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Michael Hodes
Michael Hodes, right, walks out of the Baltimore County Circuit Court on March 5, 2014 with attorney Andrew Jay Graham. (The Daily Record/Maximilian Franz)

Judge: Hodes broke the rules

Conduct found to be dishonest, fraudulent; lawyer vows to fight

Attorney Michael C. Hodes misused trust money, created a conflict of interest, misled investigators and engaged in conduct that “can only be described as dishonest and fraudulent,” a Baltimore County Circuit Court judge concluded in the disciplinary case against him.

Judge Vicki Ballou-Watts found Hodes violated each of the Maryland Lawyers’ Rules of Professional Conduct that he had been accused of breaking by the Attorney Grievance Commission of Maryland.

Based on its investigation into a complaint by Hodes’ former law firm, the commission accused him of taking more than $270,000 from the estate of a deceased client — a retired nurse who had set aside the money to create a charitable trust. Hodes has maintained he took the money as a loan that he intended to pay back with 5 percent interest, benefiting the trust.

Ballou-Watts was assigned as the hearing judge by the Court of Appeals, which will now allow both sides to file exceptions to the judge’s findings and conclusions and ultimately will determine Hodes’ professional fate.

Hodes’ lawyer in the ethics case, Andrew Jay Graham, said he plans to file exceptions to several of Ballou-Watts findings of fact and all of her conclusions of law.

Based on the evidence and the three-day hearing she conducted in March, Ballou-Watts said Hodes “showed no remorse for his actions” and instead “complained that he was subjected to a ‘star chamber’ investigation by his former law firm and claimed members of the firm reported his activity to Bar Counsel in an effort to ‘steal’ his practice and ‘make him look like a crook.’”

Ballou-Watts mentioned mitigating factors, such as Hodes’ lack of a prior disciplinary record, the restitution he made after the transfer was discovered, his charitable and educational efforts, and the recognition he has received for his practice in elder law and estates and trusts law.

“Yet, with all his knowledge and experience in the practice areas of elder law and estates and trusts, [Hodes] displayed a remarkable lack of insight into his professional responsibility as an attorney and fiduciary,” Ballou-Watts wrote. “He continued to insist that he had taken a ‘loan’ of $270,000 from the Trust in order to pay personal bills, as if this form of self-dealing was acceptable.”

The Court of Appeals will hold a hearing before deciding whether to accept Ballou-Watts’ conclusions and impose sanctions, which can range from no sanction to disbarment.

Hodes has not been charged with a criminal offense, Ballou-Watts noted.

Hodes, who was admitted to the Maryland Bar in 1975, left the firm he helped found, Hodes, Pessin & Katz P.A. in spring 2012 after the firm discovered his actions. (That firm became Pessin Katz Law P.A. in Towson.) Hodes soon opened his own firm, Michael Hodes LLC.

“We are not surprised by Judge Ballou-Watts’ findings and conclusions,” said Drake Zaharris, PK Law’s managing director. “We think she wrote a careful and considerate opinion. Clearly, our law firm had an ethical obligation to report the discovery of this matter to Bar Counsel, and consistent with that we made certain the money was returned to the trust.”

Glenn M. Grossman, bar counsel to the Attorney Grievance Commission, declined to comment on ongoing disciplinary petition.

Ballou-Watts found Hodes took money out of deceased client Gloria S. Ominsky’s trust shortly after her death, later creating and backdating a promissory note. The judge also found Hodes lied about the existence of a promissory note guaranty during the Attorney Grievance Commission’s investigation.

“[Hodes] was not entitled to ‘loan’ $270,000 or any other monies from the Trust to himself,” Ballou-Watts wrote. “However, if he had truly intended to ‘borrow’ funds from the Trust, he would have sought approval from independent counsel and executed a promissory note in his own name at the time the funds were removed.”

Graham, of Kramon & Graham P.A. in Baltimore, said he intends to challenge the factual finding that there was no executed version of the promissory note, because one of the firm’s paralegals testified that he had seen it. Ballou-Watts found the paralegal was simply mistaken.

In one of the few findings in Hodes’ favor, Ballou-Watts concluded that Hodes had not obtained unauthorized reimbursements from Ominsky when he charged her for gas and a parking citation issued to his wife, who ran personal errands for Ominsky for $25 an hour.

The judge, however, agreed with bar counsel that Hodes had backdated a $775 check to his wife and a $14,500 check to Michael Hodes Financial, his financial consulting business, from Ominsky’s trust account soon after she died.

Though Hodes argued this money was for financial consulting he had done for Ominsky, Ballou-Watts found that Ominsky never entered into a written agreement with Michael Hodes Financial.

Secretary’s suspicion

Ominsky, a retired nurse, granted Hodes power of attorney and made him the personal representative of her estate in 2009.

She died in February 2011, leaving behind $400,000. Her will dictated the money be used to establish a charitable foundation, “The Ominsky Family Charitable Foundation.” Under the terms of the will, Hodes would establish the foundation and select board members.

Hodes appointed himself president and treasurer of the foundation and named his wife, Ellen Hodes, the vice president and secretary, but appointed no other board members.

In March 2012, Hodes deposited about $375,000 into an account he created at M&T Bank, the “Gloria S. Ominsky Irrevocable Trust,” Ballou-Watts stated in her opinion.

Hodes then wrote checks from the account a few weeks later — one for $3,500 to Michael Hodes Financial and one for $270,000 to Mikelen Gallery LLC, a company he and his wife founded in 2006 to open an antiques gallery which never materialized.

Hodes then transferred $265,000 from the Mikelen account to his personal checking account and used the funds to pay off credit card bills totaling about $100,000, according to Ballou-Watts’ opinion.

In early April 2012, Hodes asked his secretary to create a promissory note obligating Mikelen Gallery to repay $270,000 to the Ominsky Trust. Though the note was created April 4, it was backdated to March 30, 2012, Ballou-Watts found.

After a tipoff from Hodes’ secretary, several wealth preservation attorneys questioned Hodes about the loan, who assured them his accountant had OK’d it.

The lawyers took the matter to Zaharris, the managing partner, who investigated the matter with a few other attorneys then called a meeting of the partners. Zaharris and several other partners then called Hodes on April 29, 2012, a Sunday. Hodes admitted to taking the money to pay personal bills and the firm advised him to retain counsel.

HPK partners asked Hodes to leave, giving him a $216,000 compensation package on the condition he repay the foundation. Hodes paid the rest of the amount with personal funds.

In May 2012, HPK reported the matter to the Attorney Grievance Commission, which filed a petition for disciplinary action against Hodes last October.

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