Misappropriation - Toronto Estate Law Blog

Sleepless Nights

nonley@hullandhull.com (Hull & Hull LLP) — Mon, 15 Sep 2008 07:52:06 -0500

Here’s a story from Calgary that will make every lawyer tremble documenting the conviction of a mother of three, and assistant at a law firm, for misappropriating $1.4 million from the firm’s trust account.

A great reminder of the need to restrict access to a trust account and exercise vigilance in who can access it. Of course, in the hustle and bustle of practice it is possible for these types of basics to fall to the background as we try to satisfy clients with the outcomes of their cases.

Most lawyers I know operate on the assumption that everything which leaves their office, including trust cheques, is their responsibility. Since not everything in every case can always be reviewed, that implies a certain amount of trust towards assistants, clerks, and other support staff. It also implies that it is very wise to know the people that work for you, and consciously keep up with them from time to time.

Nothing will protect from every rogue of course, but you never know what you might find out by staying on top of things…

Thanks for reading.

Sean Graham

Power of Attorney Abuse on the Rise

nonley@hullandhull.com (Hull & Hull LLP) — Thu, 17 Apr 2008 06:00:00 -0500

By all indications, the abuse of Powers of Attorney to misappropriate assets is on the rise.

When a grantor gives powers to an attorney to manage the grantor’s property, it allows the attorney to assist the grantor in managing property, and in fact to take over management of property altogether if the grantor does not monitor the situation. Often the very goal of the grantor is to allow someone else to completely take over management of one’s property due to age, potential incapacity or other reasons, so the grantor has no intention to monitor.

This is often a reasonable choice, and the law holds attorneys to a high standard to protect grantors. However, the potential for abuse is immense. Abuse can be willful or simply negligent, but in either case the damage can be devastating and irreversible. In many cases attorneys who stray from their duties are never made to account, although they have that obligation. Often they live with the grantor and have little or no oversight. The legal fees in securing justice are generally high, and the chances of recovering on a judgment can be low. In the result, legal proceedings might be impractical, however blatant abuse may be in a given case.

The best defence against this problem is awareness, so these varied results from a quick internet search are somewhat encouraging: a Florida law firm website; an excellent Vancouver Sun article; a synopsis of a TV news story; the New York Attorney General’s website; a news report of a Philadelphia trial; and a news release from Prince Edward Island’s provincial government commenting on the problem for World Elder Abuse Day.

This is the tip of a very large iceberg: by all indications lawyers, financial institutions, governments and of course the public will be wrestling with a growing problem for years to come.

Thanks for reading.

Sean Graham

Breach of Trust - Civil, Criminal or Both?

nonley@hullandhull.com (Hull & Hull LLP) — Mon, 02 Apr 2007 00:12:36 -0500

MacLeans magazine’s Mark Steyn is providing an acerbic day-by-day report on the trial of newspaper magnate Conrad Black in Chicago. The trial continues a pattern by the US government to lay criminal charges in cases of alleged corporate malfeasance more vigorously following the Enron scandal.

As the historic intergenerational wealth transfer currently underway gathers steam, a well-publicised case could easily drive greater government interest in prosecuting breach of trust accusations just as Enron did in the corporate realm. Virtually all lawyers practising in the area have seen serious misappropriation of property or abuse of the vulnerable by those in a position of trust. Is this criminal? If so, will the police and crown attorneys be willing to treat it as such?

The Canadian Criminal Code certainly indicates so: it includes provisions dealing with Theft by person required to account (section 330); Theft by person holding a power of attorney (section 331); Misappropriation of money held under a direction (section 332); Criminal breach of trust (section 336); Fraud (section 380); and Assaults (sections 264 to 266). These provisions could be invoked given the right circumstances in an Estate, elder abuse or capacity case.

The Police often perceive misappropriation by fiduciaries as a civil matter. On the other hand, they are increasingly aware of elder abuse or abuse of the incapable, and far more willing to intervene.

As high-profile cases involving misappropriation of funds or abuse of incapable persons receive greater media attention, look for the legal consequences to branch out from the civil context to involve criminal charges as well.

Thanks for reading.

Sean Graham