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Politician’s Fund Raid Is A Violation Of Trust

By JOETTE KATZ

A homeowner in eastern Connecticut has retired and is planning a move to Florida. She hires an attorney to handle the sale of the home she has lived in for 35 years. Upon her attorney’s advice, she signs paperwork in advance of the closing and leaves for Florida. Several weeks after the closing, she has not received the proceeds from the sale, and her attorney will not return telephone calls. She contacts another attorney to pursue the matter, and learns that the attorney who had handled the closing has embezzled the proceeds.

In Danbury, a distressed mother and father learn that their teen son has been charged with several burglaries. They contact an attorney, whom they had met through mutual acquaintances years ago. He tells them that he has considerable experience in handling cases like this one, that he “knows people” in the prosecutor’s office, and that he can handle the matter for a fee of $5,000. Although that represents a significant portion of their available savings, the couple agrees to pay the attorney. Weeks pass, and there is no further contact from the attorney. His telephone has been disconnected, and when they visit his office, it is dark and locked. They later learn that the attorney’s license has been suspended.

What do these situations have in common? The home seller and the parents likely would qualify for reimbursement of their losses from a fund operated by the Connecticut Judicial Branch known as the Client Security Fund. In hundreds of similar cases, clients who were victims of dishonest conduct by attorneys have received more than $13 million since the fund’s inception in 1999. The fund is administered by a volunteer group of judges, lawyers and lay people, and money for the fund comes from a fee paid by each licensed Connecticut attorney and judge. The fee is collected pursuant to Superior Court rules that govern the fund. It constitutes a trust that is used for the limited purpose of reimbursing clients affected by a theft or embezzlement by a Connecticut bar member. The fund is also used for a program that provides assistance to attorneys with alcohol, substance abuse, gambling or behavioral health problems.

The committee that administers the fund has endeavored to pay, and, in almost every approved case, has paid, the full amount of losses it has determined are reimbursable under the rules that govern the fund’s management. The results are tangible and real. Just last month, the committee paid a claim that involved an attorney who had misappropriated funds from the sale of the home of an elderly Alzheimer's patient. The Client Security Fund payment allowed the woman to remain in a continuing care facility.

The committee’s ability, however, to continue to pay the full amount of claims filed, and to make victims whole, will be jeopardized by recent actions taken by the governor and legislature as part of the recently passed deficit mitigation bill. That bill would transfer $2 million from the Client Security Fund to the state’s general fund, in spite of the specific purposes for which payments to the fund have been collected over the past 10 years.

The transfer also will leave the fund with no cushion against pending claims. At the end of 2008, the fund had a balance of about $7.8 million available against $5.8 million in pending claims. The actions of the governor and legislature place the fund at risk of being unable to fully pay claims if there is a large scale defalcation or an appreciable number of defalcations in the future.

In addition to reducing reserves, the governor and legislature have also violated the trust of members of the bar, who have paid the annual fee with the expectation that it would be used, as noted in the Superior Court rules, “to promote public confidence in the judicial system and the integrity of the legal profession” by reimbursing clients in rare instances when an attorney has violated the trust established within the attorney-client relationship.

On a daily basis, hundreds of attorneys and their clients engage in transactions involving hundreds of thousands of dollars, and the transactions are concluded without fanfare; indeed, since 1999, claims paid by the Client Security Fund have involved fewer than 100 attorneys. The fact that a theft or embezzlement of funds by an attorney is, however, a rare event is of little comfort to a client who learns that he has been the victim of such an act. It will be even less comfort for the client to learn that his losses may not be reimbursed fully because the governor and legislature have seen fit to use those funds for purposes that were never intended.•

Associate Supreme Court Justice Joette Katz is chair of Connecticut’s Client Security Fund.