Tuesday, May 14, 2013

Bookkeeper's Theft Leads To Attorney's Resignation

We are seeing a trend of cases involving discipline for failure to supervise non-lawyer employees.

The New York Appellate Division for the First Judicial Department has accepted an attorney's resignation on these facts:

In respondent's affidavit of resignation, sworn to on January 31, 2013, he acknowledges that there is a pending investigation by the Committee into allegations that he engaged in professional misconduct due to his failure to monitor his escrow account. He admits that he failed to realize that his bookkeeper had misappropriated approximately $46,000 from that account, and that the loss rendered him unable to pay approximately $42,000 in settlement funds owed to a client. He further admits that he did not report his bookkeeper's misfeasance to law enforcement, because he feared the collateral consequences to himself. Additionally, respondent acknowledges in his affidavit that he knowingly assisted his client in concealing the amount of settlement funds due her to protect against her disqualification from various benefits.

The court also ordered restitution. (Mike Frisch) 

http://lawprofessors.typepad.com/legal_profession/2013/05/we-are-seeing-a-trend-of-cases-involving-discipline-for-failure-to-supervise-non-lawyer-employees-the-new-york-appellate-di.html

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Comments

I agree that this is a fast-growing trend.

In fact, a comment to a new Missouri trust account rule, Rule 4-1.15 effective July 1, 2013, specifically warns that a lawyer has a non-delegable duty to protect and preserve trust account funds, and that the lawyer may be disciplined under Rules 4-5.1 and 4-5.3 for failure to supervise trust account activities. The full comment paragraph states:

[2] Rules 4-1.15(a)(3) to (7) enumerate minimal accounting controls for client trust accounts. It also enunciates the requirement that only a lawyer admitted to the practice of law in the jurisdiction or a person who is under the direct supervision of the lawyer shall be the authorized signatory or authorize electronic transfers from a client trust account. While it is permissible to grant limited nonlawyer access to a client trust account, such access should be limited and closely monitored by the lawyer. The lawyer has a non-delegable duty to protect and preserve the funds in a client trust account and can be disciplined for failure to supervise subordinates who misappropriate client funds. See Rules 4-5.1 and 4-5.3.

The new rules are available at http://www.courts.mo.gov/sup/index.nsf/d45a7635d4bfdb8f8625662000632638/7912f0aec6a155df86257aa7006d2bce?OpenDocument.

Posted by: Michael Downey | May 15, 2013 8:12:03 AM

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