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    September 24th, 2008

      Can I Trust You? Show me your honesty
    Tell me you promise me the truth… ♫

    Words  and Music by:  Rebecca St. James and Shaun Shankel

    An Alberta law firm has been defrauded of more than $1.4 million dollars over a 3.5 year period by a former legal assistant of the firm, according to The Edmonton Journal (March 19, 2008).  The legal assistant (a 36 year old mother of three) plead guilty to seven counts of fraud and one of forgery and was sentenced to 3.5 years in jail for her actions, according to The Calgary Herald (Sep. 10, 2008).  The firm was left with little chance of recovering over $800,000 once the dust cleared (The Calgary Sun Aug. 23, 2008).

    In an agreed statement of facts, the legal assistant (I won’t name her here – I think her family has been through enough) stated:

    • She forged lawyer’s signatures on trust cheques
    • She created false cheques
    • She create false cheque requisitions
    • She concealed her efforts by altering trust requisitions to transfer more funds than requested from private trust accounts to Bennett Jones’ pooled trust accounts, then writing cheques from the pooled account for her own benefit
    • She paid off credit card debts, paid The Receiver General of Canada, Canadian Tire and others
    • She removed the fraudulent cheuqes from the bank statements when they arrived and altered the statements to cover her tracks
    • She doctored letters requesting the transfer of funds from a private trust account in Los Angeles to the firm’s pooled trust accounts in Calgary

    A pre-sentence report by a forensic psychologist stated that she stole the money initially ‘because she could’ and that it ‘gave her a rush’.

    OK..so what lessons are there in this case for partners, lawyers, administrators and accounting departments?

    For one, being a large and trusted firm does not exempt you from the possibility of internal embezzlement.  Bennett Jones is a large and trusted firm in every definition of the word.

    Two, all trust accounts need to be under the full control of the accounting department. Reading between the lines, the legal assistant had access to both the bank statements and the cheques for a separate or private trust account that was the responsibility of a lawyer of Bennett Jones but was not under the full control of their accounting department.  The best practice separation of duties and roles was, for some reason, not followed in this case. The safeguards that should be built into every accounting department were somehow bypassed.

    Three, you can’t trust everyone, all of the time. There is a small minority of people who will succumb to temptation if the systems allow them to do so.

    While Bennett Jones suffered a monetary loss, no doubt the damage to their reputation was worth far more…however, they  chose to come forward and deal with the situation rather than dealing with it privately. To their credit, they chose to show everyone their honesty and told the truth, even in the face of full public scrutiny.

     

     

    This entry was posted on Wednesday, September 24th, 2008 at 2:00 pm and is filed under Firm Governance, Fraud and theft, Issues facing Law Firms, Law Firm Strategy, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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