Thursday, March 17, 2016

California Bar OKs $2 Million Boost To Its Client Security Fund, Making Amount Available This Year For Reimbursements To Clients Victimized By Thieving Lawyers To $8 Million

From a recent press release from The State Bar of California:
  • The State Bar Board of Trustees has approved the transfer of $2 million in reserves to the Client Security Fund, boosting the amount available for payouts this year to $8 million.(1)

    The board is committed to ensuring the Client Security Fund has enough money to reimburse every person who lost money or property due to theft by their attorney,” State Bar President David Pasternak said. “This program is vital to achieving the State Bar’s public protection mission. By reallocating these funds, the State Bar is trying to avoid or minimize the need to raise further funds from the California attorneys who finance this important restitution program.”

    The fund, established by State Bar-sponsored legislation in 1972, is primarily financed by an annual assessment paid by California lawyers which is currently $40 per active lawyer and $10 per inactive lawyer.

    Applications to the fund have increased in recent years as a result of the loan modification crisis, during which attorneys were prohibited from collecting advanced fees for loan modification work. In 2013, the fund paid out a record $11 million to more than 2,000 applicants. Alleged loan modification fraud still accounts for about half of the new applications being made to the fund.

    “I am delighted that careful budgeting has identified the savings needed for this transfer of funds to a critically important activity,” Executive Director Elizabeth Rindskopf Parker said. “The State Bar’s new Chief Operating Officer Leah T. Wilson deserves special credit for this important achievement – an example of excellent stewardship of mandated member fees.”

    The one-time infusion of $2 million translates to as many as 475 additional applicants being paid this year. In order to seek reimbursement from the fund, victims must first file a complaint against the attorney with the bar’s Attorney Discipline System.
Source: Client Security Fund receives $2 million fund transfer.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:
  • This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.

    There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.

    This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.
(1) The Client Security Fund is a public service of the California legal profession. The State Bar sponsored the creation of this fund to help protect consumers of legal services by alleviating losses resulting from the dishonest conduct of attorneys. The amount the fund may reimburse for theft committed by a California lawyer depends on when the loss occurred. A maximum of $50,000 is reimbursable if the loss occurred before January 1, 2009. A maximum of $100,000 is reimbursable if the loss occurred on or after January 1, 2009.

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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