Ethics in Brief: Get Ready! Random Trust Account Audits Are Coming
By David C. Carr
Two years ago, the State Bar implemented the Client Trust Account Protection Program (CTAPP). The aim of CTAPP is to deter client trust account misconduct through the imposition of a layer of regulation on top of the discipline system. The advent of CTAPP is part of the fallout from the Girardi scandal. Girardi was able to move money between trust and business accounts, that helped to conceal his theft. Of course, this problem did not begin with Girardi. One legal review article referred to misappropriation from the client trust account as “the perfect crime.” Client trust account misconduct can be difficult to detect. Requiring the reporting of client trust account overdrafts has been helpful in detecting misconduct. It is ineffective for detecting the practice flush with money that has been paying the last client settlement with a current client’s settlement money. “Robbing Peter to Pay Paul” can go on for a very long time as long the cash flows in, just as in a Ponzi scheme. But when something stops the cash flow, the whole thing falls apart quickly. This is what happened to Girardi.