Small Firms Take Look At Theft Prevention
Everybody needs a wake up-call.
Small firm practitioners across the state got just that recently, as word spread that a long-time, trusted secretary at the Waterbury law firm of Grady & Riley was charged with stealing more than $1 million from the office.
The crime was committed over a period of three years, police said, as Barbara Kalpin wrote herself at least 93 checks from a client fund that she managed. Kalpin reportedly used the money to pay her credit card bills and to bet on dog and horse races. She now faces two counts of first-degree larceny and 112 counts of second-degree forgery,
"Small firms are, of course, vulnerable to this," said Anthony R. Minchella, an executive board member of the Small Firms Practice Section of the Connecticut Bar Association. "Small firms may be even more vulnerable, because those lawyers may be busier practicing law [than larger firms] and may not pay as much attention to the administrative problems until there's a problem."
Such a problem, he said, will typically only come up when someone says, "Hey, where is the cash?"
Minchella and other small firm practitioners said the best defense a firm can have is to be proactive. "Having redundant controls is important," said Minchella. "The person who opens the mail should not be the same person who deposits the checks."
Another way for lawyers to stay proactive is to actively look for warning signs. "Be in touch with your staff and institute policies and procedures to conduct random, unannounced audits and reviews," Minchella said.
Andrew O'Toole, a solo commercial law and investigations practitioner in Hartford, agreed that it's important to have internal controls in place to allow for the tracking of all banking transactions. This is especially true because lawyers themselves are responsible for maintaining client trust account funds, under the Rules of Professional Conduct.
"I would say having controls in place, so the person who is signing or depositing the checks is not the same person who is checking the accounts, is necessary," O'Toole said, adding that double checking all withdrawals from client funds is advisable. "Even with all of the controls in place, there are people who will try to take advantage," he said. "That's not just something specific to law firms. I would say its an issue for any business that handles funds."
Being up to date on all ethics rules is also important. As Kalpin's former boss, Francis Grady, knows all too well, a theft of client funds will bring an automatic investigation by the Office of Chief Disciplinary Counsel.