10.26.07
Mark-ups may be an Ethics Trap for a Law Firm
aba journal report
THE TRAP: My Boss Made Me Do It
When John B. Bowden started work as a managing associate for the Forquer Law Firm in Greenville, S.C., he was in for an unpleasant surprise. Bowden discovered that the firm was inflating government recording fees on settlement statements for HUD-1 real estate transactions. When he asked his boss in the Charlotte, N.C., office about it, Robert Forquer told him the practice was legal and ethical.
Wrong answer. The South Carolina Office of Disciplinary Counsel informed Bowden that the firm’s Greenville office failed to keep sufficient records of recording fee charges and failed to track client funds relating to those fees. Even worse, Forquer was apparently using excess fees to cover office expenses and make various payments to himself, according to a ruling by the South Carolina Supreme Court in a disciplinary action against Bowden.
Fortunately for Bowden, he wasn’t aware of the misuse of funds. But in an agreement with the ODC that resulted in a reprimand by the court, Bowden acknowledged that it was his duty to tell clients that their bills were inflated and to assure that HUD-1 forms were accurate in closings he supervised. He also acknowledged an ethical duty to assure that other lawyers in his office complied with state ethics rules. In the Matter of John B. Bowden, No. 25978 (May 9, 2005).