Legal Industry News

February 1, 2012

New Indictment Charges Philadelphia Lawyer in Alleged Theft of $324,000 That Firm Client Received in a Personal Injury Settlement

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Michael W. Kwasnik, a Philadelphia lawyer who already is in jail for allegedly stealing over $1 million from a 96-year-old client in New Jersey, has been indicted on new charges that he stole over $324,000 from the proceeds of a personal injury settlement that his law partner recovered for a married couple.

In addition to the criminal charges, the New Jersey Attorney General’s Office previously filed a civil lawsuit charging Kwasnik, his father and other individuals with engaging in a fraudulent scheme in which 73 investors, most of them elderly, lost $8.5 million.

Kwasnik, 42, of Philadephia, who has a law office in Cherry Hill, New Jersey, has been charged in a three-count state grand jury indictment with theft by failure to make required disposition of property received, misapplication of entrusted property, and money laundering, all in the second degree.

Kwasnik was already lodged in the Camden County Jail with bail set at $1 million as the result of an indictment unsealed on Nov. 7 that charged him with the alleged theft from the 96-year-old client, a woman from Cherry Hill.

Superior Court Judge Thomas W. Sumners Jr. increased Kwasnik’s bail by $250,000 in connection with the new indictment. Both indictments stem from an ongoing investigation by the Division of Criminal Justice Financial & Computer Crimes Bureau.

“Once again, we have indicted Michael Kwasnik for stealing a large sum of money from a client,” said Attorney General Jeffrey S. Chiesa. “The allegations in our criminal and civil actions reveal a disturbing pattern in which Kwasnik has repeatedly violated the trust placed in him as an attorney and has ruthlessly taken advantage of elderly investors and clients. We will not tolerate this type of conduct and we are continuing to investigate him.”

The alleged victims in the new indictment, a married couple from Williamstown, N.J., had hired Kwasnik’s former law firm, Kwasnik, Kanowitz & Associates, to represent them in a personal injury lawsuit. Kwasnik’s partner had successfully settled the matter for the couple for $485,000, which was deposited in October 2011 into a trust account for clients maintained by the law firm.

Under the terms of the settlement, the couple was entitled to receive $324,118, representing the full settlement amount minus the law firm’s fees of over $151,000 and certain other costs previously paid by the firm. However, it is alleged that between Nov. 1 and Nov. 7, Kwasnik made unauthorized transfers of funds totaling $483,580 out of the client trust account and into a new bank account he had opened. In taking that sum, he allegedly stole the amount that the couple was entitled to receive.

Between Nov. 1 and Nov. 8, 2011, Kwasnik allegedly disbursed over $270,000 of the transferred funds from the new bank account to pay expenses of the law firm, as well as more than $12,000 in personal expenses and credit card debt. It is further alleged that on Nov. 7, after being notified of the prior indictment and while allegedly traveling in Florida to evade prosecution, Kwasnik withdrew $8,000 in cash from the account. Investigators had the bank account frozen after Kwasnik was arrested in Dothan, Alabama, on Nov. 9 on a warrant obtained by the Division of Criminal Justice. At the time of his arrest, blank checks for the bank account were found in his possession.

In the prior indictment, the 96-year-old client from Cherry Hill hired Kwasnik for estate planning purposes. Kwasnik set up a family trust for the client and her children, and was also hired to help the client administer the estate of her deceased sister. In 2006, Kwasnik received checks from the estate totaling about $1.1 million, which he deposited into the general trust account for clients maintained by his law firm.

However, rather than holding or investing the funds as assets of the client’s family trust, he allegedly withdrew the funds, stealing over $1 million. He allegedly misappropriated the funds for his own benefit and other purposes unrelated to the administration of the estate, including paying other clients and paying the operating expenses of his law firm.

At that time, Kwasnik was managing partner of the law firm of Kwasnik, Rodio, Kanowitz and Buckley. In that case, Kwasnik is also charged with theft by failure to make required disposition of property received, misapplication of entrusted property, and money laundering, all in the second degree.

The criminal cases were presented to the state grand jury and investigated by Deputy Attorney General Denise Grugan, Deputy Attorney General Peter Gallagher and Sgt. James Blong of the Division of Criminal Justice Financial and Computer Crimes Bureau, under the supervision of the bureau’s chief and deputy chief, Supervising Deputy Attorney General Terrence Hull and Deputy Attorney General Francine S. Ehrenberg.

Second-degree crimes carry a maximum sentence of 10 years in state prison and a fine of $150,000. Second-degree money laundering carries an enhanced fine of up to $500,000, plus an additional anti-money laundering profiteering penalty of $250,000. The indictments are merely accusations and the defendant is presumed innocent until proven guilty.

The new indictment was handed up to Superior Court Judge Thomas W. Sumners Jr. in Mercer County, who assigned the case to Camden County.

On Nov. 7, the day the first indictment was unsealed, Kwasnik was named as a defendant in a pending civil lawsuit which had been filed in March by the New Jersey Bureau of Securities, within the Division of Consumer Affairs, against two corporate defendants linked to Kwasnik, Liberty State Financial Holdings Corporation and Liberty State Benefits of Pennsylvania, Inc.

The new charges in the civil suit alleged that Kwasnik, his father, William Kwasnik, and other individuals engaged in a fraudulent scheme in which about $8.5 million was raised from 73 investors, most of them elderly and retired, by selling unregistered securities, on which they promised an annual return of 12 percent. It is alleged that rather than investor funds being invested as promised, they were misused, at the purported direction of William Kwasnik, including the improper transfer of approximately $5 million to Michael Kwasnik’s law firm, and to Michael Kwasnik, William Kwasnik and other relatives for their personal benefit.