Posted Dec 09, 2011 01:36 pm CST
Updated: Maine’s highest court has ruled that six partners at Verrill Dana violated ethics rules by failing to have procedures in place to monitor a lawyer after questions arose about his handling of a client account.
The lawyer, John Duncan, went to prison for two years after pleading guilty to theft and tax evasion, the Portland Press Herald reports. He had been hired at the firm in 1978 and worked in the firm’s private clients group handling trusts and estates.
The decision (PDF) by the Maine Supreme Judicial Court said then-managing partner David Warren and five executive committee members permitted Duncan to continue practicing law for more than three months after first learning of discrepancies in a client account in 2007. No additional measures were put in place during that time by Warren or the executive committee. The response violated ethics rules requiring supervisory lawyers to have policies in place to prevent unethical conduct, the court concluded.
However, the Supreme Judicial Court upheld a finding that the six partners didn’t violate ethics rules by foot-dragging in reporting misconduct. The justice who heard the case cited testimony that the partners believed the discrepancies were confined to just one account, and they did not subjectively question Duncan’s trustworthiness. “Given this testimony, the wholly subjective nature of the test to be applied, and the fact that the six attorneys reported Duncan as soon as they realized their trust was misplaced, we must affirm,” the Supreme Judicial Court said.
A paralegal and a secretary were first to discover the problem, according to the opinion. The paralegal noticed in late 2006 that Duncan had prepared a check register for a client showing a payment to Verrill Dana, but the check had been made payable to Duncan. The paralegal brought the matter to the attention of Duncan’s secretary, who investigated and found 14 such discrepancies.
The secretary finally told another lawyer in the firm about the discrepancies in June 2007, spurring Warren to launch an investigation of the client account. When confronted, Duncan said the checks written to himself represented attorney fees, and he offered to resign. Warren spoke to the executive committee about Duncan’s resignation offer; it was declined. Warren did require Duncan to repay $77,500 to the firm, however, and he complied.
There was no notification to ethics authorities or to the firm’s in-house general counsel. Duncan was finally fired in early November 2007 after an internal audit found he had also billed clients for work he had not performed and taken money from client accounts to pay himself. At that point, prosecutors were notified.
The court remanded to the single justice who heard the case to impose the appropriate sanction.
Lawyer Melissa Hewey of DrummondWoodsum commented on behalf the partners in an interview with the ABA Journal. She calls the opinion “a complete affirmation” that there was no coverup and no failure to report.
She adds that the finding on the need for additional policies “is not really a finding against individuals other than that these people happened to be on the management committee. It’s notable that, at least to my knowledge, no firm in Maine has the type of policies that the court is talking about in this opinion. It’s something that all firms now are going to have to look at and analyze. It really doesn’t bear on these individuals at all.”
ABAJournal.com: “At Issue in Ethics Trial: Did Verrill Dana Try to Cover Up in $300K Partner Theft Matter?”
Updated at 10:30 a.m. to include comments by Hewey.