Disbarment urged for six-figure misappropriation

A Carlsbad attorney faces disbarment after a State Bar Court review panel upheld a hearing judge’s findings that she misappropriated more than $112,000 from two clients. The three-judge panel’s recommendation that PATRICIA ANN GREGORY [#226239], 62, be disbarred goes to the Supreme Court for action.

Gregory also pleaded guilty in January in San Diego superior court to felony embezzlement and advertising her legal services without a license, a misdemeanor. She initially was charged with 11 felonies, including fraud and grand theft, for allegedly stealing from her clients. Eight charges were dropped and two were reduced to misdemeanors. She was sentenced in February to one year in jail and five years of probation.

State Bar Court Judge Richard Honn recommended disbarment for Gregory a year ago and ordered restitution of $74,162.50 plus interest to one client and $27,500 plus interest to another. Gregory appealed to the review department, denying misappropriation and asserting that the funds in question were earned and properly collected as attorney fees. She also said her former clients lack credibility and that she deserved more mitigation than the hearing judge awarded.

Judge JoAnn Remke, writing for the review panel, disagreed. “We conclude the record supports the hearing judge’s findings that Gregory misappropriated over $112,000 from two clients and that her misconduct was surrounded by significant aggravating factors, including dishonesty.”

In a 2007 divorce case, Gregory received $188,325 on behalf of her client, Luwain Ng, and Ng’s husband. The money represented the proceeds from the sale of the couple’s home. Although she placed the money in her client trust account, Gregory repeatedly transferred funds to a non-trust account and withdrew more than $85,000 for personal expenses. Although she gave Ng’s husband more than $94,000, she allowed the trust's balance drop to $239.

When ordered by the court to disburse $79,162 to Ng, Gregory told Ng she didn’t have the money because it had been seized to pay her outstanding student loans. She signed a promissory note acknowledging she owed Ng money and although she began to make monthly payments, Ng learned Gregory had lied about one potential source of money and demanded full payment. Ng also filed a complaint with the State Bar in 2009, leading Gregory to refuse further payments.

In an email, Gregory wrote: “If you wanted to punish me you have succeeded. I am destroyed. You have $20,000, a ridiculously low legal bill and my obligation to pay the $80,000. I have nothing. Seems a bit unfair, no? But you did get revenge. Hope it was sweet.”

The review panel found that Gregory failed to maintain client funds in trust, obey a court order and committed acts of moral turpitude. As of the Feb. 7, 2012, ruling, Gregory owed Ng more than $74,100.

A second client, Denise Doll, hired Gregory to handle various legal matters and in one case she negotiated a $27,500 settlement from an insurer for property loss. Doll’s prior attorney asserted a lien against the settlement for attorney fees. Four months later, Gregory told Doll she couldn’t give her any funds because of the other lawyer’s lien. In truth, Gregory already had withdrawn almost all of Doll’s money for her own use.

She later wrote letters, including at least three to potential landlords, stating that she was holding more than $24,000 in trust for Doll to cover at least a year of rent. Another letter guaranteed $14,100 for Doll’s benefit based on funds she was holding in trust. In fact, Gregory held no money in trust at that point.

When Doll demanded full payment, Gregory said her lien and that asserted by Doll’s former lawyer prevented her from distributing any money. After Doll complained to the bar, Gregory claimed she had earned the money and owed Doll nothing. The only bills she submitted for a period spanning several months, however, were prepared from her notes after Doll complained.

The review panel found that Gregory failed to maintain client funds in trust in the Doll matter and she committed acts of moral turpitude.

The panel also found that Gregory was dishonest and significantly harmed her clients by causing serious financial problems for them.

Gregory argued that she was entitled to more mitigation than accepted by the hearing judge, citing her good character, pro bono work and a discipline-free record. The review panel said only her cooperation with the bar justified mitigation. Gregory’s behavior in the Ng case alone is enough to warrant disbarment, the panel said. And, the judges wrote, “her refusal to accept responsibility for her wrongdoing despite the overwhelming evidence compels us to recommend her disbarment to protect the public from future misconduct.”

Gregory was admitted to the bar in 2003 and had been ineligible to practice since March 19, 2011.