SRA: Solicitor placed a lot of trust in accounts manager
A law firm whose compliance officer for finance and administration (COFA) stole £157,000 has been fined for not having proper systems governing payments from client account.
Laurence Lee & Co, a recognised sole practice in Liverpool, accepted a fine of £1,822 in a regulatory settlement agreement with the Solicitors Regulation Authority (SRA).
The eponymous Mr Lee is a veteran criminal defence lawyer who specialises in fraud matters.
The agreement recorded that the firm’s accounts manager and COFA misappropriated both client and office money totalling £157,000 over a period of seven years, transferring the money to bank accounts held by her and her son.
She pleaded guilty to fraud in August 2022 and died soon after.
The transfers led to a shortage which the firm rectified in full, some coming from Mr Lee’s personal funds.
Mr Lee was the sole principal and compliance officer for legal practice; he and another solicitor at the firm were able to operate and access its online banking.
The SRA investigation found a “lack of appropriate systems and procedures in place governing payments from client account”, as well as a lack of supervision of the COFA.
The investigation also found the firm had breached an undertaking to retain £3,000 to settle a service charge. Of this, £1,000 was “improperly withdrawn by a person unknown at the firm”, with the remaining balance then improperly billed. This resulted in a client account shortage of £3,016, including interest.
The agreement that said the firm has since put in place “policies and procedures to prevent future breaches from occurring”.
The SRA noted in mitigation that “Mr Lee was experiencing personal difficulties during the time of some of the misconduct associated with the long-term illness and subsequent bereavement of a close family member”.
These difficulties meant he was unable to attend the firm’s offices during the Covid-19 pandemic and supervise his staff effectively.
“The accounts manager worked for the firm for 25 years and the fee-earner who she worked under worked for the firm for 30 years. As such, Mr Lee placed a lot of trust in these individuals.”
Laurence Lee & Co also had accountants’ audits throughout the period and these did not reveal the improper payments.
The SRA said a fine was the appropriate sanction, and based the amount on the fact that the firm “did not act intentionally or as a result of gross negligence” and had an otherwise clean regulatory record.
Clients were not impacted and the firm has now stopped conveyancing, probate and wills work, eliminating the need for a client account as it now only does criminal legal aid.
Under the SRA’s fining guidance, this led to a broad penalty bracket of between 0.4% and 1.2% of Laurence Lee & Co’s annual turnover and a decision to use a figure towards the middle of this.
This led to a fine of £2,277, which was reduced by 20% to £1,822 to reflect the firm’s remedial action and cooperation with the investigation.
The firm also agreed to pay the SRA costs of £1,350.
Yet another long running fraud involving trusted members of staff, and involving not inconsiderable sums, which wasn’t picked up by external SAR auditors.