Clients Must Trust Lawyers? Ethics With Accounts

Little Rock lawyer Keith Moser has made headlines recently for allegedly stealing more than $732,000 from his clients’ trust accounts. One client claims $466,000 is missing from an account.

The required client trust accounting system for lawyers apparently makes it relatively simple for an attorney to steal from his clients if he’s so inclined. That’s because lawyers and their accounting staff are the ones who control the movement of money from account to account as needed.

Client trust accounts are short-term interest-bearing accounts that hold funds, usually retainer fees or other fees, until service is rendered, at which time the law firm is to transfer the money into the general operating account.

Michele Harrington, managing partner of Harrington Miller Neihouse and Kieklak in Springdale, said firms are required to account for every penny at any given time and none of the money is to co-mingle with any other funds.

“There’s an expectation of good faith,” she said.

Other trust accounts, where a client asks a lawyer to oversee the client’s funds, can be even easier to pilfer.

But with about 8,800 lawyers in the state now and 178 formal complaints (a 2 percent average) reviewed by the Office of the Arkansas Supreme Court Committee on Professional Conduct in 2002, it would seem theft among attorneys is the exception rather than the rule.

And not all of the complaints filed that year dealt with embezzlement. According to the Committee on Professional Conduct’s annual report for 2002, the most recent year available, only three of those complaints dealt with forgery or stolen checks.

Jim Crouch of Cypert Crouch Clark & Harwell in Springdale said his firm includes a statement on its monthly billing that includes a balance on the client’s trust and a list of any transactions that may have occurred. The statement is based on internal accounting and it’s understood that the firm will report accurately, he said.

Crouch said that not everything that governs trust accounts is written down. A lot of it is simply professional conduct and accountability to the client, he said.

Lawyers say there is no true accounting safeguard other than their professional and personal ethics to protect clients’ money.

Howard Brill, a professor of Law at the University of Arkansas, wrote the book on law ethics — literally. His text, “Arkansas Professional and Judicial Ethics,” is standard reading material for every UA law student. Brill has taught ethics at UA for 29 years. He said every law student is required to take a three-hour course titled “Professional Responsibility” and pass a national exam on the subject before he or she graduates.

The Committee on Professional Conduct has the authority to audit any firm’s trust account it deems necessary, but usually by the time the office is notified something is awry, it’s too late, Brill said.

Some states have a random auditing system, but so far Arkansas has opted against that course, he added.

Brill agreed with many local lawyers that there is no real safeguard in a firm that prevents a lawyer or even a savvy secretary at the firm from stealing trust money.

“I don’t think there’s any way to prevent a determined thief,” Brill said. “We’re teaching them what they need to know. [Some lawyers] are just succumbing to temptation.”