by Brian Mahany
Theft by financial professionals is rare but it happens. Statistics show that a lawyer may commit malpractice on average 3 times in his or her career but outright theft or fraud is thankfully rare.
Today’s Accounting Today has an article about a Missouri CPA who stole more than $400,000 from two trusts he controlled. One trust was established by a woman who wanted her money to go to 4 designated charities. It went into the accountant’s pocket instead. The other trust was established by the heirs of a Missouri woman who wanted to fund schools for her heirs. Once again, the money went straight into the accountant’s pocket.
The accountant, Murphy Hubbard, was sentenced to 42 months in prison and must pay restitution when he is released. Since the conviction means the end of his practice and probably his license, how he will pay that restitution is unknown. I suspect it won’t get paid.
Because theft income is taxable – think Al Capone – Hubbard owes the IRS as well.
Normally when accountants and lawyers make mistakes there is insurance available. That’s one of the primary reasons we recommend that our clients see a professional CPA to have their taxes prepared. The corner “tax preparer” who puts a sign on the sidewalk each spring is often uninsured or underinsured.
Thefts or pure frauds are much more problematic. Most insurance policies exclude intentional acts. If I steal your money, no insurance. If I am negligent in how I handle your case or simply give you bad advice your loss may be covered.
While there will always be dishonest professionals, having a big firm behind them is also helpful. In the Missouri case, Hubbard operated his own business, The Hubbard Group. If he worked for a larger accounting or law firm, however, the firm might have been liable and had the ability to pay.
Don’t think that we recommend never doing business with self employed lawyers and accountants. Some of the best and brightest are solos. If you are planning on letting that person safe keep your money however, think about two trustees and requiring dual signatures. Although criminal conspiracies do exist, the simple act of requiring two signatures eliminates much temptation and future problems.
We hope that you are never hurt by a dishonest or negligent financial professional. If, however, you lost money because of the wrongful actions of a lawyer, accountant, stockbroker, insurance agent or financial planner, call us. We can often get your money and handle your case on a contingent or “success” fee basis.
Mahany & Ertl, LLC – America’s Fraud and Financial Malpractice Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; and Portland, Maine. Services nationwide.