Solicitor used ‘rubber’ cheques to hide client money misuse

SDT: Teeming and lading

A solicitor who moved client funds around different accounts to hide the money he was taking for himself – and caused pay-outs from the SRA Compensation Fund – has been struck off.

Richard Clive Hallows also paid multiple cheques into his firm’s accounts from a company of which his wife was the sole director, knowing they were going to bounce.

The aim, according to the Solicitors Disciplinary Tribunal (SDT), was to show, albeit temporarily, that there was no shortage on client account.

But by the time Mold firm Hallows Associates was shut down by the Solicitors Regulation Authority (SRA) in February 2018, there was a shortage of at least £885,000.

The tribunal went ahead even though, at the time of the hearing, Mr Hallows was on police bail for the events at the firm.

Mr Hallows qualified in 1983 and was the sole solicitor and proprietor of the Welsh firm, where he handled commercial litigation, commercial property and conveyancing work.

The SRA was alerted to problems when a client complained that Mr Hallows had not returned the £600,000 he had paid to the firm for an investment scheme that did not proceed.

Mr Hallows, who had undertaken to return the money, gave the client a series of false excuses, such as that it was held on a designated deposit account and would take seven days to retrieve.

In fact, he had already paid money out of the account and into another, and the SDT found that Mr Hallows operated “a system of teeming and lading” – the practice of using funds in one account to replace the money taken from another – with hundreds of thousands of pounds in various accounts.

There was a pattern of cheques for large sums being paid into client account from the company owned by his wife and then being returned unpaid within a short period of time.

The SDT said this was “a device… artificially to inflate the balance on the client account” to make it look like there was no shortfall and conceal the withdrawals he had made.

In all this, Mr Hallows had acted dishonestly, the tribunal ruled.

The tribunal also found a host of other rule breaches: failing to keep the accounts properly written up, misleading third parties – including telling a law firm that he had arranged for a mortgage to be discharged when he had not – as well as breaching several undertakings.

It said a strike-off was the only possible sanction. Mr Hallows “was motivated by his desire to use client monies for his own purposes”.

It continued: “He had caused huge damage to the reputation of the profession. His clients had suffered significant harm, with a number of them having to be recompensed by the compensation fund.

“His conduct had been a complete departure from the standards expected of him by the profession and the public…

“He had displayed no insight, had not made good the shortfall and had not co-operated with the [SRA] during the investigation and the proceedings.”

Mr Hallows was also ordered to pay costs of £63,320.

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