Clients’ Protection Fund had a very tough year

The Clients’ Protection Fund of the Virginia State Bar paid out almost $200,000 more last year than it received from the annual assessments paid by each active member.

That development was as unexpected as it was unwelcome, since it came only two years after the enactment of the $25 assessment aimed at making the fund actuarially sound by 2015.

The fund paid out $900,560, far more than the $703,395 generated by the assessment and more than three times the amount paid in any previous year.

And last year also set the record for number of claims paid – a total of 218. The previous high was 80 in 2005.

The reasons for these shattered records: Several lawyers who took money from numerous clients.

The biggest culprit was disbarred Prince William County lawyer Stephen T. Conrad, who pocketed about $4 million in claims he “settled” for personal injury clients. Conrad is now serving an 11-year federal prison term. The fund ultimately paid 22 cents on the dollar, a total of $411,000 to Conrad’s victims.

The CPF is set up as a place of last resort for those victimized by dishonest lawyers. It pays only 10 percent of the amount of the fund at the time the first claim was made against any single lawyer, and the maximum amount it will pay a single claimant is $50,000.

Another disbarred attorney, Owaiian T. Jones of Spotsylvania County, was more typical of attorneys who take their clients’ money. About 70 clients sought recovery of 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 2008.

Mary Yancey Spencer, deputy executive director of the VSB, said the fund is processing a large number of claims this year from former clients of Ann Marie Miller, who abandoned many bankruptcy cases in Roanoke before surrendering her license last year.

Many of the clients are trying to recover fees of $1,000 or less, which Spencer said that reflects one of the best things about the fund. “It tends to pay the people who need it the most, the very small claims,” she said.

Cary A. Ralston, the Richmond lawyer who chairs the fund’s board, agreed. “If [the aggrieved clients] are filing bankruptcy, it means they don’t have much money, so it’s extremely important that they get the money back.”

He said the Miller case is “the last big one on my radar.” There appear to be few claims in the pipeline after it is resolved, he said.

The question remains, though, whether the 2010 fiscal year, which ended in June, will prove to be a blip or a trend in the amount of money requested and paid from the fund.

Barely four months into the current year, the fund already has paid $168,913, an amount exceeded in only nine full years of the fund’s 34-year history. The number of claimants paid, 102, is second only to 2010.

The annual assessment certainly has created more stability in the fund, which grew by fits and starts after the Virginia State Bar Council started it with an appropriation of $70,000.

After the initial appropriation, the Council added to the fund in drops 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 had never paid more than $292,000 or had more than the 80 claims in any one year.

With a possible 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.

The total value of the CPF stood at $4.79 million at the end of the 2009 year.

Legislation authorizes the assessments only through 2015, by which time the fund was projected to reach $9 million, the amount recommended by the auditors.

Even with the disastrous 2010 fiscal year, that projection is still a possibility, but the payments made so far this year suggest that it is an unlikely one.