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Legal Ethics

Misconduct Finding Upheld for Lawyer Who Reported Brother / Office Mgr’s $4M Theft from Client Funds

Posted Oct 23, 2012 1:43 PM CDT
By Stephanie Francis Ward

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Peter J. Galasso, a New York lawyer, should have been his brother’s keeper, the New York Court of Appeals found Tuesday.

Anthony Galasso was the office manager at the firm that was then known as Galasso & Langione, and Peter Galasso told authorities that his brother embezzled millions of dollars from client funds, Newsday reports. Nevertheless, the state’s high court found that Peter Galasso did not properly supervise the work of his brother, who spent the money on Barbra Streisand tickets and a Mercedes-Benz, among other things. In 2008, Anthony Galasso pleaded guilty to grand larceny and was sentenced to serve up to seven-and-a-half years in prison.

Peter Galasso and another partner were the only authorized signatures on the firm’s client escrow accounts, the opinion states, but Anthony Galasso altered bank applications to add himself as a signator. Between 2004 and 2007, he transferred more than $4 million from client escrow accounts to six other law firm accounts. According to the opinion, the funds replaced money that he already stole from the law firm.

To avoid detection, the opinion (PDF) notes, he had the bank send the escrow account statements to a post office box, and fabricated false statements for the firm to review.

Previously, a midlevel court found that Peter J. Galasso failed to properly supervise his brother’s work, which amounted to the misappropriation of client funds and a breach of fiduciary duty. The court also found the lawyer did not comply in a timely manner with the New York State Supreme Court Grievance Committee. He was suspended from practice for two years.

Tuesday’s opinion upholds the finding, with the exception of him complying with the grievance committee. It mentions a letter from the Nassau County District Attorney's Office stating that no one at the firm but Anthony Galasso had knowledge of the thefts while they occurred. The state high court sent the matter back to the appellate division, directing it to reconsider Peter Galasso’s suspension.

“Unquestionably, Anthony Galasso had devised a relatively sophisticated system and his fraud went undetected by the attorneys and accountant reviewing the documents he produced,” the New York Court of Appeal opinion states. “However, respondent ceded an unacceptable level of control over the firm accounts to his brother, thereby creating the opportunity for the misuse of client funds. Had respondent been more careful in supervising the accounts and his employee, he would have been aware of the malfeasance at a much earlier time when he could have substantially mitigated the losses.”

Updated at 3:44 p.m. to clarify headline.

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