Solicitors in trouble for allowing non-lawyers to have inappropriate control over firms

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20 October 2016

SRA: partner impersonated

SRA: partner impersonated

Solicitors who ceded control of their firms to non-lawyers – in one instance they claimed their practice had been taken over by a criminal gang – have been sanctioned by the Solicitors Disciplinary Tribunal (SDT).

In the first case, it struck off three partners at former London law firm Austin Law following mortgage frauds that have already cost the Solicitors Compensation Fund almost £2.9m.

Among other findings, the SDT heard how the bookkeeper at Austin Law successfully impersonated the third partner during an inspection by the Solicitors Regulation Authority (SRA).

The SDT said Deidre Dain Newell-Austin set up Austin Law as a sole practice in 2011, with Najma Assroundi and Rashad Ahsan joining the firm in the spring of 2013. The firm became a partnership in June 2013.

The tribunal found that Ms Newell-Austin had recruited the other two “in a highly unorthodox manner. They were not properly vetted, and were recruited, not for their skills and abilities, but simply to make up the numbers so as to allow the firm to obtain open market insurance”.

Mr Ahsan, a registered foreign lawyer, said he had been recruited “on the street” by the bookkeeper, referred to as ‘Zak’, who had overhead a phone conversation in which the lawyer told a friend he was looking for work.

The SRA authorised Austin Law to trade as a partnership on 26 June 2013, but Ms Newell-Austin resigned the following week. Another law firm reported what turned out to be a fraudulent conveyancing transaction three days later.

The SRA shut down Austin Law by the end of July 2013. A schedule of compensation fund payments revealed in February 2015 that £2.87m had been paid out in respect of six of the firm’s conveyancing transactions, with “other claims still outstanding”.

The tribunal found that Ms Newell-Austin had ceded control of the firm to several non-admitted members of staff, and by doing so had acquiesced in the firm’s involvement in fraudulent conveyancing transactions – and so had Ms Assroundi and Mr Ahsan, in taking their instructions from those unadmitted staff. Ms Assroundi and Mr Ahsan were found to have acted dishonestly in connection with this.

All three lawyers were found to have “failed to exercise appropriate supervision” over non-solicitor members of staff, and to have “permitted or acquiesced in or failed to prevent improper withdrawals from client account”.

Ms Newell-Austin was found to have “misled the SRA” by failing to provide accurate information for the partnership application by not revealing that Mr Ahsan had been arrested and questioned in relation to one of the conveyancing transactions, although he was not charged. The tribunal ruled that she had acted dishonestly in respect of this.

Ms Newell-Austin was the only one of the three to be represented before the tribunal. In mitigation her barrister argued that Austin Law had been “taken over by a gang of fraudsters, who it was suggested, had taken over other firms in a similar way”.

He said Ms Newell-Austin was under “tremendous personal and financial stress at the time” and her proven dishonesty had occurred while she was in a “desperate situation”.

However, the tribunal found that she was “motivated by her desire to leave the firm”, while the other two lawyers were “motivated by their desire to earn money”.

The SDT concluded that the three had “caused immense harm and damage to the reputation of the profession”, and that even if it had not found dishonesty but only lack of integrity against them, it would still have struck them off.

The tribunal ordered that Ms Newell-Austin and Ms Assroundi be struck off the roll of solicitors, and Mr Ahsan struck off the Register of Foreign Lawyers.

They were ordered to pay £75,000 in costs on a joint and several basis, and Ms Newell-Austin ordered to pay additional costs of £10,000.

In the other case, Soteris Nicholas was fined £10,000 after being found to have permitted a non-solicitor third party known as ‘DA’ – who was connected with another non-solicitor, YY, the funder of Mr Nicholas’s acquisition of London firm Mulberry Finch – to exercise an inappropriate level of control and influence over the firm’s activities.

The SDT said DA – a one-time Israeli lawyer who had been jailed for fraud and deception – had access to Mulberry Finch’s accounts and assessed if it was appropriate for YY to continue the funding.

“The funding from YY could have been cut off on the assessment of DA. [Mr Nicholas’s] suggestion that he could have easily obtained funding from another source, including a high street bank, was implausible and at best could be no more than speculation.”

The tribunal found it to be “completely inappropriate” for DA to have been involved in the firm, “particularly on an ongoing basis including being regularly on the premises. DA had an inappropriate level of control and influence over the activities of [Mulberry Finch] as the firm’s very existence depended on his assessment of whether funding should continue”.

In assessing culpability, the SDT said Mr Nicholas’s motivation had been to secure funding in order to acquire and run the practice and that the involvement of DA was a means to an end. “In that context the actions were not specifically planned but reflected a serious error of judgement on the respondent’s part…

“Although no individual clients suffered any harm as a consequence of the respondent’s actions, the reputation of the profession was inevitably damaged by the involvement of a convicted criminal in the running of the firm. This harm would have been reasonably foreseeable to the respondent at the time. In addition there was the risk of harm to clients.”

The SDT recognised mitigating factors, however, including the fact that Mr Nicholas had no previous disciplinary history in 30 years of practising and that the events in question took place over a very short period of time, “namely a few weeks immediately followed by illness on the part of the respondent”.

In addition to the fine, the SDT imposed restrictions on his future practice that prevent him from being involved in the running of a law firm.

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