The “sequestration”
imposed by COVID-19 provides an opportunity for everyone to do some necessary
housekeeping in order to address Client Trust Fund/IOLTA records and
We have represented
hundreds of lawyers and law firms with IOLTA (and lots of other) issues. IOLTA non-compliance is a guaranteed way to
get the attention of your bank and then Bar Counsel. Once that happens, the risk to continuing to practice
law is imminent.
So, NOW is a
good time to tackle all those required and needed tasks that have been lurking
under the bed and desks, related to IOLTA or other trust accounts.
First, the Supreme
Judicial Court IOLTA rule has rigid requirements. They should be attended to and followed to
the letter.
Second, a thorough and
top to bottom review of all IOLTA and trust accounts, records and handling is a
MUST. Issues we regularly see include
1. Non-existent reconciliations.
2. Non-existent check
registers (seriously!).
3. Non-existent individual
client ledgers for each client for whom you held monies.
4. Non-existent separate office
ledger (which holds a few hundred dollars to pay for bank charges, NSF charges
and other unexpected charge-backs).
5. Never going through the
account to determine what has happened to long-ago (let alone recently) issued
checks that have never cleared.
6. Monies sitting in the IOLTA
account and you have no real idea whose it is.
7. Commingling earned fees and
client (or third party) funds for too long.
8. Non-existent operating
accounts and failure to properly use operating accounts for earned fees.
9. Thinking (as lots of
transactional lawyers do – Yes, real estate lawyers!!!) that the “In and Out”
disbursement sheet (or CD) serves as an adequate accounting AND client
ledger. It doesn’t.
10. Addressing “false” as well as
“true” negative check register, client ledger and account balances. (For example, if you enter checks into a
computer program on the day of a “refi” closing, but you have to wait for the
redemption period to run before deposits clear, you will always show a “false”
negative in your check register and individual client ledger. Changing when checks are issued can resolve
that problem.)
We have worked through
all of these issues with lawyer-clients for years. If Bar Counsel gets
a hold of a returned check or a complaint in which any issue about record-keeping has been or might be raised, they have been signaling for months that they
intend to seek administrative suspension for non-compliance or not producing
records when asked. If there are issues
with the accounts and records, Bar Counsel will act.
NOW is the time to
start digging in and clean house. Please
don’t put it off for the next global intrusion!
Sarah. Holden is a
partner in the litigation department of the newton firm of Brecher, Wyner,
Simons, Fox & Bolan, P.C. She represents lawyers and law firms in Board of
Bar Overseers and malpractice matters, partnership breakups, departures and law
firm litigation. Sarah can be contacted
at sholdne@legalpro.com. A partner in the firm, Jim Bolan in addition
to representing lawyers and law firms in Board of Bar Overseers and malpractice
matters, he provides counsel to local, national and transnational lawyers and
law firms on professional responsibility, practice and ethics matters,
malpractice defense and prevention, and risk management and law firm audits.
Jim can be contacted at jbolan@legalpro.com
