Partners fined for not noticing that finance co-ordinator took £1.7m from client account “to keep firm running”

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31 January 2018

Accounts: Cashier fooled several members of staff

Partners in a former Stratford-upon-Avon law firm have been fined by the Solicitors Disciplinary Tribunal (SDT) after the finance co-ordinator in the accounts department took nearly £1.7m from client account “to keep the firm running”.

The SDT heard that Daniel Clarke, former head cashier at legal disciplinary practice turned alternative business structure GPB Solicitors, resigned in May 2013 having confessed to improperly using client money for the firm’s outgoings.

In an extraordinary resignation letter, Mr Clarke said: “In order to keep the firm running, I have gone above and beyond the remit of my role and have consistently utilised clients’ monies to pay bills, wages and anything else that kept the firm going.

“I have acted on my own in the above and ensured that no-one else knew of my actions.”

The SDT heard that having received the letter, the firm’s non-lawyer managing partner, Tony Kirton, reported it to the Solicitors Regulation Authority (SRA), along with Zakia Khalid, a partner and the firm’s COFA.

Unable to make up the shortfall themselves, the partners made a claim on their indemnity insurance policy and brought in a firm of auditors, Accura, to carry out a review of the accounts and report on the extent of the shortfall on client account.

Accura identified a shortfall of £1.7m – a figure confirmed by the SRA, which intervened into GPB Solicitors in October 2013.

The SDT heard that Mr Clarke managed to make the transfers despite the fact that he was supervised by a professionally qualified accountant, only called Mrs F in the ruling, who was the firm’s head of finance.

“He also managed to conceal the transfer from the managers despite the fact that Mr Kirton made it his business to speak to Mr Clarke and discuss his work with him on a near daily basis.

“Mrs F had access to the same accounting system as Mr Clarke on a daily basis and she failed to notice the manner in which Mr Clarke had manipulated the ledgers.

“The other cashiers in the accounts department also had daily access to the accounting software which Mr Clarke manipulated and they failed to notice the misappropriation, and the auditors carried out two audits without detecting Mr Clarke’s conduct.”

The SDT heard that following Mr Clarke’s success at covering his tracks, the firm’s partners reported the matter promptly to the SRA and co-operated with the regulator during the investigation.

In an agreement with the SRA approved by the tribunal, Mr Kirton, Ms Khalid and three other solicitors who were partners of GPB or its predecessor practice between October 2010 and May 2013, admitted failing to ensure that there were proper controls in place to prevent the improper transfers.

The three solicitors were Simon Andrew Newbold, Roy George and Adrian Michael Organ.

They admitted breaching the code of conduct and SRA principles and failing to remedy breaches of the accounts rules.

Ms Khalid admitted that, in her role as COFA, she had failed to take adequate steps to ensure compliance with the accounts rules.

Approving the proposed sanctions set out in the agreement with the SRA, the SDT noted that Mr Newbold and Mr Organ had previously appeared before the tribunal in July 2013 and been fined £2,000 and £3,000 respectively.

The SDT imposed a section 43 order on Mr Kirton, banning from working for law firms without the permission of the SRA, and fined him £12,500, which was reduced to £6,000 due to his financial circumstances.

Ms Khalid was fined £7,501, Mr Newbold £12,500, Mr George £5,000 and Mr Organ £7,501, reduced to £1,000 due to his financial circumstances.

The SDT ordered all five partners to pay costs of £53,000 on a joint and several basis.

Mr Clarke was the subject of a separate SDT hearing. That judgment is yet to be published.

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