The 6th C: Commingling

A few weeks ago, I blogged about the 5 Cs of ethics:

• Competence
• Communication
• Confidentiality
• Conflicts
• Candor

It’s difficult to remember all of the rules and their nuances.  Keeping the 5 Cs in mind is easier and goes a long way towards the ultimate C:  compliance.

Still, some might argue that the 5 Cs don’t address trust accounting.  To me, the duty of competence includes acting competently to account for and safeguard client funds. Still, it’s true that not one of the 5 C’s specifically addresses trust account management.

Hence, the 6th C:  Commingling.

I understand that most of us aren’t accountants or trained in bookkeeping.  Still, we’re fiduciaries who, by virtue of our law licenses, hold money that does not belong to us.  With the privilege comes responsibilities, most of which are set out in Rules 1.15 and 1.15A.

Again, I’m aware that many lawyers find the rules complicated.  As I’ve previously blogged, don’t overcomplicate them.  In a way, trust accounting boils down to a few key concepts.

1. Money held for or on behalf of a client must be in trust.
2. Money that is yours must not be in trust.
3. Deliver funds that are due a client.
4. At all times, know how much money is in your trust account and to whom it belongs.

In my experience, lawyers are very good at numbers 1, 3 and 4.  However, #2 seems to pose problems.  That’s right: lawyers aren’t the best at paying themselves.

It’s not a problem borne of evil intent.  More often than not it’s a lawyer who no matter how diligent about paying clients and third parties treats paying herself as something that she’ll get to when she gets to, even if well beyond that month’s reconcilation.

While not one of evil intent, it’s still a problem.  There’s a word for leaving money that you’ve earned in trust: commingling.  The 6th C.

Commingling is prohibited by Rule 1.15(a).  The notion that it’s misconduct isn’t new.  Indeed, today’s rules can be traced back to David Hofffman’s Fifty Resolutons in Regard to Professional Deportment.  He published them in 1836.  Check out #26:

• “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.”

That’s commingling.

Not only is commingling misconduct, it’s serious.  In 2008, the Vermont Supreme Court reprimanded a lawyer who, without an iota of ill intent or selfish motive, commingled funds.  Echoing Hoffman’s Resolution 26, the Court stated:

• “Commingling personal property with client property is a serious offense because of the likely negative consequences that may result to an attorney’s clients. As another court explained: ‘The rule against commingling has three principal objectives: to preserve the identityof client funds, to eliminate the risk that client funds might be taken by the attorney’s creditors, and most importantly, to prevent lawyers from misusing/misappropriating client funds, whether intentionally or inadvertently.’ ” (citation omitted).

The Court added:

• “In addition to the potential pecuniary harm to respondent’s clients, ‘lawyer misconduct in handling and protecting client trust accounts does injure both the public at large and the profession by increasing public suspicion and distrust of lawyers. ‘ ” (citation omitted).

I can hear you now: “but Mike, how was I supposed to know it was a violation not to pay myself right away?”

1. Now you know.
2. Those who don’t, won’t be excused.

As the Court noted:

• “Furthermore, while recognizing that respondent did not act selfishly, we will not
  minimize his infraction merely because he was unaware that his acts violated the rules of professional conduct. ‘If a failure to understand the most central Rules of Professional Conduct could be an acceptable defense for a charged violation, even in cases of good faith mistake, the public’s confidence in the bar, and more importantly, the public’s protection against lawyer overreaching would diminish considerably.’ The prohibition against lawyers commingling private monies with client funds is a fundamental precept. ‘[M]istake about the applicability of an ethical rule cannot excuse or even mitigate misconduct when the lawyer has violated a rule fundamental to governance of the legal profession.'” (citations omitted).

There’s one exception to the rule that prohibits commingling. It’s in Rule 1.15(b):

• “A lawyer may deposit the lawyer’s own funds [into trust] for the sole purpose of paying service charges or fees on that account, but only in an amount reasonably necessary for that purpose.”

Don’t guess.  Figure out what the normal charges and fees are or are likely to be and deposit that amount.  Randomly tossing in $500 or $1000 could lead to discipline.

Commingling is serious.  That’s why I’m assigning it the 6th C.  Too many Cs? Ok.  Your money is an apple.  Client money is an orange.  Apples and oranges don’t belong in the same bin.

Don’t commingle.

 

 

 

 

 

 

Learn to identify trust account scams

(Updated on January 23)

The annual Vermont Bar Association YLD Thaw Bowl was last Friday.  Here’s a question that I used:

During a segment of a CLE, I shared my thoughts on two things:

1. last-minute changes to wire instructions; and,
2. a prospective out-of-state client who claims to be owed a debt by a Vermonter, and who only communicates with you by e-mail

What general topic was I discussing during that segment of the CLE?

It struck me that many were unfamiliar with the answer:  trust account scams.

A lawyer has a duty to safeguard client property & funds.  To me, the duty includes employing reasonable safeguards against trust account scams.  Is falling for a scam an ethics violation? Not necessarily, but it might be.

I’ll share two scenarios.

Scenario 1

Imagine this: you have a personal checking account at a local bank.  The bank notifies you that your money is gone.  You are shocked.  You learn that someone contacted the bank and directed the funds in your account to be wired to a different account.  Your initial reaction might be “and you didn’t check with me to confirm!?!?”

That’s the “last-minute changes to wiring instructions” scenario.  Now, flip the scenario: the missing money is a client’s that you were holding.

Here are my posts on the topic:

• Change in wire instructions? CAUTION
• The latest scam
• Scams continue: beware ANY change in wire instructions
• Protect client funds, and your law license, by learning to identify trust account scams

Granted, the scammers are sophisticated.  Often, the change in wiring instructions will appear to have come from the client or opposing counsel.

I can’t stress enough that you can’t be too safe.  The 30 seconds you take to call to confirm might be well worth it. When you do, initiate the call to a number that you already have on file.  Don’t call a new number that appears in the change to the wiring instructions.  Don’t make the change based on a call to you.

Or, consider moving to client portals.  To learn more about them, please read Nicole Black’s post at MyCase.

If you think I’m being too cautious, please read this.  It’s a post in the ABA Journal about an associate who was scammed into authorizing a $2.5 million disbursement from trust by a last-minute change to wiring instructions.  A court order in the ensuing insurance claim is here.

And it’s not just me who is urging caution.  Andy Mikell is State Manger & Title Counsel for Vermont Attorneys Title Corporation.  I sent him the story of the $2.5 million scam.  Here’s part of his response:

• “An even newer approach involves the bad guys intercepting communications and then sending FAKE payoff letters to the Closing Attorney so that when seller’s mortgage is paid from the closing, the payoff money goes immediately to the wrong place.  Poof!

  So, in addition to telling folks to ‘trust no email’, I’m instructing our members to essentially “trust no payoff letter” either. It’s nasty out there but the scheme you forwarded should be preventable. Also, yes, we are telling folks to pay serious attention to their PLI policies. More offices are getting social engineering policies which are designed to insure against the wire scam.”

Andy also sent this article, one that goes into more detail on fraudulent mortgage payoff letters.

Scenario 2

The second scenario involves a scam that has been around even longer.  There are many twists, but a few core ingredients:

• a prospective client contacts you electronically;
• the prospective client claims to be owed money by someone who is in Vermont;
• the prospective client wants to hire you to collect the debt;
• the prospective client never meets with you or contacts you by telephone.

It’s happened numerous times in Vermont.  Usually the prospective client claims to have sold a product to a Vermonter. I’m also familiar with a version in which the prospective client claimed to be a Vermont Guard member who had been deployed out of the country, and whose ex-spouse had failed to pay the appropriate share of the proceeds of the sale of the marital home following a divorce.  The prospective client asked the lawyer to enforce the terms of the divorce order.

No matter the variation, the scammers are good.  They’ll send you what appear to be legit court orders, contracts & bills of sale.  They will have created fake websites, both for themselves and the debtors.  So, when you do some cursory research, it will look as if the debtor actually exists and is located in Vermont.  Not only that, when you contact the debtor, someone will respond and acknowledge the debt.

Here’s where the rubber meets the road.

Shortly after making contact with the debtor, FedEx or UPS will deliver a check to your office.  You will deposit the check into trust, then wire the “client’s” share.  Weeks, if not months later, your bank will inform you that the check from the debtor was a fraudulent check.  Quite likely, money that belonged to other clients – who are real – will no longer in your trust account.

Magically, the long outstanding debt resolved as soon as you got involved.  If it sounds too good to be true, it probably is.

As I argued in this post, it strikes me that this scam is so well-known that falling for it violates the duty to take reasonable safeguards to protect client funds.

Taking the time to learn to identify trust account scams is worth it.

 

Monday Morning Answers #122

Welcome to Monday!  Beautiful start to the week.  I have a feeling we’ll be wishing for weather like this a week from now.

Friday’s questions are here.  The answers follow today’s Honor Roll.

Honor Roll

links if available

• Karen Allen, Esq.
• Matthew Anderson, Pratt Vreeland Kennelly & White
• Penny Benelli, Dakin & Benelli
• Rich Cassidy, Esq.
• Andrew Delaney, Martin & Associates
• Robert Grundstein, Esq.
• Anthony Iarrapino, Wilschek & Iarrapino
• Keith Kasper, McCormick, Fitzpatrick, Kasper & Burchard
• Kevin Lumpkin, Sheehey Furlong & Behm
• Johsua Martin, Green Mountain Legal
• Lon McClintock, McClintock Law Offices
• Jeff Messina, Bergeron Paradis Fitzpatrick
• Hal Miller, First American
• Herb Ogden, Esq.
• Jim Runcie, Ouimette & Runcie
• Jay Spitzen, Esq.
• Robyn Sweet, CORE Registered Paralegal, Cleary Shahi  & Aicher

Answers

Question 1

Per a particular rule, Lawyer takes direction from Lawyer’s client, acting through client’s duly authorized constituents.

Thus, which is most accurate? Lawyer represents:

• A.   The defendant in a criminal case
• B.   A juvenile defendant in a criminal case
• C.   An estate
• D.   An organization.

The rule is V.R.Pr.C. 1.13

Question 2

When it comes to lawyer advertising, which is most accurate in Vermont?

• A.   a lawyer may not advertise prior results.
• B.   a truthful report of prior results is not a violation of the rules.
• C.   a truthful report of prior results might violate the rules if it presented so as to lead a reasonable person to form an unjustified expectation that the similar results could be obtained in a different matter.
• D.   citing the First Amendment, the PRB has recommended that the Court repeal the advertising rules

Rule 7.1, See, Comment [3]

Question 3

This morning, Lawyer and Client agreed to a nonrefundable flat fee.  Client advanced the fee to Lawyer.  Lawyer has yet to do any work for Client.

What additional information do you need in order to determine which account – trust or operating – Lawyer must deposit the fee?

• A.   the amount of the fee.
• B.   the type of case.
• C.   whether the agreement was (or soon will be) confirmed in a writing that describes the scope of the services that Client will receive.
• D.  All of the above.

Judging from the responses, maybe I didn’t phrase this one too well.  However, whether a fee is reasonable has no bearing on where it’s deposited upon receipt. Indeed, generally, a challenge to a fee, whether by disciplinary complaint or fee complaint to the Bar Association, is raised well after the lawyer has taken possession of the fee.

The question asked what information do you need to know to determine where a fee must be deposited upon receipt.  The answer is that you need to know who the fee belongs too.  And, as last week’s blog post made clear, a fee for work that has not yet been done must go into trust, unless the lawyer & client have entered into an agreement for a nonrefundable fee that is deemed earned upon receipt.  Such a fee cannot go into trust.  The amount of fee and type of case are irrelevant to the question of the account into which the fee must be deposited.

Question 4

Attorney called me with an inquiry. I listened, then I asked, “will the harm be to the actor or to someone else?”  What specific issue did Attorney call to discuss?

• A.  Disclosing confidential information related to the representation of a client.
• B.  Reporting another lawyer’s misconduct.
• C.  Reporting a judge’s misconduct.
• D.  Whether to allow a client to testify in a criminal case.

This is the difference between Rule 1.6(b)(1) and Rule 1.6(c)(1).  A lawyer MUST disclose otherwise confidential information to prevent a client or other person from committing a criminal act that the lawyer reasonably believes will result in the death of or substantial bodily harm to a person other than the person committing the act.  By contrast, if the harm will be to the person committing the act, disclosure is permissive, not mandatory.

Question 5

The Lawyer and Uncle Jack are characters in a television show.  It is the longest running  live-action sitcom in American television history.

Both The Lawyer and Uncle Jack have ethical issues. Uncle Jack is flat out incompetent.  So, his nephew, Charlie, often pretends to be lawyer, assuming he can do better than his uncle.  When pretending to be a Lawyer, Charlie specializes in bird law. He and The Gang spend much of their time at Paddy’s Pub.

In one episode, Charlie & The Gang went to The Lawyer for help getting patents for things they’d invented. The Lawyer tricked them into signing a contract that gave him all of their profits and included a restraining order against them.  To try to get out of the contract, Mac ate it.   The Lawyer, however, had made 100s of extra copies.

That same season, Charlie challenged The Lawyer to a duel.  The Lawyer accepted.

Lawyer spends much of his time representing the estate of Dennis & Sweet Dee’s grandmother.  However, and speaking of bird-law, The Lawyer’s eye was gouged out at a recent trial.  Gouged out by a bird that escaped from under his client’s father’s hat.

Name the tv show.

It’s Always Sunny in Philadelphia

 

ACH Transfers & Trust Accounts

At some of my CLE presentations, I use a category called  “Conflicts, Trust Accounts, Neither.”  It’s self-explanatory: I show a slide with a word or phrase, contestants have to identify whether the phrase relates to conflicts, trust accounts or neither.  Here are a few:

• Lateral Transfers
• Coutinho Transfers
• ACH Transfers

Take a moment.

Ok.  Here we go:

• Lateral Transfers – Conflicts
• Coutinho Transfers – Neither
• ACH Transfers – Trust Accounts

I’ve written on the issues related to a lawyer’s lateral transfer from one firm to another.

Last summer, Sports Illustrated wrote about Coutinho’s transfer from Liverpool to Barca.

Which brings us to ACH transfers.

What’s an ACH transfer?  Good question.

This is an oversimplification:  an ACH transfer is an electronic transfer of funds that is processed by the Automated Clearing House.  An ACH transfer differs from a wire transfer in several respects.  Among them: funds sent via ACH transfer are not necessarily immediately available, and, ACH transfers can be reversed.  Here are some explanations of ACH transfers and how they differ from wire transfers:

• Know Your Bank: ACH vs. Wire Transfer
• Deposit Accounts: Difference Between Wire Transfer and ACH
• The Balance: Key Differences between ACH and Wire Transfers

The Vermont Bar Association’s Professional Responsibility Committee recently issued advisory opinion 2017-1. Per the opinion,

1. It is not a violation of the Rules of Professional Conduct to accept ACH transfers into a trust account.
2. An attorney should take steps to protect against ACH reversals.
3. If a reversal occurs, an attorney must act to protect client funds held in trust.

The North Carolina State Bar has also issued an advisory opinion on ACH transfers. It’s here.  The upshot: (1) an attorney may disburse immediately against funds credited to a trust account via ACH transfer; and, (2) if an ACH transfer is reversed, an attorney does not violate the rules as long as the attorney takes immediate action to protect other funds that in trust.

The NC opinion points out that ACH reversals are rare.  That’s a good thing.  However, I’m aware of two Vermont attorneys who had to deal with reversals.  It is not fun to wake up, look at your trust account statement, and see a reversal.  Simply, a reversal means that someone other than you or your firm caused money to leave your trust account.  And, often, the money that initially came in has been disbursed.  So, when the reversal occurs, the money leaving is money that belongs to a client other than the client for whom the funds were initially deposited.

As the Vermont opinion advises, take steps to protect your trust account. To quote the opinion:

• “Some banks now offer protection against ACH reversals, with names like ACH Debit Block or ACH Positive Pay. Some possible actions for an attorney to take
  to protect against ACH reversals are to ask the attorney’s bank to block reversals of ACH deposits, to set up a separate IOLTA account for ACH transfers, to set up a subsidiary account for a particular client that can only receive funds, and to give the attorney’s bank a list of entities that are authorized to withdraw from the IOLTA account.”

Check with your bank.  And, as I mentioned yesterday at the CCBA meeting, if your bank agrees to block reversals, still continue to keep an eye on your trust account! Last summer, a lawyer informed me that she’d had an ACH reversal, so she put a “block” on the trust account.  Somehow, the bank removed the block and another reversal happened.

As always, be careful out there.

 

 

 

 

Reminder: Don’t fear trust accounting

Lately, I’ve warned often of trust account scams.  Today, I thought I’d re-post a blog that originally ran in January:  Don’t Overcomplicate Trust Accounting.

Yes – scams are scary.  But, don’t let that fear – or a generalized aversion to accounting – keep you from attending to your trust account.  Here’s what I wrote earlier this year:

*****

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.

 

 

Scams Continue: Beware ANY Change in Wiring Instructions

In March, I cautioned lawyers to beware of last-minute changes to wiring instructions.  I followed up with a post on the latest scam, one that targets a lawyer’s clients by providing the client with “new” wiring instructions.

I’m writing again because the scams continue.  In fact, this is something that HAS HAPPENED & WILL CONTINUE TO HAPPEN even here in little ol’ Vermont.

Here’s an excerpt from an e-mail that I received last week.  I’ve removed identifying information.

• “I had a commercial closing today in which I was representing the seller and the seller’s proceeds (a substantial amount) were to be wired by the settlement agent [another lawyer] to a 1031 intermediary.  I had verified the wire instructions with the 1031 intermediary (with whom I have worked many times) and with [the settlement agent’s] office by phone in advance of closing.  Twenty minutes before the scheduled closing, [the settlement agent’s] office received an e-mail which purported to be from me concerning the wire instructions.  The e-mail was not from me, but it looked authentic but for an error in our office phone number and when you scrolled over the address, you could see it originated from a different e-mail address (not mine).  Fortunately, [the settlement agent’s office] realized it was a fraudulent e-mail and did not reply.  The hacker had clearly been following the e-mail traffic on this transaction and presumably the fraud would have involved the hacker providing revised wire instructions to its own account and our client’s proceeds would have been gone—even if [the settlement agent] had replied, this would not have occurred because I had a hard copy of the wire instructions with me to verify with her at the closing table.  Fraud averted, but it is a powerful reminder that we are not immune from these sophisticated frauds.  I ended up getting a check to FedEx instead of following through with the wire.”

I exchanged a few e-mails with the seller’s lawyer and we eventually spoke by telephone. While the scam sprung to life pre-closing, the lawyer told me something that makes good sense and that I thought I’d pass on.   In the lawyer’s words:

• “our policy [is] that there are no post-closing changes in payment method.  Once that check leaves [our possession at] the closing, that is it (we put that one in place after we first heard about the use of mobile deposit and the fraudster who use the mobile deposit app and then returned with the check to the closing agent and asked to have the funds wired instead).”

Finally, please do not think that real estate lawyers are the only targets of this scam.  Scammers will  target any type of transaction. Whether wiring settlement funds to a personal injury client, wiring sale proceeds to a seller, or wiring money to anyone for any reason whatsoever, beware of changes to wiring instructions.

 

 

Bitcoin as Payment for Legal Fees

Here’s a question I’m surprised hasn’t been posed more often in the inquiries that I receive: can a lawyer accept Bitcoin as payment for legal fees?

Last September, the Nebraska’s Lawyers Advisory Committee issued Ethics Advisory Opinion 17-03.  As far as I know, it’s the only formal opinion on the topic to date.  The opinion addresses three questions related to cryptocurrency, legal fees, and the disciplinary rules:

1. May an attorney receive digital currencies such as bitcoin as payment for legal
   services?
2. May an attorney receive digital currencies from third parties as payment for the
   benefit of a client’s account?
3. May an attorney hold digital currencies in trust or escrow for clients?

To cut to the chase, the answer to each question is “yes, but . . .”  For instance, a few takeaways:

1. Yes, but as with any form of payment, the fee must be reasonable.  Example: as I write this blog, 1 bitcoin is worth $9,612.53.
2. Yes, but as with any situation in which the lawyer is paid by someone other than the client, the lawyer must comply with Rule 1.8(f).
3. Yes, but remember: bitcoins are property, not actual currency.  Rule 1.15 requires lawyers to safeguard client property.  To comply with the duty to safeguard cryptocurrency, a lawyer would need a secure digital wallet.  Of course, if the lawyer accepts cryptocurrency and converts it to U.S. dollars, the funds, if not yet earned, must go into trust.

To learn more on this topic, take a look at the full opinion.  In addition, you can find helpful summaries of the advisory opinion at A Lawyer’s Handbook, Coin Desk, and the ABA Journal.

Two other resources:

• What Lawyers Need to Know About Blockchain, a post at Slaw; and,
• Blockchain and Cryptocurrency: What Lawyers Need to Know, a podcast on the Legal Talk Network.

Finally, don’t forget about the VBA’s inaugural Tech Show on May 16.

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

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.