Summary: The majority of the losses from the New York Lawyers’ Fund is because of the misconduct of just a few lawyers.
Every state has its own version of a fund that lawyers pay into that serves to protect clients from those who mismanage funds, according to Law.com. New York’s version is the Lawyers’ Fund for Client Protection. The number of claims being filed with the fund has been growing, with 2017 being the second-highest single-year payout since the fund was created 35 years ago.
The paid claims for financial losses by lawyer misconduct was at $10.6 million last year. The fund, an independent public trust, is mainly financed by attorney registration fees. The fund reimburses clients for the “losses caused by dishonest conduct of former New York State lawyers,” including theft of estate assets, settlement proceeds, and real estate escrow funds, in addition to unearned legal fees paid to an attorney who falsely promises legal services.
The payouts from last year largely went to cover misconduct by a handful of attorneys. This includes $1.3 million for Marc Dreier’s Ponzi scheme with fake promissory notes and the embezzlement of client funds, $2.8 million for personal injury lawyer Stuart Schlesinger’s theft of settlement money and $400,000 for Michael Lippman’s theft from various real estate and estate planning matters.
The highest payout year was 2015 when $12.3 million was given out. In total, the 2017 funds covered 87 now suspended, disbarred or deceased lawyers. Of those, 70 percent of the $10.6 million was for the actions of ten former attorneys.
This is a trend that fund trustees have been noticing. In their annual report, they indicate that most of the losses come from solo practitioners who are generally male and middle-aged. Their misconduct is heavily influenced by alcohol, drug abuse, and gambling but is also affected by economic pressures, marital, professional, medical, and mental illness problems. The trustees are recommending measures to detect and prevent excessive abuse. One proposal is to require banks to give notice to the Lawyers’ Fund when an attorney trust or escrow account overdrafts. Another proposal is to ban overdraft protection on attorney trust and escrow accounts. While they decide which actions to take, the claims against the fund continue to grow.
The report states there are 351 claims filed with the fund for last year, claiming $29.2 million in losses. In 2016, there were alleged losses of $42.8 million.
See the full list of the suspended, disbarred or deceased lawyers whose clients were reimbursed for their misconduct, go here.
Do you think attorneys at risk should pay more into the fund? Share your thoughts with us in the comments below.
To learn more about New York attorneys disbarred, read these articles:
- New York Attorney Steven B. Cottler Disbarred
- Disbarred Attorney Joseph Talafous Sentenced to 26 Years
- Mitchel Tarter Disbarred Following Real Estate Scam
PDF List Source: Law.com
Photo: flickr.com