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Kelly Dillon, CFE Office of Chief Disciplinary Counsel 1.

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Presentation on theme: "Kelly Dillon, CFE Office of Chief Disciplinary Counsel 1."— Presentation transcript:

1 Kelly Dillon, CFE Office of Chief Disciplinary Counsel 1

2 What you should know. 2

3  The checks should be clearly printed to indicate the account is a “trust account”.  If your bank will not deduct the cost of ordering checks from your operating account, you should be sure to include the cost of the checks on your bank charge ledger and reimburse the account accordingly. 3

4 4 Looking for advice…

5 5 Formal Opinion 128 (nonrefundable fees) – Posted on May 19th, 2010 The Advisory Committee of the Supreme Court of Missouri has issued a formal opinion concluding that attorneys may not enter into agreements for nonrefundable fees and that all fees must be placed in the attorney's trust account until not subject to refund…

6 ◦ The funds of others. ◦ All advance fee deposits 6

7 ◦ Personal funds ◦ Earned fees ◦ Big money generating big interest 7

8  Earned fees.  Funds due clients and third parties.  Payments for which funds are held. 8

9  Funds in which two or more people claim interest.  Funds not considered “good funds” by the bank. 9

10  Keep your checkbooks in different locations.  Remove your earned fees promptly.  Reconcile your account monthly.  Supervise your staff.  Maintain your trust account records for 5 years.  Keep copies of deposited items.  Respond promptly to the OCDC. 10

11  Don’t pay your personal or office expenses from your trust account. 11

12  Don’t make payments to yourself for earned fees unless you know your records are accurate.  Don’t hold your deposits.  Don’t authorize clients to make deposits or withdrawals from your account. 12

13  General ledgers.  Client and bank charge ledgers. 13

14 TRUST LEDGER Trust Acct.: Standard Nancy WhiteFile No. DO-02-2008-0034 [Client or person with interest in funds] DateDescription of TransactionCheck #Funds PaidFunds Rec’d Running Balance 2/18/08Advance fee deposit10,000.00 2/22/08Filing fee1999100.009,900.00 3/3/08Investigator2001960.008,940.00 3/7/08Fee disbursement20081,500.007,440.00 4/2/08Investigator2031640.006,800.00 4/7/08Fee disbursement20401,500.005,300.00 5/7/08Fee disbursement20593,900.001,400.00 5/12/08Court reporter (neighbor depo)2062800.00600.00 5/15/08Advance fee deposit5,000.005,600.00 5/20/08Court reporter (accountant depo)20721,100.004,500.00 6/2/08Advance fee deposit5,000.009,500.00 6/7/08Fee disbursement2084750.008,750.00 6/30/08Court reporter (Husband’s depo)20962,000.006,750.00 7/7/08Fee disbursement21106,000.00750.00 7/20/08Advance fee deposit15,000.0015,750.00 8/7/08Fee disbursement21313,600.0012,150.00 9/7/08Fee disbursement21555,720.006,430.00 9/18/08Refund of unearned fees21706,430.000 14

15  General ledgers.  Client and bank charge ledgers.  Billing records, settlement sheets, time sheets, etc. 15

16  Receipts and disbursement journals of deposits and withdrawals that include the date, source and description of each deposit, and the date payee and purpose for each disbursement. 16

17  Ledger records for each account, including the source of all funds deposited, for who the funds are being held, amount of funds, descriptions for withdrawals, and names of persons or entities to whom funds are disbursed. 17

18  Compensation agreements with clients, including documents such as fee agreements, engagement letters or retainer agreements. 18

19  Accountings to clients or third persons. 19

20  Bills to clients. 20

21  Records showing disbursements to clients. 21

22  Physical or electronic checkbook registers, bank statements, records of deposit, pre- numbered canceled checks, and substitute checks. 22

23  Electronic transfer records that include name of the person authorizing the transfer, date of transfer, name of recipient, and confirmation from financial institution showing account number, date and time of transfer. 23

24  Reconciliations. 24

25  Portions of the client file reasonably related to the client trust account transactions. 25

26  Records of credit card transactions, consistent with law and data security standards. 26

27  General ledgers.  Client and bank charge ledgers.  Billing records, settlement sheets, time sheets, etc.  And…. 27

28 28

29 Receipt & Disbursement Journal aka: General Ledger Client and Bank Charge Ledgers Reconciled Bank Statement Other Reasonably Related Documentation Pursuant to Rule 4- 1.15(f) & Comment [19] 29

30 ~David Bowie 30

31  New organizational system: ◦ Rule 4-1.145 – definitions for safekeeping property and IOLTA accounts; ◦ Rule 4-1.15 – provisions for the safekeeping of property; ◦ Rule 4-1.155 – provisions for maintaining IOLTA accounts; and ◦ Rule 4-1.22 – provisions for file retention. 31

32  (a)(3) [NEW] – Only a lawyer admitted to practice law in MO or under the direct supervision of the lawyer shall be authorized as a signatory or authorize transfers from client trust account. (See Comment [2] – “lawyer has a non-delegable duty to protect & preserve the funds in a client trust account and can be disciplined for failure to supervise subordinates who misappropriate client funds.” - See also Rule 4-5.3)  (a)(4) [NEW] Receipts shall be deposited intact and records of deposits shall be sufficiently detailed to identify each item. (See Comment [4] – No split deposits) 32

33  (a)(5) [NEW] Withdrawals shall be made only by check payable to named payee, not to cash, or by authorized electronic transfer.  (a)(6) [NEW] Must wait a reasonable period of time for funds to actually be collected by the financial institution where the trust account is held, and cannot make a disbursement if the lawyer has a reasonable belief that the funds have not yet been collected by the financial institution. (See Comment [5]) 33

34  (a)(7) [NEW] Reconciliation of the account shall be performed in a reasonably prompt time each time an official statement from the financial institution is provided or available.  (b) Lawyer may only deposit his or her own funds in a client trust account for the purpose of paying bank service charges, and only in the amount necessary for that purpose. (See Comment 2) 34

35  (a)(3) – Cannot delegate supervision;  (a)(4) – No split deposits;  (a)(5) – Withdrawals by check or electronically to named payee, not to Cash;  (a)(6) – Need to make sure “good funds”  (a)(7) – Regular reconciliations. 35

36  Protection of the Public  Attorney Education ◦ Suggest review of the Trust Account Handbook. ◦ Recommend or require CLE attendance. ◦ Make suggestions for better accounting practices. 36

37  Number of overdraft cases opened in 2010?  2011?  2012? 37

38 ◦ Bank error ◦ Accounting error ◦ Failed to reconcile ◦ Premature disbursement ◦ Comingling or misuse ◦ Misappropriation by Attorney ◦ Other 38

39  Missouri Lawyer Trust Account Foundation ◦ Bank fees, rates, etc. ◦ 573-634-8117 ◦  Missouri Legal Ethics Counsel ◦ Melinda Bentley ◦ 573-638-2263 ◦ 39

40 40

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