When buying or selling a home, you're likely to encounter a legal term called an escrow account—sometimes called a trust account. These accounts are a crucial part of many financial transactions, especially in real estate, but they're also a place where things can go wrong if someone isn't trustworthy.
What Is an Escrow Account?
Think of an escrow account as a secure holding place for money that belongs to someone else. In a real estate deal, for example, a buyer's down payment is often put into an attorney's escrow account. The attorney, acting as a neutral third party, holds the money for both the buyer and the seller until all the conditions of the sale are met. The attorney is legally and ethically bound to keep this money separate from their own business or personal funds. This is known as the rule of "no commingling."
The entire purpose of an escrow account is to protect the client's money. The funds should never be used by the attorney for their own purposes, whether to pay for office expenses, personal bills, or lavish purchases. The attorney is simply a fiduciary, a person who holds a legal or ethical relationship of trust with their client.
When Trust Is Broken: Grand Larceny and Scheme to Defraud
The recent case of Floral Park real estate attorney Terrance Dougherty, who embezzled over $1.7 million from his clients, is a perfect example of what happens when that trust is broken. He took money that was not his and spent it on personal luxuries like nightclubs and lavish hotels. This act constitutes a serious crime, and he pleaded guilty to two specific charges:
Grand Larceny: This is a type of theft, and in New York, it's a felony with different degrees based on the value of the stolen property. Since the amount stolen was over $50,000, his crime was considered Grand Larceny in the Second Degree.
Scheme to Defraud: This felony charge applies when a person intentionally engages in a systematic and ongoing course of conduct to defraud more than one person and obtains property worth over $1,000. In this case, Dougherty's actions weren't a one-time mistake; they were a pattern of theft affecting at least 30 clients.
Dougherty's actions not only broke the law but also violated his ethical duties as a lawyer. When an attorney is accused of misconduct, a body known as the Grievance Committee investigates the complaint. This committee is responsible for upholding the ethical standards of the legal profession. As a result of the investigation, Dougherty was reported to the Grievance Committee, which led to his disbarment and the criminal charges.
Dougherty's plea means he admitted his guilt and will now face a prison sentence. He is expected to receive a sentence of 3-1/2 to 10-1/2 years in prison. This outcome serves as a powerful reminder of the importance of the legal and ethical safeguards in place to protect consumers, and of the severe consequences for those who violate the public's trust.
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