“What do you mean, insufficient funds?” attorney Meri Lewis shouted into her cellphone.
“That’s what the letter says,” her partner, Bill Clark, responded sheepishly. “What do we do about this?”
“The first thing we do is talk to that bookkeeper that you hired and find out what the hell happened!”
Clark trembled as he put the phone down. Everything had been going so well and now this. In the two years since he and Meri had formed their partnership just out of law school, they had enjoyed success beyond anything they had expected.
Through hard work, they had built up a lucrative personal injury practice. They had started small: just Meri and him working out of a tiny executive suite. Now they had more work than they could handle, impressive offices and staff: two secretaries, three paralegals and, for the last four months, a bookkeeper, Clark’s niece Skylar.
Clark looked at the letter from the State Bar. “Under the authority of section 6091.1 of the Business and Professions Code, your bank has notified the State Bar of the following insufficient funds activity in your client trust account.” A check written to a medical provider had been paid against insufficient funds. “We request your written explanation of the reported insufficient funds by July 1, 2006, enclosing any supporting documents. Thank you for your anticipated cooperation.”
Clark put the letter down and went to Skylar’s cubicle. She worked part time, 15 hours a week while attending community college. Although she had no training in bookkeeping, she was a relative and had been willing to work for just a little above minimum wage. Clark’s mood did not improve when he saw her work station. Papers were piled everywhere around her cubicle and Clark saw several unopened envelopes from the firm’s bank sitting in her in box.
He remembered how they had sat down after she was hired. He had patiently explained the firm’s procedures for managing the client trust account that he had devised. Clark had shown her the written ledgers that he had set up for each client, the written journal for each bank account, had shown her how to prepare a written reconciliation for each month’s bank statement and the written journal for client funds received, as required by the record keeping standards of California Rule of Professional Conduct 4-100(c).
He had given her the State Bar’s Handbook on Client Trust Accounting and told her to read it. She was bright and she seemed to grasp it all. He trusted her; he had convinced Meri, skeptical about hiring her, to trust her. He had even provided her with a signature stamp with his name so she could sign checks when he and Meri were out of the office.
With a start, he realized that he had not sat down with her in the past six weeks to review her work; he had been caught up in the Charbonneau wrongful death trial for four weeks, and then two weeks playing catch up on everything else.
Clark pawed through the chaos of papers in the cubicle, found the ledgers. Nothing had been updated in the last month. Grim-faced, he strode to his office. Closing the door, he thought, just how deep are we?
He logged on the firm’s online research provider. The answers he found were not reassuring. An attorney’s complete failure to supervise staff to ensure proper handling of client trust account funds was a violation of the duty of competence under Rule Prof. Conduct 3-110(A) In the Matter of Robins (Review Dept. 1991) 1 Cal. State Bar Ct. Rprt 708, 712-714.
An attorney’s responsibility for safety of funds held in a client trust account is a non-delegable duty. While an attorney cannot be held responsible for every detail of office procedure, the attorney has a duty to supervise the work of subordinates and staff. In the Matter of Malik-Yonan (Review Dept. 2003) 4 Cal. State Bar Ct. Rptr 627, 634-635. A chill ran through him as he read how Malek-Yonan’s office staff has used the signature stamp to steal $1.4 million from her clients. Suddenly, he became afraid to open those envelopes from the bank.
For a long time, Clark stared out the window at the beautiful view of San Diego Bay. What was the name of that attorney who handled State Bar matters? It would not come to him. The only thing that ran through his mind was the thought that he and Meri Lewis had embarked on a long journey to an unknown destination.
Carr is an attorney in private practice in San Diego. Since 2001 he has specialized in representing attorneys involving legal ethics and the law of lawyering. After practicing in business litigation and commercial law, Carr spent 12 years as staff attorney, discipline prosecutor and manager at the State Bar of California, before returning to private practice 10 years ago.