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With claim filings well below their mid-1990s peak and awards down nearly 50 percent from 2000, the New York Lawyers’ Fund for Client Protection last year reached an institutional milestone: For the first time in its 19-year history, the organization that pays back victims of crooked counselors provided full reimbursement on every validated claim. An annual report released Wednesday showed that after several years of almost reaching its goal of 100 percent reimbursement, the fund achieved that objective in 2001. Timothy J. O’Sullivan, the fund’s executive director, said the drop in awards, coupled with an increased limit on reimbursements, enabled the fund to return every penny of the $5.3 million stolen by dishonest practitioners. “We are very proud of the fact that every client that got an award last year received dollar-for-dollar 100 percent reimbursement of their eligible loss,” O’Sullivan said. Actually, the fund has almost always come close, and since 1986 it has reimbursed 97 percent of the losses claimed by eligible clients. In 2000, the maximum reimbursement was increased to $300,000, the highest in the nation, with all the money coming from attorney registration fees rather than tax dollars. One third of the $300 biennial fee required of all active attorneys is dedicated to the Lawyers’ Fund. “The legal profession in New York has made it possible for us to be generous in our awards,” O’Sullivan said. The Lawyers’ Fund, a state agency that began operating in 1982, has paid out more than $91 million to 5,241 victims of a relative handful of thieving attorneys. A total of 683 former lawyers were responsible for those thefts since 1982. Last year, misconduct by 65 of the 189,000 lawyers registered in New York State accounted for the 160 awards made by the fund. According to the annual report: � Unearned legal fee disputes account for the largest number of claims. Since 1982, the fund has considered 3,887 claims alleging unearned fees — nearly 36 percent of the total. However, the awards tend to be fairly small, averaging about $3,800. � Trusts and estates and real property escrow matters account for the vast majority of claims alleging theft. Last year, for instance, 54 of the 160 awards involved real property escrow monies, costing the fund more than $2 million. Estates and trusts accounted for 17 awards totalling about $1.5 million. � The number of claims filed peaked in 1997 at 1,128. Last year, there were only 548 claims, up slightly from the 492 of 2000. Meanwhile, the number of claims approved dropped to 160 last year from 205 in 2000. � Reimbursements declined dramatically between 2000 and 2001. In 2000, the fund awarded $10.5 million; last year the total was $5.3 million. � Most of the thefts are perpetrated by male, middle-aged sole practitioners, and a large percentage of the crimes are attributable to drug or alcohol abuse. Very few claims involve women attorneys. � The Second Department is responsible for the largest proportion of awards. Since 1982, thefts by 312 lawyers in the Second Department have resulted in awards from the Lawyers’ Fund. That compares with 211 in the First Department, 103 in the Fourth Department and 57 in the Third Department. O’Sullivan said that many of the real estate escrow thefts arise from the Second Department, where there are a large number of solo practitioners — who, statistically, are most likely to engage in theft — and where the longstanding practice is for attorneys to hold onto real estate monies until the transaction is completed. “Overall, we are somewhat encouraged in that the filed claims and the awards that we are approving are substantially below the numbers of a few years ago,” O’Sullivan said. BENEFITS FROM REFORMS O’Sullivan attributed the general downward trend to several reforms, especially the dishonored check notice rule, where banks alert authorities when an attorney escrow account is overdrawn. Officials believe those reports have enabled authorities to detect and stop dishonest attorneys at an earlier stage, cutting client losses and Lawyers’ Fund reimbursements. Additionally, O’Sullivan said the Lawyers Assistance Trust, a public trust created by the Court of Appeals to address and hopefully prevent substance abuse problems, is expected to prevent a great many thefts. The Lawyers Fund trustees, led by Chairwoman Eleanor Breitel Alter of Kasowitz, Benson, Torres & Friedman in Manhattan, recommended several reforms. They said that in the fund’s experience, “dishonest attorneys can and do exploit the laws of confidentiality to conceal” dishonest activity and advocated lifting the “veil of secrecy in disciplinary proceedings.” They also repeated their call for a statewide policy that would require disciplinary committees to report evidence of attorney theft to a prosecutor or criminal justice agency. One new recommendation addresses escrow accounts of suspended and disbarred attorneys, and the fact that current court rules do not deal with the transfer of escrow funds in the possession of lawyers who are suspended or disbarred. “Court rules in New York don’t make any specific provision for what happens to law client money upon a lawyer’s suspension or disbarment,” O’Sullivan said. “In New Jersey, there are very clear and precise rules that say when a lawyer loses his license he can no longer continue to maintain an attorney trust account and must promptly return money to the client . … We think it would be helpful if there were clear provisions in the New York court rules directing what happens to law client money when the lawyer is suspended or disbarred.” The annual report is available on the Internet at the fund’s Web site, www.nylawfund.org/report.shtml.

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