Sunday, November 15, 2015

Ex-Chairman Of Oregon Bar's Legal Ethics Committee Bears Brunt Of Blame For 2012-2013 Cataclysmic Meltdown Of State's Attorney Ripoff Reimbursement Fund After Treating Client Trust Account As His Personal Piggy Bank, Fleecing Dozens; Paltry Payout Per Victim Of $50K Maximum Fails To Make All Victims Whole

From a November, 2013 story in The Oregonian:
  • For 46 years, the Oregon State Bar's Client Security Fund(1) operated in happy, efficient obscurity, providing a small but steady trickle of compensation to clients who could prove they'd been ripped off by their lawyer.

    That all changed in 2012 when an unprecedented explosion of claims nearly emptied the fund.

    Payouts to clients in both 2012 and 2013 were six to seven times the norm. Several clients' losses far exceeded the Client Security Fund's $50,000 maximum pay out, meaning they suffered uncovered losses in excess of $590,000.

    The fund's meltdown is due largely to one guy: Bryan Gruetter, a veteran personal injury lawyer and former chairman of the bar's legal ethics committee.

    Gruetter's thriving practice -- he had offices in Portland and Bend -- went off the rails in 2012 in a way that shocked his peers.

    Forty-four of Gruetter's clients filed claims in 2012 and 2013 alleging he owed them $1.44 million. Typically, his customers claimed that he'd pocketed all or part of the legal settlement he had negotiated for them.

    The scope of the losses stunned bar officials. But they argue it was more of a horrific coincidence rather than any reflection on the 14,000 lawyers practicing in Oregon.

    "This was a total anomaly," said Sylvia Stevens, the bar's executive director. "We've never seen anything like it before in terms of the number of claims or the size of the claims."

    The bar [in 2012] took over Gruetter's practice and he has voluntarily resigned from the practice of law. But a more serious day of reckoning may be approaching. Federal prosecutors filed criminal charges against him [] accusing him of conspiracy to commit wire fraud.

    Prosecutors allege Gruetter "illegally diverted" more than $1.1 million of his clients' funds.

    Lana Runkel of Bend hired Gruetter to represent her after she was injured in a traffic accident. Runkel said she waited for years assuming that Gruetter was negotiating a settlement that would help her pay her medical bills. But nothing happened and her lawyer became impossible to get hold of.

    "I'm really angry, to suffer all this time and not get reimbursed," Runkel said. "He didn't do anything for us other than steal our money and cause us heartache."

    Runkel filed a claim with the Client Security Fund for $142,000. Because of the fund's payout limits, she received just $46,800.

    Steven Bennett, a Portland attorney, is one of several who investigated claims against Gruetter. He said the firm's bookkeeping was poor. Gruetter "treated his client trust account as a general, unsegregated fund where deposits and withdrawals could be made at will without attention to whose money it was," he said.

    The collapse of Gruetter's thriving practice into chaos and criminal charges has shocked other lawyers. "Bryan was a very successful lawyer," said Stevens, the bar executive director. "He was a really good guy."

    Gruetter and his public defender attorney, Bryan Lessley, declined to comment for this story.

    Gruetter wasn't the only attorney who contributed to the Client Security Fund's historically bad year.
    ***

    The tidal wave of claims has badly depleted the fund. It began 2012 with $607,132 in reserve. By Oct. 31 of [2013], that number had shrunk to $109,194.

    The fund would be in considerably worse shape if not for the bar's decision early this year to triple the assessment it charges to practicing lawyers in the state from $15 to $45 a year.

    The fund will likely try to rebuild its financial reserves to $1 million in hopes of being better prepared for another 2012-style cataclysm, Stevens said.
For more, see Oregon State Bar's relief fund overwhelmed by claims involving one lawyer, Bryan Gruetter.
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(1) The Client Security Fund of the Oregon State Bar was created to help reimburse clients who have suffered a financial loss as the result of dishonest conduct by their lawyer. According to their website, Oregon lawyers developed the program and voluntarily fund it for the benefit of the public. Claims for reimbursement are reviewed by a committee of volunteers, including one public member. All awards are made by the Oregon State Bar Board of Governors. The maximum payout is a minimal, seemingly paltry $50,000 per screwed over victim, as the victimized client named in this story, Lana Runkel, would probably attest to after she found herself short nearly $100,000 after receiving her reimbursement.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.
For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

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