Size of Protection Fund on the rise, as are claims

By Alan Cooper
Published: May 4, 2009

The Virginia State Bar Clients’ Protection Fund began modestly in 1976 with a $70,000 appropriation by the VSB Council to establish an account to reimburse clients who had lost money because of the dishonest conduct of a lawyer.

There were no claims against the fund in its first two years and only two in the third.

The numbers are much larger now. With the collection of a $25 annual fee from each active lawyer in the state beginning in the 2008 fiscal year, the fund has grown to $4.75 million.

The number of claims has grown as well, with two disbarred lawyers accounting for more than 200 cases pending before the board that administers the fund.

The largest number of claims the fund has paid in any one year had been 80, but 184 petitions were filed in the 2008 fiscal year and 182 have been filed so far this year.

One of those cases, that of disbarred Prince William County lawyer Stephen T. Conrad, points up the need for the fund and its limitations. Conrad pocketed more than $4 million from insurance companies that the insurers thought were personal injury settlements agreed to by Conrad’s clients. He is serving an 11-year federal prison sentence for the thefts.

The first limitation is the fund’s status as “a remedy of last resort for clients who are not able to obtain reimbursement from other sources, such as a bond, surety agreement or the lawyer involved,” according to the fund’s page on the VSB Web site.

The fund will pay no more than $50,000 to a single petitioner and no more than 10 percent of the net worth of the fund for the dishonest conduct of any one lawyer at the time the first claim against the lawyer is filed. In the case of Conrad, that figure is $411,000.

Barry J. Dorans, the Virginia Beach attorney who chairs the CPF board, said petitioners will get a pro rata distribution of that amount once all the claims have been filed and verified.

“It’s very rewarding to help people out when you can,” Dorans said of the board’s work. “You feel bad that a lot of people you can’t help out in full.”

Thefts such as those by Conrad are unusual, Dorans said. More typical, although on a larger scale, is the case of disbarred Spotsylvania County attorney Owaiian T. Jones.

Sixty-seven former clients of Jones have filed claims against the fund to recover retainers they gave to Jones for work that was not done before he abandoned his practice and had his license suspended and finally revoked in September.

Recovery from the fund is available only against attorneys who are no longer practicing because of disbarment or suspension, death, disability or the abandonment of their practices.

Doran said the board’s work is conducted on a case-by-case basis “more than anything I’ve ever done” because its decisions on the validity of a claim and the amount to be paid are, in the language of the board’s rules, “in its sole discretion,” with no possibility of appeal.

As a result, board members take those decisions very seriously, even when relatively small amounts of money are involved, Dorans said. Payments of as little as $500 might well represent all the money the client had at the time he dealt with the lawyer, he said.

With limited staff, the 14 members of the board divvy up the cases and conduct their own investigations, Dorans said.

The decision to assess lawyers annually put the fund on a much more stable financial footing.

After it was founded, the VSB Council added to the fund in dribs of $50,000 in some years and splashes, such as a $1 million-plus addition in 1996 that reflected the recovery from a policy purchased to supplement the fund in the case of extraordinary losses.
The supplement became necessary because of the embezzlement or theft of more than $42 million by prominent Newport News attorney David Murray in the early 1990s.

The VSB Council appropriated as much as $600,000 in other years from a budget financed entirely by bar dues, but, just as often, it contributed nothing.

Still, with the contributions and income from investments the fund grew steadily and had reached $3.4 million by 2006.
That’s a substantial amount of money, considering that the fund never paid more than $292,000 or had more than the 80 claims in any one year.

But auditors told the VSB that the fund needed to be $9 million to be actuarially sound at a time when a dues increase appeared likely in the next few years.

With the dues increase in mind, the council made its last contribution to the fund in 2005. A conversation by bar leaders with House Majority Leader H. Morgan Griffith, R-Salem, about the need for an increase in dues, in part to continue to add to the fund, led to a suggestion by Griffith that the bar assess each active lawyer $25 annually for a contribution to the fund.

Legislation authorizes the assessments only through 2015, by which time the fund is projected to reach the amount recommended by the auditors.

Bar leaders note, however, that the amount will be reached only if the recent spate of high-profile, high-volume, high-dollar cases such as the Conrad thefts are a blip rather than a trend.

Virginia Lawyers Weekly

Size of Protection Fund on the rise, as are claims

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