Supreme Court says no to resignation, disbars attorney

A Woodland Hills attorney who was convicted in 1999 of defrauding the IRS in a check-writing scheme was disbarred last summer, a month after the Supreme Court declined to accept his voluntary resignation.

In what State Bar prosecutor Don Steedman believes was an unprecedented action, the bar petitioned the court to reject what it thought was a last-minute effort by MITCHELL H. KREITENBERG [#108440] to avoid disbarment. "We thought the disbarment recommendation should go forward," Steedman said. "It had been litigated all the way through and we thought the last-minute resignation wasn't appropriate."

The State Bar Court's review department had overturned a hearing judge's recommendation that Kreitenberg, 45, be suspended for four years after his criminal conviction, and instead recommended that he be disbarred. The Supreme Court has the final say in such decisions.

The disbarment took effect June 13.

After working in-house for an insurance company in the early 1980s, Kreitenberg was recruited by his cousin to join in his personal injury business. Shortly after doing so, he became aware that some, if not all, of his cases were referred by cappers, who were paid for the referrals. According to court papers, he also knew that legal fees from those cases were split among the cappers, his cousin, the non-attorney office manager and himself. Kreiten-berg also knew these activities were illegal, and on several occasions expressed his concerns to his cousin, who challenged him to leave the practice. There is no evidence the cases themselves were fraudulent.

Eventually, Krietenberg became part of a scheme to use his client trust account to pay for the illegal referrals and to shield his income from the IRS. He deposited settlement awards into the account and made the appropriate disbursements, but instead of collecting the legitimate fees to which he was entitled, he wrote phony checks against the trust account, using his clients' names as fictitious payees and authorizing the checks to be forged. To further disguise the withdrawal of his fees, Kreitenberg and his cousin agreed the checks should be in a non-sequential order from the initial checks written o the clients.

Kreitenberg wrote more than 680 phony checks over three years, withdrawing about $1.64 million in legal fees. None of the money was reported to the IRS. Instead, the fees, split equally among Kreitenberg, his cousin and the office manager, were used "specifically to fund a massive capping and fee-splitting scheme," according to the charges.

As a result of the conspiracy, Kreitenberg earned between $250,000 and $300,000 a year for 1990, 1991 and 1992. The practice ended when the IRS audited his tax returns.

By 1996, the U.S. Attorney was conducting a criminal investigation; Kreitenberg fully confessed to his criminal activities and pleaded guilty to one count of conspiracy to defraud the IRS.

As part of the plea agreement, he was ordered to pay all back taxes, but according to court papers, there was no evidence in the record that he had fully repaid what he owed.

Kreitenberg also cooperated with authorities, who successfully prosecuted his cousin. Manny Kreitenberg [#90215] resigned from the bar with charges pending in 1994. As a result of providing information about other targets of the investigation, Kreitenberg was sentenced to five years of probation, with three months in a correctional center and three months of home detention.

Placed on interim suspension by the bar in 1999, Kreitenberg's case was referred to the State Bar Court for hearing. He stipulated to the facts underlying the conspiracy but not to a finding of moral turpitude. Judge Robert Talcott found that Kreitenberg had committed moral turpitude, but finding evidence of "extraordinary" good character, he recommended an actual suspension of four years with credit for the interim suspension.

The State Bar appealed, seeking Kreitenberg's disbarment.

The review department upheld the finding of moral turpitude, committed over six years, and also found that Kreitenberg's clients were harmed because he breached their trust and exposed them to possible tax audits.

"Given the magnitude, scope and duration of [Kreitenberg's] crime, we conclude that he should be disbarred," wrote Judge Judith Epstein. "We cannot agree with the hearing judge that the mitigation evidence is so compelling as to warrant a discipline less than disbarment."

Judges Ron Stovitz and Madge Watai concurred. Kreitenberg may seek reinstatement five years from the initial date of his suspension, Oct. 27, 1999.