Client account: £1m taken
A solicitor who took £1m from his client account to keep his firm afloat has been struck off by the Solicitors Disciplinary Tribunal (SDT).
The SDT said that once Ian James Douglas had decided to embark on this strategy, the “downward spiral was rapid and devastating”.
Before his Surrey firm, Cook & Partners, was closed by the Solicitors Regulation Authority (SRA) in April 2016, it had a client account deficit of a shade under £1m.
The SDT said “some of the money used came from estates, directly exploiting the trust and vulnerability of beneficiaries”.
The tribunal said Mr Douglas admitted dishonesty and “concealed his wrongdoing” from the SRA, “flouting his responsibilities” as the firm’s COFA.
By the beginning of last month, 40 individual compensation payments had been made to former clients from the Compensation Fund, amounting to over £902,000.
As well as the direct impact on clients “in terms of increased stress, work, and inevitable delay to prove their entitlement”, there was the indirect impact on solicitors from the compensation fund payments, “potentially increasing their individual burden in future” through higher levies.
The SDT also said that the potential reputational damages was particularly high “at a time when there is concern about the ability of the public, and in particular vulnerable individuals, to access legal services in a cost-effective way”.
In mitigation, it was said on Mr Douglas’s behalf that he was suffering from depression and problems with alcohol, but this was not put forward as an excuse.
The SDT heard that Cook & Partners, based in Croydon, was founded by Christopher James Cook in 1981. It was sold to Mr Douglas in 2008. Mr Douglas, born in 1964, became the firm’s sole equity partner, while Mr Cook, born in 1953, became a salaried partner.
Mr Cook resigned as a partner in November 2015, but continued as a consultant and as the firm’s COLP.
The SDT said that after his resignation as partner, Mr Cook “abdicated his responsibilities in respect of the firm’s financial management” and “did not do what he should have done in terms of keeping his eye on the ball”.
He tribunal said that Mr Cook’s culpability as less than that of Mr Douglas, in that he had no direct financial control of the firm or client money.
“He was however culpable in terms of having failed catastrophically in respect of fulfilment of his responsibilities as the firm’s COLP.
“His timely intervention could have limited the damage by stopping the first respondent directly or indirectly by involving the SRA.”
Both men admitted causing or permitting unauthorised debit balances on client account.
They admitted making unauthorised transfers from client account to office account, failing to carry out account reconciliations and to maintain proper records.
They also admitted failing to rectify rule breaches on discovery, failing to run their business effectively and in accordance with proper governance and failing to protect money and assets.
Mr Douglas admitted failing to report rule breaches in his capacity as COFA and carrying on his business as a sole practitioner without applying to the SRA for recognition.
Mr Cook admitted failing to report rule breaches in his capacity as COLP. Unlike Mr Douglas, he was not accused of acting dishonestly, a charge which Mr Douglas admitted.
The SDT said the two solicitors had appeared before the tribunal in 2014, where eight allegations of accounts rules breaches were proved against both of them, resulting in each of them receiving a £7,500 fine and costs of £15,000 on a joint and several basis.
The tribunal decided that Mr Douglas should be struck off and Mr Cook suspended for five years. The solicitors were each ordered to pay costs of £10,100.