Misappropriation Of Client Funds

Misappropriation Of Client Funds

Have you been accused of misappropriating your client’s funds in Los Angeles, California? This is a serious allegation that can ruin your legal career if a State Bar Court Judge finds that you violated your professional responsibilities.

An experienced attorney from The Rodriguez Law Group can help you fight allegations of professional misconduct. We’re familiar with the rules and procedures governing attorney discipline and can help you understand your rights and obligations throughout the process.

Contact our Los Angeles, CA criminal defense law firm today to get the representation you need to protect your professional reputation and avoid excessive discipline. Call us today at (213) 995-6767 to schedule a free consultation.

How The Rodriguez Law Group Can Help If You’ve Been Accused of Misappropriating Client Funds in Los Angeles, CA

How The Rodriguez Law Group Can Help If You’ve Been Accused of Misappropriating Client Funds in Los Angeles, CA

Misusing a client’s trust account funds can result in harsh penalties ranging from disbarment to criminal prosecution. If you’re facing an inquiry by the State Bar regarding your trust accounting, you need an experienced Los Angeles professional misconduct lawyer on your side.

The California State Bar’s disciplinary procedures differ from the civil or criminal justice system. That’s why having a legal representative who is familiar with the attorney disciplinary system is pivotal to protecting your rights.

If you enlist The Rodriguez Law Group to help with your misappropriation of client fund accusations, we’ll:

  • Advocate on your behalf so that you can continue to focus on your law practice
  • Help you navigate the complexities of the California State Bar disciplinary process
  • Represent you during the initial review and investigation process, determine the validity of the allegations, and gather evidence supporting your position
  • Argue on your behalf in an Early Neutral Evaluation Conference and/or State Bar proceeding

Contact us as soon as you receive any correspondence from the State Bar that implicates you in misusing client funds. We need to get started as quickly as possible to understand the allegations and gather evidence refuting them.

What Is the Misappropriation of Client Funds in California?

California attorneys have an ethical and statutory obligation to engage in client trust accounting. This includes tracking how much money they’ve received from or on behalf of each client, how much in the account belongs to each client, and how much has been paid out on each client’s behalf.

When attorneys agree to hold money in trust for their clients, they are taking on a non-delegable, fiduciary duty to account for every cent as long as the funds are in their possession. This applies even if you hire someone to handle your accounting. You must provide adequate training or supervision to employees who handle your client trust bank accounts.

The California State Bar implements ethical rules for attorneys regarding client trust accounting. These ethical rules – particularly California Rule of Professional Conduct 1.15 – were enacted for many reasons, including:

  • To uphold the integrity of the attorney-client relationship, including your fiduciary duty to your clients
  • To prevent fraud or theft of a client’s property
  • So that your executors can continue handling your clients’ accounts in the event that you die unexpectedly

The following things can subject you to disciplinary action:

  • Depositing a client’s money into a personal account or anything other than their trust bank account
  • Failure to track your clients’ funds
  • Commingling your personal funds into a client trust account
  • Failing to notify your client when you receive property or money on their behalf (notice must be given within 14 days of receipt)
  • Failure to maintain records of client funds and property received (recordkeeping)
  • Depositing a client’s funds in a trust bank account outside of California, unless you have the client’s written consent
  • Failing to label and place property received on your client’s behalf in a safety deposit box or another safe place
  • Withdrawing funds that the client disputes from a trust bank account
  • Failing to disburse undisputed funds belonging to your client that they are entitled to receive within 45 days (unless the client requests that you continue to hold them)
  • Failure to give your clients an accounting of their funds when they ask
  • Failing to maintain records of disbursement of entrusted property and funds for at least five years
  • Failing to comply with the CA State Bar’s request for an audit

It’s important to note that you may owe some of the duties mentioned above to parties other than your clients. For example, if you’re holding funds for a third party pursuant to a lien, you must notify the lienholder once the matter has settled and promptly disburse the funds if they’re undisputed.

How Can California Attorneys Meet the Requirements of Rule 1.15?

To ensure that you meet the ethical requirements of safekeeping funds for your clients, you should:

  • Maintain a client ledger for each client containing details of every transaction conducted on their behalf
  • Keep an account journal for each trust account to track the funds that are deposited and withdrawn
  • Keep all bank statements, checks, and canceled checks for each trust account
  • Keep records of your monthly reconciliations showing that you reconciled your account journals against the client ledgers and bank statements
  • Maintain journals of any property you’re holding for your clients to detail when you received it, who you’re holding it for, when it was distributed, and who it was distributed to

You should keep these records for at least five years from the disbursement date.

What About IOLTA Accounts?

Interest on Lawyers’ Trust Accounts (“IOLTA” accounts) can be used when clients give nominal amounts of money that are incapable of earning income exceeding the costs of administration. IOLTA accounts can also be used if a client’s funds are being held for a short period of time. The funds are deposited into one unsegregated account containing similar funds from other clients.

Attorneys who open IOLTA accounts or other similar interest-bearing trust accounts have certain responsibilities under the Business and Professions Code, such as notifying the State Bar when they open or close an account and ensuring that the financial institution is IOLTA-eligible.

They must also follow the same rules of professional responsibility as they would with other client trust accounts, such as accounting, recordkeeping, and safeguarding funds.

What Are the Possible Repercussions of the Misappropriation of Client Funds in California?

The State Bar of California takes the misappropriation of client assets very seriously and can recommend the following attorney discipline for the misconduct:

  • Public or private reproval
  • Probation with actual suspension
  • Probation with stayed suspension
  • Disbarment
  • Any other authorized discipline or sanctions

You may also face other collateral consequences and penalties, including:

  • Monetary liability
  • Civil lawsuits
  • Fee disputes
  • Criminal liability, including prison time
  • Loss of clients
  • Damaged professional reputation

We’ll help you gather mitigating evidence to refute the claims and attempt to resolve them as quickly as possible to avoid excessive penalties.

Contact an Experienced Los Angeles Professional Misconduct Attorney If You’re Facing Misappropriation of Client Fund Allegations

Did you receive a Letter of Inquiry or Notice of Hearing from the California State Bar containing allegations of misappropriation of client funds? You need to take action right away to address the complaint and protect your reputation. The Rodriguez Law Group can help.

Contact our Los Angeles professional misconduct attorney for more information regarding how we can help you.

Last Updated on December 3, 2022