From bad to worse: “According to a declaration by the firm’s Controller John Provenzano, millions of dollars owed to clients appeared to be missing from the firm’s accounts.” (Dan Slater, WSJ law blog; American Lawyer; earlier).
In general clients who suffer by a law firm’s defalcations, and cannot be made whole by suits against the law firm, are at risk of losing all or most of the money they’d entrusted; however, New York, where the Dreier firm is headquartered, at last report afforded broader provisions for clients than did most states. I took note four years ago of the not-especially-generous state of lawyerdom’s collective “client security” funds.
P.S. More on client security funds in comments. Larry Ribstein has thoughts on the Dreier firm’s unusual organizational structure. As for all the “dating Maxim models” stuff about the extravagance of Dreier’s personal life, that is pure tabloid-style sensationalism and will under no account be exploited in this space.
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“however, New York, where the Dreier firm is headquartered, at last report afforded broader provisions for clients than did most states”
I’m curious about this statement. If a suit against the firm cannot make them whole, where does the money come from? Anyone know more about the broader provisions?
According to its FAQ, the New York Lawyers’ Fund for Client Protection is supported by a mandatory registration fee on lawyers and has paid out upwards of $108 million over the years to wronged clients. The front page of the fund’s site seems to be down, but I found this Google cache. The New York fund affords possible reimbursement of up to $300,000 for client losses that cannot be made up by suing the defaulting lawyer, insurance, etc. That is a substantially higher sum than I believe prevails in most other places, hence my mention of generosity.
This whole area is surely going to be re-examined post-Dreier to see whether stronger protections for clients are needed/feasible, if only for the sake of law firms themselves, which will lose out in many ways if clients or other parties stop feeling relatively safe about leaving moneys in the firms’ hands.