Mishandling of son’s funds ends in mother’s disbarment

A San Francisco Bay Area attorney has lost her license to practice law for using the legal system to try to control her adult son and for misappropriating his settlement funds. ELIZABETH M. BARNSON KARNAZES [#118922], 59, of Foster City, was disbarred June 13, 2014 and ordered to make restitution and comply with rule 9.20 of the California Rules of Court.

Karnazes was initially reviewed on evidence of nine counts of misconduct, but the Review Department of the State Bar Court ultimately found her culpable of seven of those charges, including failing to maintain records of client funds or maintain client funds in her client trust account and of misappropriation and commingling. The three-judge panel wrote that Karnazes was so focused on controlling her son, Zachary, that she lost sight of her ethical obligations.

“Ignoring his desperate need for his funds, Karnazes utilized her position as Zachary’s attorney to escalate the pressure she applied on him over a three-year period when she continued to refuse payment, and ultimately attempted to take control by becoming conservator of his estate,” Joann M. Remke, then the State Bar Court’s presiding judge, wrote on behalf of the panel.

“This conduct illustrates the danger of an attorney, trained in persuasion and in a superior position to exert influence, who uses such skills and circumstances to force a client – in this case, her son – to bow to her wishes,” Remke wrote.

In January 2005, Karnazes signed a fee agreement to provide legal services for her son, who was 18 at the time, and ultimately represented him in at least three different lawsuits. One was for injuries Zachary allegedly suffered in a drug treatment program; another for injuries allegedly suffered when a school administrator abused him on a camping trip; and a third for injuries he allegedly suffered due to physical abuse.

Karnazes settled the first two lawsuits in 2009 for $40,000 and $60,000 respectively, depositing the money in her client trust account. After attorney fees and $7,500 Karnazes had given him as an advance were deducted, Zachary was entitled to $33,739.45. Despite numerous requests in person and by telephone, Karnazes did not give him the money, leading him to send her five written requests in October and November. At the time, her son had been unemployed since May 2008 and was living on disability payments.

“He had to travel by bus to and from medical appointments, could not afford his own telephone and ate free meals at a soup kitchen,” Remke wrote. “Despite Zachary’s requests for payment, Karnazes did not distribute his funds. Instead, she accused him of hating her and abandoning her when she needed him most.”

In August 2009, Karnazes deposited a check for $97,750, money she drew against her home equity account, into her client trust account, immediately withdrawing $50,000. A few months later, she deposited another $22,500 of her own funds into the account and gradually withdrew it over time.

Zachary filed a complaint with the State Bar the following summer over his mother’s refusal to give him his settlement money. Several months later, Karnazes filed a petition in San Mateo County Superior Court seeking to be appointed conservator of Zachary’s estate. At the time she was still representing him in the third lawsuit she filed on his behalf and claimed he was 100 percent disabled for mental health reasons. The court ultimately denied Karnazes’ petition with prejudice, concluding Zachary was capable of making his own decisions. The court of appeal affirmed the decision and the California Supreme Court denied Karnazes’ petition for review.

Meanwhile, in 2010 Karnazes obtained a default judgment in her son’s third lawsuit and deposited $56,995 she received from the defendant’s insurance company in her client trust account. At that point, after deducting her fees and costs, Karnazes owed her son at least $57,496.15. On March 29, 2011, she offered to give Zachary a cashier’s check for $63,000 on condition that he release his right to any disputed funds from the settlements and not discuss the terms of their agreement. Zachary refused the offer.

On June 21, 2012, four days before the start of her disciplinary trial, Karnazes gave Zachary a check for $53,507.97 and an accounting that omitted multiple withdrawals from the client trust account, failed to account for the whole time she was holding his funds and overstated her attorney fees. Assuming the costs she was claiming were accurate, Karnazes should have paid him $3,988.18 more than she gave him. She was ordered to pay that amount plus interest in restitution.

Karnazes had one prior record of discipline, a January 2010 public reproval that followed her misdemeanor conviction for trespassing. Karnazes was initially charged with grand theft and theft from a merchant for stealing items from two stores, but pleaded not guilty by reason of insanity. Two court-appointed doctors examined her and concluded she was sane at the time of the thefts. The district attorney amended the charges to include a misdemeanor trespass violation and Karnazes pleaded no contest to that charge.