Partners who failed to supervise paralegal who stole £400,000 avoid referral to tribunal

SRA: tribunal referral rescinded

Three partners whose supervision failure led to a trusted paralegal stealing £400,000 from their firm’s clients have accepted rebukes and fines instead of being referred to the Solicitors Disciplinary Tribunal.

Bendika Johal, John Edward Samuel Goodall and Tara Nicolette Clifford of Johal & Co in Harrow, north-west London, have signed up to a regulatory settlement agreement with the Solicitors Regulation Authority, which said it would now rescind its referral of their cases to the tribunal.

The money was taken by Anthony Maragh, a conveyancing paralegal who worked at the firm for 14 years before his actions were discovered and he was sacked.

In November 2015, he was convicted of “making false statements tending to prejudice her Majesty the Queen and the public revenue with intent to defraud her Majesty the Queen”, and sentenced to 40 month’s imprisonment.

Last year, a confiscation order of £125,500 was made against Mr Maragh.

He stole most of the money through a stamp duty land tax (SDLT) scam over a period of at least five years. This saw clients in 43 transactions pay over the right amount of tax, but he then under-declared the property value, paid the SDLT on that amount, and kept the difference.

He simply took the rest of the money from other client accounts, although later repaid £44,500.

An SRA review showed that Mr Maragh made 107 payments from the firm’s client bank account, of which 69 were made by CHAPS transfer, and 38 by client account cheque.

Of the CHAPS transfers, Mr Maragh was the authorised signatory on 57 instructions forms before October 2013. After October 2013, Ms Clifford was the authorised signature on 11 forms and Ms Johal the authorised signature on one form.

The agreement recounted that Mr Maragh was not a signatory to the firm’s client bank account but had been able to authorise CHAPS transfers from it without the need for approval or review from the firm’s partners. Mr Maragh also had unrestricted access to the banking device, which generated authorisation codes for transactions.

The firm changed this procedure in 2013 so that only partners could sign fax payments. The partners were the only individuals who had the authority to sign cheques.

The three partners admitted a series of accounts rules breaches, as well as failing to make arrangements for the effective management of the firm as a whole – and in particular the management of risk – and failing to run their business or carry out their role in the business effectively.

In mitigation, the three solicitors said Mr Maragh was able to exploit the firm’s accounting system by completing the fax instructions to the bank, as he would do for any other matter and provide an explanation for the payments such as ‘service charge’, ‘broker fee’ or ‘managing agent’s fee’.

“There was no reason for the partners to doubt the explanations for the payments and Mr Maragh also gave a verbal explanation for the payments. Given that a large volume of other transactions, which Mr Maragh requested, were valid, it was difficult to differentiate between valid requests and fraudulent transactions.”

They also said that Mr Maragh was a key member of staff: “There was a level of trust and respect for Mr Maragh, as he was handling a heavy caseload and worked long hours for the firm. There was no reason to doubt Mr Maragh’s integrity.”

The client account shortage was replaced, while “clients have been reimbursed and did not complain to the firm. Some of the clients who were affected by the fraud continued to instruct the firm”.

As well as rebukes for all three, Ms Johal was fined £2,000 – the most the SRA can fine without referring a case to the tribunal – and the other two £1,000 each and agreed to pay costs of £9,000 on a joint and several basis.

    Readers Comments

  • Paul Greenwood says:

    All very happy-go-lucky. Most organisations are required to have strict Control and Compliance systems, but no doubt the Auditors were too polite to check. With Solicitors being the real weakness in AML matters it is time they were forbidden from holding Client Moneys at all

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