Was That Wrong? Putting a convicted embezzler in charge of the trust account.

Was That Wrong? is a semi-regular column on Ethical Grounds. The column features stories of the absurd & outrageous from the world of legal ethics and attorney discipline. My aim is to highlight misconduct that I hope you’ll instinctively avoid without needing me to convene a continuing legal education seminar that cautions you to do so.

The column is inspired by the “Red Dot” episode of Seinfeld. In the episode, George Costanza has sex in his office with a character known only as “the cleaning woman.”  His boss finds out.  Here’s their ensuing exchange :

(Scene) In the boss’ office.

• Boss: I’m going to get right to the point. It has come to my attention that you and the cleaning woman have engaged in sexual intercourse on the desk in your office. Is that correct?
• George: Who said that?
• Boss: She did.
• George: Was that wrong? Should I have not done that? I tell you I gotta plead ignorance on this thing because if anyone had said anything to me at all when I first started here that that sort of thing was frowned upon, you know, cause I’ve worked in a lot of offices and I tell you people do that all the time.
• Boss: You’re fired.
• George: Well you didn’t have to say it like that.

The full script is HERE.  The scene is HERE.

Today’s entry involves the Florida Supreme Court’s order disbarring an attorney who hired someone who, during the job interview, stated he had been convicted of federal wire fraud & disbarred.  The hiring attorney then put the applicant in charge of the trust account.

Believe it or not, the story gets worse.

The order is here.  It was covered by the ABA Journal, the Legal Profession Blog, and Law.Com’s Daily Business Review.

• Court: We’ll get right to the point.  It’s come to our attention that you hired an employee who told you that he was both a CPA and a lawyer who had been disbarred after being convicted of federal wire fraud.
• Lawyer: Ok.
• Court: Not that it matters, but it turns out that he had never been a CPA or lawyer.
• Lawyer:  So I’ve heard.
• Court: It’s also come to our attention that shortly after you interviewed him, his federal probation officer informed you he’d been convicted of 11 counts of wire fraud, sentenced to 41 months imprisonment, 5 years of probation, and ordered to make nearly $8 million in restitution.
• Lawyer: Ok.
• Court: And that the probation officer informed you that he felt it inappropriate for your new employee to be working at a law firm, then made you sign a form acknowledging that you’d been made aware of the risk of hiring him.
• Lawyer: Who said that?
• Court: We’ve seen the form.  We’ve also learned that 5 months after you hired him, your employee stole $20,000 from trust.  You fired him, but then rehired him, and that you lied to his probation officer about the incident.
• Lawyer: Ok.
• Court: Finally, it’s come to our attention that you delegated all aspects of trust account management to him, attributed his increasingly lavish lifestyle to his girlfriend, and didn’t notice as he misappropriated more than $4 million from trust between 2010 and 2014.
• Lawyer: Was that wrong? Should I have not done that? I tell you I gotta plead ignorance on this thing because if anyone had said anything to me at all when I first started here that that sort of thing was frowned upon, you know, cause I’ve worked in a lot of offices and I tell you people do that all the time.
• Court: Disbarred.
• Lawyer.  Well, you didn’t have to say it like that.

Here are the previous entries in Was That Wrong?

• Conspiring with police to have your paralegal set up opposing counsel for a DUI mid-trial
• Bringing a gun to your disbarment hearing
• Sexting a Client
• Defrauding Investors, with Client Funds as Collateral
• Outrageous Falsehoods on a Resume
• Judge Orders Attorney Handcuffed to Jury Box
• Swearing at a Judge who Overrules Your Objection
• Forging Judges’ Signatures
• Representing Plaintiff & Defendant . . . and sleeping with Defendant
• Prosecutor Snoops on Conversations between Defendant & Defense Counsel
• Smuggling toothbrushes and pepper spray to an incarcerated client
• Framing a volunteer at your kid’s elementary school for drug possession
• Forging Wiretap Orders to Spy on a Romantic Rival
• Cannabis (In)Competence
• Inexplicable Incompetence and a Thomas Jefferson Costume

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Beware of Last Minute Changes to Wiring Instructions

The final Friday of any month tends to be a busy day for Vermont’s real estate bar.  I suspect that there are lots of closings and refi’s scheduled for today & tomorrow. So, I thought I’d re-post this blog that originally ran on March 8.  If it helps, pretend I’m using my Elmer Fudd voice when I say:

Be very, very, wary of last-minute changes to wiring instructions.

******************

The 2018 Legal Malpractice and Risk Management Conference took place earlier this week in Chicago.  I didn’t attend, but followed the Twitter updates.

Two tweets caught my eye.  Each relates to trust account scams.  I thought I’d use them as teaching tools. Consider these tweets as messages from a substitute teacher in your legal ethics class.

The message: be VERY, VERY, VERY, VERY careful when wire instructions change.

The first tweet was from Dan Pinnington.  Dan is the director of practicePro .  He’s a well-known speaker on risk management, claims prevention, and tech ethics.  Two day ago, he tweeted this.

Jennifer Groszek is an attorney & VP at Pro Quest Insurance.  Per the company’s leadership page, Jennifer provides risk management and claims prevention services.  Yesterday, Jennifer tweeted this from the LRRM Conference:

Andy Mikell is State Manager & Title Counsel at Vermont Attorneys Title Corporation.  He’s also a former member of the VBA’s Board of Managers and, perhaps the most important feather of the many in his cap, a friend of this blog.  With respect to Jennifer’s point on 2-factor authentication, Andy notes:

• “We are telling folks that the ONLY appropriate 2^nd factor authentication method is for the ‘Wiring Firm’: (a) to initiate the verification call; (b) to a phone number that they independently obtained/verified. In other words it is NOT acceptable: (a) to receive a confirmatory phone call or (b) to call a phone number in the email which contains the requested wire change.”

Andy’s point is crucial.  Initiating the call is key because scammers can trick your caller ID into showing a number that you think to be the client’s.  Further, a last-minute change in wire instructions that’s accompanied by “oh, and i have a new phone number too, please call it to confirm” should set off alarms even if you don’t have any alarms.

Excellent points from folks in the field.

 

Change in Wire Instructions? CAUTION!

Update:  Original post updated at noon on March 8 to include a great tip from Andy Mikell.

The 2018 Legal Malpractice and Risk Management Conference took place earlier this week in Chicago.  I didn’t attend, but followed the Twitter updates.

Two tweets caught my eye.  Each relates to trust account scams.  I thought I’d use them as teaching tools. Consider these tweets as messages from a substitute teacher in your legal ethics class.

The message: be VERY, VERY, VERY, VERY careful when wire instructions change.

The first tweet was from Dan Pinnington.  Dan is the director of practicePro .  He’s a well-known speaker on risk management, claims prevention, and tech ethics.  Two day ago, he tweeted this.

Jennifer Groszek is an attorney & VP at Pro Quest Insurance.  Per the company’s leadership page, Jennifer provides risk management and claims prevention services.  Yesterday, Jennifer tweeted this from the LRRM Conference:

Andy Mikell is State Manager & Title Counsel at Vermont Attorneys Title Corporation.  He’s also a former member of the VBA’s Board of Managers and, perhaps the most important feather of the many in his cap, a friend of this blog.  With respect to Jennifer’s point on 2-factor authentication, Andy notes:

• “We are telling folks that the ONLY appropriate 2^nd factor authentication method is for the ‘Wiring Firm’: (a) to initiate the verification call; (b) to a phone number that they independently obtained/verified. In other words it is NOT acceptable: (a) to receive a confirmatory phone call or (b) to call a phone number in the email which contains the requested wire change.”

Andy’s point is crucial.  Initiating the call is key because scammers can trick your caller ID into showing a number that you think to be the client’s.  Further, a last-minute change in wire instructions that’s accompanied by “oh, and i have a new phone number too, please call it to confirm” should set off alarms even if you don’t have any alarms.

Excellent points from folks in the field.

 

 

 

 

 

 

A New Year’s Resolution: Don’t Overcomplicate Trust Accounting

Last November, I posted The 50 Original Rules.  It’s a post that briefly recaps the history of the conduct rules that apply to lawyers.  Best I can tell, the earliest record of guidelines for attorney conduct in the United States is David Hoffman’s 1836 publication of his Fifty Resolutions in Regard to Professional Deportment.  My post includes each of Hoffman’s 50 resolutions.

181 years later, it’s somewhat fascinating to me how many of Hoffman’s resolutions continue to resonate.  Many are embedded in the current rules and our collective professional conscience.  Given my fascination, I’ve resolved to blog about the continued relevance of Hoffman’s resolutions, taking them one at a time.  To date, I’ve posted:

• Don’t Be a Jerk
• Don’t Switch Sides

Today’s thought:  Don’t overcomplicate trust accounting.

There are three rules that apply to client property & trust accounting:  Rule 1.15, Rule 1.15A, and Rule 1.15B.   They’re not exactly models of clarity, especially for folks with no business or accounting background.

But here’s what Hoffman resolved in 1836:

25.    I will retain no client’s funds beyond the period in which I can, with safety and ease, put him in possession of them.

26.    I will on no occasion blend with my own my client’s money. If kept distinctly as his it will be less liable to be considered as my own.

I understand that it is a GROSS OVERSIMPLIFICATION for me to say that Hoffman’s 2 lines capture all that is required by the trust accounting rules.  However, his two lines are a damned good start.

In my experience, lawyers who overcomplicate trust accounting come to fear it.  The fear, in turn, leads to avoidance.

It’s a bad idea to avoid trust accounting.

Here are some simple thoughts:

• If it’s not yours, it goes in trust.
• If it is yours, get it out of trust.
• Know how much you have and whose it is.
• Promptly pay yourself,  promptly pay your clients.

Adhering to these basic principles will go a long way towards keeping you in compliance with the trust accounting rules.  And aren’t these principles exactly what Hoffman expressed in 2 short resolutions?

Don’t overcomplicate trust accounting.

For a more complicated detailed review of the trust accounting rules, take a look at the Professional Responsibility Program’s manual on managing client trust accounts. I am working on updates that I hope to have finalized within a few months.

 

 

 

Trust Account Trap for the Unwary

Despite what I seem to blog about most, there’s more to trust account management than worrying about scams.  Much more.  And, being that it’s Thursday, I thought I’d harken back to a blog I posted in April 2015.

But first, the back story.

I pay my mortgage by phone.  During each of my monthly calls, the very kind robot tells me that “our records indicate that you last made payment using account number xxxxxx.” Then, the robot asks me if I’d like to use the same account. I always press 1 for “yes.”

Which gets me to the point of this post.

I don’t know how often it happens, but I suspect that it is not uncommon for a client to ask a lawyer to use funds in trust to pay a client’s credit card bill.  Assuming the lawyer is holding sufficient funds from the client to cover the payment, nothing in the rules prohibits the lawyer from acceding to the request.

Exercise caution when choosing to pay a client’s creditors.  It is probably a very bad idea to pay in the same manner that I pay my mortgage.  And, as this case proves, well-intentioned deeds do not necessarily go unsactioned.

Any act that provides a third-party with access to a client trust account is serious problem.

Here’s the rub: imagine you disburse from trust to the creditor. Imagine further that, like the bank that holds my mortgage, the client’s creditor links your trust account number to the client’s debt.  Finally, imagine that the next time client calls in to make a payment, the very kind robot tells client “our records indicate that you last made payment using account number xxxxx . . . would you like to use the same account again? Press 1 for ‘yes’ ?”

I don’t know about you, but when I pay my mortgage by phone I press “1” for “yes” as soon as the robot starts to ask the question, without even waiting to hear the account number that’s on file.  A client who does the same might unwittingly cause payment to be made from the lawyer’s trust account.  Funds belonging to other clients might be used to cover the transaction.  That’s a violation of Rule 1.15(f)(2).

For more on this scenario, please review this post from April 2015.

Kudos and thank you to long-time reader Peter Zuk.