I continue to be surprised at the number of times I have visited a solo practice and found that complete oversight of client property has been turned over to an employee. More often than not, this individual has been employed by the attorney for years and is always viewed as someone worthy of a high level of trust.

While I do believe the development of trusting work relationships is a good thing, there is a downside as this trust can easily lead to the deterioration, if not complete abandonment, of accountability mechanisms and sometimes trouble follows. In fact one story that has stayed with me for years involved a trusted firm administrator who eventually came to be treated by the attorney as a member of his family. This individual even participated in helping to raise the attorney’s children. That all came crashing down when the attorney eventually discovered this trusted employee had been embezzling him for years managing to take well in excess of $100,000. Suffice it to say the attorney never saw it coming and was crushed by this individual’s deceit.

Before going further, allow me to say that I do value the professional and personal relationships that can and do arise in the work setting. I believe that placing trust in employees is an appropriate and necessary practice. My purpose here is not to advocate a modicum of distrust. Rather it is to encourage and underscore the importance of creating and maintaining appropriate mechanisms of accountability for client property. Why? Because, unfortunately, even long-term trusted employees sometimes make really bad decisions. To add insult to injury, should such an unfortunate event ever occur in your firm and adequate safeguards (such as attorney oversight) were not in place, you might end up on the wrong side of a disciplinary action and/or malpractice claim. You cannot and should not delegate total and complete responsibility for all accounting functions to non-lawyer staff. Simply put, you have an ethical duty to oversee the safekeeping of client property.

With all this in mind, here are a few ideas to help you avoid such problems and, if followed, will help you demonstrate that an appropriate level of attorney oversight of client property was in place should a theft ever occur.

• Promptly identify items of value received on a short-term or long-term basis. Label them as client property and place them in safekeeping as soon as possible. Immediately deposit client funds into the trust account. Place valuable papers or other small tangible items in a safety deposit box or a fireproof safe. Large items may require safekeeping in secure commercial storage space. When maintaining client property on-site and long-term keep an inventory of the property, catalogued as on-site or off-site, and update as necessary. Diamond rings have disappeared and client x-rays unintentionally destroyed for want of this basic safekeeping practice.
• When hiring administrative, accounting or bookkeeping staff, verify reported employment history and personally speak with references. You might also review the publicly available social media presence of any prospective hire.
• Have your books reviewed by an outside auditor once a year. Typically this audit would occur during a mandatory two week vacation of the long-term employee who is in a position of trust, such as a bookkeeper.
• Require two signatures on all checks written in excess of $500 or $1000. This can help assure you personally see and review all checks being written for a significant amount.
• Make certain that all checks and cash received are kept in a locked drawer, cabinet, or safe until it’s time to take them to the bank. In addition, upon receipt restrictively endorse and copy or create a log of all checks received.
• Separate check preparation responsibilities from account reconciliation responsibilities. Allowing one person to sit in both roles is asking for trouble. In a perfect world, the account reconciler would also never have access to the trust account check stock as the checks would be kept in a locked drawer or safe.
• Trust account checks should be physically different from the operating account checks to lessen the likelihood that a check will be written on the wrong account. Consider different sizes or colors or perhaps even maintaining the accounts at different banks. Periodically take a look at both check stocks to make certain that the checks at the back are still there. Sometimes forged checks are taken from the back of the stock so that the stolen checks will not be missed.
• The use of signature stamps should be forbidden as these things have been misused too many times. If you have any signature stamps lying around in your office destroy them. For similar reasons, never leave signed blank checks lying around.
• Regularly review your bank statements and their corresponding reconciliation reports so that any discrepancies can be addressed immediately. Require that all bank statements be delivered to you unopened or consider having them sent directly to your home. Not only do you need to see and understand all activity in every account but you also want the opportunity to make certain no forged checks were written. In part, this is about trying to catch small thefts before they become something more.
• Watch for the warning signs. Although not foolproof, there are certain warning signs that should warrant careful attention. These would include your becoming aware of financial problems, witnessing the demonstration of addictive behaviors, realizing that someone is living beyond their apparent means, or that the individual never takes any extended amount of time off.