Trust
The Delaware Supreme Court imposed a six-month suspension of an attorney who had previously completed probation for trust account issues.
In 2005, Mr. Beauregard, as the managing partner of his prior law firm, admitted violating Rules 1.15(a), 1.15(b), 1.15(c), 5.3, and 8.4(c). Like here, Mr. Beauregard failed to maintain real estate account records, failed to supervise nonlawyer employees, and filed inaccurate certificates of compliance with the Court. The Court reprimanded Mr. Beauregard publicly and imposed a three-year probation period with conditions. In 2008, Mr. Beauregard completed his probationary period successfully, and the ODC closed the 2005 disciplinary complaint.
The issues resurfaced here
Mr. Beauregard formed a new law firm in 2012, Brown, Shiels & Beauregard, LLC, and served as its managing partner. Having been through the earlier disciplinary proceedings, Mr. Beauregard knew that he was required to keep the law firm’s records in compliance with Rule 1.15, and that he was responsible to report compliance with Rule 1.15 accurately on the law firm’s annual Certificate of Compliance. In addition, having been sanctioned previously for errors by non-lawyer employees responsible for keeping the firm’s financial records, he understood his supervisory responsibility to ensure these employees complied with Rule 1.15.
He delegated account maintenance to two non-lawyers but
In March 2015, a client filed a complaint with the ODC because she received two $1,000 checks from Mr. Beauregard’s firm attempting to refund a $1,000 balance remaining on a retainer. Upon receiving the complaint, Mr. Beauregard suspended Mr. O’Donnell and hired two new bookkeepers to audit the books. They found that no money was missing and that there were sufficient other funds in the account to cover the negative balances.
In September 2015, the Lawyers’ Fund conducted a Rule 1.15 compliance audit of the law firm’s books and records. The report from the Fund’s accountant found thirteen instances of noncompliance…
After the audit, Mr. Beauregard addressed the deficiencies, hired an in-house and an outside bookkeeper, upgraded the firm’s accounting software, increased the time spent supervising the non-lawyer employees, and hired an accounting firm to complete Rule 1.15 compliance audits quarterly.
On the Rule 1.15 violations
Rule 1.15 does not have a mental state requirement. But, that does not mean that every technical violation merits the ODC’s involvement or a disciplinary proceeding. In a case like this, when a lawyer did not keep the books and records but instead hired a non-lawyer to perform the function, Rule 5.3 must be read with Rule 1.15…
The Board properly took into account Mr. Beauregard’s state of mind to decide whether, as managing partner, he put reasonable supervisory procedures in place or knew of violations and took prompt remedial actions to ensure the violations were corrected. We agree with the Board’s conclusion that Mr. Beauregard was at least negligent in overseeing Mr. O’Donnell and Mr. O’Brien to ensure the books and records were maintained in compliance with Rule 1.15, and that he knew of Rule 1.15 violations due to the negative balances in the account and failed to take prompt remedial action to correct them. 48 Thus, the Board correctly found that Mr. Beauregard violated Rule 5.3(c) and Rule 1.15.
As to dishonesty
The ODC argues that the Rule’s focus is on conduct, and not state of mind. As to Rule 8.4(c), however, this distinction is one without a difference. The specific conduct referred to in Rule 8.4(c)—dishonesty, fraud, deceit or misrepresentation— implies a state of mind requirement. In other words, a lawyer knows that their conduct is something other than truthful, accurate, or forthright, but engages in the conduct anyway. Here, the Board found that Mr. Beauregard knew of rule violations, but nonetheless filed an inaccurate 2015 Certificate of Compliance with the Court. Thus, the Board properly found that Mr. Beauregard violated Rule 8.4(c) by making misrepresentations to the Court.
Sanction
Although the Board took into account Mr. Beauregard’s prior discipline, the Board found that Mr. Beauregard successfully completed his probation, his prior violations were remote in time, and “his current conduct falls very far short of the kind of conduct that warranted suspension” in comparative cases.63 Thus, the Board concluded that the appropriate sanction was a public reprimand and two-year probation with conditions…
The recent violations were not minor recordkeeping errors by subordinates. Client escrow funds were mismanaged. The real estate trust account was neglected and lacked client subsidiary ledgers to track specific client funds. Thus, in our view, the aggravating factors outweigh the mitigating factors, and under the ABA Standards, the presumptive sanction of suspension should be imposed.
(Mike Frisch)