The Risk Manager, Winter 2007
A Florida lawyer’s troubles started when he received funds to pay off a mortgage of $118,000 in a real estate transaction and failed to do so. When this omission was discovered the Florida Bar filed a complaint against the lawyer alleging dishonesty, misrepresentation, and violation of client trust account requirements. The lawyer resisted the Bar’s request for bank records forcing the Bar to subpoena bank records. Only after the lawyer retained representation did the lawyer cooperate with the Bar leading to a complete audit of his several client trust accounts. The audit showed incidents of mishandling of funds for closings, depositing earned fees and personal checks in a trust account, and paying personal expenses from a trust account. The lawyer also transferred funds between his real estate trust account and other trust accounts for no apparent reason and without fully identifying the name of clients or purpose for the transfers. When asked to explain the transfers the lawyer did not provide a complete written response to the Bar. Finally, the audit found that the lawyer’s trust account balances were sometimes negative, trust account checks were returned for insufficient funds, the real estate trust account had prohibited overdraft protection, and the bank had not been instructed to notify the Bar as required of returned trust checks for insufficient funds.
The lawyer claimed that his trust account problems were primarily the result of a dishonest employee who stole account funds. The facts showed, however, that the lawyer had not filed a report with the police over missing funds until two months after the Bar complaint was filed and 18 months after the funds disappeared. The conclusion reached was that the lawyer failed to adequately supervise the employee and failed to properly maintain trust accounts. The lawyer conceded that he had violated some rules, but insisted that he was innocent of dishonesty, fraud, deceit, or misrepresentation because his failure to supervise the employee was unintentional. The Florida Supreme Court determined that the question is whether the lawyer deliberately or knowingly engaged in the activity in question. The Court found that the lawyer’s “… failure to supervise his employee constitutes intent because he knowingly assigned his trust account responsibilities to [the employee] and then failed to supervise her activities.” The lawyer was suspended from practice for three years with three years probation from the date of reinstatement (Florida Bar v. Riggs, Fla., SC05-973, 10/5/06).
The Florida lawyer’s violation of client trust account rules would violate Kentucky’s rules if he practiced here. It is doubtful that a Kentucky lawyer in this same situation would have gotten off so leniently. For a quick refresher on client trust account professional responsibility we suggest “Client Trust Account Principles & Management for Kentucky Lawyers.” This 56 page guidebook covers the fundamentals of client trust account management and includes the complete text of key KBA Ethics Committee Opinions on client trust accounts. It is yours for the asking by contacting Lawyers Mutual (502-568-6100 or 800-800-6101) or the IOLTA Fund (502-564-3795 or 800-874-6582).