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State v. McDonald

Supreme Court of Rhode Island

April 20, 2017

Patrick Timothy McDonald.

         Kent County Superior Court (K2/11-798A) Associate Justice Brian P. Stern

          For State: Jane M. McSoley Department of Attorney General.

          For Defendant: Lara E. Montecalvo Office of the Public Defender.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.



         The defendant, Patrick Timothy McDonald, appeals from a judgment of conviction on three separate counts of embezzlement and one count of conspiracy to commit embezzlement. This case came before the Supreme Court pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not be summarily decided. After considering the parties' written and oral submissions and reviewing the record, we conclude that cause has not been shown and that this case may be decided without further briefing or argument. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

         I Facts and Procedural History

         On November 29, 2011, defendant was charged by criminal information with five counts of embezzlement in violation of G.L. 1956 § 11-41-3[1] and one count of conspiracy to commit embezzlement in violation of G.L. 1956 § 11-1-6.[2] The criminal information alleged that, between June 1, 2007, and December 31, 2008, defendant colluded with Kimberly Gostomski to embezzle funds totaling $166, 303.[3] These funds were entrusted to defendant in his capacity as a real estate attorney; Gostomski worked as defendant's paralegal.[4] A jury trial was held in January 2014. The evidence adduced at trial may be summarized as follows.

         Martin Aguilar was the first witness to testify. Aguilar testified that, on July 24, 2008, he purchased real estate in Coventry from E.M.C. Mortgage Group (E.M.C. Mortgage) for $140, 000, which he financed through Sun Trust Mortgage, Inc. (Sun Trust Mortgage). The defendant was the settlement agent for the transaction, and on July 24, 2008, Sun Trust Mortgage wired $126, 215.97 to defendant's IOLTA account[5] to be disbursed to E.M.C. Mortgage after the closing. Aguilar ostensibly purchased title insurance from defendant underwritten by Mortgage Guarantee & Title Insurance Company (Mortgage Guarantee & Title). Aguilar stated that, at the closing, defendant gave him a commitment for title insurance, which defendant had signed, and a closing protection letter, which insured Sun Trust Mortgage against loss arising out of "[f]raud or dishonesty of the * * * [a]pproved [a]ttorney in handling [its] funds." E.M.C. Mortgage never received the sales proceeds from defendant. Aguilar testified that, approximately one month after the closing, E.M.C. Mortgage's attorney notified him that defendant had never disbursed any funds. Aguilar further testified that he met with Chief Disciplinary Counsel David Curtin and also filed an insurance claim with Mortgage Guarantee & Title. According to Aguilar, however, Mortgage Guarantee & Title informed him that his title insurance policy was "null and void."

         Next, the jury heard testimony from Joseph Tavarozzi. Tavarozzi explained that, in February 2008, he refinanced two existing mortgage loans on his real estate located in Warwick through IndyMac Bank (IndyMac). The defendant was the settlement agent for the refinancing transaction; and, on February 29, 2008, IndyMac wired $147, 862.27 to defendant's IOLTA account. The defendant was expected to disburse a total of $137, 916.13 to Countrywide Home Loans (Countrywide) on February 29-$101, 691.35 to pay off Tavarozzi's first Countrywide loan and $36, 224.78 to pay off Tavarozzi's second Countrywide loan. Tavarozzi also purchased title insurance from defendant underwritten by Mortgage Guarantee & Title. Tavarozzi attested that, at the time of the closing, he was three months ahead on his mortgage payments to Countrywide. According to Tavarozzi, approximately four months after the closing, Countrywide notified him that his mortgages had not been paid. Tavarozzi testified that, upon receiving this notification from Countrywide, he attempted to contact defendant, but was never able to reach him. Instead, he spoke to Gostomski about the unpaid loans. Tavarozzi attested that, in June 2008, Gostomski called him to inform him that the first loan had been paid. Tavarozzi further testified that he received another call from Countrywide in August 2008 notifying him that the second loan for $36, 224.78 was still outstanding. Tavarozzi explained that he again attempted to contact defendant, and, unable to reach either defendant or Gostomski, contacted Mortgage Guarantee & Title to file a claim under his title insurance policy. Tavarozzi attested that Mortgage Guarantee & Title paid Countrywide the outstanding balance on his second loan. The defendant never paid Countrywide the $36, 224.78 on Tavarozzi's second loan.

         The jury also heard testimony from Michele Green, Senior Corporate Underwriter and Vice President of First American Title Insurance Company-formerly known as Mortgage Guarantee & Title. Green testified that defendant was an agent with Mortgage Guarantee & Title from January 2007 through May 2008. On May 9, 2008, however, Mortgage Guarantee & Title terminated its agency agreement with defendant because, as it explained in its correspondence to defendant, he failed to complete an "escrow review." According to Green, an escrow review monitors for agent fraud and includes examining attorneys' IOLTA accounts, real estate closing documents, and cross-referencing policies issued with premiums collected. Green testified that, upon defendant's termination from Mortgage Guarantee & Title, the company promptly blocked defendant's access to its computer systems and notified all lenders to which it had issued closing protection letters, and whose transactions were still pending with defendant, that it was revoking the closing protection letters because defendant was no longer an active agent.

         Green further recalled that, in August 2008, Tavarozzi contacted her to file a claim under his title insurance policy. According to Green, on Friday, August 29, she attempted to contact defendant about Tavarozzi and left defendant a voice mail saying, "We have somebody in our office who is making extremely serious allegations about a closing that you conducted. This is very[, ] very serious. I need to speak to you right away. Please call me or e-mail me." In response, defendant emailed Green, notifying her that he was on his way to his office to "get [her] the information A.S.A.P." Green testified, though, that she did not hear back from defendant until Tuesday, September 2, despite "dozens" of attempts to contact him over the holiday weekend. At 9:47 a.m. on September 2, defendant sent Green an email reading, in part, "The loan was not paid off. First thing this morning I requested an up-to-date payoff and will be wiring out the funds as soon as I receive it [sic] * * *." The subject line read "15 Chelmsford Avenue Warwick"-Tavarozzi's address. According to Green, however, she had never disclosed to defendant which client she was contacting him about.

         On Wednesday, September 3, defendant sent Green and her supervisor an email informing them that, prior to Green's contact on August 29, 2008, he was not aware that Tavarozzi's first loan had been paid late and that the second loan had not been paid at all. In the email, defendant acknowledged that Gostomski was informed of this and that she had "numerous phone conversations" with Tavarozzi. In the email, defendant also wrote that he "ordered the payoff [on] the second mortgage [and that it would] be paid today or tomorrow" and that he had "taken steps to ensure that this [did] not happen again." Green replied by sending defendant a fax questioning his version of events, writing in part:

"The series of events you describe [do] not make a lot of sense, or stand up to scrutiny. Your recitation of events seems to suggest that your paralegal Kim either misappropriated the funds from this closing or, for some unknown reason, failed to make the disbursements even when numerous calls from the client were made. She further, according to you, failed to notify you of any of these events.
"It is my understanding that, despite her having committed these grievous errors in judgment, she is still in your employ.
"In any scenario of events, had no misappropriation taken place, your client account would have had nearly $138, 000 in it for 5-6 months that you would have no accounting for. How would that have escaped your notice?
"In any event, since you have chosen to ignore our numerous phone calls of this morning seeking an explanation of these discrepancies, or proof that these funds have indeed been in your client account for these entire six months, you can expect to be required to deliver such explanations and proof to Rhode Island Disciplinary Counsel and the Rhode Island State Police, both of whom have now been notified."

         Green testified that defendant never responded to her fax. Green further testified that she knew defendant had not paid off Tavarozzi's second loan with Countrywide. Green attested that, with respect to Tavarozzi's insurance claim, Mortgage Guarantee & Title paid off his second Countrywide loan. Green also attested that Mortgage Guarantee & Title received a title insurance claim from Aguilar alleging that defendant never disbursed the sales proceeds after Aguilar's closing. Green testified, however, that Mortgage Guarantee & Title had never issued a title insurance policy to Aguilar and that the closing protection letter and title insurance commitment defendant gave to Aguilar were forged.

         Next, the jury heard testimony from defendant's alleged co-conspirator, Gostomski. Gostomski explained that she met defendant while she was working for another real estate attorney and that, after leaving that attorney's office, she remained in contact with defendant. Gostomski testified that, in or around January 2007, Gostomski and defendant began a romantic relationship. Gostomski further attested that, by that time, defendant had opened his own real estate law office and, in March or April of that year, she began working for him. Gostomski testified that she was defendant's only employee, and that her position included preparing all pre-and-post-closing documents for the office's real estate transactions. Gostomski attested that, at some point during the course of her employment, she began doing "some, " but not "all, " of the bookkeeping. According to Gostomski, although she was not listed as a signatory on either defendant's IOLTA or business-operating account, she, with defendant's permission, issued and signed checks from both of these accounts. Gostomski testified that she did not have the ability to access defendant's accounts online, but that defendant monitored both accounts' activities regularly. She recounted that she "would come in usually in the morning and that was usually up on the computer[;] what the balances were, what transactions had transpired in both accounts * * *." Gostomski also testified that defendant had what she believed to be the business-operating account's only ATM card.

         According to Gostomski, in February and March 2008, the office began to unravel, meaning that "a lot of things got overlooked" and "were not being handled correctly." At this time, she explained that defendant's business-operating account was frequently overdrawn, and, on occasion, she had transferred unearned legal fees from defendant's IOLTA account to his business-operating account. Gostomski testified that, even as the number of real estate closings continued to decrease, defendant never changed his spending habits. Gostomski attested ...

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