Clients' Security Board awards record amount in fiscal year 2015

Issue November 2015 By Mike Vigneux

Celebrates 40 years of client protection

The Clients' Security Board (CSB) of the Supreme Judicial Court (SJC) of Massachusetts awarded a record $2.9 million to reimburse clients who were defrauded by their attorneys in fiscal year 2015.

By comparison, the $2.9 million awarded in 2015 is more than double the $1.3 million awarded in fiscal year 2014, according to the CSB's "Annual Report to the Supreme Judicial Court for Fiscal Year 2015." This year's report marks the 40th anniversary of the CSB, which was established by an order of the SJC in 1974, seven years before the American Bar Association House of Delegates approved the Model Rules for Clients' Security Funds.

"In simple terms, the overall mission of the Clients' Security Board is to reimburse clients whose lawyers have misappropriated their money," said Karen D. O'Toole, assistant board counsel at the CSB.

The record amount awarded this year came in the form of 61 awards, whereas 114 awards were made in fiscal year 2014, the second highest number of awards ever given. Last year a total of 121 claims were filed with the CSB, whereas 2015 saw only 59 claims filed. Based on the timing of when the claims are filed, the overall numbers in the report can be unpredictable from year to year.

Taking a macro view, only 22 attorneys or .04 percent of more than 59,000 lawyers in the state defrauded their clients of the $2.9 million the CSB reimbursed in fiscal year 2015. Two attorneys, Peter J. Unitt III ($970,980.38) and Arthur J. McCabe II ($959,937), accounted for defalcations totaling nearly $2 million, or 66 percent of the total money awarded. The top five offending attorneys combined for $2.6 million or 89 percent of the overall total. In addition to Unitt and McCabe, Mark E. Cassidy ($438,098.21), Robert H. Monheimer ($127,947.07) and Reinaldo Gonzalez ($104,619.20) were responsible for that amount.

"It is a very small percentage of lawyers who are misappropriating their clients' money, but if it happens to you it doesn't feel so small," acknowledged O'Toole.

One consistency from year to year is that the category of trusts and estates tends to be the top category for lawyer defalcations. This year more than $1.72 million or 59 percent of the $2.9 million total was misappropriated by lawyers in this area. The investments category was second, with a total of $707,472.19 awarded.

Attorneys have to be suspended or disbarred by the Office of Bar Counsel, a division of the Board of Bar Overseers (BBO), before the CSB can take action on claims. The seven members of the CSB board are all lawyers from across the commonwealth that are appointed by the SJC for five-year terms.

Massachusetts is unique from other states in that the CSB reimburses 100 percent of the actual client loss and there is no statute of limitations pertaining to the claims. Most states have a cap on the amount that can be reimbursed either per lawyer or per loss. Attorneys in Massachusetts pay for the fund through their annual BBO registration fee.

"We take client protection very seriously in Massachusetts and we're fortunate to have a system of checks and balances which allows the Clients' Security Board to reimburse misappropriated client funds in full," said MBA Chief Legal Counsel and Chief Operating Officer Martin W. Healy. "The overwhelming majority of attorneys in our state treat their clients fairly but it's important to have a process in place to safeguard the public when a rare instance of fraud occurs."

"From the standpoint of an attorney who practices in Massachusetts, it's reassuring to know that we clean up the messes that are less than honorable so that people are compensated in full," added D. Ethan Jeffery, CSB chair.