Metropolitan News-Enterprise


Friday, April 15, 2022


Page 1


Audit Report:

State Bar Fails to Protect Against Persistent Ethics Violators


By a MetNews Staff Writer


The State Bar of California is doing an inadequate job of dealing with attorneys who persistently violate ethical standards, thus failing to deter future misconduct, a state auditor’s report, issued yesterday, declares.

While acknowledging that most of the deficiencies alleged in the report do exist, the State Bar cautioned in a formal response that implementation of all of the recommendations in yesterday’s report would requiring adding 30 persons to its staff, a one-time allocation of $1 million, and an annual boost in its budget of $200,000.

In a cover letter to Gov. Gavin Newsom, Senate President Pro Tempore Toni Gayle Atkins, and Speaker of the Assembly Anthony Rendon, Acting California State Auditor Michael S. Tilden said in forwarding the report:

“We found that the State Bar prematurely closed some cases that warranted further investigation and potential discipline. We reviewed files for one attorney who was the subject of 165 complaints over seven years, many of which the State Bar dismissed outright or closed after sending private letters to the attorney. Although the volume of complaints against the attorney has increased over time, the State Bar has imposed no discipline, and the attorney maintains an active license. The State Bar dismisses about 10 percent of all complaints using nonpublic measures such as private letters, which did not deter some attorneys we reviewed from continuing to engage in similar misconduct.”

Pattern of Complaints

The letter continues:

“The State Bar failed to adequately investigate some attorneys, despite lengthy patterns of complaints against them. In one example, it closed multiple complaints alleging that an attorney failed to pay clients their settlement funds. When the State Bar finally examined the attorneys bank records, it found that the attorney had misappropriated nearly $41,000 from several clients. In another example, the State Bar closed 87 complaints spanning 20 years before it sought disbarment of an attorney due to a federal conviction for money laundering. Had the State Bar taken the pattern of complaints into account when deciding whether to request additional evidence, it might have discovered the misconduct sooner and mitigated harm to clients.”

Tilden also noted that the State Bar fails to spot or deal with conflicts of interest between its investigators and attorneys whose conduct is being reviewed.

The report contains nine “case examples” reflecting asserted folly on the part of the State Bar, including the cases of the attorney who attracted 165 complaints and the one who pocketed almost $41,000.

None of the examples appears to have reference to disgraced lawyer Thomas V. Girardi, who is facing the near certainty of disbarment—and whose misdeeds over decades, now bared, led to a mandate by the Legislature for the audit, in light of the State Bar having taken no disciplinary action against the once influential lawyer, other than issuing a private reproval in 1999.

Case Examples

The report points out:

An attorney who had disciplinary charges pending in another jurisdiction and was allowed to resign on condition he not practice law again in any state, with California expressly mentioned. The State Bar of California found that the order of a sister state’s supreme court was not binding, issued an advisory letter to the attorney, and allowed the attorney to continue practicing here. The report comments: “[T]he attorney has no public record of misconduct in California. Based on the attorney’s history of practicing law with a suspended license and failing to comply with the agreement with the other state to resign from practice in California, the lack of public discipline by the State Bar increases the risk that this attorney could engage in similar inappropriate behavior in the future.”

Another state suspended a lawyer in 2020 for misappropriating funds and disbarred the lawyer early this year, but the State Bar of California, though having knowledge since April 2021 of the suspension, took no action against the practitioner as of two months ago. The report remarks that “the State Bar did not take proactive steps to inform the public that another jurisdiction had temporarily suspended the attorney to protect the public from further misconduct while the case was being decided.”

A practitioner was disciplined in 2007 in another state but did not inform that State Bar of California; the lawyer went on inactive status here; the attorney sought to become active again here and disclosed the discipline; the State Bar is now considering taking disciplinary action. The report faults the State Bar for not learning of the discipline earlier, pointing out: “In contrast to its current approach, the State Bar could take advantage of existing information about attorney discipline imposed in other jurisdictions. The American Bar Association maintains the National Lawyer Regulatory Data Bank (data bank) for regulators, such as the State Bar, to use to facilitate reciprocal discipline. The data bank is a repository of information concerning public regulatory actions related to lawyers throughout the United States. According to the intake manager, State Bar staff do not regularly use the databank to proactively identify attorneys disciplined in other jurisdictions.”

Successive complaints against an attorney of a minor nature were reviewed and the files were closed. One staff member did not know of the complaints reviewed by other staff members, thus failing to spot a pattern. By the time an audit finally occurred, it was seen that the lawyer had on nearly 50 occasions dipped into client trust funds or attempted to do so. The report suggests that “instead of closing multiple complaints as de minimis,” the State Bar “might have imposed discipline or provided guidance that would have prevented the attorney’s subsequent client trust account violations.” (The lawyer was disbarred the following year on unrelated matters.)

The State Bar did not even bother to contact an attorney for a response upon receiving a complaint of a trust account violation in December 2021 despite having sent that lawyer a warning letter just one month earlier in connection with 11 trust account violations. From 2015-21, there were 35 complaints about the lawyer, 30 of which were related to alleged breaches of client trust account duties. The report says: “Although the attorney had a pattern of cases closed through nonpublic measures going back to 2017, the State Bar had not investigated any of the attorney’s 30 bank reportable actions as of February 2022.” It also remarks that “State Bar staff should have subpoenaed the bank records for the attorney…when they received the December 2021 reportable action because the attorney had multiple previous client trust account allegations.”

A bank advised the State Bar that a lawyer failed to maintain funds in a client trust account. The lawyer was presently under investigation, but the bank’s tip-off was dismissed as relating to a de minimis violation and was not forwarded to those conducting an active investigation. Over a five-year period, 28 complaints about the lawyer had been received, 10 of them alleging trust account violations.

A lawyer, asked to explain two overdrafts on an attorney client trust account, provided records for the previous month, not the month in which the overdrafts occurred, and contrived an explanation, which the State Bar accepted. “Although the State Bar provides training to its staff on investigating client trust account violations, it may need additional expertise to investigate such misconduct,” the report says, noting that “an individual with expertise in financial matters would have likely questioned the evidence that the State Bar accepted from the attorney” in this instance. It acknowledges that two month’s ago, the Board of Trustees Finance Committee voted to hire a forensic auditor.

In line with its comments, the report recommends use of an external reviewer of disciplinary actions, use of the ABA database and reporting final out-of-state disciplinary orders on its website when the lawyer “presents a substantial threat of harm to the public,” keeping an eye on conflicts of interest, and barring staff members from ignoring de minimis violations where there are pending investigations of the lawyer.

It also calls for obtaining of bank statements and the lawyer’s reconciliations where an alleged trust account violation is not found to be a de minimis breach, curtailing use of nonpublic discipline, and engaging services of an ombudsman to deal with complaints against lawyers.

State Bar’s Reaction

The board’s chair, Best Best & Krieger LLP partner Ruben Duran, yesterday said in a statement:

“Strengthening the discipline system is our number one priority, and we are committed to incorporating the audit findings into our ongoing efforts.”

He pledged “a comprehensive review of oversight and governance policies related to the Office of Chief Trial Counsel (OCTC).”

Duran said the board regarded some of the findings “profoundly troubling,” adding:

“The Board and leadership team have been working diligently to improve the discipline system, but after years of critical audits, it is clear that some of our challenges are structural and have been decades in the making. They reflect a complex and unproductive cycle of insufficient funding, poor outcomes, and low morale.

“We must do more to address those challenges, including assessing the effectiveness of the Board’s oversight of OCTC and making changes where needed. The Board will continue to both demand and support meaningful improvement in all areas of OCTC’s operations.”

Formal Response

In its formal response, the State Bar takes issue with the recommendation of obtaining bank records when trust account violations are asserted, saying this “would consume inordinate amounts of resources and time.”

It remarked:

“[G]iven data that shows that Black male attorneys are ten times more likely than their white male counterparts to be the subject of bank reportable actions, the impact of the approach recommended by the State Auditor will fall heavily on this group of attorneys. Black male attorneys will be disproportionately required to take time away from their practices to gather and submit documentation to the bar and respond to investigative inquiries. Given that the data indicates that there is a significant percentage of cases for which this level of intervention is not required, the potentially disparate impact of the State Auditor’s approach is difficult to justify.”

After setting forth its estimated costs of implementing all of the recommendations, the State Bar noted:

“Absent new resources, the State Bar’s implementation of these recommendations will be limited to what can be done within existing funding parameters.”

Costs Exaggerated

Replying to the State Bar’s response, Tilden said:

“The resources the State Bar asserts that it needs to implement our recommendations appear to be significantly inflated and based on questionable estimates. For example, the State Bar indicates that it needs three full-time staff to monitor de minimis closures of bank reportable actions. This number appears excessive because its supervisors should already be performing some monitoring of staff’s compliance with the existing policy.”

Addressing the matter of obtaining bank statements, Tilden declared:

“[W]e stand by our recommendation…regarding obtaining bank statements and the attorney’s contemporaneous reconciliations, which are more reliable forms of evidence for investigating client trust account related cases and bank reportable actions than attorney assertions.”


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