Partners fined for sitting on almost 1,000 residual balances

SDT: Two pairs of brothers fined

Four partners in a Welsh law firm have been fined for sitting on 979 residual balances, totalling over £468,000, for “lengthy periods of time” and where there had been no activity for six months.

The Solicitors Disciplinary Tribunal (SDT) said “there had clearly been wide-ranging and systemic flaws” in the accounting practices of Carpenter Singh, which had also failed to carry out reconciliations on deposit accounts for 22 years.

The SDT heard that an investigation officer from the Solicitors Regulation Authority (SRA) obtained a list of all matters where client money was held but there had been no transactions for at least six months from the law firm, based in Llanelli, Carmarthenshire. The 979 matters had balances ranging from 2p to £95,000.

The officer found that the law firm’s last five accountants’ reports had all been qualified.

The SRA contacted the accountant, who replied that retention of client money had been “mentioned to the firm” but “as far as I am aware this has not been actioned by the client”.

Paul Duncan Leslie Carpenter, the law firm’s COLP and COFA, told the SRA he was aware of the residual balances, but “the intention had been to delay addressing the residual balances until the firm had installed a new account software package”.

Mr Carpenter “could not confirm a specific date for the installation of this proposed new software as he was considering the available packages on the market”. He agreed that the issue could not be further delayed.

The SRA’s officer reviewed a selection of matters with longstanding residual balances, such as one client owed £944 in compensation from a local authority since 2006 and an estate owed £750 since 2002.

Mr Carpenter agreed in June 2018 that the balance owing to the estate was an “oversight”, but it was still in the client account in February 2019.

There was a larger balance, over £9,800, relating to another estate, where the last correspondence on the file was dated 11 March 2013.

On that day, Carpenter Singh wrote to the Railway Pension Scheme seeking information about further money due to the estate, but the file “did not contain a response to the letter”.

Paul Carpenter, admitted in 1997, was prosecuted along with his brother Jonathan David Carpenter, admitted in 2001, as well as brothers Richard Owain Singh, admitted in 1998, and Rodric Andrew Singh, admitted in 1999.

In an agreement with the SRA approved by the SDT, the partners admitted failing to keep properly written up accounting records and carry out client reconciliations and breaching the rules on residual balances.

They also admitted causing or permitting a minimum client account shortage of at least £9,100 in breach of the rules and operating client suspense accounts with overdrawn balances of over £8,500.

The partners said in mitigation that they accepted the “seriousness” of the issues identified by the SRA, and had taken steps to put things right, including “hiring an experienced member of staff to deal with the firm’s accounting, involvement of external auditors, the purchase of new accounts software and training courses for staff”.

The tribunal fined Paul Carpenter £10,000, reflecting his greater responsibility as COLP and COFA, Jonathan Carpenter £7,500, Richard Singh £7,500 and Rodric Singh £7,500. The law firm was also fined £7,500.

The two sets of brothers and the law firm were ordered to pay costs of £10,000 on a joint and several basis.

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