8 Safeguards to Ensure You Can Trust Your Law Firm Employees

I continue to be surprised at the number of times I learn that a law firm turned over complete oversight of client property to a non-attorney member of the firm’s staff. More often than not, the reason for doing so seemed to be that this individual had been employed at the firm for years and viewed as someone worthy of a high level of trust. And while I do believe the development of trusting work relationships is a good thing, unfortunately there can be a downside. My biggest concern is unfettered trust can easily lead to the deterioration, if not the complete abandonment of accountability mechanisms. Sometimes trouble follows.

One story that has stayed with me for years involved a trusted firm administrator who eventually came to be treated by her boss, a solo attorney, as a member of his family. This individual even played a role in helping to raise the attorney’s children. Everything came crashing down when the attorney eventually discovered this trusted employee had been embezzling him for years managing to take well in excess of $100,000. Suffice it to say the attorney never saw it coming. He was crushed by this individual’s deceit.

Before going any further, allow me to say that I do value the professional and personal relationships that can and do arise in a work setting. I believe that placing trust in employees is an appropriate and necessary practice. My purpose here is not to advocate a modicum of distrust. Rather, it is to encourage and underscore the importance of creating and maintaining appropriate mechanisms of accountability for client property. Why? Because, unfortunately, even long-term trusted employees sometimes make really bad decisions. To add insult to injury, should such an unfortunate event ever occur in your firm and adequate safeguards were not in place, you might end up on the wrong side of a disciplinary action. You cannot and should not delegate total and complete responsibility for all accounting functions to non-lawyer staff. Simply put, as an attorney you have an ethical duty to oversee the safekeeping of client property.

With all this in mind, here are a few ideas to help you avoid problems and, if followed, can help demonstrate that an appropriate level of attorney oversight of client property was in place should a theft ever occur.

• Promptly identify items of value received on a short-term or long-term basis. Label them as client property and place them in a secure place as soon as possible. For example, immediately deposit client funds into the trust account. Place valuable papers or other small tangible items in a safety deposit box or a fireproof safe. Large items may require safekeeping in secure commercial storage space. When maintaining client property long-term keep an inventory of the property, catalog the property as onsite or off-site, and update this inventory as called for. Diamond rings have disappeared, and client X-rays unintentionally destroyed for want of this kind of basic safekeeping practice.

• When hiring administrative, accounting, or bookkeeping staff verify reported employment history and personally speak with references. You might also review the publicly available social media presence of any prospective hire.

• Have your books reviewed by an outside auditor once a year. If possible, this audit should occur during a mandatory two-week vacation that any long-term employee who is in a position of trust, such as a bookkeeper, should be required to take.

• Require two signatures on all checks written in excess of $500 or $1000. This can help assure an attorney personally sees and reviews all checks being written for a significant amount.

• Separate check preparation responsibilities from account reconciliation responsibilities. Allowing one person to sit in both roles is asking for trouble. In a perfect world, the account reconciler would never also have access to the trust account check stock as those checks should be kept in a locked drawer or safe.

• Trust account checks should be physically different from the operating account checks to lessen the likelihood that a check will be written on the wrong account. Consider different sizes or colors or perhaps even maintaining the accounts at different banks. Periodically take a look at both check stocks to make certain that the checks at the back are still there. Sometimes forged checks turn out to be checks taken from the back of the check stock with the hope that these checks will never be missed.

• Never provide signature stamps or leave a few signed blank checks lying around because both have been misused too many times. If signature stamps or signed blank checks are available in your office, see that they are destroyed.

• Watch for the warning signs and never ignore them once present. Although not foolproof, there are certain warning signs that should warrant careful attention. These would include your becoming aware that the trusted staff person is having financial problems, you witness the demonstration of addictive behaviors, realize this person is living beyond their apparent means, or learn that the individual never takes any extended amount of time off.