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Legal Ethics

Work-at-home lawyer suspended partly for lack of a 'bona fide office'

Updated: The Delaware Supreme Court has ordered a two-year suspension for a lawyer who, among other violations, worked out of his Pennsylvania home and did not have exclusive, designated office space in Wilmington.

The court said that Fred Barakat had failed to maintain a bona fide office, as required by Delaware Supreme Court Rule 12, and misrepresented the facts when questioned about it. He also failed to maintain adequate bank records and rarely deposited retainers into his escrow account, the court said. The Legal Profession Blog noted the suspension and linked to the opinion (PDF).

Barakat lists an official Wilmington address that “is not an ‘office’ in the traditional sense,” the opinion says. He does not have designated, exclusive office space, though he can rent a conference room when needed. Employees of the landlord collect Barakat’s mail and greet visitors. His attendance there is “sporadic and unscheduled,” the court said, citing findings by the Supreme Court’s Board on Professional Responsibility.

When questioned about the office, Barakat told the Office of Disciplinary Counsel in a 2010 letter that advances in technology made it possible for him to handle client matters without his presence at the office. In a letter sent the next year to the ODC, he said he had four employees in the Wilmington office and he was present some portion of three days a week, most weeks, the court said.

Barakat had argued he complied with the bona-fide office rule because he was reachable by phone, but the supreme court disagreed. “The rule requires that the office ‘be a place where the attorney or a responsible person acting on the attorney’s behalf can be reached in person or by telephone,’ ” and have ‘the customary facilities for engaging in the practice of law,’ ” the court said.

Barakat also argued that the rule imposed an unconstitutional residency requirement and violated the commerce clause. But a federal appeals court upheld the office requirement in 1997, the court said.

Barakat also argued he did not misrepresent his presence in the Wilmington office because court records and bank deposits verify he was in Delaware about 12 to 15 days per month. The court said that, even if Barakat were in his office three days a week, “that does not cure his misrepresentations about his staff in the Wilmington office and their activities managing his practice.”

Barakat was described as a well-known bankruptcy attorney in a September 2012 Philadelphia Daily News article that said he was injured in a shooting during a home invasion by three intruders. The ABA Journal covered the shooting in this story.

He tells the ABA Journal in an interview that he never maintained the workers in the Wilmington office were his employees. “I never used the word ‘employee’ anywhere,” he says. He cites from his 2011 letter to the ODC, which read: “My office arrangements include a four-person staff in the Wilmington office, 9-5 weekdays, including lobby reception security.”

He does acknowledge that his financial books were a “nightmare” after his computer crashed in 2009 and the person he hired to straighten it out died six months later. He finally got his books in order in January 2011, when he gave up his accounting software and switched to online banking, he said. He adds that he was audited by the Internal Revenue Service, which found no discrepancies in his tax reporting. He also cites findings that no clients suffered any harm as a result of the bookkeeping problems.

Barakat also says he believed a comment to the ethics rules authorized him to deposit advance fees of less than $2,500 directly into his operating account, though the supreme court disagreed with this interpretation.

Related coverage of similar New Jersey rule:

ABAJournal.com: “Brick-and-mortar office requirements are relaxed for state’s lawyers”

ABAJournal.com: “Virtual Offices May Violate Ethics Rules, New Jersey Opinion Says”

Updated lead sentence to reflect that there were additional violations claimed against Fred Barakat.