NYAG recovers $510K from LI lawyers in misuse-of-funds case

Two Long Island attorneys will have to pay $510,000 to settle a misuse-of-funds lawsuit filed by the New York Attorney General’s office last year. 

The AG’s lawsuit had alleged that Paul Marchese and Robin Maynard of Marchese & Maynard LLP in Manhasset were supposed to transfer assets to a foundation their client Helen Gottlieb had created to support education, cultural activities, and provide food and shelter for people in need. 

But following Gottlieb’s death, the AG alleged that the lawyers paid themselves more than $1.3 million from her trust and charitable foundation. Marchese paid his firm nearly $600,000 in fees and both he and Maynard paid themselves salaries totaling more than $750,000 from the foundation, according to the AG’s office. 

Besides paying $510,000 in restitution, the lawyers may not serve as officers or directors of a not-for-profit corporation or any other charitable organization for three years unless authorized by the Attorney General’s office. 

“New Yorkers who generously donate to charity upon their death deserve to have their wishes honored,” Attorney General Letitia James said in a written statement. “Mr. Marchese and Ms. Maynard abused their positions and misused funds entrusted to them, depriving others of significant charitable donations intended to help the most vulnerable. My office will ensure that these funds will be used as intended and continue to enforce the laws that protect charitable organizations.” 

In the settlement, Marchese and Maynard admitted to failing to register the trust after Gottlieb’s death, failing to retain timely records of the trust’s expenditures, and operating their client’s foundation without a legally constituted board of directors. As a result, they set their own compensation without review by nonconflicted directors and also failed to adopt and adhere to a conflict-of-interest policy, according to the statement from the AG’s office. 

In response, a statement issued by Marchese and Maynard contends that they believe all fees and salaries paid to the firm “were entirely appropriate and consistent with the extensive legal work the firm performed.” 

“We are pleased that this litigation has been entirely resolved without any finding to the contrary,” said the statement. The lawyers said they did legal work for Gottlieb, her trust and her foundation for 24 years without being paid. 

“We had a clear understanding with her that she would not pay us during her lifetime because her assets were largely illiquid, and that we would collect our fees from her trust after her death,” said the statement. “Unfortunately, we were unable to document our extensive past legal work to the attorney general’s satisfaction due to the loss of records while converting an antiquated computer system, a fire in our offices, and our not realizing that the attorney general would expect to see time sheets and other records more than seven years old.” 

The lawyers said they cooperated fully and are pleased that the AG’s office consented to reasonable terms and that all of the settlement funds will be donated to charity. 

As part of the settlement reached with the Attorney General’s office, the foundation will be dissolved and all of its remaining assets, which together with the restitution funds exceed $1 million, will be disbursed to other charitable organizations under the supervision of the Attorney General’s office. 

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