South Carolina Reprimands Attorney Who Failed To Safeguard Trust Assets

IN THE MATTER OF COX, SC: Supreme Court 2016 – Google Scholar:

This is a discipline case involving a lawyer who was responsible for supervising a paralegal who handled disbursements from the firm’s trust account. Unfortunately the employee converted in excess of $200,000. The lawyer who was her supervisor was the subject of this proceeding. The court explained its ruling as follows:

In total, Shaw misappropriated $349,227.34 through the issuance and negotiation of 201 checks. Seventeen of those checks totaling $75,766.95 were issued in connection with an underage client whose medical bills exceeded the total insurance available in the case. The child’s mother filed a complaint. The majority of the improperly issued and negotiated checks, including those issued in the child’s case, were issued on Mr. Saleeby’s files, however, some of the misappropriations occurred on respondent’s files and those of firm associates.
Respondent discovered Shaw’s misappropriation when the mother of one of his clients reported her son continued receiving medical bills after settling his case. Respondent learned a check had been issued in connection with the case to a person neither he nor his client’s mother recognized. Respondent attempted to reach Shaw as she had worked on the file, but she had since been terminated on other grounds. Shaw spoke with the office manager. Shaw admitted the payee was fictitious. Shaw failed to appear for a scheduled meeting with respondent, but provided the office manager with a cashier’s check for $17,288.61 and a list of files from which she had stolen money. The subsequent investigation revealed the theft was more widespread than Shaw acknowledged.
The firm reported Shaw to law enforcement. Shaw was charged with one count of breach of trust in excess of $10,000 and ten counts of forgery. She entered a guilty plea to breach of trust and fourcounts of forgery. Shaw was sentenced to a total of ten years imprisonment, suspended upon service of nine months and five years of probation. Shaw was ordered to pay $155,000 in restitution. The firm also filed a lawsuit against Shaw which it later voluntarily dismissed.
The firm incurred great expense to determine the total amount Shaw misappropriated and to repay the proper parties.
Respondent acknowledges Shaw’s theft could have been prevented if checks were only issued based on the disbursement sheet signed by the client and reviewed by the assigned attorney or if the assigned attorney reviewed the checks issued against the signed disbursement sheet. Respondent further admits Shaw’s theft could have been discovered and stopped had the backs of the cleared checks been reviewed during the monthly reconciliation process. In addition, respondent admits the firm was only reconciling the receipt and disbursement journal to the bank statement. Neither the disbursement sheets nor the client ledgers were used in the reconciliation process.
During some of Shaw’s employment, respondent was her direct supervisor and, at other times, Mr. Saleeby was her direct supervisor. Respondent acknowledges that, as a partner in the firm, he was required to make reasonable efforts to ensure the firm had measures in place giving reasonable assurance that the firm’s non-lawyer staff conducted themselves in a manner that was compatible with his professional obligations. Respondent further acknowledges that, as her direct supervisor during part of her employment, he was obliged to make reasonable efforts to ensure that Shaw conducted herself in a manner compatible with his professional obligations. Respondent admits the firm’s trust account practices were inadequate.
Respondent admits that his conduct violated the following provisions of the Rules of Professional Conduct, Rule 407, SCACR: Rule 1.15 (lawyer shall safekeep client property); Rule 5.3(a) (partner shall make reasonable efforts to ensure that firm has in effect measures giving reasonable assurance that non-lawyer employee’s conduct is compatible with professional obligations of lawyer); and Rule 5.3(b) (lawyer having direct supervisory authority over non-lawyer employee shall make reasonable efforts to ensure that employee’s conduct is compatible with professional obligations of lawyer). In addition, respondent admits his conduct violated the financial obligations of Rule 417, SCACR.

The lawyer was reprimanded but not suspended because he did not personally convert any funds.

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