THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, October 3, 1995 TAG: 9510030252
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: PORTSMOUTH LENGTH: Long : 178 lines
When Frank and Gayle Galiney found themselves victims of a bad lawyer, their first reaction was to try to get compensation.
The lawyer, Joseph James Basgier Jr. of Virginia Beach - who has surrendered his license and is awaiting sentencing on embezzlement charges - had botched the Galineys' lawsuit. He missed a filing deadline, then covered up by telling the Galineys their case was still pending.
The deception went on for years. Over time, the Galineys lost their home, their business and their credit, in part because of Basgier's mistakes. When they finally discovered the lie, they convinced Basgier to pay them $50,000 for his mistake, plus another $131,000 over 10 years.
But when the monthly payments stopped, the Galineys found themselves up a creek.
They couldn't collect from Basgier's legal malpractice insurance. He had none.
They probably can't collect criminal restitution, even though Basgier has pleaded guilty to embezzling $80,000 from his former law firm and other clients. He didn't embezzle from the Galineys.
Finally, they can't collect from a State Bar fund that pays victims of crooked lawyers. That's because Basgier didn't steal anything from them. He just loused up their case.
And so the Galineys have learned a lesson that victims of Peninsula lawyer David Murray learned in 1992, after Murray stole $42 million from clients, then killed himself:
In Virginia, neither the State Bar nor the state courts guarantees that victims of dishonest or incompetent lawyers are fully protected.
``I thought,'' Gayle Galiney says, ``there are supposed to be systems in place to keep these sort of things from happening.''
Frank Galiney is angrier. ``The bar is definitely there for the good of the attorneys and not the good of the public,'' he says. ``They should have better checks and balances somewhere along the line.''
What went wrong?
It began with a lawsuit filed late.
Galiney owned four bowling alleys and three used-car lots, but he had a problem. He owed a lot of money to a finance company. He had guaranteed many loans from the finance company to his customers, so they could buy his cars.
But then the customers started defaulting on the loans, and Galiney was on the hook.
That was trouble. Over two years, the bad debts ran into serious money. Galiney paid back $125,000 in 1986 and 1987, according to court papers.
Galiney thought this was a fraud. He thought the finance company was making him pay off loans that had nothing to do with his car business. And the debts were threatening his businesses and his home.
So Galiney sued.
``I thought it was a simple matter,'' Galiney says. ``I was going to get my money back.''
Galiney went to a lawyer friend, Robert Steinhilber of Virginia Beach. Steinhilber passed the case to a partner, Jim Basgier, who drew up the lawsuit and filed it in Norfolk Circuit Court. That was in 1988.
For three years, the case bounced from court to court.
By the final bounce, it was too late. The last lawsuit was filed in 1991, beyond the three-year limit.
A judge threw it out. Galiney would get no money.
After an angry confrontation, the Galineys say, Basgier admitted his mistake. ``He laid it on the line,'' Gayle Galiney recalls. ``He could not find a legal remedy for the situation. He started begging and crying.''
So the Galineys struck a deal: To remedy the error, Basgier paid them $50,000 cash and agreed to pay another $131,000 over 10 years. He even signed a promissory note.
But by then, the Galineys had lost their bowling alleys, their car lots and their fancy home in Point Elizabeth. ``I lost everything over this mess,'' Frank Galiney says.
Basgier and his attorney could not be reached for comment. Basgier declined to comment after his criminal hearing in August.
Galiney acknowledges that not everything was the lawyer's fault. Galiney admits making some business mistakes that contributed to his own financial downfall. And he did not really lose everything. He and his wife still live in a comfortable house with a swimming pool near Craney Island.
Still, Galiney says, if he had known the truth about his lawsuit, he might have made different business decisions.
``Maybe I should have been smarter,'' Galiney says, ``but I relied on (him) as an officer of the court.''
After the shock wore off, the Galineys went after Basgier's legal malpractice insurance.
Nine of 10 Virginia lawyers have it. It protects them from a client's claim of injury arising from a mistake, just like a doctor's medical malpractice insurance.
But Basgier didn't have it. He had let his policy lapse, Galiney said.
That was possible because the Virginia State Bar and the Virginia Supreme Court do not require lawyers to have malpractice insurance. They simply hope that most lawyers realize the wisdom of insurance.
``We want all of our lawyers to have malpractice coverage,'' says Michael W. Smith, a Richmond attorney who is president of the State Bar. ``It doesn't make any sense not to have it. It would be similar to driving your automobile without insurance. It wouldn't be a very smart idea.''
For a while last year, in response to the Murray disaster, the bar considered requiring malpractice insurance of all lawyers. But a committee rejected the idea, saying it would ``lull the public into a false sense of security.''
``The key point here,'' the committee wrote, ``is that malpractice insurance policies currently exclude dishonest and intentional acts. Thus, mandatory malpractice insurance would have offered no protection to clients against losses like those involved in the Murray case.''
It would, however, have protected clients like Frank Galiney against sloppiness like Basgier's.
``Why don't they require lawyers to have malpractice insurance?'' Galiney asks. ``That at least would be some little benefit to the public.''
Next, the Galineys turned to a little-known State Bar fund. It is called the Client Protection Fund and it pays people who have lost money to dishonest lawyers.
But that has problems, too.
Mainly, the fund is too small - it would go broke if it paid every valid claim. So the State Bar limits how much each wronged client can collect. The cap is $25,000, no matter how big the claim.
The State Bar also will not pay more than 10 percent of the total fund to clients of any single bad lawyer. That way, one attorney's many criminal acts, like Murray's, can't break the bank.
Unfortunately, it also means that victims of one lawyer get very little compensation.
Murray's clients, for example, filed claims for millions of dollars. In the end, 23 clients split $55,000 because the fund had just $550,000 in the bank.
Bar officials know the fund is too small. ``Demands upon the fund will continue to be unmet in significant part, so long as the 10 percent limit remains in force,'' the fund's chairman wrote last year.
So the bar is trying to make it bigger. Every year, the bar is chipping in an extra $200,000 until the fund reaches $3 million. At that rate, it could take a while because the fund also is paying out about $200,000 in claims.
Still, the fund today is triple the size it was during the Murray scandal - $1.5 million, as of last month. That means it can pay up to $150,000 for one bad lawyer.
To victims of Basgier's embezzlements, the fund has already paid a total of $30,080, including one payment for the maximum $25,000. Another claim is pending.
But the Galineys got nothing.
``They told us we're not eligible,'' Gayle Galiney says. ``It's only for people that lawyers actually took money away from.''
Finally, the Galineys sought criminal restitution from Basgier.
That probably will fail, too.
In August, Basgier pleaded guilty to three counts of embezzlement. In return, prosecutors dropped one count of forgery - the only count related to the Galiney matter.
Technically, that means the Galineys are not victims of Basgier's crimes.
Despite this, a prosecutor asked Judge Edward Hanson in August to order $50,000 restitution from Basgier to Frank Galiney. ``He lost his business as a result of the defendant's actions,'' prosecutor William Monroe argued.
The judge disagreed. If the Galineys want their money, Hanson said, they will have to sue Basgier.
Hanson will officially rule on the restitution issue Oct. 10, when Basgier is formally sentenced. The plea agreement calls for no jail time, but 10 years of court-ordered good behavior.
Basgier, 44, has already lost his law license. He surrendered it in March 1993 with disciplinary charges pending at the State Bar. He now works as a title searcher.
``I really have no desire to see Jim (Basgier) go to jail,'' Frank Galiney says. ``He's going to be punished enough in life with what he's lost. In essence, he's lost more than I have. . .
``But if nothing else, he should be held accountable to everyone. I would be happy with one-third of what he owes me. Just something.'' ILLUSTRATION: MOTOYA NAKAMURA
Staff
[Color Photo]
Gayle and Frank Galiney probably won't be able to collect much from
the lawyer who misled them. He had no malpractice insurance.
PAYING FOR LAWYERS' MISDEEDS
Year-by-year payouts from the Virginia State Bar's Client Protection
Fund, in thousands of dollars.
STAFF Chart
SOURCE: Virginia State Bar
by CNB