Burdens Of Management
The Vermont Supreme Court approved the imposition of private discipline as proposed by a Panel of its Professional Conduct Board for a managing partner’s mismanagement of the firm trust account.
The attorney has practiced for 34 years and is the managing partner of a law firm in Bennington as told in the Panel report
Over the course of his 34 years of practice, Respondent has transitioned from manual trust account management to software-based trust account management systems.
In mid-2014, Respondent’s law firm was using Quicken accounting software and was in the process of upgrading to QuickBooks accounting software.
On September 8, 2014, a staff member who was managing much of the day-to-day bookkeeping for 14 years, including the trust accounting reconciliation, left the firm unexpectedly.
Shortly after the staff member departed, Respondent reviewed all of the bookkeeping records and found the trust account reconciliations were current and accurate, and decided to hire an outside accountant to finish the transition from Quicken to QuickBooks and restructure the organizational system. The transition to QuickBooks was delayed for a protracted period of time. The cause of the delay was a failure on the part of Respondent to secure sufficient resources to advance and complete the transition task in a timely manner.
As a result of the incomplete transition from Quicken to QuickBooks and an inability to hire a suitable replacement for the departed staff member, Respondent’s law firm operated, for a protracted period of time, with an inadequate system for managing his IOLTA account. Respondent eventually hired a capable person to assist him with bookkeeping functions, but she left the firm sometime in 2016.
The attorney tried to reconcile accounts but fell behind due to a busy real estate practice
As of approximately December 2016, Respondent was six months behind in completing the requisite monthly reconciliations. Respondent was generally aware of his obligations under the Rules of Professional Conduct relative to managing client trust accounts (IOLTA), including the obligation to perform monthly reconciliation. He believed that he would catch up with the monthly reconciliations and otherwise come into compliance within a reasonable period of time and that, in the meantime, no client funds were in jeopardy.
During this period of time in 2016 and through the fall of 2017, there were numerous times when Respondent did not collect wire fees ranging from $10 to $20. When Respondent became aware of these omissions, he promptly covered them out of the firm’s operating account.
Help arrived
In June 2017, after nearly a year of searching and a few short-term hires that did not work out, Respondent finally located and hired a suitable replacement staff member whom he currently employs to assist him with his trust accounting obligations.
But the bar then arrived as well
In December 2017, as part of a routine compliance audit, JMM & Associates’ CPA Randall Sargent reviewed with Respondent his trust account records for the period of October 1, 2016 to November 30, 2017.
The audit revealed several deficiencies but no misappropriation or dishonesty
Respondent accepted full responsibility for his misconduct from the outset of the compliance audit. In addition, at the evidentiary hearing, he expressed his remorse for his misconduct and the Panel finds his testimony to be compelling.
The violations
During the period of time audited – October 1, 2016 to November 30, 2017 – Respondent’s accounting system did not meet the requirements of Rule 1.15A(1)-(3). Respondent was relying on manual recordkeeping in individual client files to track receipts and disbursements from his IOLTA and other trust accounts. He lacked a coordinated accounting system. Respondent failed on several occasions to keep track of wire transfer fees charged by the bank, resulting in accounting errors. In addition, Respondent failed to identify the client adequately on several checks written from trust accounts, causing some transactions to be posted to the wrong client and resulting in incomplete and inaccurate accounting. Respondent also failed to provide timely notice to his clients of receipts and disbursements. And Respondent failed to perform the requisite monthly reconciliations of the bank statement, account register, and list of client balances.
It was incumbent upon Respondent to ensure that he was maintaining an adequate accounting system at all times and to undertake timely and complete reconciliations in order to identify any errors and correct them promptly. He failed to do so. His conduct violated Rule 1.15(A)(a).
A lengthy sanction discussion concludes
In sum, the Panel concludes that a private admonition is the appropriate sanction.
…it is appropriate in light of the extensive nature of the past violations to impose a period of probation in conjunction with a requirement that a follow-up audit be conducted, at Respondent’s expense, to monitor Respondent’s compliance with his trust account obligations.
(Mike Frisch)