I’ve been on the road a lot, giving CLE programs. I love visiting various counties in Pennsylvania. My presentations are well-received. As I proudly heard former PBA President Gretchen Mundorff say, as she recently introduced me, “No one sleeps or reads the paper during one of Ellen’s presentations. She may make you squirm, but she will not lose your attention!”
Yes, I admit it: I often make you squirm. But that can be a good thing, from my perspective. Because if I can cause you to squirm, I can prompt you to push your call-to-action button.
Let’s face it, there are so many things calling for your attention every moment. Client work probably comes first. After all, that’s what you went to school for. That’s what you’ve trained and honed your skills for. And that’s what pays the bills.
For most, second in line is family and home life. Yes, we wish we could put that first. We occasionally witness that one of our colleagues has figured out how to change that and put family first. If we’re not one of the rare ones who achieve that, we’re a bit jealous, aren’t we?
Sure, there are sacrifices made to be able to put family first in line. I applaud those who are able to do so. And brave enough. But I don’t criticize those who cannot. If you’re one of those lucky ones, accept the win and don’t dwell on the trade-offs.
But I digress. (The last few paragraphs are a message—from me to someone who understands from a recent conversation—that purposely making trade-offs to achieve your desired balance is a display of strength, not weakness. Cut yourself a break!)
I’ve noticed lately, as I interact with attorneys at various locations throughout the state, that there seems to be an extra weight bearing down on most shoulders. I see it in the eyes of those who attend: pleading expressions, anxious smiles and nervous attentiveness driven by a dread of learning one more thing one is doing wrong. Please, Ellen, your eyes wearily implore, don’t tell us one more thing we need to change or do.
I get it. Managing a firm has become so complex. There was a time when law firm life was simpler. Most management issues were dealt with reactively rather than proactively. Of course, that was never sound business practice. But the repercussions were few and resulted in relatively minor consequence by today’s standards. Nowadays it can mean glaring headlines.
Truth is, I’m trying really hard to cut you a break in this article. Just explaining something, is my thinking. Impart a little wisdom. But don’t ask for any action to be taken. And then I read the glaring headline in Above the Law. “Former Cleary Facilities Manager Received Jail Time for Stealing $1M+ From the Firm.”
Another large fraud perpetrated on a firm. And it happens at firms of all sizes. In fact, solo and small firms are the most frequent targets, and not just by new hires. Mostly, frauds are committed by long-term employees who are highly trusted. And it hit me like a hammer. We’ve been so focused on protecting our firms and safeguarding our client’s confidentiality and property from outside threats that we may have taken our eye off another ball that’s always in play: threats from within. So how about I just remind you about a few things that will lower your risk?
For a lot of firms the way we work and accomplish many important law firm management tasks has changed. The pandemic and evolving hybrid work models created the change. But we may not have updated our procedures adequately for monitoring internal threats.
The employee who defrauded the firm in the news story referenced above, began working for them in the late 1990s. He had become well-trusted. He approved invoices for phony services through straw companies created with an outside accomplice, over a period of 3 years from 2015 – 2018, when caught. The article described his lavish lifestyle, including high-end performance cars, luxury furniture and designer clothes. No wonder the firm finally investigated.
So, a few things: first, it’s not a bad idea to need an approval for new vendors. Another set of eyes to examine a price list, verify service performed, check a website, review a proposal or note a delivery receipt; any one validation step is probably sufficient to prevent such a scheme.
Also — and the smaller your firm the easier it is to spot — keep an eye out for lifestyle changes which bear no connection to compensation. And sadly, let me remind you that no one in your office should be trusted beyond question. That’s why you should have good procedures in place that all must be accountable to follow. They keep otherwise good people from doing bad things, either because they feel they can get away with it or because exigent circumstances (or greed) drive them to it. But always there is an expectation they will get away with it. Do everything you can to make them feel the opposite: that they will likely get caught.
Another headline in The Legal Intelligencer, “Former Sacks Weston Lawyers Face Up to 40 Years for Allegedly Defrauding Firm,” explains how two attorneys from a Philadelphia-based litigation boutique allegedly conspired to misdirect fees from the firm to themselves from 2018-2020. They resolved cases without knowledge of other firm partners. In some cases the insurers and other payors were told to send the legal fees to the attorney instead of the firm. One wonders in this day and age how an insurance company would fall for that. When diversion wasn’t possible, the checks were intercepted at the firm’s mailbox. It’s alleged that about $750,000 has been stolen. The concealment was made by closing the related files as unresolved or not viable. Had the firm consistently sent end-of-engagement letters, this scheme would have failed.
With a continuing of remote work in many offices, firms need to rethink what access rights to what data a worker should continue to have. It was one thing when the entire office worked remotely and it was hastily enabled. By the same token, look at what paperwork and steps were eliminated during remote work. Have we actively taken steps to include safeguards in another manner? Security, systems, procedures and controls all work together to smolder thoughts of wrongdoing before they erupt.
Keep an eye out for suspicious behavior, such as people who don’t take their vacation, never take a day off, don’t share information about their job when appropriate and who won’t delegate.
Let’s make sure a tight labor market doesn’t override due diligence and proper vetting of candidates at every level. Take a step back to identify gaps in supervision, especially for new people.
Another headline from Above the Law, blares “Ex-Biglaw Paralegal Allegedly Embezzled More Than $600K From Firm.” She’s accused of transferring bankruptcy estate funds meant for creditors to her own accounts over a period of nine years. There is a simple fix. On occasion, someone else should receive the monthly bank statement first (physically or electronically) and look for inconsistencies, such as deposits not credited to clients or payments to unknown payees or an employee. Just randomly and periodically.
Lastly, separate duties as much as you can given the size and composition of employees. For example, one person opens the mail and lists or copies all checks received. A different person credits the payments, and makes the deposits.
These are just a few ideas. There is nothing really new. This is just a reminder. We’re so worried (rightfully) about cybercrime that we’re probably getting a bit lax about reviewing our procedures for internal fraud prevention.
A version of this article originally appeared in the November 20, 2023 issue of the Pennsylvania Bar News.
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