"12-Month Suspension from the Bar, for Fraudulently Manipulating Billings to Get Bonus Money from Firm"

The story, with a link to the new Wisconsin opinion, is over at Volokh and there is some interesting commentary below that post.

The lawyer "wrote up" his hours to meet internal cutoffs for bonuses, then surreptitiously "wrote down" the hours so the client would not get bilked. (Like the much discussed case, Board of Bar Overseers v. Warren, the new case has an issue about theft from the firm itself.)

Comments

[Milan Markovic]

John,

Thank you for the link.

As is often observed, disciplinary authorities are understaffed and underfunded. Consequently, bar counsel is going to have a lot of discretion as to which cases to bring. While I certainly think the attorney in question merited an admonishment, and perhaps a suspension, is this truly the kind of attorney who poses a threat to the public? More generally, shouldn't the main focus of attorney discipline be on those who are likely to steal from their clients or otherwise fail to do right by their clients? I understand that their are other rationales for attorney discipline, but in a world of extremely finite resources, this strikes me as the most important.

Empirical research indicates that overbilling is endemic for a number of different reasons and that many firms offer only minimal oversight over attorney billing. See, e.g.,Susan Fortney, Soul for Sale, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1505619 . If the attorney had merely stayed silent about his overbilling, he likely would have escaped detection. The firm also had no guidelines on write downs, and he was only caught because he wrote down his time so that the client would not be charged for fictitious hours.

I understand the general rationale that an attorney who steals from his employer is likely to steal from a client, but that logic seems odd here. And in being dismissed from his firm and presumably being forced to pay restitution as part of the settlement, his misconduct has already had negative consequences - consequences that most attorneys who overbill never face. It is also possible that the attorney may not have contested bar counsel's charges if he had been offered a less severe punishment (such as a public reprimand without suspension).

I do not mean to condone the attorney's conduct, but this does seem like an odd use of bar counsel resources in my opinion.

[Nicole Hyland]

I see your point, Milan, but I think another thing disciplinary authorities look for is easy provability. It's hard to catch a lawyer who intentionally overbills his clients. Here, the fraud was much more clear, because the lawyer billed substantial hours to a client in the last few months of the year and then secretly went into the billing system to delete those hours after he qualified for the bonus. The firm may not have had a policy about write downs, but it had a procedure, which was to get a pre-bill, mark it up, and send it back to the billing department. This lawyer circumvented that procedure in order to hide what he was doing. Also, he did it two years in a row.

I think this is what killed him:

"The total of all time entered by Attorney Siderits into the billing system in the last three months of 2008 was 239.6 hours; the total amount of time deleted in the first three months of 2009 was 231.9 hours. Thus, only 7.7 hours of all hours that Attorney Siderits recorded in the last three months of 2008 were actually charged to a client."

[Milan Markovic]

Dear Nicole,

I agree entirely with your comment.

Interestingly, the attorney billed "only" 29 hours of fictitious time in 2007, which he wrote down in early 2008. It seems that he was emboldened by not being detected and consequently billed far more fictitious time at the end of 2008 (as you point out).

I am reminded of Patrick Schlitz's claim that unethical conduct among BigLaw attorneys starts with "borrowing time" and minor bill padding and then becomes far more flagrant over time. That's certainly what appears to have happened here.

[Doug Richmond]

The prosecution of a thief is "an odd use of bar counsel resources"? Seriously?

[Milan Markovic]

Doug,

I would rather bar counsel focus on lawyers who steal from their clients (whether through over-billing or otherwise). Here the harm was to the lawyer's firm. It fired him and recouped the bonus. The attorney had no prior disciplinary history and may have been willing to accept a public reprimand and a shorter suspension (he appeared to argue as much to the court). He also did not contest the payment of costs associated with discipline.

So, yes, I think that taking nearly two years to attain this result against this particular lawyer may not have been an ideal use of scarce resources.

[John Steele]

Milan, I appreciate your comments and your viewpoints. I guess you and I just fundamentally disagree on this one, for the reasons Doug pithily stated.

My sense is that Nicole is correct about the dynamic at work. Now let's think about what the prosecution might do to nip these sorts of things in the bud before, as Schiltz noted, they grow into even larger thefts.

[Milan Markovic]

Thanks, John. Although I stand by my comments, I am not surprised that my view on this one is unpopular, and I certainly don't believe that disciplinary authorities need to be more sympathetic to thieves!

The lack of effective oversight over attorney billing certainly continues to be a significant problem for the profession.

[Monroe Freedman]

Not entirely unpopular, Milan. As you acknowledge, honesty is a serious matter. But that wasn't your point. He was punished enough to make the particular disciplinary sanction unnecessary, and bar disciplinary resources are inadequate to do the oversight job that needs doing.

[Mike Frisch]

As a former longtime bar prosecutor, one observation that I would make is that you deal with the cases that come to your attention and proceed as appropriate in light of the standards that have emerge from your system.

Bar Counsel decisions as to charging ethics violations are (in most systems) made subject to the review and approval of authorities outside of the office. Bar Counsel must deal with that as well.

Agree that delay is the worst aspect of bar discipline.

As to prosecuting billing fraud, just because it's hard to do does not mean Bar Counsel should shy away from such cases. Believe me, it's frustrating to try to convince volunteer lawyers that it is serious misconduct -- see In re Romansky (my case before I escaped to academia), 825 A.2d 311 (D.C. 2003).

[Nicole Hyland]

I think the disciplinary authorities do focus primarily on lawyers who steal from clients. My understanding is that the vast majority of disciplinary cases relate to misuse of escrow accounts and client funds. I don't think it's inappropriate to devote resources to a case that presents a slight twist on that scenario - arguably, an attorney who is willing to use deception to steal from his firm is only a few steps away from doing the same to a client.

Mike - I googled your Romansky case and came across the 2007 Court of Appeals decision after remand. http://caselaw.findlaw.com/dc-court-of-appeals/1253071.html

Really interesting reading. Can't say I agree with the court's conclusion on the recklessness vs. negligence issue, and a 30-day suspension seems pretty light for fabricating a letter from a client and billing another client for personal work. wow.

One thing that's not addressed in the opinion is the legality firm's retainer agreement provision for adding a "premium" to matters that are otherwise billed hourly? Is this a common practice? I haven't come across it before. Even if the premium is disclosed on the bill, is that an enforceable provision? Doesn't it arguably violate Rule 1.5(b) requiring a lawyer to "communicate to a client . . . the basis or rate of the fee and expenses for which the client will be responsible." Being able to arbitrarily add a "premium" to any bill after the work is done seems questionable.

[Mike Frisch]

I was gone from Bar Counsel when Romansky was remanded --the whole thing was a disaster from an ethics enforcement viewpoint. At least the court in the remand rejected the idea that dishonesty in billing was an "internal matter" that was entirely free from bar regulation.

Agree with Nicole that the "negligence" suggestion (which came from the BPR and not the hearing committee) is pretty ridiculous in light of the actual evidence.

[Nicole Hyland]

I found this Hofstra law review article by Lisa Lerman about the Romansky case, which provides some fascinating background information. http://law.hofstra.edu/pdf/lrv_issues_v34n03_a09.pdf

I'm only about half-way through the article but so far it's a great read (once you get past all the accolades for Professor Freedman at the beginning - just kidding Professor).

By the way, I'm putting together a retainer agreement and billing ethics cle - hence my current obsession with this issue. If anyone knows of any other interesting materials I can look at, I'm open to suggestions.

[Monroe Freedman]

Speakers at Hofstra consider the accolades to be required. Nevertheless, they go to my head.

[Stephen R. Diamond]

The Wisconsin Supreme Court has held that misappropriation from the firm will be treated the same as misappropriation from a client. This demonstrates a lack of perspective as well as a certain hypocrisy, since the discipline imposed was not in fact the equivalent of what has been imposed for stealing from clients—yet too severe under the facts presented.

(See my "Wisconsin Bar Equates Clients with Business Partners." ( http://tinyurl.com/asqeocy )