- “TOPIC: Law firm lawyer retention policies, financial disincentives, conditional loan forgiveness, withholding of deferred payments that have the effect, either expressly or in practice, of discouraging or deterring competition with the firm.”
- “QUESTION: May a law firm impose financial terms, including but not limited to payments in the form of forgivable loans, bonuses, deferred compensation, withdrawal payments, deductions from capital that are expressly forfeitable or forfeitable at the discretion of the firm, that have the effect, either by their express terms or in practice, of discouraging or deterring competition with the firm?”
- “DIGEST: The implementation by law firms of partnership or employment financial terms, including but not limited to payments in the form of forgivable loans, bonuses, deferred compensation, withdrawal payments, deductions from capital or otherwise that are automatically forfeitable or forfeitable at the discretion of the firm, that have the effect, either by their express terms or in practice, of discouraging or deterring competition with the law firm by lawyers who leave the law firm, is impermissible under Rule 5.6(a) of the New York Rules of Professional Conduct.”
“Large law firms could face prosecution for overbilling” —
- “Large law firms that overbill their clients or make false environmental and diversity claims could be prosecuted under new [UK] legislation coming into force next Monday.”
- “Simon Airey, partner at McDermott Will & Schulte, described the new ‘failure to prevent fraud’ offence in the Economic Crime and Corporate Transparency Act 2023 (ECCTA) as a ‘complete and utter gift’ to the Serious Fraud Office, and said there was no reason why law firms would not be prosecuted.”
- “The offence, which comes into force on 1 September, makes large organisations criminally liable if an ‘associated person’ commits fraud intended to benefit the organisation, and the organisation lacked ‘reasonable’ fraud prevention procedures.”
- “An ‘associated person’ would include associates and trainees, agents of the firm and subsidiaries.”
- “Large organisations are those which meet two out of three criteria: more than 250 employees, turnover exceeding £36m and a balance sheet total exceeding £18m.”
- “Mr Airey said the new offence also applied to large foreign law firms, such as his own, with offices in London which by themselves would not qualify – McDermott is headquartered in the US.”
- “Thomas Jenkins, of counsel at City firm RPC, said a particular risk area was billing and time recording, and law firms ‘should be alive to risks arising from fee-earners over-recording time’.”
- “For example, ‘if a fee-earner deliberately inflates or rounds up time entries, this conduct could trigger liability for the firm, even if the matter partner is entirely unaware of it’.”
- “It could also include ‘fraud by silence’, for example deliberately not notifying a client about a data breach in order to stay instructed.”
- “To protect themselves, law firms must ‘engage in proper risk assessments’, which ‘honestly and frankly’ assess the risk of acting, particularly in high-risk areas like conveyancing. They must ‘design and tailor’ policies to meet those risks.”
- “Mr Jenkins said assessments should ‘identify specific vulnerabilities, such as weaknesses in billing processes or gaps in oversight’, and based on the findings, firms might need to strengthen internal controls.”
- “Both solicitors pointed out that smaller law firms could be prosecuted under ECCTA through what Mr Airey called the ‘senior manager regime’, a part of the Act which came into force at the end of 2023.”
- “Under this regime criminal liability extends beyond board members to anyone who meets the statutory test of being a ‘senior manager’. Mr Airey said that in a law firm this includes heads of department and heads of functions like HR or finance.”
- “A ‘tiny law firm’ in the UK could be ‘infected’ by the behaviour of one of its senior managers, just as a senior manager of a US law firm in the UK could ‘infect’ the whole firm.”
- “Mr Airey described ECCTA as ‘the biggest change ever in corporate criminal liability’, giving the authorities ‘the ability to do things’ that had previously been denied to them.”
“DOJ Drops Another Fraud Case Against a Client of Bondi’s Brother” —
- “The Justice Department dismissed a criminal wire fraud indictment of two St. Louis real estate developers, the second reversal this month benefiting a white-collar client of Attorney General Pam Bondi’s brother.”
- “Brad Bondi, a Paul Hastings partner who represented one of the construction company owners accused last September of 11 counts of wire fraud to earn millions in unlawful tax incentives, successfully convinced DOJ to seek a court dismissal Wednesday. The judge approved it.”
- “It marked an about face from a motion he signed Aug. 4 defending the merits of the prosecution. Interim US Attorney Thomas Albus’s latest filing—which didn’t include the signature of the case’s sole line prosecutor—focused on a June letter from DOJ Solicitor General John Sauer invalidating aspects of race and sex-based business enterprise programs.”
- “Bondi’s firm had defended co-defendant Sid Chakraverty from the get go but he entered his first court appearance July 15. In a post on LinkedIn, Bondi congratulated the defendants, writing that the government agreed with his contention ‘that the St. Louis program (under which our clients were being prosecuted) was unconstitutional.'”
- “Bondi and his firm didn’t immediately respond to questions about whether he communicated with the attorney general or other members of her leadership team about this case.”
- “‘This decision was made through proper channels, and the Attorney General had no role in it,’ said DOJ spokesman Gates McGavick in a statement.”
- “The dismissal comes less than three weeks after another Bondi client, Carolina Amesty, secured an identical outcome. Amesty, a Republican state legislator in Florida, had been charged in January—three days before Trump took office—with stealing government property related to Covid-19 relief fraud.”