Recession Drives Uptick In Cheating, Stealing By Lawyers, Say Calif. Bar Officials; Some Fail To Pay Back Cash "Borrowed" From Client Trust Accounts

In Northern California, The Fresno Bee reports:

• The recession has driven an increasing number of California lawyers to cheat and steal, say State Bar officials, who expect to discipline or expel hundreds of them in coming months. Financial pressures are behind the increase in lawyer wrongdoing, they say. Complaints are coming from clients who say their lawyers illegally withheld settlement money or charged them for work they didn't do -- especially those who promised help modifying mortgages.

• This recession has been especially hard on lawyers, said Carol Langford, a San Francisco lawyer who defends lawyers before the California State Bar Court in disbarment cases. [...] Langford said she has seen an uptick in lawyers mishandling client trust funds.

• Lawyers are required to keep funds in separate accounts for clients. They're supposed to turn over money to a client if a case settles. Attorneys who steal from clients often start off by "borrowing" money from their clients' trust accounts. They put a little bit of the money back, but not all. After a while, they end up being unable to repay, said Andrew Kaufman, a professor of legal ethics at Harvard Law School.

• Langford said lawyers often are in denial. They believe they can pay the money back. "Probably 65% to 75% of the time, they're wrong," she said. An attorney in Fresno County who misappropriated more than $180,000 from seven clients is an example of what can happen. Timothy Raymond Gelegan said he thought he would reimburse his clients. "That's how I was rationalizing it -- that it was going to be paid in full," he said, when asked recently about what led to his disbarment in March 2009.

• Gelegan said he was having family problems and alcohol issues, as well as depression. He stopped practicing in 2007 and reported himself to the bar. The bar sought disbarment, and Gelegan stipulated to 12 acts of misconduct and misappropriation of funds from the seven clients. He made restitution of more than $108,000 to two of the clients. The others received more than $94,000 from the bar's Client Security Fund that compensates people who have been victims of acts of theft by an attorney.(1)

For the story, see Valley lawyers turn to crime in tough times.

(1) According to the story, in 2008, the California State Bar's Client Security Fund paid more than $4.6 million on 479 claims. A client can receive up to $100,000 in compensation, the story states. The fund is supported by fees from lawyers licensed in California. It typically takes about a year for a client to be compensated by the bar for a lawyer's theft. This year the wait could be longer.

For Client Security Funds that are intended to soften the blow for those ripped off by dishonest attorneys in other states and Canada, see:

• United States: Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• United States: Check the USA Client Protection Funds Map;
• Canada: Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.