Bressler Risk Blog

“Troutman Pepper Accused of Inattentive Case Management in $59M Malpractice Suit” —

• “Troutman Pepper Hamilton & Sanders was hit with a malpractice suit Wednesday in New York by a former client, who claims that the firm’s alleged subpar representation, inadequate communications, and a crucial conflict of interest resulted in the client facing a combined $60 million in liability dispersed across two construction cases.”
• “The suit, filed in New York County Supreme Court by Barclay Damon and Rottenstreich Farley Bronstein Fisher Potter Hodas on behalf of client Judlau Contracting, claims that Troutman Pepper and construction litigation partner Frank Cara failed to properly investigate claims against the company and consequently offered ill-informed defenses on its behalf in two cases.”
• “‘Instead of benefiting from [Troutman Pepper and Cara]’s advertised abundance of construction law expertise and litigation acumen, Judlau received a trash basket overflowing with professional incompetence,’ in both underlying suits, the complaint claims.”
• “In the first underlying case, the malpractice complaint asserts, Judlau was facing down a potential class action filed by three of its non-union crossing guards claiming that they were owed ‘prevailing wages’ as a result of performing of union-designated work. Filed in 2017 with the New York Supreme Court and titled Herman v. Judlau Contracting, this underlying case, initially overseen by Judge Andrew Borrok, resulted in a summary judgment ruling against Judlau according to court documents.”
• “‘Judlau does not substantively dispute the plaintiffs’ characterization of their work on the job sites…Instead, Judlau argues that the plaintiffs are not entitled to prevailing wages because any prevailing wage work performed by them was de minimus. The argument fails,’ reads Judge Borrok’s original opinion. ‘Judlau has also offered no defense with respect to its failure to provide the plaintiffs with statutorily required wage notices.'”
• “However, the malpractice complaint alleges, Troutman Pepper and Cara failed to conduct appropriate investigation into the nature of the claims. If they had, the complaint says, the firm ‘would have learned that Judlau never used these non-union workers to perform uncompensated union work.’ “
• “‘Had competent attorneys put any thought into developing Judlau’s defense, they would have explored one or more three separate options,’ ranging from seeking a dismissal or stay while underlying legal issues were addressed by the appropriate administrative agency, to investigating and refuting the facts presented by the plaintiffs, or seeking action against the government project owner, the suit continues. ‘Troutman failed to pursue any one of these available options—and, incredibly, set forth no other viable defense.'”
• “Compounding these elements of alleged malpractice, the overarching malpractice suit claims, is that Cara was serving as outside general counsel and eventually as an executive vice president and general counsel to Iovino Enterprises, one of Judlau’s competitors.”
• “‘Beginning in 2018, Cara served as outside general counsel to Iovino Enterprises. Then, on information and belief, from November 2019 through July 2020—critical periods in both the Herman and SOJV litigations—Cara became Iovino Enterprises’ in-house Executive Vice President and General Counsel while remaining a partner at Troutman,’ the malpractice suit alleges.”
• “‘Incredibly, not only was Cara simultaneously and improperly representing Judlau as a Troutman partner in the Herman and SOJV matters while at the same time serving as Executive Vice President and General Counsel for one of Judlau’s competitors, but during that very time period, Judlau and Iovino Enterprises were directly averse to one another in a contentious arbitration,’ the suit continues. ‘Naturally, these conflicting obligations interfered with Cara’s ability to devote proper time and attention to Judlau and its matters,’ thus resulting in the offloading of work onto inexperienced associates in both underlying matters.”
• “Cara also previously served as Judlau’s general counsel and executive vice president before joining Troutman Pepper, according to profile on the firm’s website.”
• “The malpractice suit accuses Troutman Pepper and Cara of legal malpractice in both underlying cases. It is seeking at least $59 million in damages to cover the verdicts from the two underlying cases and asks that the firm disgorge fees related to those two cases; the complaint further seeks costs, disbursements, pre-judgment interest, and attorney’s fees.”
• “‘While we regret that this lawsuit became necessary, we had no choice but to move forward with this action,’ said Judlau COO Bard Nystrom in a written statement. ‘The courts’ decisions in Herman have had industry-wide effects including multiple lawsuits against other contractors.'”
• “‘We are aware of the complaint and deny the claims. The Friedman Kaplan law firm is representing Troutman Pepper and Mr. Cara in this case. The lawsuit is without merit, and we will present our defenses in court at the appropriate time,’ said a Troutman Pepper spokesperson in an emailed statement.”

“Orrick, Herrington & Sutcliffe LLP Data Breach Litigation: Notice of Class Action Settlement” —

• “A settlement has been proposed (the ‘Settlement’ or ‘Settlement Agreement’) with Orrick, Herrington & Sutcliffe LLP (‘Orrick’) in a class action lawsuit about a security incident impacting Orrick (the ‘Data Breach’). This notice summarizes the proposed Settlement. If you are a Settlement Class Member, there are benefits available to you from the proposed Settlement. The Settlement includes all individuals residing in the United States who were sent notice of the Orrick Data Breach. The easiest way to submit a claim under the Settlement is on this website under File a Claim.”
• “For the precise terms of the settlement agreement, please visit the Case Documents“
• “The Settlement provides payments and other benefits to people who submit valid claims for lost time, certain documented out-of-pocket expenses, and additional credit monitoring services. More specifically, the settlement relief includes:”
  • “Compensation for Lost Time: If you spent time addressing issues relating to the Data Breach, you can make a claim for reimbursement for up to 5 hours of time at a rate of $25.00/hour. To submit a valid claim, you must represent that the time and/or effort spent was incurred as a result of the Data Breach.”
  • “Credit Monitoring: Orrick previously offered 24 months of credit monitoring services with its initial notice of the Data Breach. With this Settlement, you can submit a claim for three additional years of three-bureau credit monitoring services, including $1 million in identity theft insurance.”
  • “Compensation for Out-of-Pocket Expenses: If you have incurred actual, unreimbursed expenses as a result of the Data Breach, you can make a claim for reimbursement for up to $2,500.00. Examples of actual, unreimbursed losses include: (i) costs and expenses spent addressing identity theft or fraud; (ii) preventative costs including purchasing credit monitoring, placing security freezes on credit reports, or requesting copies of credit reports for review; and (iii) other documented losses that were not reimbursed. You must include documentation to support that the out-of-pocket expenses were the result of the Data Breach.”
  • “Compensation for Documented Extraordinary Loss: If you experienced out-of-pocket losses for actual identity theft or fraud and submit documentation to support that such losses are the result of the Data Breach, you can make a claim for up to $7,500.00.”
  • “CCPA Payment: If you are a California resident, you can make a claim for a payment of $150.00 in recognition of your claims under the California Consumer Privacy Act.”
  • “Alternative Cash Payment: In lieu of submitting a claim for lost time, out-of-pocket expenses, or extraordinary loss, you may submit a claim for a $75.00 Alternative Cash Payment.”

“Cyber attacks on law firms jumped by 77% over the past year” —

• “The number of successful cyber attacks against UK law firms rose by 77% in the past year to 954, up from 538 the year before, according to a new study of the threat. Chartered accountants Lubbock Fine said that the wave is driven by criminals seeing law firms as prime targets for ransomware attacks or blackmail. This is due to the sensitive personal and financial information they hold, which hackers can sell on the dark web or threaten to publish on the internet. Earlier this month, a global survey revealed that ransomware attackers have been paid off at least eight times in recent years.”
• “‘The data that law firms hold on behalf of their clients is often highly sensitive – and therefore, valuable if you intend to blackmail a law firm,’ said Lubbock Fine partner Mark Turner. ‘This makes them a very attractive target. Hackers will often demand a blackmail payment from law firms or threaten to post that sensitive data on the internet.'”
• “Ransomware attackers have been paid off at least eight times in recent years”
• “Another tactic is to lock firms out of their own data until a ransom is paid.”
• “Nearly three quarters of the UK’s top 100 law firms have been impacted by cyber-attacks, according to a report by The National Cyber Security Centre.”
• “Turner said that, in the face of such attacks, law firms need stronger cyber defences than most businesses. ‘This might include segregating data across different departments, teams and individual clients,’ he said.”

“Law firm Kirkland conflicted in Invitae bankruptcy, DOJ watchdog says” —

• “The U.S. Department of Justice’s bankruptcy watchdog said on Monday that genetic test maker Invitae Corp should not be allowed to hire Kirkland & Ellis as bankruptcy counsel because of the law firm’s work for one of Invitae’s lenders.”
• “The Office of the U.S. Trustee, a part of the DOJ that oversees the administration of bankruptcies, said in a court filing, opens new tab that Kirkland has a conflict of interest because one of its current clients is private equity firm Deerfield Partners, which is Invitae’s top lender and the ‘main beneficiary’ of a 2023 debt restructuring that placed Deerfield at the front of the line for repayment in Invitae’s bankruptcy.”
• “Kirkland, which has said it represents Deerfield in matters ‘unrelated’ to Invitae’s bankruptcy, did not represent Invitae at the time of the debt transaction. Deerfield is represented by separate counsel in Invitae’s bankruptcy case.”
• “But the U.S. Trustee argued that Kirkland could not concurrently represent Invitae while Deerfield was its client. ‘The fact that K&E represents Deerfield in unrelated matters does not change the existence of a conflict of interest,’ the U.S. Trustee wrote in an objection filed on Monday in New Jersey bankruptcy court.”
• “U.S. Bankruptcy Judge Michael Kaplan will consider Invitae’s request to hire Kirkland at an April 29 hearing in Trenton, New Jersey.”
• “Invitae filed for bankruptcy protection in February, seeking to find a buyer and reduce its $1.5 billion in debt. Invitae does not expect equity shareholders to receive any recovery in its bankruptcy, according to court documents.”
• “Invitae’s junior creditors raised concerns about Kirkland’s role in the bankruptcy in an objection, opens new tab filed about a week before the DOJ’s objection.”
• “The creditors may seek to unwind the 2023 debt transaction so that they can free up “hundreds of millions of dollars” to repay junior creditors, instead of Deerfield.”

“Judge’s Citi Investment Doesn’t Merit Recusal, Ethics Panel Says” —

• “A federal appellate court judge with a stake in Citigroup Inc. doesn’t need to recuse himself from the banking industry’s challenge to an $8 cap on credit card late fees, a federal judiciary oversight committee said.”
• “An investment held by Judge Don Willett of the US Court of Appeals for the Fifth Circuit in the country’s second largest credit card issuer was too ‘indirect and contingent’ to trigger a requirement that he recuse himself from the case, Judge Gerald A. McHugh, the acting chairman of the US Judicial Conference’s Committee on Codes of Conduct, said in a letter posted Wednesday.”
• “The Consumer Financial Protection Bureau, which released the credit card late fee rule March 5, has pushed for Willett to recuse himself from the case due to the Citigroup investment. Along with being a major credit card issuer, Citigroup is a member of the US Chamber of Commerce, the American Bankers Association, and the Consumer Bankers Association, three of the six trade groups suing to block the rule, the CFPB said.”
• “But the judicial ethics committee previously determined that owning stock in a company that belongs to a trade group involved in litigation didn’t automatically require a judge’s recusal, McHugh, a judge in the US District Court for the Eastern District of Pennsylvania, said in a letter to Willett dated April 16.”
• “The CFPB was effectively arguing for a standard that a judge should recuse any time a litigant raised concerns about impartiality, McHugh said.”
• “‘The judicial system could not function effectively under such a standard, and that is exactly why the Code imposes a standard of reasonableness,’ he wrote.”
• “Willett in an April 9 statement said his Citigroup stake amounted to $2,000 in a Coverdell Education Savings Account for one of his children.”

“Client Says Kasowitz Benson Torres Owes $100M for Alleged Conflict of Interest” —

• “Kasowitz Benson Torres was named a defendant in a summons in New York state court Wednesday by a real estate investment client seeking at least $100 million in relief. The Am Law 200 firm and a former partner were allegedly acting in the interest of parties adverse to the client in a real estate development project.”
• “Kasowitz Benson and partner Douglas Heitner are accused of acting against the interests of client 111 West 57th Investment and affiliated entities throughout the financing of a real estate development project for the benefit of the firm’s longtime clients, including sponsors, managers and developers involved in the project.”
• “The firm’s allegedly conflicted loyalties, particularly in a 2017 strict foreclosure dispute, led to the loss of an ‘extremely valuable asset’ for 111 West 57th Partners, an affiliated entity of 111 West 57th Investment listed as a plaintiff, according to the summons.”
• “On Thursday, a representative of Kasowitz provided the following response to the summons. ‘This threatened lawsuit is yet another meritless filing by a serial litigator now on his sixth set of lawyers who has met defeat repeatedly in state and federal court in numerous lawsuits he has filed related to his failed investment in this groundbreaking 57th Street project, including suits against lenders, insurers, partners and now apparently law firms. Kasowitz has never even represented this person, let alone done anything wrong, and will seek sanctions if any complaint is frivolously filed. Indeed, filing a summons and notice with a ludicrous monetary demand in order to seek headlines is itself unethical and improper which we will address in the appropriate forum.'”

“US Prosecutors Call for Hearing Amid Potential Conflict of Interests in Alex Mashinsky and SBF Cases” —

• “The US government raised concerns about potential conflicts of interest in the ongoing criminal cases of FTX and Celsius Network founders Sam Bankman-Fried and Alex Mashinsky on February 6. The area of concern surrounds the legal representatives handling both cases.”
• “In a court filing, the US government outlined its concerns to Judge Lewis Kaplan in the Celsius and FTX cases and their founders.”
• “In the document, the US prosecutors requested a Curcio hearing to address a conflict of interests in both cases. The decision ensued upon the identification of Marc Mukasey and Torrey Young as legal counsels representing Celsius Network founder Alex Mashinsky, and Sam Bankman-Fried (SBF), the disgraced CEO of FTX.”
• “The two attorneys were said to have previously filed a notice of appearances for SBF on January 9 and now represent Alex Mashinsky. Given this, the prosecuting team has requested a hearing for the defendants to waive their rights to be represented by the attorneys.”
• “Additionally, the core objective of the Curcio hearing is for the court to determine the severity of the conflict and how to proceed. The court could dismiss both counsels if a major conflict of interest is identified.”
• “In the ongoing legal case with the US government, Celsius’ founder Mashinsky has admitted lending funds to FTX subsidiary Alameda Research. In return, Alameda Research paid back these loans using customers’ funds. Given that Alameda Research, FTX, and Celsius are standing trial for criminal charges, US prosecutors have stated that this could present a strong ground for conflict of interest.”
• “If legal materials could cause rifts between both parties, the current legal representatives will be limited in sharing such information. Both defendants were found guilty of multiple criminal charges involving fraud and promoting unregistered security tokens. SBF is set for a trial sentencing on March 28.”

“Law firm Anderson Kill wants ex-CFO’s lawyer tossed in employment clash” —

• “U.S. law firm Anderson Kill is seeking to disqualify a lawyer representing its former chief financial officer in an employment lawsuit that accuses the firm of forcing the CFO out after he suffered a fall and concussion last year.”
• “New York-founded Anderson Kill said Friday it plans to call plaintiff Paul Schwartz’s lawyer Tiffany Ma as a ‘necessary witness’ as part of its defense in the Manhattan federal case.”
• “Ma began representing Schwartz in his negotiations over his return to work after he hit his head taking out the garbage in February 2022, the firm said.”
• “Anderson Kill said in its filing that Schwartz stopped talking to the firm in May 2022 and spoke only through Ma until June 2022, when the firm fired Schwartz. Professional rules prohibit Ma from serving as both a witness and as Schwartz’s lawyer, the firm argued.”
• “‘To the extent plaintiff might be temporarily inconvenienced by the need to retain new counsel if Ms. Ma were disqualified, he has only himself – or Ms. Ma – to blame,’ the firm said.”
• “Schwartz sued Anderson Kill and two of its employees in August, claiming the firm harassed him into coming back to work before he was ready and then fired him in violation of federal and New York discrimination laws.”
• “When Schwartz proposed reasonable accommodations in May, the firm allegedly demoted him from chief financial officer — with a $302,000 base salary and significant annual bonus — to billing manager, with a $122,900 salary and a far smaller bonus.”

[Previously on this on.] “Law Firm Did Not Breach Client Confidentiality With Press Release About Med Mal Verdict, State High Court Rules” —

• “The Illinois Supreme Court disagreed with an appellate court’s finding that a Chicago plaintiffs law firm’s press release, which detailed its former client’s mental health diagnoses in the course of announcing a $4.2 million medical malpractice verdict, violated the Mental Health Developmental Disabilities Confidentiality Act.”
• “The state high court’s opinion reversed the appellate court’s decision and affirmed the Cook County Circuit Court’s dismissal that alleged the defendant law firm, Burke Wise Morrissey & Kaveny and its former attorney, Elizabeth A. Kaveny, violated the Mental Health and Developmental Disabilities Act by commenting on the case and disclosing details about the mental health history of a former client, John Doe, for an article published in the Chicago Daily Law Bulletin.”
• “During oral argument before the Illinois Supreme Court in September, Kimberly A. Jansen, a partner at Hinshaw & Culbertson in Chicago who represented Kaveny and the firm, argued that Doe’s complaint was properly dismissed he voluntarily disclosed the information at an underlying medical malpractice trial. ‘[N]othing in the medical malpractice case was sealed,’ she had argued.”
• “On the contrary, Thomas M. Paris, a solo practitioner, argued on behalf of Doe—who has been identified in court papers as an attorney—that the information about his client’s diagnoses, suicide attempt, the effects of his injuries, and the ‘redisclosure of that information to the press’ violated his confidentiality.”
• “‘We find that Doe waived his claims of confidentiality under the Act by voluntarily and publicly disclosing his private health information in a public trial, and the qualified protective order under HIPAA did not preclude such waiver,’ Justice P. Scott Neville, Jr., wrote, citing Novak v. Rathnam (1985). ‘We also find that the defendants are not liable under the Act, as the evidence and testimony divulged during Doe’s medical malpractice trial were not records or communications made in the course of mental health services; therefore, the Act does not apply to the defendants’ posttrial discussion of said evidence, records, or communications.'”
• “Furthermore, contrary to the appellate court’s reasoning in Doe’s case, the state high court said that a qualified protective order under the Health Insurance Portability and Accountability Act privacy rule ‘does not regulate how a person may choose to use his own medical information once it is received from a covered entity.'”
• “‘Moreover, there is nothing in the HIPAA privacy rule that prevents legal counsel from discussing facts that were voluntarily revealed in a public trial,’ Neville wrote. ‘In fact, the public nature of the proceeding not only removes the confidentiality of the voluntarily disclosed mental health information (Novak, 106 Ill. 2d at 485), but it also exempts from punishment anyone who speaks about the publicly released information. See Craig v. Harney, 331 U.S. 367, 374 (1947).'”

“Paul Weiss Stays on Google Suit After Surviving Yelp Motion” —

• “The law firm Paul Weiss Rifkind Wharton & Garrison can continue representing Alphabet Inc.‘s Google in the Justice Department’s advertising technology monopoly case against the company, a federal judge ruled.”
• “In a Friday bench ruling in the US District Court for the Eastern District of Virginia, Judge Leonie M. Brinkema denied a motion by Yelp Inc. and the News/Media Alliance trade group to disqualify the firm over previous work it did for the two groups. The motion—based on allegations that Paul Weiss was conflicted between its current work representing Google and prior work for Yelp and NMA—fails to show any real risk of prejudice, Brinkema said.”
• “Friday’s ruling shows the high bar for alleging ethics violations for lawyers from the same firm who may represent opposing sides in similar cases.”
• “‘Under this approach most large law firms would be disqualified from similar matters,’ Brinkema noted on Friday. As a result, there can’t be a finding of prejudice against either Yelp or NMA, she said.”
• “Most states’ ethics rules for lawyers bar them from switching sides in a case without permission from their prior clients. But the situation in the Google case is less straightforward. Paul Weiss had presented Yelp and the News/Media Alliance—a trade group for 200 newspapers in the US and Canada—in prior antitrust work involving the tech giant.”
• “It’s not enough for parties to be ‘potentially’ affected by the outcome of the ad tech case to show that they’re adverse to Google—an important hurdle in the ethics claim, Brinkema said.”
• “Google may not submit any evidence pertaining to the two groups going forward, however. And an attorney who previously represented NMA and Yelp for Paul Weiss and has advised on the Google case can’t be involved in the future, Brinkema said. If any details from the firm’s previous work for NMA and Yelp ‘leak over’ to the attorneys working for Google, the leak must stop immediately and be reported to the court, she said.”

“Houston bankruptcy judge David Jones resigns after misconduct complaint regarding his relationship with an attorney” —

• “A prominent Houston bankruptcy judge resigned Monday amidst allegations he did not disclose a years-long romantic relationship with an attorney whose law firm regularly appeared in his court, even after he was asked to recuse himself from a case over the relationship.”
• “The New Orleans-based appellate court is investigating the allegations and filed a formal misconduct complaint against Jones on Friday, citing multiple potential violations of the code of conduct for federal judges.”
  “The allegations against Jones surfaced in a federal civil rights lawsuit filed against him earlier this month, by a shareholder for a company that had a bankruptcy case in Jones’ court, and stem from his relationship with a former attorney for Jackson Walker LLP. The Texas law firm said in a statement that the attorney in question joined the firm as a partner in 2018 and left in December of last year.”
• “Richman wrote in the formal complaint that the lawyer began living with Jones before 2018 and, although she did not personally appear in Jones’ court after that point or serve as the attorney of record for any cases in his court, she worked on some of those cases and was paid accordingly, with Jones approving those attorney fees. Richman wrote that the fees in question were ‘substantial.'”
• “She also wrote that Jones’ relationship with the attorney was the subject of a motion to recuse the judge from a case involving Jackson Walker, but Jones allegedly did not disclose the relationship to two other judges who subsequently denied the motion for recusal. Jones ended up presiding over the case and approved Jackson Walker’s attorney fees, Richman wrote.”
• “‘There is a reasonable probability that if Judge Jones had disclosed the facts concerning his relationship … the motion to recuse would have been granted,’ Richman wrote.”
• “Jim Wilkinson, a spokesperson for Jackson Walker, said it learned of the attorney’s ‘potential relationship’ with Jones in March 2021 and subsequently instructed her to “stop working and billing on any case that had been assigned to Judge Jones.” Wilkinson said the law firm also sought guidance about the matter from outside ethics counsel. ‘We are confident that we acted responsibly,’ Wilkinson said.”

“California lawyers must report ‘treason’ under newly-signed law” —

• “California Gov. Gavin Newsom has signed into law a bill requiring attorneys to inform the state bar if they suspect other lawyers of treason. Newsom signed Senate Bill 40 into law on Tuesday [October 11]. A spokesperson for the governor said his ‘signature speaks for itself.'”
• “The new rule requires lawyers to inform the bar if they know of attorneys in the state who engaged or conspired to engage in seditious conspiracy, treason, rebellion or insurrection, as defined by federal law.”
• “The rule would not apply to information protected by attorney-client privilege, and it would be considered professional misconduct for a lawyer to use the provision to harass others.”
• “Senate Bill 40 also places more legislative oversight on the State Bar. The California Senate will now have to sign off on the appointment of the State Bar of California’s executive director and general counsel.”
• “In August the California Supreme Court began requiring lawyers to report fraud, misappropriation of funds and other criminal acts or conduct that raise ‘a substantial question’ about another lawyer’s ‘honesty, trustworthiness, or fitness as a lawyer.'”

“Holding Client Money Could Face Increased Regulatory Scrutiny” —

• “Law firms holding client money could come under increased scrutiny from U.K. regulator the Solicitors Regulation Authority given the cash that could now be earned from higher interest rates, one lawyer has warned.”
• “With the base interest rate in the U.K. rising from 0.1% in 2021 to 5.25% as of August 2023, law firms handling any client money could be set to earn substantial sums of interest. If they don’t account for that to clients in a ‘fair manner’, they could be likely to face increased scrutiny from the SRA, according to RPC partner Graham Reid.”
• “As it stands, firms are bound by the SRA to pay a ‘fair’ sum of interest on client funds, meaning that they don’t have to pay the full value of interest earned. But, with some law firms paying out less than 1% of interest on client accounts, the extra may be significantly boosting profits, says Reid.”
• “Reid continued: ‘With new enhanced powers to fine firms and a vigorous approach to rule enforcement, the SRA can be expected to take a very dim view of those that do not pay fair interest and thereby cause client detriment. The key messages are: Is it fair? Is it properly explained? Can you fully justify your decision-making to the regulator?'”
• “In recent years, handling client payments has become rarer and rarer for law firms. Last year, Travers Smith managing partner Edmund Reed explained that the service had been ‘going out of fashion’ for many years, with the pandemic accelerating the move away from client accounts.”

“Legal profession proactively mitigating money laundering risks” —

• “A new report released today shows the Australian legal profession is proactively working to mitigate the risk of being a party to money laundering and that where vulnerabilities exist, those not already being addressed can be addressed through augmentation of existing controls to which the profession is already subject.”
• “‘The Government is currently considering how best to achieve the existing anti money laundering and terrorism financing (AML/CTF) regime objectives in relation to the legal profession,’ Law Council of Australia President, Mr Luke Murphy said.”
• “‘The Law Council has always believed that due to the strict rules and regulations under which the Australian profession operates, the potential for lawyers being used to facilitate AML/CTF is small. To test the validity of that belief, we engaged Russ + Associates to undertake an independent review of the profession’s vulnerability to being an unwitting party to money laundering and terrorism financing. Russ + Associates is a specialist tax and AML law practice who are recognised experts in AML/CTF advice.'”
• “‘To our knowledge, the examination of vulnerabilities Russ + Associates were engaged to undertake is a world first. We believe this highlights the commitment the Australian legal profession brings to understanding and minimising AML/CTF risks and provides a strong evidence base upon which effective decisions and changes can be made.'”
• “‘What the report found is that beyond the regulations and professional requirements lawyers are subject to, they have taken additional steps to reduce risks. These include limited receipt of cash, particularly when it comes to funds from overseas, not holding assets for clients, and ensuring they meet all reporting obligations.'”
• “‘That is not to say that no vulnerabilities exist, and we thank the firms who participated in this study for being frank about the risks they have identified in their practices.'”
• “Vulnerabilities identified included lawyers not routinely making enquiries about a client’s source of wealth and difficulty in confirming the provenance of funds, with differences in risk between jurisdictions.”
• “‘The report highlights the positive attitudes and behaviours among the legal profession towards integrity, risk awareness and aversion, and to fulfilling statutory and professional obligations. It shows vulnerabilities are present, but they can be managed through augmentation of existing controls.'”

“Cautionary tale: Defrauded law firm loses insurance suit” —

• “A Boston law firm’s business policy did not cover losses stemming from its processing of a fake cashier’s check that it received from a “new client” who had retained the firm under a false identity, a U.S. District Court judge has ruled in dismissing a lawsuit against the insurance carrier.”
• “Wells Fargo notified Brooks & DeRensis on Nov. 4, 2021, that the bank had dishonored a cashier’s check for nearly $90,000 that the law firm had deposited into its IOLTA account just days earlier.”
• “The firm had accepted the check as settlement of an employment matter brought by a new client claiming to be ‘Brian Rodriguez.’ The firm promptly wired $88,385 of the deposited amount to the bank account of the client, but it turned out later that the ‘client’ was using a false identity.”
• “‘Taking the factual allegations in the complaint as true, B&D received a forged cashier’s check from a third-party purporting to be Rodriguez’s employer,’ Casper wrote. ‘As a cashier’s check, it was purportedly made or drawn by and drawn upon Wells Fargo, N.A. B&D was the payee or the bearer in this circumstance, not the maker, drawer or drawee.'”
• “While Casper found coverage existed under an endorsement providing ‘Counterfeit Currency and Money Orders Coverage,’ the judge went on to conclude the insurance contract’s ‘false pretenses’ exclusion applied. ‘This exclusion addresses a scenario where the insured willingly transfers funds to a third-party based on some false representation or receipt of a false check,’ Casper wrote.”
• “Nina E. Kallen, an insurance coverage litigator in Roslindale, said she has had colleagues who have been taken in by similar scams. That includes lawyers who thought they were taking adequate precautions.”

“Many Businesses Blindsided by New Anti-Money-Laundering Law” —

• “A new law aimed at ending the United States’ notorious reputation as a haven for ‘shell’ companies created to obscure crimes will require tens of millions of businesses to report ownership information for the first time, starting Jan. 1.”
• “But there’s a big problem, according to a newly released survey: Awareness among businesses that will have to comply, and even advisers such as certified public accountants and lawyers, is extremely low, raising the specter that business owners will be hammered with hefty fines, potentially even prison time.”
• “The information services company Wolters Kluwer surveyed 700 business, half of which will have to comply with the law. Of that half, 74% were oblivious to it.”
• “The requirements will apply to 32.6 million businesses, including the vast majority of private businesses and many small businesses. Generally excluded are heavily regulated businesses and large operating companies. (Find details on who must comply here.)”
• “Aronowitz said many businesses may not be able to count on their professional advisers to assist. In the Wolters Kluwers survey, just 54% of law firms and CPAs were aware of the CTA.”

The ABA notes: “The Corporate Transparency Act: Deniers Beware” —

• “The Corporate Transparency Act (“CTA”), effective January 1, 2024, requires certain businesses to report certain information to the Financial Crimes Enforcement Network for persons with “substantial control” over the business or 25 percent or more of the equity in the business.”
• “The CTA’s intent is to end the position of the U.S. as a haven for “shell” companies used in the commission of certain crimes. There are steep, escalating fines and possible jail time for noncompliance with the CTA’s requirements.”
• “Many people are CTA deniers, saying they’ve never heard of it, it doesn’t apply to small businesses, their lobby wouldn’t allow it, it can’t be constitutional, they won’t report, they’ll just pay the fine, or fiduciary duties are not implicated.”
• “Whether you like it, hate it, or are indifferent, the CTA has been thoroughly vetted and is here to stay. Compliance is both mandatory and advisable.”
• “The CTA marks a seismic shift in the legal landscape for businesses operating in the United States. Prior to the CTA, entity beneficial owner disclosure was solely (if at all) the purview of state or tribal law. Now it is a focus and purview of federal law enforcement agencies.”
• “Many professional advisers and business professionals have been caught off guard by this fundamental change in business entity law, now taking on a federal facet for the first time. Those that are aware have, by and large, taken a wait-and-see approach to either advising their clients and business associates or evaluating their own compliance profile. This is because much of the mechanics of compliance remains elusive. The ability for businesses to begin directly interfacing with FinCEN on filing and compliance continues to be in the future, giving those persons “in the know” little to offer as current action items—causing many to defer sounding the alarm bell until more is known from FinCEN. However, the wait must end, as there is limited and dwindling time remaining to take action before the window of opportunity closes at the end of 2023.”