Personal Funds In Trust Account = Suspension

In Matter of Walters, 2018 N.Y. App. Div. LEXIS 519 (1st Dept. Jan. 30, 2018), the attorney was suspended for over two years because, among other things, he maintained personal funds in his trust account and paid business and personal expenses from that account. This case highlights the importance of attorneys strictly adhering to the regulations and guidelines for managing client trust accounts.

The Background Of The Attorney’s Suspension In California Based Upon Storing Personal Funds In An Attorney Trust Account

The First Judicial Department suspended the attorney from practicing law in the state of New York on May 6, 1999, for failure to file attorney registration statements and pay biennial registration fees.

An investigation in California, where the attorney was also admitted to practice, revealed that the attorney deposited three $1,000 checks received as attorney’s fees from a client into his client trust account and provided legal services while under administrative suspension in 2003. This action violated California Business and Professions Code section 6068 (a), 6125, and 6126 (b), and California Rules of Professional Conduct rule 4-100 (A). The attorney also admitted to maintaining earned legal fees and personal funds in his client trust account, out of which he paid business and personal expenses, and improperly depositing or commingling personal funds in his trust account.

As a result of these actions, the attorney entered into a stipulation with the state bar of California in which he admitted to professional misconduct and consented to discipline. The stipulation included a one-year suspension, which was stayed, and a two-year probation with conditions. On August 12, 2004, the California State Bar Court approved the stipulation, and by order filed December 3, 2004, effective January 2, 2005, the California Supreme Court suspended the attorney from the practice of law for one year, stayed the execution of that suspension, and placed him on probation for two years subject to specified conditions recommended by the State Bar Court.

Trust Account Violations Lead To Discipline

The Court noted that “Respondent is 57-years-old and was a sole practitioner in California from 1991 to 2003, during which time he handled corporate and entertainment matters. While he claims he provided competent representation to his clients, he failed to attend to the administrative aspects of his law practice which included his registration status in California and New York, and his obligations pertaining to his client trust account which ultimately led to his discipline.”

This case highlights the importance of attorneys strictly adhering to the regulations and guidelines for managing client trust accounts. Attorneys have a fiduciary duty to maintain the funds of clients in a separate account and to use those funds only for the benefit of clients. Failure to do so can result in disciplinary action and damage to the attorney’s reputation. Attorneys should ensure they have proper systems in place to monitor and manage escrow accounts to avoid similar situations.

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.