Attorney Michael C. Hodes called it a “Star Chamber” proceeding.
He was in Seattle, about to climb into a cab to the airport and catch his flight home.
That’s when he got the phone call from his law firm.
“I’m 3,000 miles away and not even understanding what they are talking about,” Hodes said on the witness stand Monday in Baltimore County Circuit Court, where a judge is conducting a hearing on ethics charges levied against him. “It came out of nowhere. It blindsided me.”
Hodes said the callers never gave him a chance to explain the $270,000 loan he took out of a deceased client’s trust account by the firm he founded, Hodes, Pessin & Katz P.A.
“They were making accusations that I was riding off into the sunset with the money,” Hodes said.
Hodes took the stand on the third and final day of an evidentiary hearing in the case, in which the Attorney Grievance Commission is seeking sanctions against him for violating professional rules of conduct.
Pessin Katz Law P.A., the firm that succeeded HPK, has maintained that it acted quickly and fairly after discovering the loan, advising Hodes to get an attorney and allowing him to take his clients with him when he left the firm in April 2012. The firm did insist on having the trust repaid, and it reported its findings to the Attorney Grievance Commission of Maryland.
The Attorney Grievance Commission has accused Hodes of taking the $270,000 from a deceased client’s trust account and of backdating documents to try to make it look like a loan.
Hodes and his attorney, Andrew Jay Graham of Kramon & Graham P.A. in Baltimore, have maintained that Hodes was simply taking out a loan, which he intended to pay back with 5 percent interest. They also said Hodes told others at the firm about the loan and made no attempts to hide it.
“I was trying to find a way to get 5 percent returned [to the foundation] and I thought it was a good strategy,” Hodes said.
The loan was improper, Deputy Bar Counsel Raymond A. Hein said in his closing statement.
“Mr. Hodes had control of this money as a fiduciary and was not allowed to make a loan to himself at an interest rate he determined and would benefit himself,” Hein said.
Graham, however, said there is no clear and convincing evidence of fraud.
“[The Attorney Grievance Commission’s] view of the case is significantly skewed,” Graham said in his closing statement.
Hodes, who spoke with one arm propped to the side on the witness stand and the other gesturing while he spoke, also testified that he could have billed three or four times the amount he did to a deceased client he is accused of taking money from.
“I could have billed a heck of a lot more money,” Hodes said. “I was really very generous in billing my time.”
Hodes, who said he bills about $600 an hour, testified that he performed even the most meaningless of tasks for his former client, Gloria S. Ominsky, a retired nurse with no close family members, such as buying her a walker at Costco.
Often, he said, he would forget to ask for reimbursements or lose track of mileage he should have billed Ominsky for.
Overall, he said the firm billed Ominsky $170,000 between the beginning of his representation in 2005 to her death in 2011. Hodes testified that less than 10 percent went to him.
And as far as the loan, Hodes said it had a higher return rate than the average market value.
“You’re making allegations like the money benefitted me,” Hodes said. “It also benefitted the Ominsky trust.”
Hodes did say he regretted taking the loan, saying he was “heartbroken” and that he realized later it would have been simpler to secure a loan from a bank.
“I will go to my grave feeling bad about this situation,” Hodes said.
Hodes is still in charge of Ominsky’s account, which donates money to nonprofits like public radio station WYPR and Everyman Theatre in Baltimore.
In previous days in court, attorneys and staff from Hodes’ former firm, the current and past deans of the University of Baltimore School of Law, and Hodes’ wife testified.
Graham has elicited testimony about Hodes’ role as a major rainmaker at the firm, his busy schedule and his tendency to be forgetful and not pay attention to detail.
Hodes said in court that he is often very busy and relies on others to take care of the details. Currently, he said, he has 80 elder-care cases, 50 estates and trusts administration cases and 50 to 70 estate planning cases.
Judge Vicki Ballou-Watts will issue findings and deliver them to the Court of Appeals, which assigned her as the hearing judge. Each side will be allowed to file exceptions to her findings.
Whether and how Hodes is sanctioned will be up to the Court of Appeals.
Asked to leave
Hodes left HPK in April 2012 at the firm’s request, after it discovered the loan.
According to testimony at the hearing, the discovery came after Hodes gave his legal secretary a draft promissory note for $270,000, with the money coming from the Ominsky account and going to Mikelen Gallery LLC. The company had been established by Hodes and his wife to run an antiques gallery that never materialized.
The draft of the note then went to other attorneys in the elder law department, who warned Hodes not to deposit it.
Hodes said no one at the firm told him not to take out the loan.
The note made its way to the firm’s management, who investigated the loan before calling a partners meeting to discuss the topic.
There is no signed copy of the promissory note though Hodes said he signed it and one of his former paralegals also testified that he had seen the note.
Hodes said he did not want to allege any “wrongdoing” but that the note could have gotten lost in a file.
Graham said emotions were running so high at the firm that the partners were not “fair or reasonable.”
“This thing would have never gotten this far today if they had proceeded prudently,” Graham said.
Ominsky granted Hodes power of attorney and made him the personal representative of her estate in 2009, according to a petition for disciplinary action filed by the Attorney Grievance Commission last fall.
Hodes testified that he advised Ominsky to set up a foundation with the money she left behind and denied her offer to leave the funds to him.
When Ominsky died in February 2011, she left behind $400,000 in assets that she dictated should be used to establish The Ominsky Family Charitable Foundation.
Hodes opened an account at M&T Bank and deposited Ominsky’s funds there in March 2012.
Hodes then wrote a $270,000 check to Mikelen Gallery, which was established in 2006. He transferred that money from the company’s account to his personal checking account and used the money to pay off bills, including a $100,000 credit card bill, the Attorney Grievance Commission alleged.
He also wrote other checks, including one for $14,500 to his financial planning firm and another for $775 for his wife from Ominsky’s account after she died, then backdated them, according to the commission.
Graham and Hodes said in court that this was money owed to Hodes for his work on Ominsky’s account.
After the firm discovered the loan, partners held a meeting and eventually asked Hodes to leave. He was paid $216,000 in severance, which went towards repaying the debt in the Ominsky account. He paid the rest from his personal funds.
Members of the firm have said in testimony that the firm allowed Hodes a severance because he could not repay the $270,000 himself.
Hodes testified Monday that he obtained a $350,000 loan from a bank after leaving HPK to start his own firm.
Hodes opened his firm in May 2012, the week after he left HPK Law.