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Attorney Entitled to Receive Reimbursement from HUD for Legal Fees

By Gabriella Khorasanee, JD | Last updated on

Richard Guertin was Corporation Counsel for the City of Middletown, New York (presumably centrally located), in 2004. From 1997 to 2004, Middletown received federal funds from the United States Department of Housing and Urban Development to "promote the 'development of viable urban communities.'"

As a result of eight questionable loans, Guertin, along with Middletown Mayor Joseph DeStefano and Middletown Community Development Director Neil Novesky, were indicted on charges that the three conspired in an illegal scheme to benefit from loans stemming from federal funds.

The Criminal Trial

At trial, the three were found not guilty of all charges. Novesky asked HUD for reimbursement for his legal fees, and HUD permitted the reimbursement because the trial court had found "no credible evidence that he was involved in any illegal scheme." DeStefano and Guertin soon followed with similar requests for reimbursement but were turned down.

Even though they were found not guilty, the trial court had noted that one of the eight loans was "troubling" because DeStefano could personally benefit indirectly, and because Guertin, in addition to being Corporation Counsel, advised DeStefano as a personal client. Guertin appealed HUD's refusal to reimburse, and the district court affirmed.

The Second Circuit

The Second Circuit reversed the judgment of the district court because both HUD and the district court put too much reliance in one non-binding finding of the trial court. Instead, the Second Circuit noted that with every questionable loan, there was no finding "Guertin acted with any purpose other than administering the CDBG program."

A Lesson in Hats

Here, the trial court noted that "Guertin did wear two hats" when he acted as both Corporation Counsel and as DeStefano's presonal lawyer. In this case Guertin did not engage in any wrong doing, but he took a risk in representing DeStefano in his personal capacity. That said, attorneys must always be mindful of any potential for conflict of interest, and should always err on the side of precaution.

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