In re Warhaftig

Attorney Warhaftig (defendant) ran a real estate practice and regularly withdrew money from clients' trust account balances for his own use, expecting to repay it from fees he anticipated earning on other clients' closings, tracking anticipated versus actually-earned fees on a separate ledger and replacing withdrawn funds with his own money whenever a deal fell through. After learning in advance of an unscheduled compliance audit, Warhaftig — on his accountant's advice — withdrew money from his own sons' trust accounts to cover shortfalls before the audit; the auditor detected the withdrawal pattern but, given the size of Warhaftig's practice and the constant cycling of funds, couldn't identify which specific clients had been affected. At his ethics hearing, Warhaftig testified he began the withdrawals due to financial strain from a declining practice, his wife's cancer diagnosis, and his son's costly psychiatric treatment, insisted he never actually caused any client to lose money and always covered required disbursements, and admitted knowing the withdrawals were unauthorized but didn't feel he was 'stealing' because his recordkeeping ensured no client harm. The Disciplinary Review Board departed from the usual mandatory-disbarment precedent for knowing misappropriation, recommending public discipline instead based on Warhaftig's colorable interest in the funds via anticipated fees; the New Jersey Supreme Court reviewed that recommendation.