Self-Created Stress Is Not Mitigation for Escrow Misappropriation: Second Department Reaffirms Strict Fiduciary Standards in Matter of Bachu

Introduction

In Matter of Bachu (2025 NY Slip Op 04721), the Appellate Division, Second Department, issued a per curiam opinion suspending attorney Darmin T. Bachu for two years based on a sustained pattern of escrow-account misappropriation, failure to maintain required records, and conduct adversely reflecting on fitness arising from a substantial disbursement to a suspended attorney. The decision offers a clear statement on two fronts: (1) disbursing escrow funds before corresponding deposits clear constitutes misappropriation regardless of eventual client loss, and (2) stress arising from an attorney’s own criminal conduct cannot mitigate violations of fiduciary duties.

The proceeding was brought by the Grievance Committee for the Second, Eleventh, and Thirteenth Judicial Districts. After a reference to a Special Referee and a hearing, all four charges were sustained. The court confirmed the Special Referee’s report and imposed a two-year suspension, rejecting the respondent’s primary mitigation theory and underscoring non-delegable fiduciary obligations under Rule 1.15 of the Rules of Professional Conduct.

Summary of the Judgment

The court held that:

The Grievance Committee proved four charges: a sustained pattern of misappropriation of fiduciary funds (Rule 1.15[a]); a separate misappropriation via an $11,000 escrow check to a family member (Rule 1.15[a]); failure to maintain required escrow bookkeeping records, including a contemporaneous ledger (Rule 1.15[d]); and conduct adversely reflecting on fitness (Rule 8.4[h]) tied to disbursing over $420,000 to an attorney known to be suspended.
The Special Referee’s findings were confirmed in full.
Mitigation such as community service and pro bono work was considered, but the court expressly rejected the respondent’s argument that stress from his criminal prosecution explained or mitigated the misconduct, noting the mismanagement predated his arrest and that stress caused by one’s own criminal conduct cannot mitigate further fiduciary breaches.
Sanction: two-year suspension from the practice of law commencing September 19, 2025, with standard reinstatement conditions under 22 NYCRR 1240.16 and compliance requirements under 22 NYCRR 1240.15 and Judiciary Law § 90.

Case Background and Key Facts

The respondent maintained a JPMorgan Chase IOLA escrow account (ending in 6908). The core misconduct comprised:

Issuing escrow checks to clients or himself for fees before the underlying settlement funds were deposited or cleared, causing the checks to draw on other clients’ money (across 11 matters spanning 2015–2018, including Chand, Frederic, Azeez, Johnson, Abrams, Rahman, Porter, Juman, Gomez, Deodharry, and Deen).
Issuing an $11,000 escrow check to a family member to repay a personal loan; the check cleared when no corresponding funds existed for that transaction.
Maintaining no contemporaneous ledger or meaningful reconciliations for the escrow account prior to the Grievance Committee’s investigation.
Depositing $425,883.30 in MetLife checks for three of suspended attorney Michael Gangadeen’s former clients and then issuing $420,883.30 to “Michael Gangadeen, Esq.” (the respondent admitted at his EUO that he knew of the suspension; a letter purportedly authorizing payment to Gangadeen was dated years later, in 2022, undermining his claim of contemporaneous authorization).

Additional facts noted (though not separately charged) included the respondent’s practice of paying clients in cash from office funds and failing to reconcile those payments with the escrow account, as well as paying himself duplicate fees in certain matters.

Analysis

Precedents and Authorities Cited

The decision cites:

Matter of Bachu, 208 AD3d 39 (Second Department): the respondent’s prior public censure (July 20, 2022) based on a 2019 misdemeanor conviction (attempted possession of stolen property). The court considered this disciplinary history in calibrating sanction.

The opinion otherwise relies on the governing rules and statutes rather than case-law exposition:

Rule 1.15(a), (d) of the Rules of Professional Conduct (22 NYCRR 1200.0): strict obligations to preserve client funds and maintain detailed contemporaneous records.
Rule 8.4(h): prohibits conduct adversely reflecting on a lawyer’s fitness.
22 NYCRR 1240.15 and 1240.16: compliance during suspension and reinstatement standards.
Judiciary Law § 90: authority for discipline and scope of restrictions during suspension.
22 NYCRR 691.11(a): continuing legal education requirements applicable to reinstatement.

Notably, the court did not canvas a line of comparative sanctions cases. Instead, it applied established fiduciary principles to the facts and anchored the sanction in the totality of circumstances, including prior discipline and the extended, multi-matter pattern of misuse.

Legal Reasoning

The court’s reasoning proceeds along four integrated tracks:

What counts as misappropriation under Rule 1.15.
The court treated disbursements “when there were no and/or insufficient corresponding funds on deposit” as misappropriation, regardless of whether the intended settlement funds arrived later or whether clients ultimately suffered loss. The emphasis is on the protective function of escrow: each client’s money must be available to that client at all moments. Using other clients’ money to cover earlier checks (even briefly) is conversion of those funds and violates core fiduciary norms.

The opinion repeatedly notes checks that “cleared against other client funds” and those that cleared “at least in part” against other client funds. This objective bank-account reality, not the lawyer’s subjective intent or after-the-fact corrections, defines the violation.
Recordkeeping and reconciliation are non-optional.
The respondent admitted that he kept no contemporaneous ledger and practiced “haphazard” disbursement, using previously issued checks as a proxy for tracking. Rule 1.15(d) requires exacting, contemporaneous records showing the source, amount, and purpose of funds for each client. The failure to maintain those records not only constitutes an independent violation; it also explains how the cascade of misappropriations occurred. The court also flagged non-standard cash payments to clients as a sign of systemic mismanagement.
Dealing with suspended attorneys and the “knew or should have known” standard.
As to the $420,883.30 disbursed to Michael Gangadeen, the court sustained a Rule 8.4(h) violation. The Special Referee found, and the court implicitly accepted, that the respondent knew of the suspension (based on his EUO testimony) and that his subsequent denials were unsupported. The after-the-fact “authorization” letter dated 2022 (years after the 2016 transaction) undermined any claim of contemporaneous, informed client direction. The through-line is simple: a lawyer cannot treat a suspended attorney as a payee conduit for client funds, and “assum[ing] everything was okay” is not compatible with fiduciary diligence—especially where the lawyer knows of the suspension.
Mitigation boundaries: stress from one’s own criminal conduct is not mitigation.
The court explicitly rejects the respondent’s core mitigation argument that a “particularly stressful period” (his arrest and prosecution) explains or softens the misconduct. Two reasons are decisive:
- Chronology: the mismanagement predated the arrest.
- Causation and culpability: any stress the respondent experienced “was caused by the respondent’s own criminal conduct,” and “cannot be used to mitigate the respondent’s disregard of his fiduciary duties.”
This is the opinion’s most salient clarification for future cases: self-created stress from one’s own wrongdoing cannot excuse separate professional violations.

Impact and Forward-Looking Significance

The decision’s practical and doctrinal consequences are substantial:

Bright-line reaffirmation of escrow integrity: Any check that clears against other clients’ money, even briefly, is misappropriation. “No client lost money” will not avert serious discipline.
Mitigation limits: Stress arising from the attorney’s criminal matters is expressly not mitigating—particularly where chronology shows the misconduct predated the stressor and where the stress flows from the attorney’s own culpable acts.
Suspended-attorney interactions: Lawyers must verify attorney status and avoid routing client funds through a suspended lawyer. Even purported client authorization requires careful scrutiny and contemporaneous documentation; post hoc paperwork will not suffice.
Recordkeeping is foundational: No contemporaneous ledger and poor reconciliations are per se violations that often precipitate (and aggravate) misappropriation. Restoring order only after an investigation begins is too late.
Sanction calibration: A two-year suspension reflects the seriousness of a multi-matter pattern, the personal benefit gleaned (e.g., premature fee withdrawals and a personal-loan repayment from escrow), and prior discipline. While the court considered community service and character evidence, those were outweighed by the fiduciary breaches.
Operational compliance for practitioners: The case underscores the need for real-time ledgers, monthly 3-way reconciliations, separation of operating/business expenses from escrow, and strict “deposit-then-disburse” sequencing.

Complex Concepts Simplified

IOLA/escrow account: A segregated, interest-bearing attorney trust account for holding client funds. Each dollar belongs to a particular client (or third party) until properly disbursed.
Misappropriation: Using one client’s funds for another purpose (even temporarily), or for the lawyer’s own purposes, without authorization. It occurs the moment an escrow check clears without matching funds for that client’s matter.
Ledger and reconciliation: A contemporaneous record showing, for each client, all deposits, disbursements, and running balances. “Three-way” reconciliation typically compares (1) bank statement, (2) checkbook register, and (3) client ledgers monthly.
Rule 1.15 (NY): Governs preservation of client property, deposits/disbursements, prohibition on commingling, and meticulous recordkeeping.
Rule 8.4(h) (NY): Prohibits conduct adversely reflecting on a lawyer’s fitness, including dealings that compromise public trust in the profession.
Special Referee: A judicial officer designated to hear evidence, assess credibility, and make findings/recommendations in attorney discipline matters.
EUO (Examination Under Oath): Sworn testimony taken during the disciplinary investigation; admissions at an EUO carry significant weight.
Letters of Caution/Advisement: Nonpublic disciplinary guidance signaling professional concerns; repeated letters can be aggravating in later sanctions.
Judiciary Law § 90 and 22 NYCRR 1240: Statutory and regulatory framework governing discipline, suspension conditions, and reinstatement procedures.

Practical Compliance Notes for Practitioners

Never disburse before deposited funds are collected and specifically allocated to that client.
Maintain a separate, contemporaneous ledger for each client matter in escrow and perform monthly reconciliations.
Do not use escrow for personal or business expenses—ever. If a mistake occurs, promptly self-report, restore funds, and document corrective measures.
Verify attorney status (especially of payees or referrers) through official sources before disbursing client funds; never disburse to a suspended lawyer.
Obtain contemporaneous written client authorizations for unusual disbursements; retain them in the file and reflect them in the ledger.
Avoid cash payments; if unavoidable, document meticulously and ensure escrow-to-client traceability.

Conclusion

Matter of Bachu powerfully reiterates New York’s uncompromising approach to escrow stewardship. The court confirmed that:

Disbursing when funds are not on deposit is misappropriation, even absent ultimate client loss.
Recordkeeping failures are independent violations that often enable misappropriation.
Knowingly routing client funds to a suspended attorney violates fitness rules, and after-the-fact “authorizations” cannot sanitize past misconduct.
Stress that stems from the lawyer’s own criminal conduct is not a mitigating factor for separate fiduciary violations.

The two-year suspension reflects the gravity of a multi-matter pattern, the personal benefit derived from premature and improper disbursements, and prior disciplinary history. For the bar, the decision is a sharp reminder that fiduciary duties in handling client funds are absolute in practice: compliance must be proactive, precise, and verifiable—every time.