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#1740703 - 09/13/12 06:35 PM IOLTA Accounts
sra724 Offline
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Joined: Jul 2011
Posts: 46
Should an IOLTA account have transfers online from it to other accounts including lawyer's operating account or personal checking?
If no, how should I deal with this?

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#1740769 - 09/13/12 09:09 PM Re: IOLTA Accounts sra724
John Burnett Offline
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You may find some specific language prohibiting such activity in the IOLTA rules of your state. If you can find them, it will be good ammo to have when you tell the attorney you're pulling the plug on it.

It's reasonable, I suppose, for there to be transfers between the attorney's operating account and the IOLTA (attorney holds client funds in IOLTA, matter is finalized, attorney takes fee from IOLTA funds and issues check for what's owed to the customer. But no way would it be acceptable to have transfers between the IOLTA and the attorney's personal account.

It's likely that state IOLTA rules will require documentation of every nickel disbursed from an IOLTA account, and that may mean that the only acceptable way for the funds to be moved out is by check or by documented wire transfer order.
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#1740774 - 09/13/12 09:17 PM Re: IOLTA Accounts sra724
rlcarey Offline
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It would also be good ammo for a SAR filing.......
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#1740776 - 09/13/12 09:19 PM Re: IOLTA Accounts sra724
John Burnett Offline
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A-men on that.
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#1740891 - 09/14/12 01:56 PM Re: IOLTA Accounts sra724
CompliKat Offline
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I have a similar situation where it appears that checks are drawn out of the IOLTA account and are paying for things like medical costs, life insurance, tuition to private school, something referencing "stud fees" for quarter horse, Bananna Republic, and credit cards with the same account number (every month?).... attorney's children are referenced on the medical and tuition checks. I have even seen "Shareholder Loan" in the memo of some checks going to another business venture he has. Some internal discussion has left me with the "it's not quite right but exactly what is it" feeling. He may be paying those things out of the portion of the funds that represents his fees so it may be simply a matter of not-so-intelligent bookkeeping (I mean, really he is an attorney he should know that stuff like this looks suspicious, right???) I'm sure the State Board would be interested and would grill him mercilessly about this. But if I were to file a SAR, how would I characterize the suspicious activity? I don't know that he isn't spending his own money, and I know our SAR committee would want to tread very carefully... Any ideas?

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#1740906 - 09/14/12 02:14 PM Re: IOLTA Accounts sra724
rlcarey Offline
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I would be reviewing the rules and making a decision. Here they are for Louisiana, where I think you are located. If nothing else, I would provide a copy to the attorney and tell him to either modify his bookkeeping or you will close the account.

http://www.raisingthebar.org/iolta/iolta_supremecourtorder.pdf

There is no reason to trend lightly. While people make claims that the bank has no responsibility to monitor - just ask the banks that are being sued for allowing ponzi schemes to run through their banks. If he is not properly protecting client funds, I see it as no different. You have knowledge at this point. If he wants to make personal expenditures, he should be writing himself a check and performing those transaction though a personal account.
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#1740951 - 09/14/12 03:14 PM Re: IOLTA Accounts sra724
John Burnett Offline
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When you know, you can not ignore. Otherwise, you get hit with the classic definition of "willful blindness" and you'll lose every time. The litany of apparent breaches of fiduciary duty in CompliKat's narrative is so extensive and so blatant that I wouldn't even wait to finish reading my state's IOLTA rules before I'd file the SAR and recommend the slimeball be kicked to the curb.
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#1741100 - 09/14/12 06:48 PM Re: IOLTA Accounts sra724
CompliKat Offline
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Just curious what you would classify the activity as on the SAR? Any suggestions?

And thank you Gentlemen for your insight.

(I forgot to mention payment for what appears to be a duck hunting trip south of the border... :-)

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#1741108 - 09/14/12 07:00 PM Re: IOLTA Accounts sra724
rlcarey Offline
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Galveston, TX
It probably would be an other "Misuse of an IOLTA account.
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#1741117 - 09/14/12 07:04 PM Re: IOLTA Accounts sra724
CompliKat Offline
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OK, I guess that makes sense tho my committee is loathe to use "Other". Incidentially I did take this up with bank counsel and he was going to address the matter with the Atty's loan officer. As yet I have not seen any change in the activity and yes it does bother me!!!!! I guess I know what my next step will be....

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#1741177 - 09/14/12 08:04 PM Re: IOLTA Accounts sra724
John Burnett Offline
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Agree with Randy. Item 35z (other/other) Misuse of IOLTA account; misuse of client funds; fiduciary breach (pick one)
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#1741257 - 09/15/12 12:24 PM Re: IOLTA Accounts CompliKat
Elwood P. Dowd Offline
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Next to Harvey
The alternative explanation for using IOLTA funds to pay personal bills is that the bills are being paid from accrued fees which should be transferred to the firm as income. That is, instead of withdrawing funds that are actually owed to him, he is using them to pay personal bills. Thus, he is only cheating on his income taxes, not defrauding his clients.

These situations require some courage, but courage has to come based on the ability to identify the lesser of two evils. Obviously, your bank believes the SAR subject is litigious by nature and there will be blood if he finds out about the SAR. On the other hand, you believe you may be watching a customer commit a crime.

Today, banks are being punished for voyuerism; they are expected to do more than watch.

So, simply watching it happen is not an option. If the dollar thresholds are exceeded a mandatory SAR filing accrues. That's actually the easy decision. The more likely "stop action" will come from contacting the bar association as discussed here.

P.S. You might also consider "embezzlement" as a check box option. While the deifinition provided years ago assumed the victim was the bank, it's still an accurate descriptive term.

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#1744521 - 09/26/12 08:16 PM Re: IOLTA Accounts sra724
sra724 Offline
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Joined: Jul 2011
Posts: 46
Thank you!

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