Expert Notes Need For “External Accounts” As Lawyer Misappropriates $300,000 From Barclay Damon
As law firm escrow account breaches continue to impact law firms, one expert suggests external accountants. The New York Law Journal reports that a trusts and estates lawyer in Albany who was a senior partner at Barclay Damon was charged last week with defrauding and stealing money from clients as well as his own law firm. He had practiced at the firm and its predecessor for 37 years.
“Some larger firms use in-house and external accountants, and possibly a chief financial officer.”
The attorney was accused of taking over $300,000 in payments that should have gone to his own firm. According to court records, he received a $25,000 payment in a trusts and estates case and deposited it into his own personal bank account, even though any payment for legal services should have been negotiated by Barclay Damon, not an individual attorney. The firm had no record of the payment from the client for legal services, according to court records.
Quoting an ethics expert, the Journal observed that:
Speaking generally, the larger the law firm and the more client transactions it undertakes, the more comprehensive is a firm’s reconciliation process in making sure each dollar and cent from a client is accounted for…. Some larger firms use in-house and external accountants, and possibly a chief financial officer. Firms also make sure checks are issued to proper payees….
[L]aw firms must have processes or procedures to ensure that partners or employees are not stealing money, and if these procedures are not in place, there can be disciplinary sanctions against lawyers who are signatories on an account.
Timothy O’Sullivan, executive director of the Lawyers’ Fund for Client Protection, further noted that:
[O]ther partners at the firm and the firm itself are potentially civilly liable for losses caused by a member of the firm.
Likewise, the Journal noted that: “Larger firms can still be vulnerable to abuse of client funds.” Of course, as a law firm, protecting client funds and preventing misappropriation is of the utmost importance. Implementing proper procedures and having experienced professionals actively monitor accounts can greatly reduce the risk of these incidents. One tool that can aid in this effort is Law Ledgers.
Contact us about proprietary software that actively monitors accounts and alerts law firms to any suspicious activity, helping to prevent disciplinary sanctions against lawyers and potential liability for the firm. Additionally, our team of experienced professionals is available to provide guidance and support.
According to a study by the American Bar Association, embezzlement is the most common form of attorney misconduct. Law Ledgers can help law firms take proactive measures to prevent such incidents and protect their clients’ funds. By working with Law Ledgers, law firms ensure the security of their clients’ funds and mitigate the risk of misappropriation.
Don’t let theft become a problem for your law firm.
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 partner. A bounced check will automatically trigger a report to the Grievance Committee and typically lead to an audit covering the preceding six months of records.
At Law Ledgers, we specialize in helping attorneys avoid these common pitfalls. We work closely with you to create a plan for proper supervision and actively monitor your books to protect you from theft. Contact us today to schedule a consultation and see how we can help you safeguard your escrow accounts and avoid disciplinary action.
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.
