Legal Ethics

Law clerk of 28 years diverted $3M from real estate lawyer, authorities say

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After 28 years, real estate attorney James Naumovich had implicit trust in his law clerk, Gina Kioussis, and considered her a friend and family member.

But she allegedly diverted $3 million in client funds for her own use, when it came down to a choice between what she was supposed to do and expensive health needs of her husband and elderly mother, reports the Law Times.

Although $2.4 million was recovered, Naumovich had to defend 28 client lawsuits over the missing funds, the article says. Meanwhile, his clerk was convicted in a criminal fraud case concerning the other $600,000 or so and sentenced to community service.

Naumovich had an outside bookkeeper reviewing the firm’s financial records, but that person was “either negligent or complicit,” says his lawyer, Alfred Schorr. “What Mr. Naumovich failed to do—and this is a lesson for everyone—he didn’t look at his bank statements. He didn’t look at his cancelled checks at any time,” Schorr last week told a hearing panel for the Law Society of Upper Canada.

He and counsel for the law society are jointly seeking a two-month suspension of Naumovich’s license to practice, for what the legal ethics case prosecutor calls “a complete abdication of professional responsibility.” The real estate lawyer may have helped his side of the case, however. He immediately reported the missing funds to the law society once a client called him to say his mortgage, which was supposed to have been paid off, hadn’t been.

Although this argument didn’t cut any ice with the hearing panel, Schorr said other lawyers who hear about Naumovich’s situation worry that they, too, could find themselves in a similar pickle.

As prior posts have detailed, claimed thefts by trusted employees from law firms and attorneys are surprisingly common. Part of the problem is that victimized law firms may opt to keep quiet about such thefts, rather than make a police report that could lead to embarrassing public exposure.

Among the most recent news reports:

Ex-Employees Admit Embezzling $788K From NJ Law Firm (Nov. 2012)

Title Insurer Seeks to Freeze Law Firm’s Trust Account After Murder of Its Office Manager (Jan. 2013)

Former Law Firm Bookkeeper Gets 21 Months for Embezzling $500K (Jan. 2013)

Lawyer loses license for 2 years because his bookkeeper brother stole $4M from firm (Feb. 2013)

After settling $138K theft suit with office manager, firm discovers $164K more gone, goes to police (May 2013)

2 lawyers who say their bookkeeper fled to Argentina with $4.8M in client funds are disbarred (May 2013)

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