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Tuesday, December 11, 2007

Be Careful Who You Hire and Supervise Your Staff

Lawyers and law firms cannot be too careful, even if the trusted staff person is a long-term employee with a reputation for competence and integrity. Harvey Latney Jr., the part-time commonwealth’s attorney in Caroline County who maintains a practice in Richmond, discovered that Shelia Mae Boone, his secretary for 27 years, is a crook. She pleaded guilty in November to a federal bank fraud count related to the theft of at least $92,930 from an estate administered by Latney. Boone’s attorney claims that’s all his client took, but an attorney for Latney insists Boone stole about three times that amount from estates administered by Latney and from law firm accounts. An estate is suing Latney for more than $200,000, and he is contending that he can tap a legal malpractice insurance policy with limits of $100,000 per occurrence and $300,000 in total coverage. The insurer, ALPS, maintains that the claim is excluded under the policy.

Some policies, however, do contain an endorsement for fidelity claims arising out of employee theft. In fact, lawyers conducting real estate settlements in Virginia must have coverage for employee defalcation under state law, i.e., the Consumer Real Estate Settlement Practices Act (CRESPA).

Lawyers have an ethical duty under Rule 5.3 of the Rules of Professional Conduct to supervise and monitor the activity of non-lawyer staff in a law office and can be subject to discipline for failing to do so.

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