Attorney Escrow Agent Disciplined By The Court

Criminal conviction, failure to maintain advance fees, resulted in disciplinary action.

In Matter of Grant, the court disciplined an attorney escrow agent based upon his criminal conviction. The attorney’s conviction arose from his participation in a scheme whereby victims paid advance fees for fraudulent standby letters of credit (SBLCs) issued by fake banks. Among other things, the attorney failed to maintain advance fees as required.

Attorney Misappropriates Over $300,000 From Escrow Account

Between 2014 and 2019, the attorney acted as escrow agent in these transactions and accepted advance fees from the victims which he was to hold in his escrow account pending issuance of the SBLC. Pursuant to an agreement, he was not to wire the funds out of the account until the victim received the SBLC. Nevertheless, he ignored this contractual duty and he immediately wired the victims’ monies to his co-conspirators. In addition, he misappropriated $316,699 in law client funds from his attorney escrow account. As part of his sentence, the court directed the attorney to pay restitution of $4.8 million to the victims of the SBLC scheme (for which he was jointly and severally liable with two other defendants) and $316,699 to the law client, and to forfeit the $160,000 he personally earned from the SBLC scheme.

In imposing disbarment, the First Department noted that:

This Court’s precedent makes clear that “[a]bsent extremely unusual mitigating circumstances,” which the Referee did not find in this case, intentional conversion of client or third-party funds warrants disbarment (Matter of Lubell, 190 AD2d 479, 481 [1st Dept 1993]; see also Matter of Bernier, 177 AD3d 37 [1st Dept 2019]; Matter of Bloomberg, 154 AD3d 75 [1st Dept 2017]; Matter of Ballner, 140 AD3d 115 [1st Dept 2016]; Matter of Babalola, 139 AD3d 61 [1st Dept 2016]).
2022 NY Slip Op 07195

Smart Bookkeeping Is Key

Thus, it is crucial for law firms to have proper procedures in place to ensure that client funds are not misused. By using services such as Law Ledgers, firms can have experienced professionals actively monitoring their accounts and gain access to proprietary software that will protect them. This can help prevent disciplinary sanctions against lawyers and potential liability for the firm. Additionally, firms can have access to speak with experienced professionals anytime.

Escrow violations are the most frequent ground for attorney discipline in New York. An attorney can be disciplined for failing to spot misappropriations from their escrow accounts even where the account was managed by another law firm partner. A bounced check will automatically trigger a report to the Attorney Grievance Committee and, in almost every instance, will lead to an audit covering the preceding six months of records. Likewise, courts have imposed discipline even where no client is harmed when an attorney commingles personal funds with business funds. We can help you avoid these issues by working closely with you to create a plan for the correct type of supervision, and actively monitor your books to protect you from theft.

Please note that the information provided on this website is for general informational purposes only and is not intended as legal or tax advice. The information is subject to change, and it is important to consult a specialist before making any decisions. Law Ledgers provides accounting services to New York lawyers and law firms, including escrow protection, tax advice and bookkeeping administration. Contact us today for personalized support.