Thursday, December 03, 2015

Director Of California Bar's Attorney Ripoff Reimbursement Fund: Great Deal Of Complaints Stem From 2008 Housing Crash & Lawyers Who Fleeced Homeowners In Foreclosure; $18 Million In Claims Applications Currently Pending, But Only $6 Million Available

In Hanford, California, The Sentinel reports:
  • “There are few things as dangerous to the public as a lawyer seduced by money, and instead of helping clients, rips them off,” Los Angeles-based attorney Lori Meloch firmly maintains.

    As director of the State Bar of California Client Security Fund,(1) she has seen — and helped to remedy — horribly tragic examples of lawyers gone bad. Today, a great deal of her work stems from the housing crash of 2008 and lawyers who amassed fortunes, victimizing people facing foreclosure.

    In the Great Recession, often out of a job and upside-down on what was owed on grotesquely overpriced homes they never should have been allowed to get into, “Homeowners paid thousands of dollars to law firms promising to obtain loan modifications or other forms of foreclosure relief, but doing absolutely nothing at all beyond taking money from desperate people,” Meloch points out.

    For a tale of several attorneys who took millions of dollars from clients, we recommend the Bloomberg Business in a Sept. 10 article, “Inside a Deeply Suspect Mortgage-Relief Operation in L.A.” The article focused on attorney Vito Torchia Jr., and his cronies at Irvine-based Brookstone Law Corporation.

    One of our readers, “Linda,” paid Torchia over $12,000 in 2012 to stop the foreclosure on a home when the payments were all current. She received nothing beyond a letter stating all the great things his firm would do for her.

    In May of this year, Torchia was declared ineligible to practice law after the State Bar filed a stomach-churning multi-count notice of disciplinary charges. “When lawyers are disciplined by the Bar, their cases are a public record and available on the California State Bar website. It is information that potential clients need to know,” Meloch underscores.

    Losing your license to practice law is one way lawyers who see Bar membership as a license to steal are dealt with. “But in many instances, the State Bar is able to compensate victims of dishonest lawyers through the Client Security Fund which more people need to know about,” Meloch told You and the Law.

    “To quality for compensation from the Client Security Fund, the loss of money or property must have been the result of the attorney’s dishonesty, but not because of incompetence or malpractice,” she explained.

    “You need to show that the money or property actually came into the lawyer’s possession. If you pay your lawyer in cash, always get a receipt, keep cancelled checks, copies of checks, bank statements, anything showing payment. Without it, we can’t help,” she stresses.

    We asked, “What are the types of dishonesty which could qualify for reimbursement from the Security Fund?” Meloch listed five basic categories:

    (1) Theft or embezzlement of money or property, for example, after settling a personal injury case, illegally keeping the client’s money;

    (2) Where the lawyer has been paid in advance, performed no services or an insignificant portion of services and fails to refund unearned fees;

    (3) Borrowing money from a client without the intention or knowingly lacking the ability to repay the money;

    (4) Obtaining money from a client representing that it will be used for investment purposes and no investment is ever made;

    (5) Intentionally engaging in any dishonest or fraudulent act which leads to the loss of the client’s money or property.

    The Client Security Fund is only able to consider a case after the lawyer has been through the attorney discipline system and a final decision is reached. Only after that finding–and the attorney is disciplined–can reimbursement from the Client Security Fund can be sought.

    “How long can it take?” we asked.

    We have to wait for the discipline to be final before the Client Security fund can proceed. It is not a quick process,” Meloch notes, “And after the discipline is final, it can take up to three years because of our funding limitations.

    “There’s an important time limit to be aware of. Victims must apply to the fund within four years of when they knew or should have known about the loss.”

    “When lawyers pay their yearly fees to the State Bar, $40 goes to support the fund. Right now, we have $18 million in applications, but only $6 million available, so it will take time to pay claims up to a maximum of $100,000 each one,” Meloch stated.

    The California State Bar website is an excellent source of information about filing a complaint against a lawyer or seeking reimbursement.
Source: Help for victims of dishonest lawyers.
(1) The State Bar of California's Client Security Fund was established to reimburse eligible clients who have suffered a loss due to misappropriation or embezzle­ment by a California-licensed attorney

For similar "attorney ripoff reimbursement funds" that sometimes help cover 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.

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.

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