A New York fund that reimburses clients who have suffered financial losses caused by lawyer misconduct paid more than $10 million last year, the second-largest single-year payout in the 35-year history of the fund.
The Lawyers’ Fund for Client Protection is an independent public trust, primarily financed by New York attorney registration fees, that reimburses law clients for “losses caused by dishonest conduct of former New York State lawyers” such as theft of real estate escrow funds, estate assets and settlement proceeds, as well as unearned legal fees paid to a lawyer who falsely promised to render legal services.
Last year, money from the fund went to reimburse victims of several high-profile ex-attorneys. For instance, about $1.3 million of the payout is tied to Marc Dreier, imprisoned for a Ponzi scheme involving fake promissory notes and embezzlement of client funds; about $2.8 million related to former prominent New York personal injury lawyer Stuart Schlesinger, who stole from settlement money; and $400,000 due to Michael Lippman, a disbarred lawyer in Yonkers who stole from clients in various real estate and estate planning cases.
The fund said the $10.6 million payout in 2017 is second only to 2015, when $12.3 million was awarded. The 2017 funds went to reimbursing losses caused by 87 now suspended, disbarred or deceased lawyers, the fund said, but 10 former attorneys were responsible for more than 70 percent of the total payout.
In an annual report about the history of the fund and last year’s payout, the fund’s trustees said it was their experience that most losses involve solo practitioners, the majority of whom are male and middle-aged. Misconduct is often traced to alcohol or drug abuse and gambling, while other causes are economic pressures, mental illness, marital, professional and medical problems, the trustees said.
Trustees of the fund are recommending specific proposals to detect and prevent further abuse, such as requiring banks to provide notice to the Lawyers’ Fund of any overdraft on an attorney trust or escrow account and prohibiting overdraft protection on such accounts by amending the rules of professional conduct.
Meanwhile, the fund continues to receive claims for potential payouts. The annual report said there were 351 claims filed with the Lawyers’ Fund last year, alleging $29.2 million in losses, a decrease from the $42.8 million in alleged losses from the previous year.
Below, from the fund’s annual report, is the full list of suspended, disbarred or deceased lawyers whose conduct led to reimbursed losses in 2017: