BROKEN TRUST
Theft. Fraud. Breach of trust. Criminal actions that victims say deserve criminal penalties. A Toronto Star investigation found the Law Society of Upper Canada often fails to report the crimes of its members to police
They treat client trust accounts as their personal piggy banks, facilitate multimillion-dollar frauds and drain retirement savings of the elderly.
While most lawyers caught stealing from their clients are reprimanded, suspended or disbarred by the profession’s regulator, the vast majority avoid criminal charges, a Star investigation reveals.
The Star found that more than 230 lawyers sanctioned for criminal-like activity by the Law Society of Upper Canada in the last decade stole, defrauded or diverted some $61 million held in trust funds for clients.
Fewer than one in five were charged criminally. Most avoided jail.
“I truly believe there are two laws — a set of rules and regulations for lawyers and a different set for everyone else,” said Richard Bikowski, who was fleeced out of $87,500 by now-disbarred Toronto lawyer Lawrence Burns.
Unlike the law societies in most other provinces, the Law Society of Upper Canada does not, as a rule, report suspected criminal acts by its members to police, no matter how much money lawyers steal.
In one case, a lawyer took $750,000, in part because he apparently wanted to buy a Lexus. Another used money he was holding in trust for a client to buy an Ottawa condominium.
Lawyers play a vital role in society. They are supposed to keep our money safe, guard our secrets and oversee our estates when we die, among other responsibilities.
Those who betray this trust can do untold damage.
Despite “misappropriating” close to half a million dollars from four clients, Burns, who was disbarred in 2011, has never faced criminal charges. During his discipline hearing, he blamed “undiagnosed depression” and a “minor cogni- tive impairment” for his thievery, according to law society documents.
Burns, now 64, lives in a North Toronto home, zips around town in his Rogue SUV, and dotes on customers at his restaurant, The Homeway, at the corner of Mount Pleasant Rd. and Erskine Ave.
When the Star visited him at his restaurant to ask about his case, Burns, sporting slicked-back hair and a moustache, immediately escorted the reporters outside.
“I’m not giving you an interview,” Burns said outside the eatery, where breakfast is served until 3 p.m. daily and the shaved ham on a walnut raisin ciabatta loaf with honey mustard mayo goes for $11.
Other lawyers found guilty of professional misconduct by the law society, who evaded criminal charges, include:
Pradeep Pachai, a lawyer for a car insurance company who conspired with an executive of the firm to steal $1.5 million by grossly inflating insurance claim payouts. Pachai was disbarred, but avoided criminal prosecution after paying back his half of the take. When contacted by the Star, Pachai said he wanted to let “sleeping dogs lie.”
Luc Barrick, an Ottawa lawyer, took some $360,000 from his clients before moving to Paris three years ago. He has yet to return. Barrick told the Star he didn’t steal anything and had to go to France to seek treatment for hemophilia. The law society dismissed a doctor’s note as insufficient evidence of his illness and disbarred him in absentia.
Massimiliano Pecoraro, a Toronto criminal lawyer who was disbarred for overbilling Legal Aid Ontario by $30,000. An investigation showed there were reasonable grounds to believe that he actually overbilled Legal Aid more than $100,000, but that he paid most of it back before the law society got involved. Pecoraro fabricated trials and bail hearings that didn’t take place. When caught, he blamed stress from the breakdown of his marriage. Pecoraro did not respond to a letter from the Star or voicemail messages.
The Star found it was common for alleged law-breaking lawyers like these to avoid criminal charges.
Of the more than 1,000 discipline decisions made by the law society in the last 10 years, the Star identified 236 cases in which lawyers were sanctioned for offences that were characterized by our analysis as criminal, including theft, fraud, breach of trust, forgery and perjury.
The Star could find criminal charges for only 41 of these lawyers. In more than half of cases where criminal charges were laid, the law society sanction came after. Of those bad lawyers sentenced criminally, the punishments were generally lenient, ranging from house arrest to community service. The Star found that only 12 went to jail.
Why do so many lawyers who steal from their clients avoid criminal justice?
A big reason is that the law society in practice does not report alleged criminal offences by its members to police.
The Star shared its findings with law society treasurer Thomas Conway, who said solicitor-client privilege, a principle he described as “sacrosanct,” prevents the organization from reporting lawyers it believes have committed criminal acts to police.
“There’s a constitutionally protected right that every client has to have communications that he or she has with his or her lawyer protected,” Conway said. “It would be presumptuous of us to violate that client’s right to have a complaint reported to the police. It’s their choice.”
The Star found victims are often reluctant to go to police, fearing being drawn into lengthy criminal proceedings that are unlikely to recover their stolen money. And police fraud squads are overburdened and often don’t have the resources to take on complex fraud investigations, say police officers and lawyers who handle financial cases.
The law society’s rationale for not reporting lawyers suspected of committing a crime to police is “overly simplistic” and “wrong” says Brampton Crown attorney Steve Sherriff, who was in charge of disciplinary prosecutions at the law society from 1982 to 1989. Sherriff says reporting a lawyer to police in no way violates solicitor-client privilege.
In fact, he believes provincial legislation gives the law society all the power it needs to report bad lawyers to law enforcement.
“I am not confident that the public gets fair warning of criminal conduct by lawyers,” Sherriff said. “I continue to have serious concerns that the public is needlessly at risk.”
Like doctors and teachers, lawyers govern themselves.
The law society is responsible for regulating Ontario’s 46,000 lawyers and 5,000 licensed paralegals. Its website states that it has a duty to “protect the public interest” and to “act in a timely, open and efficient manner.”
Of the approximately 4,700 complaints received annually, about 3,100 are authorized for full investigation. About 100 make it to a disciplinary hearing each year.
It can take years before the law society makes a decision on disciplinary action. In one case the Star found, it took more than five years to deal with two lawyers accused of fronting a $1.5-million advance-fee scam. One lawyer was disbarred, while the other was allowed to resign his licence to practice.
Disciplinary hearings are open to the public and are conducted by tribunals made up of “benchers” — mainly elected lawyers and paralegals and some appointed “lay” people.
When the Star asked the law society if it reports criminal acts by its members to law enforcement, spokesman Roy Thomas said the regulator encourages complainants to report offences to police, and discipline hearings and other evidence in the public record “can be accessed by police.”
“It would be a serious misrepresentation for you to suggest that the Law Society of Upper Canada does not co-operate proactively with all the law enforcement agencies in the province,” he said.
Det. Sgt. Cameron Field, of the Toronto Police Service’s financial crimes unit, said the force does not “pick and choose” complaints posted on the websites of regulatory bodies.
“If one of these organizations became aware of criminal wrongdoing and did not report it to us then we would be very concerned,” he said. “It is essential for the well-being of these organizations and in maintaining public confidence in their ability to properly regulate their respective professions.”
Sherriff said the “vast majority” of clients victimized by lawyer fraud would consent to the law society sharing their names and contact information with police.
“A report to the police from the law society, which invariably has the evidence, will carry greater weight than a report from a client,” he said. In its decisions, the law society favours innocuous-sounding words like “misapply” and “misappropriate” in place of “steal” and “theft,” and in many cases, provides few details. For instance, in one disciplinary case the Star found, the law society says that the lawyer is simply “suspended on an interlocutory basis” until a disciplinary panel “varies or cancels the order.” What it doesn’t say is that the lawyer is being investigated for her alleged role in a real estate scam that investors believe could cost them as much as $17 million.
“I am not confident that the public gets fair warning of criminal conduct by lawyers.” STEVE SHERRIFF BRAMPTON CROWN ATTORNEY
Many discipline summaries also make reference to missing money but don’t include a dollar amount. Defenders of the law society’s policy of not reporting alleged criminal activity to police argue that doing so could discourage bad lawyers from self-reporting their misconduct and co-operating with investigations. “We call upon various members of our profession and members of the public to be frank and open with us,” said Toronto criminal lawyer Clayton Ruby, a life bencher of the law society and former chair of the professional regulation committee, which investigates and prosecutes lawyers. “Some of them would not come to us if, in fact, we were going to report them to police.” Ruby added that, in his opinion, the cost of mounting expensive fraud prosecutions is not attractive to police. Several benchers contacted for this story declined to comment, saying they had received a letter from the law society warning them not to talk to the Star. Reporting bad lawyers to law enforcement officials is not a problem for law societies in many other provinces. In fact, the majority have policies to report alleged criminal activity by their members to police. Law societies in Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, P.E.I. and Newfoundland and Labrador all report lawyers disciplined for suspected criminal behaviour to police or the province’s minister of justice or attorney general. The law society in B.C. can report evidence of criminal offences to police, but how much they can share may be limited by solicitor-client privilege. Meanwhile, the law society in Quebec says it is considering changing its professional code, currently under review, so that it can report lawyers’ suspected criminal activity to law enforcement. In Nova Scotia, the legislation that governs the profession was changed in 2003 to allow the head of the Barristers’ Society to release information to police if there is evidence of a criminal offence and “if it’s in the public interest,” said executive director Darrel Pink. As Pink sees it, the fact that it may report alleged criminal conduct to police has not hindered the law society’s ability to discipline lawyers. “They’re not people from whom we’re getting a hell of a lot of cooperation anyway,” he said.
Asked about the policy in Ontario, Pink said, “It sounds like the Law Society of Upper Canada has a statutory problem which prevents them from doing what’s reasonable.” It hasn’t always been this way. When Sherriff was in charge of disciplinary prosecutions at the Law Society of Upper Canada in the 1980s, he said he picked up the phone “countless times” to inform police about lawyers suspected of committing serious crimes, like theft and fraud.
In 1998, the Law Society Act was overhauled, and new regulations related to confidentiality were added under Section 49.12. This section prohibits the law society from disclosing information to any third party revealed as the result of an audit, investigation, review or seizure.
Following a 2005 Star investigation into the silencing effect of Section 49.12, an exception was added to allow the law society to report suspected criminal activity to police only when there is “a significant risk of harm” to the lawyer involved or another person and “making the disclosure is likely to reduce the risk.”
According to law society treasurer Thomas Conway, officials “can and do” disclose information to law enforcement authorities in “limited circumstances” that fit this description.
Despite repeated requests, the law society did not provide a single example of a case where they’ve reported a lawyer to police.
Sherriff says the exception added to Section 49.12 clearly gives the organization the power to report lawyers’ alleged criminal activity to police as long as it is likely to reduce the risk,
which is almost always true in fraud cases.
In Sherriff’s view, the law society’s stance on the matter could therefore be summed up like this: “We could do it, but we choose not to.”
When lawyers are disciplined by the law society, but not charged criminally, consequences can be disastrous.
Peel police Const. Michael MacDougall, who used to work in his force’s fraud squad, led an investigation into Mississauga real estate lawyer Mariano Mazzucco under the name Project Dirty Lawyer, beginning in 2008.
MacDougall said he was astounded to discover that Mazzucco was disciplined in 2000 by the law society for “misappropriating” — the organization’s preferred term for stealing — more than $300,000.
MacDougall, who left the financial crimes unit in 2010, said the law society never reached out to police during the investigation.
The law society gave Mazzucco a 30-month suspension, and allowed him to return to work under the supervision of another lawyer. He continued running a Ponzi scheme that ultimately bilked dozens of people and banks out of nearly $10 million.
“He should have lost his licence then (in 2000), and this should have been reported to the police back then and dealt with,” said MacDougall.
Mazzucco was disbarred in 2010, and sentenced to six years in jail in 2012. He was recently released from prison after serving a third of his sentence, and is living at a halfway house in downtown Toronto.
In an email to the Star, Mazzucco said he doesn’t believe that a police investigation into his trust account would have detected the Ponzi scheme, which he said he ran out of his personal bank account.
“The disbarment and public shaming that follows after detection of professional misconduct is a significant deterrent to lawyers,” Mazzucco said, adding he was treated fairly by the law society.
Mazzucco says he hasn’t made make restitution to his victims.
“I currently have no income and no assets,” he said.
While many disbarred lawyers go on to pursue fruitful second careers, victims often fight for years to get their money and their lives back.
Ontario lawyers are required to have malpractice insurance provided by LawPro, an insurance company owned principally by the law society. But LawPro covers only financial losses caused by negligence, errors and omissions and excludes dishonest behaviour, such as theft and fraud, except in rare cases.
The law society instead offers restitution for these types of losses through its victim compensation fund.
Here’s the catch: the fund will not refund more than $150,000 per claim — one of the lowest and most stringent caps in the country. (The limit is currently under review by the law society’s compensation committee.)
And, unlike compensation funds in many other provinces, Ontario’s is considered a “fund of last resort,” meaning in many cases all other legal avenues must be exhausted before it can be accessed.
This could include anything from filing a police report to suing the lawyer — a remedy, which, as some victims have bitterly observed, generally requires hiring another lawyer and spending more money. Just ask Richard Bikowski. In 2004, he was expecting about $90,000 from the sale of the home he owned with his common-law partner following the breakdown of their relationship.
Lawrence Burns, the Toronto lawyer representing Bikowski’s common-law partner, was supposed to hold the money in trust until the separation proceedings were over. But Burns never paid the money out.
Bikowski complained to the law society, prompting Burns to cut a cheque to the court. But the cheque bounced.
Four years after the ordeal began, Bikowski, now 50, received $87,500 from the law society’s victim compensation fund, but had to spend $50,000 on his own lawyer fighting to get it.
Under questioning by the law society, Burns said he had “no recollection” of what happened to Bikowski’s money. When presented with evidence showing the funds being transferred out of his trust account to another bank account he controlled, Burns refused to answer questions.
The law society’s investigation found that Burns used most of it for office expenses and payments to family members.
Despite facing questions from the law society after Bikowski’s complaint in the fall of 2007, Burns seemed undeterred. A few months later, in early 2008, he went on to steal $64,000 from a client who had received the money as part of a settlement following a car accident.
These two incidents were not isolated; Burns had “misappropriated” from two more clients dating back as far as 2004.
In one case from that year, Burns was unable to explain how $25,000 of settlement money deposited into his trust account on behalf of a client was whittled away to $2,200.
In April 2006, Burns deposited $300,000 into his trust account on behalf of a client who was going to use the money to pay off a mortgage. That money disappeared too.
During his disbarment proceedings, Burns blamed his actions on a “minor cognitive impairment” that affects his short-term memory and judgment, and as a result, his withdrawal of trust monies was “an honest, if negligent, mistake.” The discipline panel noted that Burns provided no medical evidence in support of his claims.
Burns was ordered to pay the compensation fund $93,000. The law society refuses to say if he ever did. Burns keeps everything in his wife’s name — his restaurant, home, and SUV — a tactic used to keep creditors at bay, according to investigators.
Burns has never been charged criminally with theft or fraud.
“There are no winners in this situation,” said Bikowski.
“It makes you really grind your teeth about how these people get away with it.”