ANNAPOLIS — The Court of Appeals disbarred longtime lawyer Michael C. Hodes on Tuesday afternoon, hours after hearing argument in the disciplinary case against him over his handling of some $270,000 a deceased client had left in his care.
The disbarment will take effect immediately, the top court said in its unsigned one-page order. The court promised to give its reasons in an opinion later.
“The court has spoken and there is nothing else to say,” said Andrew Jay Graham, Hodes’ lawyer.
Graham, of Kramon & Graham P.A. in Baltimore, said he had spoken to Hodes after the court’s order but declined to discuss details of the conversation.
Hodes did not immediately respond to a request for comment left at his Towson office.
On Tuesday morning, Graham told the court Hodes viewed the money he took from the client’s trust as a loan and always planned to repay it. (He did, in fact, repay it upon being forced out of his former law firm.)
Graham also said all actions taken by Hodes were known by his former law firm, and that the loan was designed to benefit the client’s estate by producing interest income.
“He never dreamed he wouldn’t repay the loan,” said Graham. “He proceeded with good intent. This was not a good idea but this is not subject to a violation” of the Maryland Rules of Professional Conduct.
The Attorney Grievance Commission of Maryland, represented by Deputy Bar Counsel Raymond A. Hein on Tuesday, had another description for Hodes’ actions.
“This was a theft, pure and simple,” Hein told the Court of Appeals.
Arguing for Hodes’ disbarment, Hein pointed to a 1982 Court of Appeals’ opinion that held a fiduciary can’t make a loan to himself. The lawyer in that case also was disbarred.
While the commission sought Hodes’ disbarment, the ultimate sanction was up to the Court of Appeals.
After the disbarment order was issued, Bar Counsel Glenn M. Grossman said he appreciated the speed with which the top court acted, but did not want to comment further until the opinion is released.
The hearing judge assigned to make initial determinations in the case, Baltimore County Circuit Judge Vicki Ballou-Watts, in April found Hodes violated each of the rules he had been accused of breaking by the Attorney Grievance Commission.
Based on its investigation into a complaint made by Hodes’ former law firm, the commission accused Hodes of taking the money from Gloria S. Ominsky, a retired nurse who had set aside the money to create a charitable trust. Hodes has maintained that he intended to pay back the money with 5 percent interest, benefiting the trust.
Graham told the court Tuesday that Hodes could have borrowed the money elsewhere, noting that Hodes in fact obtained a $350,000 loan from a bank shortly after leaving what was then known as Hodes, Pessin & Katz P.A. in Towson.
Ballou-Watts ultimately concluded Hodes misused trust money, created a conflict of interest, misled investigators and engaged in conduct that “can only be described as dishonest and fraudulent.”
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.’”
Hodes has not been charged with a criminal offense, and Graham said Tuesday that Hodes has never previously been subject to discipline by the top court.
Hodes, who was admitted to the Maryland Bar in 1975, left the firm he helped found in the spring 2012 after the firm discovered his actions. (That firm is now Pessin Katz Law P.A.)
Hodes soon opened his own firm, Michael Hodes LLC.
Drake Zaharris, managing director of Pessin Katz, said in an emailed statement the firm knew nothing of Hodes’ improprieties, and members unanimously asked Hodes to leave with 48 hours of discovering his actions.
“The record and Judge Ballou-Watts’ findings of fact make that clear, and Bar Counsel’s statements during oral argument fully support our firm’s version of the events,” Zaharris said. “We agree with the decision of the Court of Appeals.”
Ballou-Watts found Hodes took money out of 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.
Ominsky 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 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.
Chairman or counsel?
Graham and Court of Appeals Judge Sally D. Adkins clashed several times over Graham’s saying Hodes was acting as chairman of the foundation when he took the money from the estate, and not as a lawyer.
“Does it matter he began life as an attorney?” Adkins asked.
Graham replied that loans by an estate to a lawyer representing the estate are allowed, and that borrowing is permissible so long as the loan is “fair and reasonable.”
Retired Judge Dale R. Cathell picked up on Adkins’ line of questions. Cathell was sitting in place of Judge Shirley M. Watts, who recused herself from the arguments.
“This court has disbarred lawyers for not paying income tax,” said Cathell. “If a lawyer is caught robbing a bank, he’s going to get disbarred whether or not he was acting as a lawyer.”
“There’s no clear and convincing evidence [Hodes] was acting fraudulently,” Graham replied.
HPK partners asked Hodes to leave in April 2012, 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 in October 2013.
The case is Attorney Grievance Commission of Maryland v. Michael C. Hodes, AG No. 61, September 2013 Term.