Matter of Holden

Matter of Holden 2026 NY Slip Op 05532 September 30, 2026 Appellate Division, Second Department Per Curiam Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This decision is uncorrected and subject to revision before publication in the Official Reports. In the Matter of Stephen Holden, an attorney and counselor-at-law. Grievance Committee for the Ninth Judicial District, petitioner; Stephen Holden, respondent. (Attorney Registration No. 1608876) Supreme Court of the State of New York, Appellate Division, Second Judicial Department Decided on September 30, 2026 2020-01182 Hector D. Lasalle, P.J. Mark C. Dillon Colleen D. Duffy Francesca E. Connolly Valerie Brathwaite Nelson, JJ. Courtny Osterling, White Plains, NY (Antonia Cipollone of counsel), for petitioner. Scalise & Hamilton, P.C., Scarsdale, NY (Deborah A. Scalise of counsel), for respondent. DISCIPLINARY PROCEEDING instituted by the Grievance Committee for the Ninth Judicial District. The respondent was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on October 15, 1965. Per Curiam. [*1] Per Curiam. OPINION & ORDER The Grievance Committee for the Ninth Judicial District served the respondent with a notice of petition and a verified petition, both dated August 17, 2021, containing six charges of professional misconduct. The respondent served and filed a verified answer dated November 30, 2021, admitting to some of the factual allegations contained in the petition, and denying all but one of the conclusions of law contained therein. By decision and order on application dated April 14, 2022, this Court referred the matter to the Honorable Sondra M. Miller, as Special Referee, to hear and report. A preliminary conference was held on September 6, 2022, and a hearing was conducted on March 8, 2023, and March 9, 2023. In her report, the Special Referee, in effect, sustained all six charges in the petition. The Grievance Committee now moves to: (1) confirm so much of the Special Referee's report as, in effect, sustained all six charges of the petition; (2) disaffirm so much of the Special Referee's report as: (a) made a recommendation of sanction; (b) reversed her ruling made during the hearing concerning an exhibit; (c) contained certain information related to charge three of the petition; and (d) found that the respondent had no disciplinary history; and (3) impose such discipline upon the respondent as this Court may deem just and proper. The respondent submits an affirmation in which he responds to, and opposes in part, the Grievance Committee's motion. He asks this Court to either follow the recommendation set forth in the Special Referee's report with regard to sanction or to impose discipline no greater than a public censure, inter alia, due to his imminent retirement. We sustain charges one, four, and five, and do not sustain charges two, three, and six. The Petition The respondent was a signatory on two attorney special accounts maintained at TD [*2]Bank, both of which he used incident to the practice of law with his law firm, Holden Brothers, P.C. The first account was titled "Holden Brothers PC, IOLA Attorney Trust Account," with an account number ending in 2654 (hereinafter the attorney trust account). The second account was titled "Holden Brothers PC," with an account number ending in 1748 (hereinafter the master account). Charge one alleged that funds were misappropriated from the attorney trust account for client matter "Surace" in violation of rule 1.15(a) of the Rules of Professional Conduct (22 NYCRR 1200.0). Two deposits were made into the attorney trust account for the Surace matter on or about December 20, 2017, and January 25, 2018, in the amounts of $16,250 and $83,750, respectively. In or about March 2018, check number 3597, drawn on the attorney trust account in the amount of $100,000, payable to Lawrence Bellom, Esq., as a down payment on behalf of Surace, was dishonored for insufficient funds. Charge four alleged that the respondent engaged in conduct that adversely reflected on his fitness as a lawyer in violation of rule 8.4(h) of the Rules of Professional Conduct by failing to exercise reasonable management and supervisory authority of the attorney trust account. The respondent's cousin and law partner, James Holden, Jr. (hereinafter James), was a signatory on the attorney trust account. James deposited funds that he received in his capacity as president of the Masonic Guild and as trustee of the Margaret E. Sackett Trust (hereinafter Sackett Trust), into the attorney trust account. Thereafter, James invested the Masonic Guild and/or Sackett Trust funds in the form of loans to several parties, including himself, from the Masonic Guild and/or Sackett Trust funds on deposit in the attorney trust account. Charge five alleged that funds were misappropriated from the attorney trust account for the Sackett Trust, in violation of rule 1.15(a) of the Rules of Professional Conduct. As of September 1, 2017, the sum of $519,324.22 was required to be held in the attorney trust account. However, on that date, the balance in the account was deficient with regard to the Sackett Trust funds by approximately $290,402.47. In the respondent's answer, he admitted some factual allegations of the petition, but denied that he violated the Rules of Professional Conduct with regard to charges one, four, and five. The Hearing Record The respondent testified that he had been a member of his family's firm, Holden Brothers, P.C., founded by his grandfather, for approximately 60 years. Several years after the respondent joined the firm, James also joined and became a partner. Although James and the respondent worked in similar practice areas, they worked on separate cases and did not participate in each other's cases or share proceeds. The respondent admitted that he should have done more to supervise the firm's bookkeeper and to properly reconcile, review, and audit both of the firm's escrow accounts and claimed that he did not realize that there were any issues with these accounts until he received notice of dishonored check number 3597, related to charge one. According to the respondent, Surace was James's client, and the respondent had not handled any of the transactions alleged in charge one. The respondent also asserted that his firm's conversion to computerized accounting software caused its long-time, nonagenarian bookkeeper to fall behind in timely updating the firm's ledger cards, which led to the error underlying the dishonored check. The respondent testified that the bookkeeper used the firm's bank statements and check stubs to verify each transaction in her individual client records, but there is no indication that she otherwise completed a routine comprehensive reconciliation of the escrow accounts or provided regular accounting to the respondent. It was not the respondent's practice to verify that a deposit had cleared his escrow account prior to disbursing the corresponding funds. In relation to charge four, the respondent claimed, among other things, that he was unaware or had no direct knowledge of James's deposit of Sackett Trust and Masonic Guild funds into the attorney trust account, or of the loans made with these funds, until the Grievance Committee's investigation. However, the respondent also testified that he questioned James about certain transactions in the attorney trust account at the time when James was engaging in the transactions and mentioned an awareness of loans orchestrated by James going through the attorney trust account. The respondent claimed that there were "no red alerts" of improper escrow use prior to the Grievance Committee's investigation but also admitted that the firm's client cards showed deposits and disbursements of funds from the Sackett Trust and Masonic Guild. The firm's records showed loans ranging from about $20,000 to $100,000, including loans to James, with only some loans repaid. The bank records for the attorney trust account showed disbursements related to the Sackett Trust. The respondent claimed in response to charge five, inter alia, that Sackett and the Sackett Trust were James's clients, not the respondent's, therefore James was responsible for all related transactions, and the respondent was not aware of James's conduct regarding these clients. With regard to the Grievance Committee's allegation of a shortage in the attorney trust account of approximately $290,402.47, the respondent testified that he did not notice any record which would have indicated this shortage to him, prior to the dishonored check, and denied the allegation. He nonetheless admitted that he deposited $6,000 in personal funds into the attorney trust account to cover the dishonored check and an additional $60,000 to cover shortages in the attorney trust account, in addition to the approximately $163,000 in personal funds provided by James to cover shortages in the attorney trust account, including related to the dishonored check. The hearing record contained further examples of mismanagement of the escrow accounts, including that $60,500 in fiduciary funds for client matter "Brailey" were deposited into the master account and disbursed from the attorney trust account at a time when no corresponding funds were held in the attorney trust account. Approximately five years later, an amount of $60,500 was transferred to the attorney trust account from the master account to remedy the discrepancy. Furthermore, the respondent claimed that, until the Grievance Committee's investigation, he was unaware that there was a sum of $125,466.75 in the firm's master account. Of these funds, $60,500 related to the Brailey matter, and $2,000 belonged to a trust for James's mother. The respondent could not account for the remaining $62,966.75, but nonetheless claimed that no clients were financially harmed by his conduct. The respondent presented evidence of his extensive service to several legal and charitable organizations, including the White Plains and Westchester Bar Associations, the Salvation Army, and the Rotary Club of White Plains, as well as his recognition by the New York State Senate and a United States congresswoman. The respondent submitted the testimonies of four character witnesses. In further mitigation, the respondent asserted that there was "no client money shortage at all," but nonetheless expressed remorse with regard to the disciplinary proceeding, acknowledging that it was ultimately his responsibility to ensure proper escrow management. The respondent indicated that he instituted several remedial measures concerning the management of his escrow accounts, including regular escrow account reconciliation. He also testified that he had fully cooperated with the Grievance Committee's investigation and that his actions lacked venality and conveyed no personal benefit to him. He testified that he would be winding down his practice within the year. The Special Referee's Report The Special Referee, in effect, sustained all six charges in the petition. At the hearing, the Special Referee denied the admission of an affidavit of James as an exhibit. However, in her report, the Special Referee reversed her ruling and admitted the affidavit. The Special Referee stated that, because the respondent would be retiring, the errors underlying the disciplinary proceeding were attributable to James, the respondent's conduct was non-venal, he took remedial measures, and the respondent did not have "a single other disciplinary issue," she recommended no further punishment than what the respondent had already endured, in order for him to "enjoy his golden years" with his reputation "untarnished." The Instant Motion By notice of motion and affirmation dated February 27, 2024, the Grievance Committee moves to: (1) confirm so much of the Special Referee's report as, in effect, sustained all six charges of the petition; (2) disaffirm so much of the Special Referee's report as: (a) made a recommendation of sanction; (b) reversed her ruling made during the hearing concerning James's affidavit; (c) contained certain information related to charge three of the petition; and (d) found that the respondent had no disciplinary history; and (3) impose such discipline upon the respondent as this Court may deem just and proper. The Grievance Committee reports that the respondent's disciplinary history consists of a Letter of Advisement from 2023, an Admonition from 2012, and two Letters of Caution from 1987 and 1976, respectively, none of which relate directly to escrow management. The respondent submits a lengthy affirmation through counsel, responding to, and opposing in part, the Grievance Committee's motion, and asking this Court to either follow the Special Referee's recommendation with regard to sanction or to impose discipline no greater than a public censure, due to, inter alia, the respondent's imminent retirement from his well-respected, multi-generational law firm. The Grievance Committee submits an affirmation in reply to the respondent's affirmation, arguing, among other things, against the admission of James's affidavit, and the findings made by the Special Referee based on that affidavit, and that it was improper for the Special Referee to make a recommendation regarding the proper sanction in this matter. Findings and Conclusion In view of the evidence adduced at the hearing and the respondent's admissions, we find that charges one, four, and five are sustained, and charges two, three, and six are not sustained. Those branches of the Grievance Committee's motion which are to confirm so much of the Special Referee's report as, in effect, sustained charges one, four and five, and to disaffirm so much of the Special Referee's report as made a sanction recommendation, admitted the affidavit of James, and found that the respondent had no disciplinary history, are granted. Those branches of the Grievance Committee's motion which are to confirm so much of the Special Referee's report as, in effect, sustained charges two, three, and six, and to disaffirm so much of the Special Referee's report as made incorrect findings as to charge three, are denied, as charges two, three, and six are not sustained. In determining an appropriate measure of discipline, we have considered, inter alia, the respondent's contributions to the legal and civic communities, the remedial measures taken to improve his firm's escrow management, the respondent's remorse and cooperation, and the evidence of his good character. Notwithstanding the mitigation advanced, we find that the respondent abdicated his fiduciary duties, failed to reconcile his escrow accounts for several years, and failed to heed obvious warning signs, leading to an escrow shortage of approximately $290,000 and more than $62,000 in funds that the respondent could not account for. James, the respondent's law partner, routinely deposited and disbursed funds that were not collected pursuant to the practice of law into and from the firm's escrow account, and the respondent has a disciplinary history. Under the totality of the circumstances, we find that the respondent's misconduct warrants his suspension from the practice of law for a period of three years. LASALLE, P.J., DILLON, DUFFY, CONNOLLY AND BRATHWAITE NELSON, JJ., concur. ORDERED that those branches of the Grievance Committee's motion which are to confirm so much of the Special Referee's report as, in effect, sustained charges one, four and five, and to disaffirm so much of the Special Referee's report as made a sanction recommendation, admitted the affidavit of James Holden, Jr., and found that the respondent had no disciplinary history, are granted; and it is further, ORDERED that those branches of the Grievance Committee's motion which are to confirm so much of the Special Referee's report as, in effect, sustained charges two, three, and six, and to disaffirm so much of the Special Referee's report as made incorrect findings as to charge three, are denied; and it is further, ORDERED that the respondent, Stephen Holden, is suspended from the practice of law for a period of three years, commencing October 30, 2026, and continuing until further order of this Court. The respondent shall not apply for reinstatement earlier than April 30, 2029. In such application (see 22 NYCRR 1240.16), the respondent shall furnish satisfactory proof that during the period of suspension, he (1) refrained from practicing or attempting to practice law, (2) fully complied with this opinion and order and with the terms and provisions of the rules governing the conduct of disbarred or suspended attorneys (see id. § 1240.15), (3) complied with the applicable continuing legal education requirements of 22 NYCRR 691.11(a), and (4) otherwise properly conducted himself; and it is further, ORDERED that the respondent, Stephen Holden, shall comply with the rules governing the conduct of disbarred or suspended attorneys (see 22 NYCRR 1240.15); and it is further, ORDERED that pursuant to Judiciary Law § 90, during the period of suspension and until the further order of this Court, the respondent, Stephen Holden, shall desist and refrain from (1) practicing law in any form, either as principal or as agent, clerk, or employee of another, (2) appearing as an attorney or counselor-at-law before any court, Judge, Justice, board, commission, [*3]or other public authority, (3) giving to another an opinion as to the law or its application or any advice in relation thereto, and (4) holding himself out in any way as an attorney and counselor-at-law; and it is further, ORDERED that if the respondent, Stephen Holden, has been issued a secure pass by the Office of Court Administration, it shall be returned forthwith to the issuing agency and the respondent shall certify to the same in his affidavit of compliance pursuant to 22 NYCRR 1240.15(f). ENTER: Darrell M. Joseph Clerk of the Court