Bar aims to improve client trust account oversight

Facing intense scrutiny over the handling of complaints from clients of suspended plaintiffs’ attorney Thomas V. Girardi, the State Bar Board of Trustees approved the creation of a program that it says will strengthen the bar’s oversight of client trust accounts.

“The board is moving forward with urgency and resolve to fix the problems that have come to light over the last several months,” board Chair Ruben Duran said in a statement Friday. “Strengthening the regulation of client trust accounts through proactive oversight and intervention will improve public protection and increase trust in our discipline system,” he said.

“We must help attorneys improve their own trust accounting practices so that we can prevent lapses that could harm clients, and we must get better at detecting and prosecuting misconduct by those attorneys who engage in intentional malfeasance regarding entrusted funds,” Duran said.

But some bar watchers said they had their doubts the new program would accomplish much.

California State Bar defense attorney and ethics expert Erin M. Joyce of Pasadena said the random audits of client trust accounts that is the centerpiece of the program wouldn’t have prevented Girardi from stealing millions of dollars from clients, as he is alleged to have done.

“It’s not because they didn’t have random audits that they screwed up the Girardi cases,” Joyce said. “It’s because they obviously had some cozy relationship with that law firm at the very highest levels at the executive director level.”

Critics have said Girardi’s close relationship with several top officials at the State Bar several years ago shielded him from scrutiny when plaintiffs and creditors began making allegations against him. Girardi was suspended from practice this year, after the allegations were laid out in a federal lawsuit filed in Chicago by one of his former co-counsel.

Recommendations for reforms of bar practices were in a report presented to a meeting Thursday of the board of trustees. The Committee on Special Discipline Case Audit, chaired by Trustee José Cisneros, advocated:

• Requiring attorneys to report annually to the bar about whether they are responsible for client trust accounts and to provide basic account information and certify they know and comply with the rules of professional conduct related to safeguarding client funds.

• Certain client trust accounts undergo a compliance review by an independent third-party certified public accountant. The bar would then follow up on any identified issues.

In July, California lawmakers called for an audit of the State Bar after it admitted “mistakes” in handling decades of allegations that Girardi stole millions of dollars in client funds. A proposed bill, Senate Bill 211, would direct the state auditor to conduct an audit of the bar’s discipline system.

In September, the California Supreme Court issued an order to show cause in a Los Angeles Times lawsuit against the State Bar asking for release of Girardi’s disciplinary records. Before the order, the bar had denied The Times’ repeated requests to release the information. Los Angeles Times Communications v. State Bar of California, S269401.

Joyce said a massive backlog of client complaints is another reason changes the bar announced weren’t likely to catch problem attorneys.

“They’re not following their primary charge, which is to protect the public. And how you protect the public is you process the actual complaints you already have,” she said. “But instead of doing that, they’re going to randomly pluck solo and small firm lawyers to put through the wringer on having to do a full compliance review of independent third party CPAs.”