Tag Archives: payments

N.Y. Lawyer Misconduct Fund Braces for Surge

As a law student who has taken, and was required to take, a course in Legal Ethics this story, that I came across, basically provided the justification for that requirement. Just remember folks, the lawyers who follow the rules are never in the papers, and honesty isn’t just a legal obligation, but also good for business too!

Law.com – N.Y. Lawyer Misconduct Fund Braces for Surge

N.Y. Lawyer Misconduct Fund Braces for Surge

‘Catastrophic losses’ in single case cause concernJoel StashenkoNew York Law Journal
April 16, 2007

Dishonest attorneys prompted the awarding of $7.1 million in 2006 from the New York Lawyers’ Fund for Client Protection, which warned Thursday that the fund is likely to start seeing claims from the largest case of lawyer theft in its 25-year history.

Last year, the fund paid out $1 million less than the $8.1 million awarded in 2005. The average awarded annually over the last five years has been just over $6.3 million. (The report is available at www.nylawfund.org.)

See the 2006 Annual Report and highlights from the report.

Officials say the fund’s finances are “very strong,” but claims for reimbursement from clients defrauded by Andrew F. Capoccia and two attorneys working for him in his debt-reduction practice could total $5 million to $6 million alone, although the claims might be spread over more than one year, said Timothy J. O’Sullivan, executive director and counsel to the fund. Several hundred, and possibly thousands of clients, may seek help once federal authorities distribute restitution payments, he said in an interview Thursday.

While trying to anticipate a new challenge, the fund said an old problem — the theft of money kept in escrow by lawyers for downstate residential property purchases — continues to plague the system, though to a somewhat lesser degree in 2006 than in 2005.

Sixty-two of the 147 awards last year went to cover $2.9 million in real estate escrow losses. That was down from the 116 awards totaling $5.2 million the fund paid for escrow losses in 2005.

The escrow loses are almost exclusively a New York City and Long Island problem. Sellers’ attorneys there typically hold down payments for residential properties, often as much as 10 percent of the purchase price. Upstate, down payments tend to be much smaller and brokers usually hold the money.

A New York State Bar Association committee chaired by Ira S. Goldenberg of White Plains has been working for more than one year on a study of the real estate escrow process and ways to better protect clients’ money.

Alter said the theft of real estate escrow, which has accounted for 36 percent, or $44.8 million, of all payments from the fund since 1982, is “certainly not a decreasing trend.”

“It is not easily addressed,” she said Thursday. “Lawyers and clients, they get used to doing it one way and it’s often very hard to convince people to put in some safeguards and to change the practice. Most lawyers are good and honest and the honest ones don’t want to change and their clients don’t want them to change because it becomes more complicated.”

The Nassau and Suffolk county bar associations have also been studying real estate escrow practices.

In its annual report, the fund called for the adoption of a court rule requiring the transfer or protection of escrow funds held for clients in instances where attorneys have been suspected of or disbarred for misconduct.

Alter and O’Sullivan emphasized that only a miniscule number of lawyers are involved in dishonest acts that lead to awards. In 2006, 35 lawyers were responsible for the $7.1 million in reimbursements. There are about 229,000 lawyers in New York state.

Alter added, however, that every “blood-curdling” instance of lawyer dishonesty discredits the profession.

“It is something so far from what we are expected to do or how we are expected to behave,” she said.