Thursday, May 19, 2016

Golden State's Head Auditor Rips California Bar For, Among Other Things, Screwing The Already-Screwed Victims Of Dishonest Lawyers By Stiffing Them Through Its Currently-Insolvent Client Protection Fund, Obscuring Fact That Payout Estimates Approach $19 Million While 2015 Year-End Cash Balance Sits At Only $2.2 Million; Victims Can Be Left Sucking Wind For Years Before Claims Are Paid

In Sacramento, California, the Courthouse News Service reports:
  • The California State Bar lacks millions of dollars in funding to compensate victims of attorney misconduct, but pays some of its executives more than the governor, the state auditor said [last week].

    The state bar, which regulates the conduct of attorneys through its discipline system and administers the California bar exam, is supported primarily through annual member fees.

    It also receives revenue through recovery payments from dishonest attorneys who have caused the bar to reimburse their clients. But according to the audit, disbarred attorneys rarely pay the money they owe — leaving the agency to rely almost entirely on annual member fees to reimburse the victims of dishonest attorneys.

    The review, released by State Auditor Elaine Howle, said that the agency has not been upfront about its lack of money in its client security fund necessary to compensate all of the victims.(1)

    "Since 2010, estimated future payouts to consumers have far outstripped the amount of money in the client security fund available for payments. Because the state bar did not take sufficient action when it first identified this potential problem, it is currently unable to make timely reimbursements," the 68-page audit stated.

    At the end of 2015, the agency reported a backlog of 5,500 applications for payment and estimated that it would need to pay a total of $18.9 million related to those claims.(2)

    "Nonetheless, it had only $2.2 million available in its client security fund at the time. In other words, the fund's likely future payouts outstripped its assets by $16.7 million," the report stated.

    Victims can potentially wait four to five years before receiving any reimbursement, the audit said.

    "The state bar's long delays in paying claims harm the people who are waiting and who may be counting on these resources to meet basic needs," the report said.

    The audit also pointed out that the state bar's salaries are its largest and fastest-growing expense, with the agency's top 13 executives making more than Gov. Jerry Brown's salary of $182,791.

    The senior director of admissions' maximum annual salary is just over $208,000, while the maximum salary for state agencies' civil services executives with comparable responsibilities is just under $136,000.

    "If the state bar capped all executive staff salaries in positions below that of the operations officer at the highest level for comparable [executive assignment positions], it could save as much as $428,000 annually," the report said.

    The audit also highlighted problems with the agency's errors and lack of transparency when it comes to its financial reports, which limits "stakeholders' ability to understand the state bar's operations and the Legislature's ability to ensure the appropriateness of the state bar's fees," Howle said.

    Additionally, the bar has made some inappropriate financial decisions, the report said.
For more, see Calif. State Bar Blasted for Lack of Transparency.

See also, The Recorder: New State Bar Audit Finds Problems New and Old (may require paid subscription; if no subscription, GO HERE, then click the appropriate link for the story).

For the State Auditor's Report, see The State Bar of California: Its Lack of Transparency Has Undermined Its Communications With Decision Makers and Stakeholders.

Go here for Report Summary, and here for Fact Sheet.

(1) The California State Bar's Client Security Fund is purportedly 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.

(2) The report states that the number of claim applications to the Client Security Fund program soared beginning around 2009, in large part because many Californians had become victims of loan modification schemes.