Vet Your Lawyer

Fake Immigration Lawyer Guilty of Bilking Clients – NYTimes.com.

How Do Lawyers Get Away With This Stuff? – You’re the Boss Blog – NYTimes.com.

Ex-S.E.C. Lawyer Pleads Guilty in Dreier Case – DealBook Blog – NYTimes.com.

[audio http://vetyourlawyer.com/files/2009/03/r-wood-2.mp3]

Here is my interview with Richard Wood, Accounting Manager at a major west coast law firm, about client trust accounts in the wake of Marc Dreier. Richard is also active in Law Firm Administration circles. Here’s a link to his blog.

Richard Wood, Accounting Manager, Summit Law Group

Example of an Attorney Client Trust Invoice

This Time, Legal Advice for Immigrants Is Real – City Room Blog – NYTimes.com.

Here is a news story that proves average people need to vet their lawyers just like big companies do.

Victor M. Espinal

According to the NYT, this guy had been “practicing” for nearly two decades before he was caught. He was apparently quite prominent; a local bar association was offering scholarships in his name. This is what happens when people rely only on word of mouth, which is inherently out of date and unreliable. Espinal’s practice, like Marc Dreier before him, was all a house of cards. One victim was quite forgiving, however, underscoring the most poignant part of this tragedy:

With no right to a court-appointed lawyer, low-income immigrants facing detention and deportation often end up with cut-rate lawyers whose genuine law licenses do not mean competence.

This is why we make every effort to make our services affordable. Everyone, from the Fortune 500 to the newest immigrant, ought to have an objective basis for confidence in their lawyer.

THE CRACK-UP.

Here’s an article from American Lawyer that goes into more depth about some of the warning signs I talked about in my entry from a few weeks ago.  The judicial sanctions would have turned up in a routine check of his court performance, and I suspect his financial issues would have shown up in a credit check. All the more reason “Reputation is Meaningless” and you should always Vet Your Lawyer.

Some good videos with information and insight about the Marc Dreier situation.

[youtube=http://www.youtube.com/watch?v=8fuYkupmg0w]

[youtube=http://www.youtube.com/watch?v=NaGhCs6eQY0]

There’s been a lot of ink spilt in recent weeks about the missed or ignored warning signs that might have prevented or limited the Bernie Madoff scandal. I contend there were red flags in the case of Marc Dreier as well.

It’s now become evident that the Fed’s were closing in on Dreier even before his arrest on impersonation charges in Toronto. It seems that Sheldon Solow, one of the former clients whose paper Dreier claimed to be selling, had alerted the US Attorney. Solow was likely tipped off by suspicious would be buyers who had been approached by Dreier and did their due diligence.

But what about before that? Could some of the chaos, pain, and the loss left in Dreier’s wake have been avoided?

4 1/2 years earlier, on July 5, 2004, Charles Blagi of the New York Times reported on a bankruptcy court hearing before Judge Burton R. Lifland. To summarize, Solow and Dreier published misleading ads in the NY papers which Judge Lifland strained to find adequate negative adjectives for.

According to the Times, the judge virtually invited the opposing party, Mr. Kalikow, to pursue the matter against Dreier further. I can understand why Mr. Kalikow might not want to be the moving force behind any further action. He had just been dragged back into an ugly and unnecessary court fight and was probably glad to simply be done with them. But there was nothing to stop Judge Lifland from making a complaint himself. And since the whole incident was fully reported in the New York Times, there was nothing to stop the disciplinary committee from opening a case on their own if they wanted to. But no one did.

True enough, hindsight is 20-20, and one could argue that there is no necessary nexus between harassing an opposing party and embezzling hundreds of millions of dollars. But I would say two things about that.

First, it was obvious to all concerned that an ethical breach had occurred, and that very publicly, and yet Dreier got away with it. Clearly this emboldened him to feel that he was untouchable. Second, it shows that Dreier was unwilling or unable to say no to a wealthy and lucrative client even when that clients demands threatened Dreier’ standing with the courts. This suggests that his polestar was not law and ethics, but money and profit. The cynics among you will say that’s hardly shocking, but lawyers take no oath to mammon when they are licensed.

Besides, Dreier had been sanctioned at least two other times in state and federal court, both for frivolous legal filings, in 2003 and 2005. But until last month, he had no record of discipline. What, then, was the basis of his great reputation? Apparently not his legal acumen but his willingness to do the bidding of the rich and unreasonable.

I was struck by the following line in the Disciplinary Committee’s recitation of the uncontested evidence: “…sworn declarations from a number of attorneys at, and affiliated with, Dreier LLP attesting to the fact that the firm’s escrow accounts, to which respondent was the sole signatory, had repeated shortfalls amounting to tens of millions of dollars; …”. New York, like every state to my knowledge, has a bank reporting law. Any time an attorney’s trust or escrow account goes negative, the bank is supposed to report it to the authorities and the attorney is called upon to explain himself. Trust accounts are by definition not the attorney’s money. He can pay himself out of it once it’s been earned, and he can spend it at the client’s direction and in the client’s interest, but under no circumstances should it ever be overdrawn, hence the bank reporting laws.

This is where language is important. By ‘shortfall’ does the committee mean overdrawn, or simply that some of the money was missing? Because if the former, the banks have a lot of explaining to do. That Dreier was the sole signatory does not prove he was the only one with knowledge.