The annual report of the OSB Client Security Fund
By Sylvia Stevens
'Why do I have to contribute to the Client Security Fund - I don't steal from my clients?' This is a question we receive on occasion as members address their annual dues statements. The short answer is that the CSF assessment is mandatory. The longer answer is that Oregon lawyers have committed to having a fund to reimburse losses caused by those few lawyers who do steal from their clients.
The Client Security Fund was established in 1967 to 'relieve or mitigate pecuniary losses to the client of active members caused by dishonest conduct of those members in their practice of law.' ORS 9.625. It was one of the country's first such programs, but over the ensuing 34 years, every jurisdiction has adopted a similar program for client protection. Although the funding varies among the jurisdictions, it all comes from lawyers either directly or indirectly.
The OSB Client Security Fund is financed entirely by annual member assessments (established by the Board of Governors), interest on the fund balance and 'subrogation' collections (money we recover from the lawyers whose clients we have reimbursed). The CSF maintains a reserve using a formula based on claims activity for the prior five years, with a minimum balance of $500,000. The annual member assessment has been $15 for the past several years.
A claim is eligible for reimbursement by the fund if the loss was caused by the lawyer's dishonesty in a lawyer-client relationship or while acting as a fiduciary in a matter related to the lawyer's practice of law. In addition, the claimant must have a civil or criminal money judgment against the lawyer or, for claims of less than $5,000, the lawyer must have been sanctioned by the bar for the same conduct. Claims are assigned to a member of the Client Security Fund Committee1 for investigation. The CSF Committee reviews the investigation report and recommends payment or denial of the claim. If a claim is recommended for payment, it goes to the Board of Governors for final approval. The maximum amount paid on a claim is $50,000.
Since its inception, the fund has reimbursed clients more than $1.9 million. All fund payments are attributable to approximately 100 lawyers. Only five lawyers have generated total claims in excess of $100,000, and only eight lawyers have generated total claims totaling between $50,000 and $100,000. Although the fund occasionally pays a $50,000 claim, most claims are for less than $10,000 and a large number are for less than $5,000.
As of Jan. 1, 2001, there were 12 claims pending from 2000. Between Jan. 1 and Sept. 30, 12 additional claims for reimbursement were received.2 The fund paid eight claims totaling $51,209 between Jan. 1, 2001 and Sept. 30, 2001. As of Sept. 30, 2001, there were 10 claims under investigation for which reimbursement of $191,000 was sought. For reasons the committee has not been able to determine, claims activity in the past two years has been declining. For most of its existence, the fund saw yearly increases in the dollar volume of claims. In 1999, the fund paid $178,995 in claims. In 2000, claims for the year were down to $94,068. Extrapolating from the Sept. 30 figure, total claims paid in 2001 are estimated to be approximately $70,000.
Claimants who receive reimbursement from the fund are required to assign to the Oregon State Bar all of their claims against the lawyer (to the extent they were reimbursed by the fund), including any judgment that was obtained. The bar then pursues collection of the assigned claims. Recoveries are generally modest, ranging between $5,000 to $10,000 per year for the last few years. Recoveries in 2001 are estimated to be approximately $6,400. Outstanding 'receivables' total approximately $1.2 million. Many have been assigned to a collection agency; others are handled in-house by the CSF administrator. A number of former lawyers make regular restitution payments to the bar.
Following is a brief description of claims that were paid between Oct. 1, 20003 and Sept. 30, 2001:
Paul Gloyn ($10,031.25). Gloyn absconded with client funds when he fled to Mexico in August 1999 to avoid criminal prosecution. The fund reimbursed four of Gloyn's clients during this period in addition to $24,065 paid previously. One additional claim against Gloyn was pending at the time of this report in the amount of $8,000. Gloyn is currently in custody in Coos County awaiting trial.
Roger Anunsen ($58,353). This sum represents reimbursement to 10 of Anunsen's clients. In each case, the fund determined that Anunsen had collected advance fees for which no meaningful work was performed. Two additional claims are under investigation, and one additional claim has been approved for payment but not distributed at the time of this report.
Steven G. Miller ($18,058.97). The fund reimbursed the personal representative of an estate from which Miller misappropriated funds. Miller was convicted of aggravated theft; in addition to a jail sentence and probation, Miller was ordered to pay restitution. The fund has an assignment of the restitution judgment.
Jon C. Corell ($3,867.50). Correll converted an excess attorney fee payment, which was reimbursed to the client by the fund. Correll is cooperating in making restitution to the fund.
Mark W. Jacobsen ($2,000). Jacobsen took a retainer from a client, filed a complaint, then disappeared. The fund reimbursed the client for the entire retainer, concluding that Jacobsen's work was of no value to the client. Jacobsen subsequently tendered a Form B resignation to the bar.
1. Members of the CSF Committee in 2001 were Alice Bartelt (chair), Michael Lewton (secretary), Timothy Grabe, Guy Greco, Ron Somers, Eddy Swearinger, Stephen D. Brown, Robert B. Smith, Kim Carty, Phil Garrow, Hong Hyunh and Bonita Merten (public member).
2. The CSF operates on a calendar year; however, publication deadlines allowed inclusion of data for 2001 only through Sept. 30, 2001.
3. Data for the period prior to Oct. 1, 2000 was published in the 2000 annual report. See note 2.
| CSF Accounts Receivable
Call the bar at (503) 620-0222 in the Portland metropolitan area or toll-free statewide at (800) 452 8260 and speak with Sylvia Stevens, assistant general counsel, ext. 359, or George Riemer, general counsel, ext. 405. They can also be contacted by e-mail at email@example.com or firstname.lastname@example.org.
ABOUT THE AUTHOR
Sylvia Stevens is OSB assistant general counsel and administrator of the Client Security Fund. She can be reached at (503) 620-0222 or (800) 452-8260, ext. 359, or sstevens@ osbar.org.