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Sunday, December 28, 2008

Edward D. Fagan is Disbarred in New York State

Below is the decision of the New York State Appellate Division, First Department, to end the career of Mr. Fagan:

Angela M. Mazzarelli, Justice Presiding,
Richard T. Andrias
John W. Sweeny, Jr.
James M. McGuire
Dianne T. Renwick, Justices.
In the Matter of Edward D. Fagan,
(admitted as Edward Davis Fagan),
an attorney and counselor-at-law:
Departmental Disciplinary Committee M-3148
for the First Judicial Department, M-3193
Edward D. Fagan,
Disciplinary proceedings instituted by the Departmental Disciplinary Committee for the First Judicial Department. Respondent, Edward D. Fagan, was admitted to the Bar of the State of New York at a Term of the Appellate Division of the Supreme Court for the Third Judicial Department on February 23, 1988.
Alan W. Friedberg, Chief Counsel, Departmental Disciplinary Committee, New York
(Mady J. Edelstein, of counsel), for petitioner.
Respondent pro se.
M-2732 (July 14, 2008)
M-3148 (August 11, 2008)
M-3193 (July 14, 2008)

Respondent Edward Fagan was admitted to the practice of law in the State of New York by the Third Judicial Department on February 23, 1988, under the name Edward Davis Fagan. At all times relevant to this proceeding, he has maintained an office for the practice of law within the First Judicial Department.

The Departmental Disciplinary Committee now seeks an order pursuant to 22 NYCRR 603.4(d) and 605.15(e)(1) confirming the report of the Hearing Panel and disbarring the respondent from the practice of law in the State of New York. Respondent has filed a cross motion to compel the Committee to produce the record of the disciplinary proceedings, and a separate motion seeking, inter alia, to disqualify the Hearing Panel. This disciplinary proceeding arises out of respondent’s representation of the plaintiffs in a lawsuit filed in the United States District Court for the Southern District of New York entitled Association of Holocaust Victims for Restitution of
Artwork & Masterpieces, a/k/a “AHVRAM”, et al v Bank Austria Creditanstalt AG, et al, No. 04 Civ. 3600. Respondent filed that $6.8 billion action in 2004 against various corporations, governmental entities and financial institutions alleging theft, retention, and sale of artwork looted during the Holocaust.

On August 19, 2005, Judge Shirley Wohl Kram dismissed the amended complaint in the case on the basis that it failed to assert any basis for federal court jurisdiction and that it constituted “little more than an end run” around a separate action which ended in a comprehensive settlement against defendant Bank Austria (Assoc. of Holocaust Victims for Restitution of Artwork & Masterpieces v Bank Austria
Creditanstalt AG, 2005 US Dist LEXIS 17411, *6 [SDNY 2005]). Judge Kram also noted that the plaintiff organization AHVRAM did not exist.

Judge Kram granted Bank Austria’s motion to sanction respondent, finding that the lawsuit, being “entirely without color”, was frivolous and in bad faith in violation of Rule 11. Judge Kram commented on, among other things, respondent’s lack of
preparation and professionalism, his “glaringly inadequate filings,” and the fact that he deceived the court of “critical facts” concerning the previous class action settlement against Bank Austria in which he had substantially participated (2005 US
Dist LEXIS 17411, *12). Judge Kram stated that the pleadings contained flagrant misrepresentations, that respondent falsely claimed that he was a member of the plaintiff organization AHVRAM, and that respondent attempted to circumvent the Bank
Austria settlement. Judge Kram further noted that respondent, through AHVRAM, was prosecuting actions against at least six governments or entities, and stated that the findings were “bolstered by the fact that this case appears to be part of a
pervasive and disturbing trend.” (2005 US Dist LEXIS 17411, *18).

Finally, Judge Kram stated that respondent engaged in champerty in violation of Judiciary Law § 488 and DR 5-103, based on her conclusion that respondent purchased interests in stolen artwork solely for the purpose of bringing lawsuits involving that artwork (2005 US Dist LEXIS 17411, *17). Judge Kram fined respondent $5,000 to be paid immediately to the court, and ordered him to pay his adversary’s litigation costs and fees.

Respondent moved for reconsideration of and a stay of the court’s rulings, which the court denied on November 17, 2005. The court further determined that respondent owed Bank Austria a total of $345,520.64 in litigation costs and expenses, and ordered him to immediately pay the $5,000 fine or post a bond. On December 1, 2005, judgment was entered against respondent and in favor of the defendant in the amount of $345,520.64. On January 13, 2006, the U.S. Court of Appeals issued a mandate dismissing respondent’s appeal of Judge Kram’s August 19, 2005 sanction order and deemed any pending motions moot. In her November 17, 2005 decision denying reconsideration, Judge Kram commented further on respondent’s “flagrant,repetitive, and blatant” conduct and “careless abdication of his duties as a lawyer” (2005 US Dist LEXIS 28880, *27).

The court believed the only way to deter respondent from “bringing baseless suits in the future” was to hold him liable for the litigation fees and costs of his adversary. On April 2, 2007, this Court granted the Disciplinary Committee’s unopposed petition giving collateral estoppel effect to the findings of Judge Kram and concluded that respondent engaged in conduct that violated DR 1-102(A)(4)(conduct involving dishonesty, fraud, misrepresentation or deceit), DR 1-102(A)(5)(conduct prejudicial to the administration of justice),DR 1-102(A)(7)(conduct that adversely reflects on fitness to practice), DR 5-103 (acquiring a proprietary interest in the subject of the litigation), DR 7-106(A)(conduct in disregard of
rulings of the court), and DR 7-106(C)(7)(violating established rules of procedure).

A Hearing Panel held hearings on December 7 and 17, 2007, and January 9, 2008, to determine the appropriate sanction for respondent’s misconduct. After several applications by respondent for adjournments and for recusal of Panel members were
rejected, respondent appeared before the Panel pro se, testified on his own behalf and called one witness. The Committee argued that respondent had produced no proof
that he had paid the $5,000 sanction imposed by Judge Kram or any part of the attorney’s fees and costs.

The Committee also offered respondent’s disciplinary history as evidence in aggravation: 1) in 2002, respondent received a public reprimand in New Jersey (the equivalent of a censure in New York) for making misrepresentations to a client regarding the status of her case; 2) in 1994, Judge Michael Mukasey of the United States District Court, Southern District of New York, sanctioned respondent, also under Rule 11, for filing frivolous counterclaims and fined him $500 plus the opposing party’s attorney’s fees and costs; 3) in February 2007, Judge Viktor
Pohorelsky of the United States District Court, Eastern District of New York, sanctioned respondent under FRCP 45(c)(1) for improperly issuing an unduly burdensome subpoena to a non-party witness and ordered him to pay more than $14,000 in attorney’s fees and costs; 4) in August 2007, Judge Shira Scheindlin of the
United States District Court, Southern District of New York, disqualified respondent from representing the plaintiffs in an action in part because of his personal bankruptcy and his admission that his financial future was related to the outcome of
the litigation, and found that he had made false representations to the court, obtained an order of confidentiality from the court under false pretenses, and fined him $5,000. In that case, In re Ski Train Fire in Kaprun Austria, 2007 U.S. Dist. LEXIS 60229, *11, *20 n39, Judge Scheindlin noted that respondent had testified during a May 2007 deposition that in addition to his personal bankruptcy, up until April 2007 he failed to file any tax returns from 2000 through 2006, and stated that she intended to refer the matter to the Southern District’s Disciplinary Committee.

Although respondent objected and stated that at least two of the sanction rulings were on appeal, he failed to provide the Hearing Panel any evidence to corroborate these assertions or explain their status. In testifying about his efforts to comply with the sanctions previously imposed upon him respondent conceded that he owed over
$3,000 for administrative costs involving the 2002 New Jersey disciplinary proceeding; that in the AHVRAM matter he had paid only $250 towards the $5,000 fine and that he had not paid any of the $345,520 in attorney’s fees. Respondent has not paid any of the sanctions and/or fees imposed by the federal courts in 1994
($500), in February 2007 ($14,773) and in August 2007 ($5,000).

While respondent has appealed Judge Scheindlin’s August 2007 decision, he did not obtain a stay of his obligation to pay the sanction. In addition, the Committee proffered a letter written by respondent to Judge Scheindlin in December 2007 (while the hearings were taking place before the Hearing Panel), in support of her recusal, wherein he accuses her of, inter alia, bias and conducting ex parte communications with witnesses. Respondent testified before the Panel that he stood by those statements. The Committee also produced a Daily News article quoting respondent as having made similar statements publicly. At the conclusion of its case, the Committee suggested that respondent be disbarred.

Respondent’s testimony in support of mitigation sought to minimize his behavior before Judge Kram by characterizing it as “procedural” violations of her orders for which he blamed his clients and for which the sanctions imposed by Judge Kram were
sufficient punishment without need for further action by the Panel. He also stated that he failed to pay the sanction imposed by Judge Kram because he could not afford to, and that he had communicated with the court about his personal financial
situation. Respondent also testified that his behavior was due to a difficult divorce that he was going through during the period in which the AHVRAM matter was being litigated. He acknowledged that he had overburdened himself by taking on too many cases at one time, but explained that he was reluctant to withdraw from any of the matters because in the past when he had given up control of cases, those cases had been compromised. He admitted that in retrospect he should not have taken on the AHVRAM case. His sole witness was Kenneth Torres, a private investigator who
worked for respondent on some Holocaust cases. He elicited testimony from Mr. Torres that sanctioning respondent would “impact the victims” whom respondent represented because he did not think anyone could become familiar with the cases to the same
extent as respondent.

At the close of his presentation respondent requested a short period of time to submit documents in support of his position, including an affidavit from one of his clients. The Panel granted his request, giving him until January 25, 2008, and
set a briefing schedule. Respondent submitted one character letter and was given a one-week extension to submit supporting documents. When respondent asked for a second extension, because his computer had been stolen, the briefing schedule was
readjusted. However, despite the extensions, respondent never submitted any new evidentiary materials in support of his position. Nor did he submit a brief on mitigation. Instead, on March 12, the latest deadline set, respondent wrote the Hearing Panel claiming that he was never properly served with the Committee’s brief, and requested reconsideration of the Panel’s rulings on his motion to disqualify two Panel members and his request to subpoena a witness. He also requested another filing
extension to April 1. The Committee provided a copy of the fax confirmation sheet evidencing service of its brief on respondent.

The Panel denied respondent’s requests and the record was closed. Only at that point did respondent apply to this Court for vacatur of this Court’s April 2007 collateral estoppel order and to enjoin the Hearing Panel from issuing its sanction report. This
Court denied that motion on June 17, 2008. On May 14, 2008, the Hearing Panel issued its report concluding that respondent’s false submissions to the court and “knowing misrepresentations” were sufficiently serious when coupled with the other violations found by this Court, to warrant disbarment. The Panel found there to be significant aggravating factors including respondent’s “pattern” of misconduct, his failure to pay sanctions imposed by Judge Kram, his lack of contrition and disruptive and dilatory conduct before the Panel.

It found his “sparse” mitigation evidence “insufficient to overcome the seriousness of his violations and the overwhelming aggravating evidence.” It noted that respondent’s testimony that his clients would suffer if he were sanctioned because no one would take over his victims’ rights cases was unpersuasive. The Panel noted in the report that out of the four cases he was working on at the time, he had been disqualified as counsel from one of them and in another, the AHVRAM matter, the action had been dismissed.

We find that the Hearing Panel’s recommendation of the sanction of disbarment has ample support in the record. Respondent’s conduct before Judge Kram was dishonest and
prejudicial to the administration of justice. Respondent knew that the plaintiff AHVRAM did not exist and that the relief he sought had already been obtained by settlement in another action.

Disbarment is an appropriate sanction for attorneys who, like respondent, have made deliberate misrepresentations to a court (see e.g. Matter of Friedman, 196 AD2d 280
[1994], appeal dismissed 83 NY2d 888 [1994], cert denied 513 US 820 [1994]; Matter of Truong, 22 AD3d 62 [2005], appeal dismissed 6 NY3d 799 [2006]). Disbarment is similarly appropriate where an attorney has repeatedly violated court rulings and procedures and failed to pay a judgment (see Matter of Heller, 9 AD3d 221 [2004], lv
denied 3 NY3d 607 [2004]; Matter of Klapper, 253 AD2d 72 [1999]; Matter of Pollack, 238 AD2d 1 [1997].

In light of the significant aggravating factors, including respondent’s pattern of prior sanctions for unprofessional conduct (see e.g. Matter of Gadye, 283 AD2d 1
[2001]), his failure to pay sanctions and fees imposed, and lack of contrition
or acknowledgment of wrongdoing (see Matter of Robson, 31 AD3d 163 [2006], lv denied 7 NY3d 830 [2006]), and the absence of little if any mitigation, respondent is unfit to practice law.

Accordingly, the Committee’s petition should be granted, the Hearing Panel’s determination as to sanction confirmed, respondent disbarred and his name is stricken from the roll of attorneys and counselors-at-law in the State of New York.
Respondent’s cross motions should be denied.
All concur. Order filed. [December 11, 2008]

Con Man and Snake Oil Salesman Ed Fagan Tries To Shut Down, Lewenstein Serves Subpoena on Gizella Weisshaus

Lawyer Disbarred for Failing to Pay Sanctions, Fees in Holocaust caseNoeleen G. Walder,, 12-12-2008

An attorney well known for representing Holocaust survivors has been disbarred after he neglected to pay sanctions imposed by a federal judge in a multibillion-dollar lawsuit against Bank Austria Creditanstalt and other entities.

In an August 2005 decision excoriating Edward Davis Fagan, Southern District of New York Judge Shirley Wohl Kram fined the lawyer for having a financial interest in the outcome of the $6.8 billion action and trying to circumvent a $40 million payment made by Bank Austria to Holocaust survivors and their heirs. Several months later, the judge denied Fagan's bid to reargue Association of Holocaust Victims for Restitution of Artwork & Masterpieces, a/k/a "AHVRAM" v. Bank Austria Creditanstalt, No. 04 Civ. 3600, and ordered the attorney to pay Bank Austria nearly $350,000 in attorney fees.

Thursday, in Matter of Edward D. Fagan, M-2732, M-3148, M-3193, a unanimous panel of the Appellate Division, 1st Department, held that Fagan's failure to pay the bulk of the $5,000 sanction and all of the money owed to Bank Austria, his "pattern of prior sanctions for unprofessional conduct" and his "lack of contrition" made him unfit to practice law.

In addition to the money Fagan owes as a result of the case before Kram, he has failed to pay more than $20,000 in sanctions and fees imposed by three other federal judges, the panel said.

Fagan said in an interview Thursday that he plans to immediately move for a rehearing and reargument and will take the case to the state Court of Appeals, if necessary.

Fagan claimed that he had new evidence that Bank Austria and its counsel, Charles G. Moerdler of Stroock & Stroock & Lavan, had lied to Kram. Among other things, he said, they "failed to fully disclose" that two stipulations made subsequent to the settlement with Bank Austria permitted him to go forward with his suit.

Moerdler vehemently denied making any misrepresentations to the court.

"Mr. Fagan simply has no grasp of the truth," Moerdler said Thursday.

In an Oct. 8 order, Kram permitted Fagan to file a motion for reconsideration of her prior rulings.

Fagan, who began his career as a personal injury attorney, gained fame in the mid-1990s as the first attorney to sue the German, Swiss and Austrian banks for allegedly stealing money from Holocaust victims.

According to Moerdler, Fagan obtained several million dollars in attorney fees from the suits.

In 2004, Fagan filed a $6.8 billion suit accusing a number of corporations, governmental entities and financial institutions, including Bank Austria, of stealing and selling artwork looted during the Holocaust.

In August 2005, Kram dismissed the action, which she said was "little more than an end run around" an earlier class action settlement agreement reached in In Re Austrian and German Bank Litig., 80 F. Supp. 2d 164.

In addition to filing "glaringly inadequate pleadings," misleading the court about the scope of the prior settlement, and falsely claiming that he was a member of a plaintiff organization that did not exist, Kram held that Fagan had committed champerty by having a financial stake in the artwork of which he accused Bank Austria of stealing.

The judge fined Fagan $5,000 and ordered him to pay all of Bank Austria's litigation fees in connection with the suit.

On Nov. 17, 2005, Kram refused to stay the judgment or reconsider her August decision, and directed Fagan to pay his fine "without delay" or post bond. Citing his "careless abdication of his duties as a lawyer," she also concluded that Fagan owed $345,520 in attorney fees to Bank Austria.

On April 2, 2007, after granting the disciplinary committee's unchallenged petition giving collateral estoppel effect to Kram's findings, the 1st Department held that Fagan had violated a number of disciplinary rules prohibiting an attorney from disregarding a court's rulings, engaging in conduct involving dishonesty, fraud, misrepresentation or deceit, and acquiring a proprietary interest in the subject of the litigation.

In hearings before the disciplinary committee, the committee contended that Fagan had never paid the $5,000 sanction or attorney fees to Bank Austria. The committee also cited four prior instances since 1994 in which Fagan had been either reprimanded or sanctioned for misconduct.

Most recently, in August 2007, Southern District of New York Judge Shira Scheindlin disqualified Fagan from representing plaintiffs in a suit brought by relatives of six Americans who died in a ski train fire in Kaprun, Austria. After noting that Fagan, who had filed for personal bankruptcy, had a personal interest in the litigation's outcome and made false representations to the court, Sheindlin slapped the attorney with a $5,000 fine.

Fagan argued that two of the sanction rulings cited by the disciplinary committee were being appealed.

While he admitted to the hearing panel that he had only paid $250 of the $5,000 fine and none of Bank Austria's fees, he characterized his failure to comply with the judge's orders as "procedural violations."

According to the decision, Fagan said he could not afford to pay the sanction and blamed his conduct before Kram on a difficult divorce. He said he should not have taken on the $6.8 billion action because he already was saddled with a heavy case load, but feared that the litigation would be compromised if he relinquished control of the matter, the panel noted.

Despite asking for and receiving more than one extension from the disciplinary committee to bolster his case, Fagan failed to submit a brief on mitigation or new evidentiary materials.

On May 14, the hearing panel found Fagan's "sparse" mitigation evidence "insufficient to overcome the seriousness of his violations and the overwhelming aggravating evidence" and recommended that Fagan be disbarred.

The 1st Department agreed.

Fagan "knew that the plaintiff AHVRAM did not exist and that the relief he sought had already been obtained by settlement in another action," the panel held.

"In light of the significant aggravating factors, including respondent's pattern of prior sanctions for unprofessional conduct ... his failure to pay sanctions and fees imposed, and lack of contrition or acknowledgment of wrongdoing ... and the absence of little if any mitigation, respondent is unfit to practice law," the panel concluded.

Moerdler said Thursday, "It is always sad and tragic when a lawyer is disbarred." In Fagan's case, "it is even more so because there was a time when he was a serious champion of Holocaust victims and he was a person who helped start the proceeding to try and recover the ... property that Holocaust victims lost. Thereafter, he seems to have gone off the rails and that's really too bad."

In response to Fagan's recent motion for reconsideration, Bank Austria has requested that further sanctions be imposed against him, and asked the court to enjoin him from filing any more claims that are precluded by the Bank Austria settlement.

Justices Angela M. Mazzarelli, Richard T. Andrias, John W. Sweeny Jr., James M. McGuire, and Dianne T. Renwick sat on the panel.

Mady J. Edelstein handled the case for the Departmental Disciplinary Committee.

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