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In re Johnson

Supreme Court of New York, Second Department

April 19, 2017

In the Matter of Paul Arthur Johnson, an attorney and counselor-at-law. (Attorney Registration No. 2839348)

          Mitchell T. Borkowsky, Hauppauge, NY (Leslie B. Anderson of counsel), for Grievance Committee for the Tenth Judicial District.

          PER CURIAM.

         The Grievance Committee for the Tenth Judicial District notified this Court, by letter dated October 18, 2016, that the respondent, Paul Arthur Johnson, had been disbarred from the practice of law in the State of California by order of the Supreme Court of California filed December 7, 2015. By order to show cause dated November 2, 2016, this Court directed the respondent to show cause why discipline should or should not be imposed upon him in this State pursuant to 22 NYCRR 1240.13, based on the misconduct underlying the discipline imposed by the order of the Supreme Court of California filed December 7, 2015, by filing an affidavit in accordance with 22 NYCRR 1240.13(b) with the Clerk of this Court, with proof of service upon the Grievance Committee, on or before November 23, 2016. The respondent has neither interposed a response, nor requested additional time to respond. The respondent was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on November 12, 1997, and admitted to the California Bar on May 29, 2001.

         By order of the Supreme Court of California filed December 7, 2015, the respondent was disbarred from the practice of law in that State for violating California Rules of Professional Conduct rule 4-100(A) (which provides, in part, that all funds received or held for the benefit of clients must be deposited in a client trust account and no funds belonging to the attorney or law firm shall be deposited therein), and California Business and Professions Code, section 6106 (which provides, in part, that the commission of any act involving dishonesty, moral turpitude, or corruption constitutes cause for suspension or disbarment).

         As revealed in the State Bar Court Decision and Order of Involuntary Inactive Enrollment (hereinafter the SBC order), the State Bar of California (hereinafter the State Bar) initiated the charges against the respondent by filing a Notice of Disciplinary Charges on December 5, 2014. The respondent filed a response on February 2, 2015. The trial was conducted over three dates: March 24, March 25, and April 7, 2015.

         The underlying misconduct, as set forth in the SBC order, involved the following two matters:

         The DeCuir Matter

         "Peter DeCuir (DeCuir) is the CEO of PlayersRoad, Inc., a company seeking to build an internet website. In 2013, DeCuir was seeking $3.5 million in capital to finance his company. Through a friend who brought businesses seeking capital together, DeCuir was introduced to Arthur Tucker (Tucker), CEO of MSW Industries LLC. Tucker promised DeCuir a $5 million return on an $110, 000 investment or at the very least, double his investment within 20 days. To this end, on November 15, 2013, DeCuir and Tucker entered into a Financial Cooperation Agreement (Agreement) involving a Private Bank Monetization Transaction, ' specifically the funding, delivery and joint use of a $10 million bank guarantee/standby line of credit.

         "On November 15, 2013, pursuant to the Agreement, DeCuir delivered $110, 000 to respondent's client trust account..., in order to accomplish the funding for the transaction. The Agreement specifically stated that DeCuir's $110, 000 was never at risk because it was accomplished by bank to bank delivery with the $110, 000 held in an escrow account of an attorney. Pursuant to the Agreement and to respondent's stipulation of facts, respondent was named as an escrow agent with respect to the $110, 000. Respondent stipulated that in his capacity as an escrow agent, he was to transfer DeCuir's funds to the funding bank in order to fund the transaction only upon confirmation from DeCuir and Tucker. In short, the Agreement specified that respondent was to act as an unbiased fiduciary for the completion of the Agreement."

         The State Bar Court found that, despite the respondent's knowledge of the terms of the Agreement, "between November 18 and December 3, 2013, [he] disbursed all of DeCuir's $110, 000 without DeCuir's authorization or consent." In fact, he disbursed the funds to Tucker directly and/or to third parties. Further, although the respondent argued that he had no fiduciary duty to DeCuir, the State Bar Court found that he was an escrow agent, and that he owed a duty to protect the funds in his trust account on behalf of DeCuir. The State Bar Court concluded that there was clear and convincing evidence that the respondent willfully misappropriated DeCuir's $110, 000 when the respondent's trust account balance fell to $250 on December 30, 2013, and later dropped to $.50 on March 12, 2014. In April 2014, the respondent returned $20, 000 to DeCuir.

         The Chen Matter

         "In August 2013, Lili Chen (Chen) sold her home in Australia for approximately $130, 900. The proceeds of the home represented all of her savings. Her fiancé, Tim Overton (Overton), convinced her to use the proceeds to help him build a church near the airport in Sydney, Australia. To this end, Chen was introduced to Arthur Tucker.

         "On November 25, 2013, Chen and Tucker entered into a Non-Recourse Loan Agreement (Loan Agreement) involving a Private Bank Monetization Transaction, ' specifically the funding, delivery and joint use of a $10 million bank guarantee/standby ...


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