A Manhattan lawyer admitted to the bar in 1976 has been suspended from practicing law for four years after misappropriating tens of thousands of dollars in client funds and engaging in the unauthorized practice of law while under interim law-practice suspension, a state appeals court has ruled.

But the lawyer, Claude Castro, who runs a small or solo law firm located on Madison Avenue, according to multiple websites, avoided a disbarment that an attorney grievance committee at one point had asked for. And a referee who held a 2019 liability hearing in the disciplinary matter decided that Castro's misappropriation of at least $58,000 was "nonvenal"—or without a corrupt intent—because, said the referee, the misappropriation of client money was attributable to "poor" self-management by Castro of his law firm, according to an Appellate Division, First Department panel that adopted the referee's liability findings and sanction recommendations in full while handing down Castro's four-year suspension.

Castro, who represented himself both before the referee and the First Department had testified to the referee "that in 2009 he started his own law firm but was not equipped to handle both the demands of his practice and management of the firm, and poor record keeping caused him to lose track of his client's funds," the unanimous First Department panel wrote in its opinion issued July 23.

On the issue of unauthorized practice of law, Castro had further testified before the referee, said the panel, that he "did not feel it would have been right to refuse to assist" a client whose case was taken over by new counsel once Castro was forced off the case because his license to practice law was suspended on an interim basis in 2017. The "immediate" interim suspension was handed down by the Appellate Division, First Department in 2017, according to the July 23 opinion, because Castro had failed to cooperate with First Department attorney grievance committee's investigation into the misappropriated client funds. The misappropriation, wrote the panel, dated back to Castro's representation of a tenant-client embroiled in a landlord-tenant dispute that was active in 2010, and the grievance committee began investigating Castro's possible conversion of client funds at some point after the onetime client complained to the committee in 2014 about Castro.

According the panel's opinion, a lawyer named Evan Klestzick had testified to the referee in 2019 that he'd taken over the case after Castro was suspended and when the case "was already on the trial calendar."

Klestzick further testified, the panel wrote, that Castro "did not receive any compensation from the case, never held himself out as an attorney but assisted Klestzick, at his request, to understand all the facts and issues of the complicated case and to locate some evidence."

In addition, Klestzick told the referee, according to the panel, that Castro had "analyzed" a trial transcript in the case and "emailed him a memorandum which contained trial strategies," and also had "met with him [Klestzick] and the client during the March 2019 trial, and assisted him on drafting his motion to vacate."

But in his report on the disciplinary matter, the referee, who did find Castro liable for eight out of the 10 charges levied against him by the grievance committee, including the unauthorized practice of law, wrote that he viewed Castro's unauthorized practice as different from some previous, precedent-setting matters that had leveled disbarment against some lawyers who'd engaged in unauthorized practice of law.

"The Referee acknowledged precedent showing that disbarment is the usual sanction for such misconduct," wrote the panel. But the referee "found Castro's misconduct was distinguishable from those cases in that he did not appear in court or at a closing, he did not fail to advise clients of his suspension, and he did not hold himself out as an attorney in good standing."

"Rather, he 'sought to assist incoming counsel on a serious claim only when Klestzick asked and demonstrated he was not prepared' which 'balancing factors need to be also taken into account,'" the panel added, quoting from the unnamed referee's report on the matter.

The referee also gave some weight to mitigating factors and circumstances in regard to Castro's misappropriation of more than $58,000 in the unnamed tenant-client's fund, the panel said.

According to the panel's opinion, the referee found that between March and June 2010, Castro deposited $93,040 into a trust account, and then between April and June 2010, he disbursed $34,890 to his client's landlord in accordance with court order.

"The remaining balance of $58,150 should have remained intact until payment was made to the client. However, respondent's bank records show that, between August 2010 and October 2013, the IOLA account balance repeatedly fell below $58,150, and, as of July 2012, had fallen to $562.27," the panel added, and "finally, in December 2014, respondent paid his client the $58,150 he was owed after the client complained to the AGC."

The referee wrote, according to the panel, that "his recommendation of a sanction calls for a balancing of the various issues presented," including that "the mitigation witnesses show that [respondent] is a zealous advocate with personal qualities to be admired in a practitioner. However, this aspect needs to be weighed against his mismanagement of his practice leading to a shortfall in his escrow account. The referee does not feel that disbarment is a warranted sanction."

The panel, composed of Justices Rosalyn Richter, Ellen Gesmer, Jeffrey Oing, Anil C. Singh and Peter Moulton, chose to adopt the referee's findings and four-year suspension punishment, which in the legal matter before the panel, the grievance committee had also asked be adopted despite its request to the referee, at one point, for Castro's disbarment.

Castro, said the justices, asked for a three-year suspension retroactive to the date of his interim suspension, Oct. 31, 2017, based on his entire record.

The panel's suspension of four years is retroactive to 2017 date, their opinion states.

Castro could not be reached for comment.