State Bar Moves Forward on Client Trust Account Audits

The State Bar is moving forward with random audits of attorney client trust accounts.  A presentation to the Regulation Admissions and Discipline Oversight Committee (RAD) Thursday April 17 detailed preliminary steps taken to institute such audits, including determination of the sample population and necessary changes in statutes or rules to authorize such audits and create an enforcement mechanism.  A consultant has been engaged to work on the sample issue and the State Bar Office of General Counsel has been tasked with reviewing the existing law and recommending changes.  It is hoped that the costs of such audits can be reduced by relying on attorney self-reporting through a detailed questionnaire, rather than relying on teams of full-fledged auditors to examine records.

The Bar recognizes that it currently does not have the authority to conduct such an audit unless there has been a client complaint (Bus. & Prof. Code section 6091.) There was discussion at RAD about instituting the audits as a voluntary program, in part (OGC) perhaps to determine how serious a problem non-compliance with the client trust account rules is.

Either voluntary or compelled compliance with an audit request raises privilege issues because misappropriation of client funds raises the possibility of criminal prosecution.  An attorney’s statutory duty to cooperate with a State Bar investigation is circumscribed by the availability of Constitutional or statutory privileges (Bus. & Prof. Code section 6068(i).)  Would these Constitutional or statutory privileges be available to the respondent in an audit?  The State Bar is required by statute to furnish evidence of criminal conduct to the prosecuting agencies (Bus. & Prof. Code section  6044.5)(a)) essentially making the State Bar an agent of the prosecutor.  Would a response mandating disclosure of misappropriation be an unreasonable search and seizure under the Fourth Amendment if there is no client complaint?

Californian’s have a Constitutional right to privacy under Article I, section 1 of the state constitution.  That right extends to financial records and specifically to client trust records (Hooser v. State Bar (2000) 84 Cal. App. 4th 997.)  Attorneys also have duty to maintain the confidences of their clients “at every peril to themselves.” (Bus. & Prof. Code section 6068(e).)   Production of an attorney’s client trust account records in the course of a State Bar investigation usually requires extensive redaction of the confidential information concerning other clients.

It is unknown whether these issues are within the purview of the OCC’s review of enabling legislation.

It is to be hoped that the proposal for random client trust account audits, once fully fleshed out, will be subject to the public comment process at the Board of Trustees level.  But another concept discussed at the Board level at its January 2014 meeting, requiring advanced fees in trust, suddenly found itself embedded in AB 1515 without such vetting.

The ongoing transformation of the State Bar has introduced some uncertainty in the process by which lawyers have input into these proposals. It’s probably not too early for California lawyers to make themselves heard informally on the issues raised by random client trust account audits.


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