Over 1,700 California Lawyers Face Suspension for Non-Compliance with Trust Account Rules

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More than 1,700 California lawyers face administrative suspensions for failing to comply with the state’s new trust account rules. The State Bar of California implemented the Client Trust Account Protection Program in response to the high-profile case involving attorney Tom Girardi, who was accused of embezzling over $18 million from clients. This program requires lawyers to report their responsibility for client trust accounts, provide essential account information, complete an annual self-assessment, and certify adherence to ethics rules related to safeguarding client funds.

Around 2,000 California lawyers were initially placed on involuntary inactive status for their non-compliance with the new rules. However, as of July 25, the number of lawyers facing suspension had dropped to more than 1,700, as reported by Law 360. The Los Angeles Times, on the other hand, reported that the initial number placed on inactive status was over 1,700, with the number further decreasing to 1,641 as of July 28.

The trust account program’s primary goal is to prevent attorney theft and protect client funds. In light of the Girardi case, which had over 200 disciplinary matters opened against him over four decades, with only three leading to disbarment, a review found that some complaints were likely closed improperly. The new rules aim to hold lawyers accountable for their trust account management to address these concerns and enhance transparency.

  

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Lawyers were given a deadline of April 3 to comply with the program’s requirements. According to the Los Angeles Times, those who failed to do so were fined $75 and informed that they had until June 30 to rectify the situation. However, despite the warnings, administrative suspensions began in July for lawyers who remained non-compliant.

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Steven Moawad, the special counsel overseeing the trust account program, emphasized that the suspensions resulted from nonreporting, indicating that some lawyers may have intentionally concealed discrepancies in their trust accounts. He noted that nonreporting could be associated with misappropriating client funds, as some lawyers might have hesitated to reveal their illegal activities.

Additionally, Moawad pointed out that there could be instances where licensed lawyers passed away, but the state bar was not notified, leading to non-compliance records. The situation underscores the need for effective communication between legal professionals and the State Bar to ensure proper reporting and compliance.

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The trust account rules have ushered in a new era of accountability and transparency in the legal profession, aiming to restore trust in attorneys and safeguard clients’ financial interests. As the disciplinary actions unfold, the State Bar of California continues to assess the compliance status of lawyers and take appropriate measures to ensure ethical conduct within the legal community.

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