Trust Betrayed: How Misusing IOLTA Funds Led to Richard W. Gannett’s Disbarment

When attorneys handle client or third-party funds, the law demands absolute honesty and care. In the case of Massachusetts lawyer Richard W. Gannett, that duty was broken when he deposited and withdrew more than $42,000 in disputed funds from his IOLTA account without authorization. The result was swift and severe disbarment, upheld at every level of appeal. This case stands as a stark reminder that mishandling trust money is one of the fastest ways to end a legal career.

 

In the Matter of Richard W. Gannett, 489 Mass. 1007 (2022).

On March 23, 2018, bar counsel filed a disciplinary petition against Richard William Gannett, alleging that he had wrongfully deposited trust funds into his IOLTA (Interest on Lawyers’ Trust Account) account specifically, a check of $42,227.28 in which Lee Bank had an interest and then misused those funds in violation of professional conduct rules.

After an evidentiary hearing, a hearing committee recommended disbarment. The Board of Bar Overseers adopted that recommendation, and a single justice of the Massachusetts Supreme Judicial Court (SJC) ordered Gannett disbarred.

Gannett knowingly deposited the check into his IOLTA account, without Lee Bank’s consent, even after the bank clearly stated it was not authorized to do so.

He subsequently withdrew the exact amount for himself, fully aware that the bank had rights to those funds under the loan and forbearance agreements.

The SJC found that he violated several Massachusetts Rules of Professional Conduct, including:

  •  Withdrawing trust funds while a third party’s interest was disputed and failing to return funds.
  • Failing to promptly notify and pay a third-party entitled to trust funds.
  • Engaging in dishonest or deceitful conduct, and behavior that reflects poorly on fitness to practice law.

Gannett denied misconduct and asserted due process violations, claiming inadequate counsel preparation and ineffective assistance. The SJC noted there’s no recognized right to counsel in bar discipline proceedings nor a claim for ineffective assistance akin to criminal cases, rejecting his arguments.

On appeal, Gannett raised a new claim: that his hearing counsel had an un waivable conflict of interest due to alleged malpractice in an unrelated case. The court remanded the matter to the single justice.

The single justice ruled that Gannett had known of the facts underlying the claim before the hearing, failed to timely raise it, and therefore waived the issue. She declined to consider it and denied his motion to expand the record.

The full SJC subsequently affirmed the disbarment and the denial of his motion to expand the record.

In July 2022, Gannett petitioned to reopen the disciplinary proceedings, basing the request again on his attorney conflict and counsel deficiency claims. The board denied his petition.

This case is significant because it reinforces the absolute duty of lawyers to safeguard client and third-party funds. The Massachusetts Supreme Judicial Court sent a clear message that:
Misuse of IOLTA funds is among the gravest professional violations even if the amount is relatively small or the lawyer believes they have a personal claim to the money, taking disputed funds without proper authorization is treated as intentional misappropriation, which almost always results in disbarment.
Disbarment is not easily undone ,Once the court determines that trust account misuse was intentional, efforts to reopen or re-litigate the case years later face a nearly insurmountable burden.
In short, the case is a cautionary tale: mishandling trust funds and disregarding procedural obligations will not only cost a lawyer their license but also leave virtually no path for reinstatement.
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