New York Lawyer Disbarred, Again (MORE, CLICK HERE)

Second Time's the Charm?: NY Lawyer Disbarred . . . Again
The New York Law Journal by Anthony Lin - March 24, 2008

A onetime law firm associate, disbarred in 1988 for insider trading, then re-admitted in 2003, has been disbarred again for misrepresenting his past in applications both for reinstatement and for non-legal licenses to work as an insurance agent and a stock broker.

Israel G. Grossman committed his insider trading offenses while working as an associate at the firm now known as Kramer Levin Naftalis & Frankel. The confidential information he passed to friends and family about transactions the firm was working on netted them $1.5 million in trading profits.

Arrested and convicted in 1987, the then-34-year-old Mr. Grossman was sentenced to two years in prison. He was also later found jointly and severally liable to the Securities and Exchange Commission for $2.5 million. The case attracted considerable attention at the time, coming soon after prosecutors ensnared the much larger insider trading ring led by investment banker Dennis Levine.

But the Appellate Division, First Department, ruled last week that the now 55-year-old Mr. Grossman had consistently denied having a prior conviction on professional licensing applications to the state insurance department and the National Association of Securities Dealers. He failed to disclose these applications in his successful quest for reinstatement to the bar in 2003, even though he was facing criminal prosecution at the time for allegedly lying to the NASD about his past.

"Under these circumstances, disbarment is the appropriate sanction, as respondent has engaged in a pervasive pattern of affirmative misrepresentations and failed to fully accept responsibility for his serious misconduct," the court said in Matter of Israel G. Grossman.

Mr. Grossman sought work as an insurance agent in 1994. In both his applications for employment at various insurers and for a license from the state Insurance Department, he stated that he had not been convicted of any crime other than traffic violations or a juvenile offense. He also stated that he had not been censured, fined or suspended by any regulatory agency.

In 2000, Mr. Grossman's then-employer, New York Life Insurance Co., asked him to apply for a broker's license from the NASD. The application asked: "Has any domestic or foreign court ever found you were involved in a violation of any investment-related statute(s) or regulation(s)?" Mr. Grossman answered negatively.

This response led to criminal charges in December 2001, after New York Life learned of Mr. Grossman's prior conviction and reported him to the NASD. Mr. Grossman was applying for reinstatement to the bar at around the same time.

He had been rejected on a prior attempt in 1996, but the court granted his second application in May 2003. In last week's decision, the court noted that Mr. Grossman disclosed neither the criminal charges then against him or the fact that he had been found personally liable for $2.5 million in insider trading profits.

Mr. Grossman, appearing pro se, argued unsuccessfully that he had not disclosed his insider-trading convictions in the other licensing applications because he had been advised incorrectly by one insurer and an employment lawyer at the time of his hiring that the question only applied to convictions within the last five years.

He was acquitted on the charge stemming from his NASD application after a bench trial, but only after Southern District Judge Shira Scheindlin rejected Mr. Grossman's guilty plea as equivocal and insisted on a trial.