A law firm owner whose “wholly inadequate” compliance systems led to him being duped by two bogus clients and by a bogus solicitor has been struck off.
Charles James Ete has, however, appealed the decision of the Solicitors Disciplinary Tribunal (SDT) to the High Court.
Mr Ete, who qualified in 1997, was the sole equity partner and owner of Barking, Essex firm Charles Ete & Co and in 2018 he acquired Pride Solicitors in West London. The Solicitors Regulation Authority (SRA) shut down both firms in January 2019.
Charles Ete & Co acted for two clients on property sales in 2018 where the combined proceeds of £450,000 were paid to third parties after the solicitor overlooked various red flags about the transactions.
These included dates of birth not being verified (and conflicting with another data source in one case), absence from the electoral roll, two misspellings of a client name, a middle name being missing in a passport, and the sex of an apparently female client appearing as ‘M’ in the passport provided.
Further, the solicitor did not do enough to question, and confirm in writing, the instructions to make payments to unrelated third parties, “which on their face, and even more so in this context, should have aroused suspicion”.
The SDT said: “The weight of evidence of concerns which should have prevented the payments to the third parties was overwhelming and comfortably met the requisite standard that it was more likely than not that the payments were improper.”
In failing to act on these suspicions, Mr Ete lacked integrity, the tribunal found.
At the time of the interventions, the SRA identified further improper payments of nearly £790,000 that arose from three property sales undertaken initially at Pride Solicitors but completed via Charles Ete & Co’s client account.
Mr Ete approved the payments based on paperwork provided by ‘Person A’, a purported solicitor at Pride Solicitors.
The tribunal said it had “some sympathy” with Mr Ete’s position as a result but found that he had not scrutinised the papers sufficiently.
“Having been referred to the relevant Land Registry office copy entries, showing ownership of the relevant properties, it appeared to the tribunal to be more likely than not that these documents had been doctored. The documents were immediately implausible and unconvincing on their face.”
Though it did not make specific findings on the precise size of the client account shortage, the SDT said it was “inevitably very substantial and amounted to several hundred thousand pounds”.
This also showed a lack of integrity, as did the finding that Mr Ete had therefore allowed his client account to be used as a banking facility.
Person A was employed as a solicitor at Pride Solicitors from 12 October 2018, having been introduced to Mr Ete earlier that month by the firm’s previous owner as a 12-year-qualified solicitor with five years of experience in conveyancing.
Mr Ete did not take up the two references he had been given but checked Person A’s name on the Law Society website. He told the tribunal that Person A’s conduct and demeanour were consistent with being an experienced solicitor and that “he knew a solicitor when he saw one”.
Person A’s fraudulent practising certificate – which the tribunal considered “obviously amateurish” – used the SRA ID number for a genuine solicitor who worked as in-house counsel for a bank and was in a different font from a genuine certificate. It was also not for the then current year.
The SDT found that Mr Ete failed to exercise adequate supervision and control over Person A, which enabled him to conduct the three conveyancing transactions which bore the hallmarks of vendor fraud.
“The tribunal recognised that [Mr Ete] took some steps to verify the work that Person A had completed on the conveyancing matters. However, by [his] own evidence, conveyancing was not his usual area of practice.
“The tribunal considered that a perfunctory glance at the paperwork at the stage when Person A requested that payments be made was inadequate.”
The need for a system of control and supervision was “heightened” in conveyancing, given the transfers of large sums of money.
Again, the SDT said Mr Ete had lacked integrity, as he had in failing to take “more extensive and probing steps to verify the identity and regulatory status of Person A”, such as by taking up at least one of the references.
This was “a continuation of his lax approach to recognising and investigating when there were grounds for concern”, the tribunal added. This displayed manifest incompetence.
The SDT made one finding of dishonesty against Mr Ete in telling his indemnity insurer, during policy renewal, that he was not aware of any circumstances likely to give rise to claims when he had been told six days earlier that one of the property transactions may have been fraudulent and that the matter had been reported to the SRA, the buyer’s solicitors’ insurer and the police.
It was “inconceivable” that Mr Ete was not aware he had to declare this to his insurer.
In mitigation, the SDT noted that he had a hitherto clean disciplinary record and had tried, albeit unsuccessfully, to recover the money paid away, while repaying the deposit to the buyer in one case.
Deciding it had to strike him off, the SDT said Mr Ete had not made “any meaningful nor adequate efforts” to ensure his compliance systems were fit for purpose.
Whilst he had not been the instigator of the frauds, “it was his compliance failures which had allowed this harm to materialise”.
The SDT also reprimanded Henry Onotere Mume, qualified in 2008, who had been a salaried partner at Charles Ete & Co and its COLP and COFA from December 2016. He admitted failing to undertake the role of COFA effectively.
Mr Mume was inexperienced and the SDT said he was “in an invidious position with responsibilities as COFA without control over the management of the firm”.
He was also banned from acting as a compliance officer in the future without the SRA’s approval.
Mr Ete was ordered to pay costs of £64,260 and Mr Mume £7,140.