Appeal of discipline leads to much stiffer penalty

A San Francisco attorney who appealed a State Bar Court discipline recommendation wound up with a much stiffer penalty, including an order that he make restitution of more than $16,000. MURRAY DONALD KATZ [#24333], 68, was suspended for five years, stayed, and was placed on five years of probation with an actual two-year suspension and until he makes restitution and proves his rehabilitation. He also was ordered to pass the CPRE and comply with Rule 955. The order took effect April 18, 1996.

The order marks a dramatic increase in the level of discipline originally recommended by a former State Bar Court hearing judge. In 1994, Judge Alan K. Goldhammer recommended that Katz be suspended for 18 months, stayed, and placed on three years probation with an actual suspension of 75 days. He did not require restitution.

No remorse demonstrated

When Katz asked for reconsideration, Goldhammer increased the actual suspension to 90 days, stating that Katz had not demonstrated any remorse for his misconduct.

Katz then appealed to the review department, which boosted his actual suspension to two years and ordered restitution totalling more than $16,000 plus interest. The appeals panel also reinstated two counts of misconduct Goldhammer had dismissed.

The court found that Katz endorsed a client's false financial statement in connection with the purchase of a business, filed a Chapter 11 bankruptcy petition in bad faith and failed to obey bankruptcy court orders.

Katz helped a client negotiate extremely favorable terms for the purchase of a paint manufacturing business. As part of the deal, his client had to provide a financial statement of his personal net worth.

The court found that although Katz knew his client grossly exaggerated his assets, the attorney endorsed the statement anyway. Katz also misrepresented that another business owned by his client was successful financially when in fact it was not.

When the deal went sour, all parties to the deal sued each other for fraud.

Bankruptcy filed

Katz' client declared bankruptcy in 1987 when facing foreclosure on a construction project. However, the bar court found that Katz filed the Chapter 11 petition for the express purpose of forestalling the foreclosure sale.

During the proceedings, the bankruptcy court found that Katz and his client wilfully failed to turn over all records to an examiner and it ordered Katz to pay sanctions of $1,000.

In addition, the creditor sought a bad faith ruling and sanctions from the court and received both. The court found that the bankruptcy petition was filed in bad faith and was an abuse of the bankruptcy process and that Katz failed to appear at several hearings and meetings. It awarded sanctions of $7,500 to the creditor.

Moral turpitude found

As a result of his conduct, the bar court found that Katz failed to maintain respect due to the courts and pursued the bankruptcy in bad faith. His misconduct was found to involve moral turpitude.

His "meritless defenses and contentions in the . . . proceedings clearly demonstrate that (Katz) lacks insight into the wrongfulness of his actions," the review department wrote. He "does not fully comprehend his professional responsibilities."

Katz himself declared bankruptcy in 1988.

Katz also was disciplined in 1985 for writing 13 checks for more than $12,000 on insufficient funds. The misconduct in the bankruptcy case occurred while he was on probation with the bar.