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Client protection fund at risk of maxing out

By: Eric Heisig//January 10, 2014//

Client protection fund at risk of maxing out

By: Eric Heisig//January 10, 2014//

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The State Bar of Wisconsin might have to defer payment on claims filed by people who have been wronged financially by attorneys.

Bar officials said the Wisconsin Lawyers’ Fund for Client Protection, from which claims payments are made, is hitting its limit. Money for the account comes from $20 assessment attorneys in state pay annually.

The committee that handles claims is set to decide on 47 claims that total $2.2 million during its meeting Feb. 4. That total, according to bar officials and members of the committee, is higher than it’s been in recent memory, and may result in having to defer payments of some claims over a five-year period.

Andrea Gage, spokeswoman for the State Bar, said a current account balance was not immediately available Friday. As of June 2013, the account had $349,380.71 in it, according to the fund’s report for fiscal year 2012-13.

Amy Wochos, chairwoman of the committee, said the increase in claims – which all will be vetted to determine whether a client is eligible for payment – is something that she and bar staff members have discussed. Wochos, who has been involved with the committee for five years, said the increase has not been “a steady climb.”

“There has definitely been a jump this year,” she said.

There may not be one specific reason for the increase, she said, but their theory is that it is a delayed result of the recession.

“We may be seeing the result of a lag from economic problems resulting from the economic downturn,” Wochos said.

George Brown, the bar’s executive director, backed up Wochos’ theory when speaking at the Board of Governors’ meeting in December. He explained that the increased claims may be the result of attorneys who “have faced gambling problems and economic problems.”

Brown’s report to the BOG in December also stated the number of claims – and the amount requested in each – may mean that the bar will have to defer payments for some people.

The Wisconsin Supreme Court’s rules state that payments can be deferred over a five-year period if there is not enough money in the account.

Wochos said if her theory is correct, the problem is not going to be resolved any time soon.

“I don’t know if we’ve crested,” she said. “I hope so. We just don’t have enough money.”

The rule also states that if the full amount has not been paid within five years, “any balance remaining unpaid shall remain unpaid and the claim shall be closed.”

This is not the first time in recent history that the fund has been in danger of going into the red. A similar situation occurred in FY 2009-10 when the fund was slammed with six-figure claims and ended the year with more than $800,000 in outstanding claims.

The Supreme Court ultimately imposed the $20 fee in April 2011, changing it from a system that assessed a fee by how much the fund paid out in the prior fiscal year.

Client grievances on the rise

The Office of Lawyer Regulation reported it also has seen a bump in the amount of grievances filed since 2008.

During Fiscal Year 2012-13, the OLR fielded 2,324 complaints. In FY 2007-08, it received 2,066 complaints.

“Lawyers themselves have to make a living, and they’re going to have business stresses in a bad economy. It’s more difficult for them to make ends meet,” OLR Director Keith Sellen said. “That may be a reason why a lawyer may be a subject for more grievances.”

Ray Dall’Osto, an attorney with Gimbel, Reilly, Guerin & Brown LLP who represents attorneys involved in disciplinary cases, said the inverse correlation makes sense. In general, law firms – much like other businesses – don’t do as well during an economic downturn.

“Business goes up and down,” Gimbel, who also is a member of the BOG, said. “The pool of clients still has legal needs, and their economics have contracted, too.”

Still, Wochos and Sellen both said a recession may not explain everything about the increase.

For one, the client protection fund has several claims pending that add up to large amounts of money.

One attorney, Steven Wilson, had 15 claims filed against him that totaled nearly $631,000, according to the bar. Those claims, according to Brown’s report to the BOG in December, “all involve the theft of personal injury settlement funds, and many of the claimants did not know that their personal injury claims had been settled.”

A probate case for Wilson, who died in June, involves some of these claims and is pending in Outagamie County.

“It could be an aberration,” Wochos said. “A few bad apples whose claims came up at the same time.”

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