Dan Whitten

FRONT ROYAL — Lawyers have reacted to the ethical dilemma that Lee Berlik, Jennifer McDonald’s civil lawyer, has been placed in following the recent revelation that she allegedly used stolen money to pay for his services.

The allegation is detailed in the report of Cherry Bekaert, the firm hired to investigate the Front Royal-Warren County Economic Development Authority’s finances.

The report states that McDonald, the authority’s former director who is being held in jail without bond on counts of embezzlement and fraud, requested a $10,000 wire draw from First Bank and Trust with instructions to send it to Berlik Law LLC.

The wire request was made five days after the first hearing in a civil defamation county Supervisor Tom Sayre filed against McDonald. The Cherry Bekaert report states that McDonald included instructions with the wire request that the money was for the “Afton Inn Attorney.” County and EDA Attorney Dan Whitten noted that there is no “Afton Inn attorney” beside him, as he has represented the authority in any matters regarding the Afton Inn renovation project.

Whitten said that if Berlik has knowledge that the money was stolen, “I believe he has an ethical duty to give it back.” Whitten said another reason Berlik should give the money back is that he may be a witness against McDonald, and if that is the case, he will have to withdraw as her counsel.

Sayre noted that the allegation by Cherry Bekaert means that “McDonald is allegedly using embezzled town and county money to pay Berlik to fight me and my defamation lawsuit.” He added, “this is apparently the last fraudulent activity that Cherry Bekaert caught McDonald doing.” McDonald resigned about one month after the requested wire transfer.

While Berlik declined to comment on what he knew about the wire transfer, he said: “I can say I don’t work for the Afton Inn.” None of the documents released along with Cherry Bekaert’s report indicate that Berlik knew the wire included potentially stolen funds.

At the Wednesday motions hearing in a defamation case in which McDonald is suing Sayre for defamation, attorney David Downes noted that Berlik may be an “accessory after the fact” and that he may have a conflict of interest.

Downes said after the hearing that the American Bar Association’s rules regarding conflict of interest state “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.”

The rules further state that a conflict of interest would exist “if there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or by personal interest of the lawyer.”

Downes said that he believes McDonald will be charged federally with wire fraud because of that particular transaction. He added that U.S. attorneys have an obligation to investigate whether Berlik knew or should have known that he received embezzled money.

Downes added that Berlik cannot deny he has been put “on notice” of where that money may have come from.

When asked what he would do in Berlik’s situation, Downes pointed to the fact that in August he withdrew from representing Leslie Deavers — who was convicted of embezzlement and arson — when she gave him an unauthorized $1,000 check from a third party.

Defense Attorney David Silek said if Berlik had reason to believe or knew that the funds were stolen, it presents an “ethical problem.” He said Berlik may become a witness, which would force his withdrawal from counsel.

Silek said he does not know whether Berlik must return the money, as the Uniform Commercial Code provides a level of protection for a party that receives money. He added that the general rule, however, is that the money can be retrieved by authorities or the EDA.

Silek said there is no doubt regarding what he would do in Berlik’s situation.

“If I as an attorney learn that my client has retained me with stolen money, I believe I have both an ethical and moral obligation to return that money to its proper owner and then withdraw from representation of that client,” Silek said.

Town Attorney Doug Napier said it gives him “heartburn” that a former government “employee or actor” would use public funds for representation in a civil case. While he does not know the exact details of the situation, Napier said “I would not be surprised” if McDonald paid Berlik with stolen money.

Napier said if that is indeed what happened, the money is technically recoverable. He added that since Berlik may not know that money was stolen, it may not be recoverable from him.

“She’s liable for it, in my view...he may not be if he can show that he didn’t know it was stolen, and I’m going to make an assumption that he didn’t know that,” Napier said.

He added that “the problem is she’s in jail, how are you going to get the money from her?”

Napier noted that the town is about to file a lawsuit against the EDA and McDonald seeking to recover any of its funds that were misappropriated.

Napier said “I don’t know what we’ll recover,” adding that he has been practicing law for 40 years and “I’ve just never seen anything like this.”

– Contact Josh Gully at jgully@nvdaily.com