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Vermont Supreme Court Adopts the Professional Responsibility Board’s Decision Regarding Attorney Failure to Safeguard Client Funds in Trust

In In re PRB No. 2013-145 (Jan. 25, 2017), the Vermont Supreme Court upheld and adopted the opinion of the Professional Responsibility Board (PRB), publishing the opinion as its own to clarify a matter which it believes is particularly relevant to small law practices and solo practitioners: the handling and record keeping of client trust accounts and funds.

Issue: A small Vermont law firm, which paid a regular employee an additional stipend to serve as bookkeeper, found when audited that the bookkeeper had not reconciled records of accounts for six months. A hired CPA found that the firm’s practices were not in compliance with the Vermont Rules of Professional Conduct because accounts were not kept separate, the balance was not traceable to individual clients or otherwise verifiable, the account had not been reconciled for over six months, and there were more than $75,000 of outstanding checks payable to the firm that had not been deposited in client trust accounts. There was no evidence that client funds had ever been improperly used or were in jeopardy of loss, or that there was threat of financial injury to clients. The sole, yet significant, violation was in the bookkeeping practices of the firm and the absence of separate accounts for each client.

Holding: The PRB found that the Respondent violated rules 1.15A, 1.15(A), and 1.15A(a)(2) of the Vermont Rules of Professional Conduct because he “did not perform timely reconciliations of his client trust account and failed to keep accurate records of client funds in trust.” He was also found to have commingled his own funds with client funds.

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