Lawyers Journal

In a marked shift from last year, the Clients' Security Board (CSB) of the Supreme Judicial Court of Massachusetts awarded the lowest amount of reimbursement funds in more than 20 years to clients defrauded by their attorneys in fiscal year 2016.

According to the CSB's recently released "Annual Report to the Supreme Judicial Court Fiscal Year 2016," the $0.85 million ($846,842.96) awarded this year is the lowest amount since 1992 ($968,894.77).

The total reimbursement made this year to 28 claimants is a striking contrast to fiscal year 2015 when a record $2.9 million was awarded to 61 claimants. Also of note, the dismissal rate in 2016 (dismissals divided by adjudications) of 44 percent was the sixth largest rate in 36 years with two dismissals totaling $1.2 million.

Overall numbers in the report can vary greatly from year to year based on when claims are filed. The 2016 report covers claims made between September 1, 2015, and August 31, 2016.

"The lesson that emerges from all of this is that a single year does not create a trend," wrote CSB Chair D. Ethan Jeffery in the report. "One can begin to understand the Board's rhythm only by examining its statistics over many years."

Established by an order of the SJC in 1974, the mission of the CSB is to reimburse clients whose lawyers have misappropriated their money. In Massachusetts, the CSB reimburses 100 percent of the actual client loss with no statute of limitations, whereas most other states set a cap on the amount that can be reimbursed. Attorneys in Massachusetts pay into the fund through their annual Board of Bar Overseers (BBO) registration fee.

"Massachusetts continues to be a strong model for other states in the areas of both legal ethics and client protection," said MBA Chief Legal Counsel and Chief Operating Officer Martin W. Healy. "While only a very small percentage of attorneys in the commonwealth defraud their clients, it's essential that we have an entity like the Clients' Security Board to reimburse losses in full."

"This year Massachusetts remains, again, both unique in, and in the vanguard of, the client protection movement in the United States," added Jeffery in the report.

Before the CSB can take action on claims, offending lawyers have to be suspended or disbarred by the Office of Bar Counsel, a division of the BBO. In 2016, just 23 lawyers out of a total of 59,503 in the state (0.04 percent) defrauded their clients. However, the impact can be very significant on an individual client basis.

Assistant Board Counsel Karen D. O'Toole referred to the board's work as "the public face of the entire disciplinary process," as the CSB is the entity that ultimately reimburses clients.

"The victims can see that the lawyers of the commonwealth are really doing something for that one person," noted O'Toole. "The lawyers have paid money into the fund and the fund is reimbursing that victim."

Three lawyers combined for more than $500,000 of defalcations in 2016 or more than 60 percent of the overall amount awarded - Arthur J. McCabe, II of Andover ($236,495.10), Thomas F. Healy of Needham ($165,000) and Kirk Y. Griffin of Marblehead ($113,697.42).

The greatest amount of reimbursed money once again came in the category of trusts and estates which totaled $284,461.30 (17.86 percent) through five awards. The real estate category was next with one award totaling $236,495.10 (3.57 percent).

For the first time in the CSB's history, the Office of the State Auditor (OSA) conducted a performance audit of board operations during a portion of fiscal years 2015 and 2016. The OSA interviewed board staff and reviewed hundreds of claims filed between September 1, 2012 and February 28, 2015. The official audit report was released in February 2016 and the result was a "clean" audit of all CSB operations.