the total loss caused by Ms. Williams’ actions. To the extent thatRespondent discovers other defalcations to any client of Respondent, either in thecourse of the audits of her books and records, or otherwise, and to the extent theCPA discovers such defalcations, Respondent shall immediately, and no later than10 days of learning of the loss, report the loss in writing to the office of BarCounsel,( 10) Respondent shall make full restitution, and provide proof to the Office of BarCounsel of the same, to Client A within a period of five years from the dale of theSubcommittee’s disposition.(11) For the next five years, Respondent shall submit to the office of Bar Counsel anannual report detailing the payments Respondent has made to any affected client(s),including Client A, the date(s) such payment(s) have been made, and Respondentshall submit proof to the office of Bar Counsel that such payment(s) have beenmade. Respondent shall also include within the annual report a statement attestingthat no further claims have been discovered or that additional claims have beendiscovered, the amount of such claims, the date of discovery, and the extent towhich such claims have been paid. If additional claims are discovered, and ifRespondent does not attest to the Bar that such claims have been paid, investigationshall be conducted to determine the nature of the loss. If the loss resulted from Ms.Williams’ actions and Respondent’s failures described herein, then Respondentshall provide Bar Counsel with a plan for restitution, and Respondent will remainobligated to make such restitution.Upon satisfactory proof that such terms and conditions have been met, this matter shall beclosed. If the terms and conditions are not met by the specified dates, this subcommittee shallimpose the alternative sanction of a Certification for Sanction Determination for the imposition of
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of an alternative disposition of a specific period of suspension of license pursuant to Part Six,Section IV, Paragraph 13.G.5. of the Rules of Court. The sole issue to be determined by theTenth District Section II Committee will be Respondent’s compliance with the terms herein. TheRespondent shall bear the burden of proof by clear and convincing evidence that she has met allthe terms. Respondent has waived her right to have a three judge panel pursuant to Va. Code Ann.Section 54.1 -3900 el seq, hear such matter.Any notice required to be given by Rule to Show Cause shall be by Certified Mail, ReturnReceipt Requested to Respondent at her address of record with the Virginia State Bar. Any noticerequired shall be deemed given and complete by Bar Counsel depositing such notice as set forthherein.Pursuant to Part Six, Section IV, Paragraph 13.B.8.C. of the Rules of the Virginia SupremeCourt, the Clerk of the Disciplinary System shall assess costs.TENTH DISTRICT SUBCOMMITTEEOF THE VIRGINIA STATE BARElsey Aljetj/Harris, IIIChair
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CERTIFICATE OF SERVICEI certify that on P3’ of February, 2009,1 mailed by Certified Mail, Return ReceiptRequested, a true and correct copy of the Subcommittee Determination PUBLIC Reprimand withTerms to Sue Ella Easterling Kobak, Esquire, Respondent, at P.O. Box 428, Pennington Gap, VA24277-0428, Respondent’s last address of record with the Virginia State Bar, and by first class mail,postage prepaid to Henry Keuling-Slout, Esq., Respondent’s Counsel, at Keuling-Stout, P.C., 125Clinton Avenue East, P.O. Box 400, Big Stone Gap, VA 24219.Renu Mago, Assistant Bar Counse!