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Oregon State Bar Professional Liability Fund Hours & Info(503) 639-6911 or (800) 452-1639 (Toll-Free within Oregon)Monday - Friday 8:30 a.m. - 5:00 p.m.
There is nothing worse for a lawyer than finding out there is less money in the trust account than is expected. This is money belonging to clients entrusted into the lawyer’s safekeeping. What happened?!
1. Have you been doing monthly Three-Way Reconciliations? This reconciles the sum of all client trust account balances with the trust account deposits and disbursements journal or check book register with the reconciled trust account bank statement. The PLF has a handy form you can use for this.
2. If you haven’t been doing monthly Three-Way Reconciliations, you will want to begin doing them as they can help you spot something wrong before it becomes a major meltdown.
1. Lawyer control trust account check book but relies on eyeballing online trust account statement. Amount seems to be right. Lawyer writes $1,000 trust check to take fees earned on both Client A matter and Client B matter. Lawyer writes another $130 client trust account check for Client C’s court filing fees. Assistant brings billing statements to lawyer prior to mailing. Lawyer notices Client A’s billing statement shows that Client A has $370 withdrawal for fees leaving $1,130 balance. Client B’s billing statement show that Client B has been requested to remit $1,130 for $630 fees and $500 trust account replenishment. Assistant asks if lawyer want to send a second retainer agreement to Client C because it has not been returned with retainer. Lawyer writes check refunding Client A $1,130 because matter has been concluded. Today, Tuesday, the lawyer receives notice of overdraft in the trust account of $22,130. Lawyer sees that on Friday, a $15,000 deposit was made to the trust account and a $6,000 $6,000 transfer was made from the trust account to the general account. On Monday, trust account checks for $6,000 and $9,000 were cashed and the $15,000 settlement proceeds amount was reversed from the trust account. Client A was refunded the proper amount $1,130. Client B has not sent the $1,130 but the law firm already took $630 fees owed. Client C has not sent in the requested $1,000 retainer but his filing fee for $130 was paid from the trust account. Lawyer sees that the firm’s portion of Client D’s settlement proceeds $6,000 was taken by transfer and by check. Client D’s portion of the settlement proceeds $9,000 cashed. Client D’s settlement check was refused at the issuing bank because of an endorsement error so trust account bank reversed the deposit of $15,000.
How could you keep that all straight in your head?
2. Lawyer is multitasking at desk, doing banking and calling clients and answering questions from support staff. Lawyer asks bookkeeper how much Client A, Client B, and Client C are being billed in order to transfer money from the trust account to the general account. Bookkeeper says $1,000 for Client A and $1,500 for Client B, $1,550 for Client C and $2,000 for Client D to replenish trust balance and pay accounts receivable of $500. Bookkeeper uses intercom to tell Lawyer she made a mistake and that Client C owes $1,550 but only has $50 available in trust account. Lawyer returns to desk with coffee and picks up ringing phone to talk with opposing counsel. Lawyer doodles over legal pad and reads two numbers $6,050 and $500 so transfers $6,550 from the trust account to the general account. Lawyer picks up client statements to drop into mail on way home. The next month, bookkeeper notices bank says different amount in trust account than is shown in computer program. Lawyer says he doesn’t like how confusing the computer program shows transactions but says to go by what the bank shows. Bookkeeper says not enough money in general to pay payroll and rent. Lawyer asks what Client C owes. Bookkeeper says due to additional hours, Client C now owes $3,500. Lawyer does quick balance transfer of $3,500 which just covers payroll and rent payments and tells bookkeeper to process payroll checks and mail rent payment. Lawyer is shocked to come into office Monday to find that trust account is overdrawn $7,500 and that general account has $0 balance.
Client C had balance in Account Receivable (AR) of $1,500 after applying the $50 balance in Client C’s trust account balance. Lawyer took $1,550 because did not hear message from bookkeeper about this over the intercom while away from desk getting coffee. The next month lawyer misunderstands bookkeeper and assumes Client C owes an additional $3,500 and so transfers that amount. As a result, $5,000 was withdrawn from trust account when Client C only had $50 in trust account. Lawyer misunderstood that Client D was being billed $2,000 and had $500 AR balance. Lawyer misread numbers on legal pad and interprets that $500 is in addition to the $6,050. Lawyer has to quickly replenish $7,500 but doesn’t have that amount in the general account or the lawyer’s personal account. New client coming in with $8,000 retainer paid by credit card should save the day eliminating any overdraft.
How did they goof so badly?
3. Lawyer busy with litigating cases. Had a legal assistant to help with billing and document preparation. After a number of months, let the legal assistant go. Hired a different assistant. This legal assistant said the former legal assistant didn’t update any billing records so didn’t know how much any client had in the trust account. Lawyer looked at trust account balance online and saw there was enough money on hand. Lawyer didn’t understand online banking records for trust account or general account so just relied on whatever the balance was shown. Soon there was a big overdraft of $8,000 in the trust account. When an accountant tried to figure out both accounts, it was discovered that the earlier employee had wrongfully been taking money from both accounts. The complete amount of money embezzled is not known because a client has come forward to complain that her monthly statements haven’t shown three cash payments being made. The lawyer has needed to let go the second legal assistant because cannot afford to pay her now that the shortages are needing to be covered. The police is not hopeful that the prior legal assistant will be found or will be able to make restitution.
How can the mess in these two accounts ever be fixed?
1. Account for every penny coming into the trust account and paid out from the trust account. Use a Trust Account Receipts and Disbursement Journal form available on the PLF website in the Practice Aids and Form category titled Trust Accounting or your trust account checkbook register.
2. Print out a report for each client showing amounts received and amounts paid out of the trust account or use a Client Ledger Card form available on the PLF website in the Practice Aids and Form category titled Trust Accounting to fully track money held in trust on a monthly basis.
3. Open your trust account statement or review the statement online every month to catch any irregularities.
4. Promptly review and reconcile your monthly trust account statement to adjust for deposits made but not credited by the statement cut-off date and checks written but not yet cashed by the statement cut-off date.
5. Use the Trust Account Reconciliation form available on the PLF website in the Practice Aids and Form category titled Trust Accounting.
6. Remember that you are ultimately responsible for the trust account even if you have a bookkeeper and accountant. You need to review the accounting carefully– especially if you aren’t “good at math.”
7. If any confusion or concerns exist about your lawyer trust account, contact one of your Practice Management Advisors at the PLF 503-639-6911 or toll free in Oregon 1-800-452-1639, Dee Crocker, Beverly Michaelis or myself, Sheila Blackford. We are confidential and are here to help.
This past week, I purchased software for my laptop. I elected to download the software instead of waiting for the program CD to be sent. But that wasn’t the problem. The problem was electing the option: Install Normal instead of Custom Install. Normally, you wouldn’t need to do a custom install. I never did and you, too, likely may not have customarily used Custom Install.
This is what happened and why I recommend you do Custom Install in the future.
My program installed nicely. WinZip Pro. It is a ‘reputable’ file compression program recommended by CNET. Should be fine, right? Well, the company decided to add some other things in the Normal Install. I got a browser highjacker: My SearchDial Toolbar and start.mysearchdial.com.
“Hey! Where’s my homepage???”
I kept getting start.mysearchdial.com instead of the homepages I had set. I put start.mysearchdial.com into Google, and found out what it was and how to remove it. Thank you blogger, Stelian Pilici for your June 1, 2013 blog post Remove Start.MySearchDial.com hijack (Removal Guide) on the blog Malware Tips Your Security Advisor. Mr. Pilici says: “Start.MySearchDial.com is a browser hijacker, which is promoted via other downloads, and once installed it will add MySearchDial Toolbar, and change your browser homepage and search engine to Start.MySearchDial.com”
His instructions are straightforward and I quickly had it removed from both Internet Explorer and Chrome – it was attached into both browsers. The instructions are hyperlinked above for you. Hopefully, companies like WinZip won’t continue this practice. And hopefully, CNET will post warnings about what is contained in the formerly innocuous, Normal Install. Do your friends, families, and colleagues a favor – pass the word.
Believe it or not, the most common password is the word password. Before feeling smug about that unique password you created, think about how many sites where you have used it. Fess up; you are not alone. The aggravation of forgetting a password has led many people to use one password everywhere. The danger is that if a hacker comes upon your password and a list of your accounts, the hacker can try to enter these other accounts with the password already known. How could this happen? I will share my own experience about when my personal gmail account was hacked.
I must fess up: I used one password on all non-financial related sites. The Gmail Hacker got into my gmail account, looked around in my in box and pulled up my Facebook account email. How did I find out? The Gmail Hacker began getting emails sent to my gmail address. Discovering what had happened, I changed my gmail password to a unique strong password then tried to deal with Facebook. I contacted Facebook to report I had been hacked and wanted to insure that the Gmail Hacker would be shut down out of my Facebook account. I also changed my Facebook password to be another unique strong password. To my aggravation, I periodically get emails from Facebook addressed to the Gmail Hacker asking to return to Facebook. I delete these emails, uttering a curse upon Facebook for ignoring my report of being hacked by this person(s). My hacker did not go by the name Gmail Hacker but I do not want to add to his/her hacking ego by repeating it.
So lesson learned. Use a strong password, strong because it’s length and complexity render it difficult to breech. Many sites now have a password strength meter to check how strong this password choice is compared to safety guidelines. Current security standards show that a safe password should be a minimum 16 characters long made up of upper and lower case letters, numbers and symbols. Your safest course of action is to use a password generator otherwise human nature resorts to a pattern that a hacker could figure out. Randomness and unpredictability are qualities that will keep your password safe(r).
Jotting your list of passwords on a post it and and sticking it on your computer monitor is not a good practice at the office or even at home. There are a number of good password keeper programs or apps that are very helpful. Be sure to create a long, complex, random and unique password to access your password keeper. Google password keeper and you’ll see there are password keeper apps for iPhones, iPads, android devices, web-based, or downloadable to your laptop or desktop. Some you might want to check out include Password Keeper (www.password-keeper.net), KeePass Password Safe (www.keepass.info.com), RoboForm (www.roboform.com), LastPass (www.lastpass.com) and eWallet (www.illiumsoftware.com/eWallet/). Whichever password keeper you use, keep it safe with its own unique password. Now get busy changing all those unsafe passwords!
What is the best trust accounting software I should adopt for my firm?
When should I run a conflicts search?
How long I should keep closed client files – if my client has a copy already?
Where should I open my office to get more business?
Which networking events may be helpful to me as a new attorney?
Who can help me figure out what I need to do to open my own office?
These are all questions that get asked over and over by lawyers. The big question behind all of them is one: where are your go to resources? Today, I’d like to tell you about where you can find a variety of valuable of go to resources.
Ask a Practice Management Advisor
I work for the Oregon State Bar Professional Liability Fund as a practice management advisor. If you are an Oregon lawyer or member of an Oregon lawyer’s firm, then you know the PLF is the mandatory malpractice insurance carrier for the basic coverage required of Oregon lawyers in private practice. If you are not an Oregon attorney, you may have a practice management advisor associated with your state bar association. To see a list of practice management advisors in North American, see here ABA Law Practice Management Section Practice Management Advisors/State & Local Bar Outreach Committee. Call your practice management advisor! We are a resource to getting you the answers to your questions.
Practice Aids & Forms
What you may not realize is that the PLF has a huge variety of free practice aids and forms that can be downloaded from www.osbplf.org. See Loss Prevention on the menu and select the last item, practice aids and forms. Download all of them in Word or WordPerfect and you can customize them. You find a variety of checklists to help you to tackle various substantive practice areas – adoptions to workers’ compensation– plus topics that cut across all practice areas like conflicts of interest, calendaring and docketing, engagement, nonengagement, disengagement, file management, opening your law office, closing your law office, trust accounting, and technology. Lawyers are surprised by the number of practice aids and forms that are available.
You want to open your own law office? The PLF has free guides which you can download in PDF format from the PLF website, on the menu under Loss Prevention, select Books from the PLF: A Guide to Setting Up & Running Your Law Office, A Guide to Setting Up & Managing Your Lawyer Trust Account, Planning Ahead: A Guide to Protecting Your Clients’ Interests in the Event of Your Disability or Death, and Oregon Statutory Time Limitations Handbook.
Books from the OSB: BarBooks is a resource you simply must take advantage of because you are entitled to free access to excellent books specific to your desired practice area, such as the helpful five volume Advising Oregon Businesses. If you want to look at what publications the OSB offers, see the Legal Publications Catalog. Don’t overlook valuable publications that are associated with CLEs.
You want to learn about practicing in different areas?
CLEs from the PLF:You can find CLEs geared to avoiding malpractice traps in family law or how to set up a conflict system or handling your trust account or improving your understanding of financial considerations about managing your law office plus a great variety of other practice management at the PLF. See PLF website then on menu under Loss Prevention select CLE to review on-demand programs, access programs available on DVD of a CLE you might have missed and download the CLE’s handouts, or learn about an upcoming in-person CLE.
CLEs from the OSB:You can find CLEs specific to your desired practice area plus other CLEs – find out what CLEs are available in a variety of formats, QuickCalls, CLE On Demand learn about upcoming live seminars you can attend in person or by webinar by accessing the OSB CLE and Seminars catalog at OSBCLE.org.
CLEs from the Oregon Law Institute (OLI):You can find CLE offerings that fit your needs at OLI. Don’t overlook the OLI resources, whether in person seminars, webinars, MP3 courses, or review their product catalog.
American Bar Law Practice Management Section CLEs: The LPM Section offers CLEs produced by the American Law Institute (ALI). You do not have to be a member of the ABA LPM Section, though you may want to join. See information about the LPM CLEs here.