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October 2005WSBA Random Examinations of Trust Accountsby Julie Mass Members frequently ask about the Bar’s random-examination program. The Bar has been authorized to conduct random examinations of lawyers’ trust accounts since 1977.1 The general purpose of the Bar’s random--examination program is both remedial and educational in nature. The primary focus of the Bar auditors is to assist members and protect the public. The objectives are to correct deficiencies noted and to educate the lawyer as to the trust account rules and regulations. We have worked with many lawyers who tell us that, although they were initially apprehensive about the examination process, they found it to be a beneficial and positive experience. The auditors frequently go the extra mile to help lawyers understand the rules and ensure that adequate records are maintained. Many lawyers have come to see the random-examination program as a valuable member service. The Disciplinary Board chair reviews all random-examination reports and occasionally directs the Office of Disciplinary Counsel (ODC) to conduct an investigation of serious violations. In a few cases, lawyers have been publicly disciplined (suspended, reprimanded, censured) as a result of the findings of the random examination. The process Of approximately 25,400 active lawyers, 12,600 (50 percent) handle client funds and maintain trust accounts. Approximately one percent to 10 percent of lawyers with trust accounts are examined each year. Under regulations adopted by the Supreme Court,2 lawyers are selected at random from the WSBA’s member database. The selection must be proportionally based on the number of practicing lawyers in each congressional district. Thus, the more populated congressional districts will have a higher number of lawyers selected for random examinations. Once a lawyer or firm has been examined, they are removed from the random selection pool for two years. Lawyers selected for an examination receive at least two weeks’ notice from the Bar auditor. The auditor sends the lawyer a letter explaining the examination procedures, what records will be needed, and the week he or she would like to conduct the examination. We generally ask for bank statements, check registers, deposit slips, client ledgers, and copies of reconciliations for the last year. The lawyer is requested to call the auditor to schedule the examination. Trust account examinations generally take one day to complete, but some examinations take more or less time depending on the situation (record-keeping system used, volume of trust transactions, availability of records, etc.). Lawyers are required to cooperate with a Bar examination.3 The auditor is required to “preserve inviolate all confidences and secrets of clients of the examined lawyer or firm.”4 Any report of the examination is not subject to disclosure unless a disciplinary proceeding is commenced.5 Even then, client confidences may be protected.6 Most violations noted are minor or a result of the lawyer’s or firm’s misunderstanding of the requirements imposed by RPC 1.14. After the examination, the auditor discusses his/her findings with the lawyer or firm’s managing partner. The auditor will prepare a report and send a copy to the lawyer and the Disciplinary Board chair. In most situations, if the lawyer makes the suggested corrections, the examination is over and the file is destroyed.7 In some situations, the Disciplinary Board chair may order that a re-examination be conducted to verify that deficiencies have been corrected.8 Common trust account violations The most common violations noted during random examinations include the following: Miscellaneous: • Failure to maintain complete records. Putting client funds at risk: • Failure to wait for deposits to clear banking system before disbursing funds. Failing to put client funds in the trust -account: • Improper handling of overpayments, advance fee deposits, or other client funds. Trust account information Several resources are available to help you with your trust account. The WSBA publishes a booklet called “Managing Client Trust Accounts: Rules, Regulations and Common Sense,” which provides some guidance. It can be found on the WSBA website (www.wsba.org) or contact the WSBA Service Center (800-945-WSBA, 206-443-WSBA, or questions@wsba.org) to receive a copy. Information needed to set up an IOLTA account (the Request to Establish IOLTA Account form and a list of authorized financial institutions) is also available on the WSBA website. If you have specific trust account questions, you may contact WSBA Audit Manager Trina Doty (206-727-8242), WSBA Auditor Jim Roberg (206-733-5921), or WSBA Auditor Cheryl Heuett (206-733-5937). Other lawyer resources include WSBA’s Law Office Management Assistance Program (206-727-8237) and Ethics Line (206-727-8284). Julie Mass is a lawyer and a CPA. She was the WSBA audit manager from January 2000 through May 2003. During this time, she oversaw the WSBA’s random-examination program, conducted “for cause” audits of lawyers’ trust accounts, and educated lawyers as to the rules and regulations regarding trust accounts. She is now the WSBA’s director of finance and administration. NOTES
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