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Evidentiary hearing opens in ethics case against attorney

An attorney for lawyer Michael C. Hodes argued Tuesday that his client had simply taken a loan — one he intended to pay back, with interest.

The Attorney Grievance Commission of Maryland, however, said Hodes took $270,000 from a deceased client’s trust account intended for charitable donations while he was the representative of the estate.

Hodes, of Michael Hodes LLC, went before Judge Vicki Ballou-Watts in Baltimore County Circuit Court on Tuesday for the first day of the evidentiary hearing in the disciplinary action against him.

“[Hodes] is not the selfish, conniving person they make him out to be,” his attorney, Andrew Jay Graham, told the judge.

At the start of the hearing, Graham said Hodes’ client, retired nurse Gloria S. Ominsky, approved any actions Hodes took while she was alive.

Graham also said the money Hodes took from Ominsky’s account after she died was a loan that Hodes intended to pay back with 5 percent interest. That, Graham said, was the intended purpose of the trust account — to earn money year over year.

“If Ms. Ominsky would be able to weigh in on this issue from above, she would have said, ‘This is fine,’” said Graham, a partner at of Kramon & Graham P.A. in Baltimore

The evidentiary hearing is expected to last at least through Wednesday. Ballou-Watts has been assigned by the Court of Appeals to conduct the hearing and make findings, which either side can then challenge. The Court of Appeals itself will ultimately determine if and how Hodes should be sanctioned.

The Attorney Grievance Commission alleged Hodes took money from Ominsky’s account to pay off bills, including a $100,000 credit card bill.

Hodes left the firm he helped found, Hodes, Pessin & Katz P.A., in spring 2012, shortly after the firm discovered Hodes’ actions concerning Ominsky’s trust.

The law firm, now known as now Pessin Katz Law P.A. in Towson, filed a complaint with the Attorney Grievance Commission and the commission filed a petition for remedial action against Hodes in October last year.

Graham told the court that over the course of Hodes’ six-year relationship with Ominsky, she came to see him as family, even offering to leave her money with him after she died — an offer Hodes refused.

“The relationship was characterized on both sides by loyalty, trust and affection,” Graham said.

Graham also pointed to mitigating factors, like Hodes’ cooperation with Bar Counsel’s investigation and his lack of prior disciplinary record.

“People don’t suddenly become fraudsters and start committing fraud out of the blue,” Graham said in court.

A six-year relationship

Hodes began representing Ominsky in 2005, according to the commission’s disciplinary petition. In a 2009 will Hodes executed on her behalf, Ominsky granted him power of attorney and designated him as the personal representative of her estate.

Ominsky died in February 2011, leaving $400,000 in assets and no surviving family. Her will dictated that the funds were to go to The Ominsky Family Charitable Foundation.

The funds went into an HPK trust account before Hodes deposited it in a checking account he created called “Gloria S. Ominsky Irrevocable Trust” at M&T Bank in March 2012.

A few weeks after creating the account, Hodes wrote two checks against it. The first, for $270,000, went to Mikelen Gallery LLC, a company formed by Hodes and his current wife to operate an art gallery, which never launched. The second check, for $3,500, went to Michael C. Hodes Financial Consultants Ltd., which is Hodes’ financial planning company, according to the commission’s petition.

Hodes then transferred $265,000 from Mikelen Gallery into his personal checking account, which had a balance of about $3,000 at the time.

Though the commission’s petition claims no other attorney at HPK knew of the withdrawals, Graham insisted in court that Hodes had mentioned a loan to other attorneys at HPK, his wife and an outside accountant.

“Someone who was perpetuating fraud does not go around telling people about it,” Graham said.

The commission stated that Hodes asked his secretary to write a promissory note for the $270,000 after taking the funds from the account. Though the note is dated March 30, 2011, it was actually created in April 2012, according to the petition.

After depositing the money in his checking account, Hodes paid $25,010 to M&T Bank and more than $75,000 on four credit card accounts.

He wrote checks to the “Weingart Trust” for $161,500 and the “Laurie Manney Trust” for $1,272. Manney was Hodes’ sister. Hodes wrote four $9,000 checks to his ex-wife, Lois Hodes, according to the petition.

‘Entourage’

The commission also took issue with actions by Hodes and his current wife, Ellen Hodes, prior to Ominsky’s death.

The commission claimed Hodes billed Ominsky $25 per hour to have his wife run her personal errands, and that his wife used Ominsky’s account to reimburse herself for gas, a parking ticket and speeding ticket.

Graham contended in court that Hodes and Ominsky had a very close relationship and that she had given him permission to drive her car.

Graham also said Hodes’ wife had become close with Ominsky, with Ellen once going to her hospital bed at 3 a.m.

Richard Adams III, a former executive assistant to Hodes who is now at Rosenberg Martin Greenberg LLP in Baltimore, testified that he and other HPK staff would run Ominsky’s errands — often at a much higher rate, $175 an hour — and that the elderly client told him on many occasions that she liked having a team of staff members helping her with her legal work as well as her errands.

“Ms. Ominsky liked having an entourage of people,” Graham said in court. “And she could pay for it. It made her happy. It served a purpose and she was happy to pay.”

The commission alleged Hodes wrote two checks from Ominsky’s checking account – one for $775 to his wife and another for $14,500 to his financial planning company — after she died, and back-dated them.

Graham said Hodes was owed the money.

“Mr. Hodes had earned the $14,500,” he said. “All he was doing was bringing that current.”

Crisis management

Tuesday’s hearing also revealed how Hodes’ firm responded after discovering the transactions.

Attorney Steven A. Allen testified that questions were first raised about the Ominsky account on a Wednesday in late April, he and a few other partners investigated for a couple days before calling a partners’ meeting the following Sunday morning.

Though there was no formal vote, there was largely a feeling among partners that Hodes should leave the firm, Allen told the court.

“There was an enormous amount of anxiety about what happened,” Allen said.

Allen, PK Law Managing Director Drake Zaharris and their outside counsel, Arnold M. Weiner of The Law Offices of Arnold M. Weiner in Baltimore, called Hodes on the phone while he was at a conference in Seattle to talk to him about the firm’s discovery.

The firm never forced Hodes to leave, but asked him to, Allen said.

“The firm was teetering,” Allen said in court. “If he was not leaving, there might not be a firm.”

Allen stressed that the firm worked with Hodes as he left, agreeing not to make public comment on his departure and allowing him to take his clients.

“I told him from day one, ‘We are treating you fairly,’” Allen said. “‘We have to get through this. It’s a serious matter, but we are willing to be fair.’”

When Hodes left HPK, he repaid the $270,000 to the Ominsky trust, which was taken care of partially by the $216,000 the firm gave Hodes at his separation.

Allen said during his testimony, however, that Hodes did not have a right to a severance and the agreement was drafted in that way because the firm felt it was partially responsible and Hodes insisted he did not have $270,000.

Graham responded that after leaving PK Law, Hodes obtained a bank loan for $350,000 on “basically his signature alone.”

Hodes, who also has his own talk show on WBAL-AM on financial planning, started his new law firm the week after leaving HPK, with offices in Towson, Columbia and Salisbury. He told The Daily Record at the time that he had wanted to get away from the large firm life, saying there was no animosity between him and his former partners.