Recession drives more California lawyers to cheat, steal

The recession has driven an increasing number of California lawyers to cheat and steal, say State Bar officials, who expect to discipline or expel hundreds of them in coming months.

Financial pressures are behind the increase in lawyer wrongdoing, they say. Complaints are coming from clients who say their lawyers illegally withheld settlement money or charged them for work they didn't do — especially those who promised help modifying mortgages.

This recession has been especially hard on lawyers, said Carol Langford, a San Francisco lawyer who defends lawyers before the California State Bar Court in disbarment cases.

In past downturns, lawyers were among the last professionals affected because clients usually put a priority on paying legal bills, Langford said. But not this time. Now everyone is "waiting until the very last minute to pay a lawyer," she said.

Along with losing clients, lawyers have lost money in the stock market and lost value in their homes — assets that could have kept them going until the economy turned around, Langford said.

And amid the real estate free-fall and shady loan-modification programs that sprang from it, some lawyers saw an easy way to make money.

The State Bar is investigating more than 300 California lawyers involved in loan-modification rip-offs. Typically, homeowners facing foreclosure complain that they paid attorneys who then did nothing to help them keep their homes.

The loss to the public from loan-modification cases is in the millions of dollars, State Bar officials say. Most of the attorneys under investigation are from Southern California, but many of the victims live in the central San Joaquin Valley, enticed by loan-modification companies that advertised on the Internet.

"It's the most disturbing thing I've seen in the legal profession practicing for more than half a century," said Howard Miller, president of the California State Bar.

In 2008, before the flood of loan-modification cases, the state disciplined 469 of the state's 206,165 lawyers.

Of those, 245 were suspended from practicing law and 57 were disbarred. The disciplinary figures for last year have not been released, but "we anticipate seeing very different numbers in 2009," said Etzel Berrio, special assistant to the bar's chief trial counsel.

The State Bar is investigating 1,200 loan-modification cases. As of mid-January, it had resignations from 13 lawyers, and three trials were pending at the State Bar Court, Layton said. Settlements have been reached with lawyers in five cases to accept discipline, he said.

There was hope that loan-modification complaints would dwindle when Gov. Arnold Schwarzenegger signed legislation in October that prohibits lawyers from taking advance payments from homeowners. But complaints from people keep coming. "My answering machine is full every day," Layton said.

Most of the lawyers Layton investigated had been in practice only a few years or had been retired, he said.Langford said it stems from lawyers who can't get jobs. An adjunct professor at the UC Hastings College of Law in San Francisco, she sees law students unable to find work at law firms. "We're starting to see even the big firms, huge firms laying off like crazy," she said.

Lawyers in the central San Joaquin Valley aren't immune to the recession. The Fresno County Public Defender's Office laid off or demoted six attorneys in December. But private firms have not laid off large numbers of people.

Brian Tatarian, a Fresno family-practice lawyer for 31 years and assistant treasurer of the Fresno County Bar Association, said everyone is feeling financial pressures. But "perhaps the pressures in larger cities are greater, where there are so many attorneys, but I have not heard of those concerns locally," he said.

How badly the recession hits a law practice depends on the legal specialty, said Timothy Sullivan, president-elect of the Fresno County Bar Association and an insurance lawyer at McCormick, Barstow, Sheppard, Wayte and Carruth LLP.

"People who do real estate work, they're hurting," he said. "People who do bankruptcy are doing a record business."


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