Posted on Nov 01, 2006
Testimony paints picture of tangled finances
Ex-employee says Frankel admitted shortage
KATHY STEVENS-The York Dispatch
Article Last Updated:10/31/2006 06:57:47 PM EST
A heated argument about nonpayment of a client's settlement prompted Mark David Frankel's admission to a shortage in his law firm's escrow account and ultimately led to a slew of theft charges against the personal-injury lawyer, a former employee testified Tuesday.
Stephen Stambaugh testified that he'd lent Frankel money on more than one occasion, but had no idea that an account reserved for clients' settlement funds was short -- or that shortages totaled some $1.46 million.
He became suspicious Wednesday, Oct. 27, 2004, when a client threatened to complain to a disciplinary board that her attorney had failed to pay her share of a cash settlement. The attorney, Girard Rickards, who had taken Frankel's cases after Frankel was disbarred for unrelated events, brought the matter to Stambaugh's attention. Stambaugh then tracked down Frankel.
"I started tearing into Mark (Frankel)," Stambaugh said. "He kept doing his shuck and jive and then collapses into a chair and says, 'OK, the escrow account is short.'"
Couldn't say how much: Stambaugh said Frankel indicated the shortfall was $5,000, $10,000 or $15,000t, but told Stambaugh he really didn't know the amount, that only the bookkeeper, Anita Livaditis, knew the scope of the problem. He further told Stambaugh that all he needed to do was make more settlements, pay clients who'd waited the longest and make the others wait, Stambaugh testified.
The following afternoon, Stambaugh said, he discovered the magnitude of the problem when the firm's assistant bookkeeper, Tammy Herman, presented him a with a list of clients who either were owed money directly or for whom cash had not been paid for their medical bills, for instance.
He, Rickards and Herman would talk that day to York County District Attorney Stan Rebert.
"The rest is history," Stambaugh said.
Frankel, 58, of 1510 Kentwood Lane, Spring Garden Township, is charged with 60 counts of theft and one count of misapplication of entrusted property. His son, Stephen Frankel, 34, of 1200 Baker Place, Frederick, Md., faces 28 counts of theft and one count each of conspiracy and misapplication of entrusted property.
Couldn't cover payments: The alleged thefts occurred between September 2001 and October 2004 when tax payments were electronically transferred to the IRS from the escrow account. It was to be reimbursed from the general account, but the firm could not cover the funds.
Defense attorney Joanne Floyd said Mark David Frankel had attempted to right the account. She presented more than two dozen checks he had provided for deposit in firm accounts -- mostly the firm s general fund account rather than the escrow account. He borrowed some $45,000 from his mother, $200,000 from a sister and on more than one occasion borrowed from Stambaugh.
This, Floyd said, represented her client's intent to make it right. She also asserted that once Frankel left the firm in June 2004, he no longer had financial control. She suggested that Livaditis had the ultimate authority when it came to what funds were used and how.
Livaditis testified earlier in the day that while "legally " and "technically" Mark David Frankel did not have control of funds, he still had a say in daily operations despite the fact that Stephen Frankel was supposedly in charge of the firm. She also confirmed that for six months one year Mark David Frankel did not collect his weekly pay of $7,700.
The firm, however, did pay $13,300 rent each month to Mark David Frankel for the law office buildings that he was buying until he left the operation. The firm also paid mortgages on the property, according to testimony.
Firm owed members: Stephen Frankel's attorney, James West, argues that the escrow account and financial health of the firm were a mess long before his client took over. West said the magnitude of the problems fueled depression and resulted in a brief psychiatric stay for the younger Frankel, who at that time contemplated suicide.
Livaditis agreed with West that the firm owed Stephen Frankel more than $80,000. That is why he felt justified in transferring $40,000 from the escrow account to the general account and then withdrawing that money to buy a Hummer, West said. West said Frankel s Porsche was about to be repossessed, and he needed a car.
Meanwhile, Rickards, who was hired at the firm in June 2004, was paid one-third of a promised $15,000 signing bonus and never received promised bonuses of 20 percent of the firm s fee for his work on lawsuits Mark David Frankel turned over to him.
Rickards testified yesterday that he'd agreed to take the job because he believed he could double his then $90,000 yearly salary. He was to receive $1,000 a week base pay along with the bonuses.
He said Stambaugh asked him to join the firm. Stambaugh, he said, had earned some $400,000 the previous year, and Rickards said he saw the new job as an opportunity. When assets of the firm were frozen, Rickards said, the business owed him some $25,000.
"We were making an incredible amount of money there," Stambaugh said about why he occasionally lent money to the firm. "We were making so much money, I just wanted to be a stakeholder."
The trial resumes at 10:30 a.m. in the York County Judicial Center.