FAQ #1 – Is there a way to have my attorney trust account voluntarily reviewed or audited to ensure that it is in compliance with the standards set forth in the NJ Court Rules

There is currently no process by which an attorney can request that the NJ Office of Attorney Ethics (OAE) determine if an attorney trust account is in compliance with all the relevant rules and case law, other than to request that the account be subject to a formal audit (which request may or may not be granted). The random audit program does not operate as a proactive process, so much as a form of “spot-checking” to be sure that the bar is generally in compliance. However, the downside is that all this is after the fact in the sense that it is not mentoring law firms on what they may be doing incorrectly.

In order to be proactive in seeking to determine whether their trust account is in compliance before there is a formal random audit by the OAE, the firm may wish to hire a forensic accountant with knowledge of this area. Such an outside professional can be retained to perform a monthly three-way reconciliation, though, in any event, the duty to perform those reconciliations is not delegable by the attorney. In other words, the reconciliations would presumably need to be done by both the forensic accountant and the attorney. This added level of oversight can be helpful for another reason: any deficiencies may be picked up and corrected by the attorney proactively to effectively forestall a finding of deficiencies by an OAE auditor at a later time.

FAQ #2 – If I hire my own accountant to perform internal monthly reconciliations of my NJ trust account, does that constitute a defense if I am later audited by the Office of Attorney Ethics and they find deficiencies anyway?

The answer is yes and no. On the one hand, an attorney has a non-delegable duty to perform the three-way reconciliations each month. The fact that an accounting firm is being hired to do the same thing—and may even be able to do it better than the attorney or their staff—does not relieve the attorney of that nondelegable duty.

On the other hand, in the event that an ethics violation relating to the trust account is uncovered, the fact that the attorney has utilized an accounting firm to back up the attorney’s own efforts to ensure that there were no deficiencies in their trust account may be offered in mitigation of the quantum of discipline. While there are no guarantees such a submission would reduce the quantum of discipline, presumably, it would more likely be an effective argument in situations involving a finding by the Office of Attorney Ethics of sloppy bookkeeping, rather than knowing misappropriation.

FAQ #3 – My bookkeeping software created errors in my internal recordkeeping for my trust account. Will that be a defense if deficiencies are found in an audit?

Once again, it will not be a complete defense, but may be offered in mitigation of the quantum of discipline. However, that may not prove to be availing because the public policy of the ethics rules relating to the maintenance of attorney trust accounts requires that the attorney maintain the records in compliance with R. 1:21-6. The fact that the software application creates errors or does not properly maintain the information does not modify that duty; the attorney arguably should be picking the error up when they perform their own three-way reconciliations, exclusive of whether the digital application also picks it up.

FAQ #4 – Can I defend an ethics violation for inadequate bookkeeping regarding my trust account on the basis that my bookkeeper did not properly perform the internal recordkeeping for my NJ attorney trust account?

The NJ Rules of Professional Conduct create a duty on the part of the attorney to supervise non-attorney staff. Specifically, NJ RPC 5.3(a) states that the attorney is required to “adopt and maintain reasonable efforts to ensure that the conduct of non-lawyers retained or employed by the lawyer, law firm, or organization is compatible with the professional obligations of the lawyer.” Therefore, even if the non-lawyer bookkeeper makes an error that is based upon the failure to follow instructions or training that the attorney provided, that will likely not be enough to exonerate the attorney from having responsibility for that error.

FAQ #5 – If my bookkeeper violates the rules relating to maintenance of my New Jersey attorney trust account, what is the legal test to determine whether I am responsible?

There is a three-part test to determine if the attorney will be responsible for the violation of the NJ Rules of Professional conduct by their non attorney staff. The elements of that test are “(1) the lawyer orders or ratifies the conduct involved; (2) the lawyer has direct supervisory authority of the person and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take remediated action; or (3) the lawyer has failed to make reasonable investigation of circumstances that would disclose past instances of conduct by the nonlawyer incompatible with the professional obligations of the lawyer, which evidence a propensity for such conduct.” NJ RPC 5.3(c). Accordingly, if the situation constitutes a violation of any of these three elements, the attorney may well be responsible for the non-lawyer’s act or omission.

The Nissenbaum Law Group’s ethics defense team defends attorneys accused of violating the rules governing the maintenance of NJ IOLTA trust accounts.

The Nissenbaum Law Group has been defending attorneys in ethics matters for over twenty years. The firm regularly handles trials brought by the Office of Attorney Ethics or District Ethics Committees seeking to impose discipline under the Rules of Professional Conduct. The firm also appears before the Disciplinary Review Board and the New Jersey Supreme Court. In addition, the Nissenbaum Law Group represents attorneys and their law firms in regard to random audits of attorney trust accounts by the OAE.