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When Lawyers Steal the Escrow Funds

Most lawyers and law firms comply with the rules regarding attorney trust accounts; however, theft from attorney escrow accounts remains one of the primary sources of bar discipline in New York despite rigorous enforcement efforts and harsh sanctions.

Most of these cases involve real estate transactions in which clients put down 10 percent to secure the sale. They also frequently involve personal injury practice and other areas where lawyers manage large sums of money.

Escrow accounts are an essential part of real estate transactions

An escrow account is an integral component of real estate transactions. It protects earnest money deposits and ensures funds are only released to sellers once all conditions of the sale have been fulfilled; further, mortgage payments and insurance policies remain active; thus mitigating risk for lenders.

Escrow accounts can also help make home buying simpler by holding onto property taxes and homeowners insurance, relieving new homeowners of the burdensome expense associated with them each year.

Escrows play an indispensable role, yet aren’t without risks. Stealing deposits from an escrow account is one of the leading offenses cited for disbarment or suspension in New York; for this reason it is essential to hire a reliable attorney who adheres to both ethical standards and legal regulations.

They can be a financial burden

The amount of money that must be put in an escrow account depends on a home’s insurance and property taxes, which may fluctuate year to year. If an escrow agent miscalculates these expenses, all parties involved could lose significant sums of money – in addition to being held liable for paying any bills from previous owners of the property.

Attorneys must exercise extreme care when handling funds held in an escrow or trust account, adhering to any governing agreements as carefully as possible. Misusing these funds can result in ethical charges against an attorney and even disbarment proceedings being initiated against them.

Incorporating personal funds with business accounts, for instance, can damage the escrow nature of client funds held in trust for them and expose them to attachment by his or firm’s creditors – something considered malpractice and which will likely require the attorney to reimburse his or her clients for stolen funds.

They can be a source of income

Most civil law firms maintain escrow accounts for real estate transactions or personal injury settlements. When managing these accounts, administrators often must abide by strict rules; failure to do so could result in lawsuits or disciplinary actions, even criminal conviction and disbarment of an account manager.

Crooked lawyers regularly rob clients of money through theft from escrow accounts – one of the leading reasons for suspension and disbarment in New York. Since 1982, The Lawyers Fund for Client Protection has reimbursed victims of real estate escrow theft with 40% of claims paid back through it alone.

Attorneys engaging in escrow fraud could face criminal and professional sanctions for bank and wire fraud. Furthermore, they must report such violations to both the American Bar Association (ABA) and state bar associations and take reasonable security precautions to protect clients’ funds.

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