Professionals are often entrusted with access to personal and financial information from their clients. Professionals take great care to ensure that they protect this information from disclosure and that they comply with ethical guidelines regarding proper use of client funds. However, even when professionals fully comply with the rules, there may be occasions where employees or other individuals who have access to the information through their professional employer use it for an improper purpose. While professionals cannot always prevent employee misconduct, the actions they take to remedy any misdeed can often mean the difference in assessing personal liability.
Take, for instance, the recent disciplinary action against a Louisiana attorney whose assistant embezzled client funds. The trouble began several years earlier when the attorney’s clients filed a complaint with the State Office of Disciplinary Counsel stating that the attorney had withheld funds from a case settlement. The attorney informed the clients that he was unaware of the problem, but that he would have his secretary look into it. The secretary later confessed that she had been embezzling money from the attorney for years and acknowledged that she had been depositing funds from the attorney’s operating account into a personal account.
The attorney terminated the secretary and reported her to the police. The secretary was, however, able to estimate the amount that she owed and obtained a personal loan from a relative to make restitution to the attorney’s clients. The attorney deposited the funds from the secretary into his trust account and also made a personal deposit. However, an audit showed that the attorney did not fully make his clients whole until several years later.
Despite the attempt at restitution, the Office of Disciplinary Counsel found the attorney negligent and recommended a 30-day suspension. On appeal, the Supreme Court noted that the attorney did not make his clients whole until three to four years after he received the funds from his secretary and that he was negligent in supervising his secretary. The Court then upheld the 30-day suspension.
While professionals cannot prevent all intentional wrongful acts of their employees, they can takes steps to minimize and correct any harm that results if employees do engage in improper conduct. For one, at the first sign of financial impropriety, professional should investigate the cause of any discrepancy, and in certain cases hire a forensic accountant to uncover any fraud or embezzlement. If it is determined that funds were misused, professionals should immediately notify clients and the proper authorities and take all necessary steps to make restitution to the victims. Failure to act promptly could lead to personal liability for the wrongful acts of others.