A lawyer?s misdeeds spur state bar to revisit proposal
By Marc Davis
The Virginian-Pilot
© March 16, 2008
It took one really bad lawyer to force the Virginia State Bar to do an about-face.
It started Oct. 19, with a plan to protect clients from dishonest lawyers. The proposal would make it harder for lawyers to secretly settle lawsuits and other claims for insurance without their clients’ knowledge and then keep the money.
This angered trial lawyers. They said there is no evidence that Virginia lawyers are crooks, so the plan was unnecessary.
The vote wasn’t close: The State Bar voted 54-7 to scrap the plan.
Then disaster struck.
Less than two months later, on Dec. 5, a Northern Virginia lawyer, Stephen T. Conrad of Woodbridge, was arrested and accused of doing exactly what the plan was designed to prevent. He settled hundreds of cases without his clients’ approval, then signed their names to settlement checks and kept the money.
Now, embarrassed by the Conrad case, the State Bar is reconsidering the protection plan it rejected in October.
Conrad was charged with embezzlement and forging his clients’ signatures. He surrendered his law license on Dec. 14, acknowledging that he “could not successfully defend” against the allegations. He is being held in the Prince William County jail.
Bar leaders said Conrad misappropriated at least $3.7 million. His misconduct dates to at least 2002 and continued through 2007, according to criminal charges and the State Bar’s investigation.
To prevent future Conrads, the bar’s proposal would require insurance companies to notify clients directly whenever settlement money is paid to lawyers on their behalf. That way, lawyers could not keep the money without their clients’ knowledge.
Currently, insurance companies notify only the lawyers, and they, in turn, tell their clients and pay the money.
The Virginia Trial Lawyers Association strongly opposed the plan. Now, the group is backpedaling.
In a letter to the State Bar last month, the association’s president, Charles J. Zauzig III of Woodbridge, said his group is happy to work with the bar to reconsider the issue.
And that’s exactly what will happen.
State Bar President Howard W. Martin Jr., a Norfolk lawyer, has sent the proposal back to a study committee for more work.
The Conrad case changed everything, Martin said. “That got the attention of the Virginia trial lawyers and some plaintiff lawyers on our board,” he said. “They said maybe it’s time to take another look at this.”
Conrad, 40, has been practicing law since 1993. He mainly represents clients with personal injury or workers’ compensation claims.
In November, a judge appointed a receiver to take over Conrad’s law office after repeated complaints of misconduct. In its court filing, the bar cited details in at least five cases in which Conrad settled cases without his clients’ knowledge and kept their money. The clients:
- In 2004, Conrad settled a personal injury case for $14,000. For years, he lied to the client about the settlement and refused to return her phone calls. He finally told the client in 2007, after she threatened to go to the State Bar, and he sent her some money.
- In 2005, Conrad settled a personal injury case for $5,000. The client found out two years later from a third party. Conrad told the State Bar he couldn’t pay the money because of medical liens. He failed to produce subpoenaed documents.
nIn 2005, Conrad settled three personal injury claims arising from a traffic accident for $10,500. The clients found out two years later after contacting the insurance company.
- In 2006, Conrad settled a personal injury case for $6,800. One year later, the client still wasn’t aware of the settlement when the State Bar told him about it.
- In July 2007, Conrad settled a workers’ compensation case for $22,500. The client found out a few months later after independently researching his case. Conrad promised to pay the client within 24 hours, but didn’t.
There is no definitive figure for how much Conrad is suspected of misappropriating. At a meeting of the bar’s executive committee, Martin said Conrad mishandled at least $3.7 million from about 250 clients.
“It’s a moving number,” said the court-appointed receiver, Richard S. Mendelson, an Alexandria lawyer. “It changes every day.”
Mendelson said he is reviewing files of more than 500 clients, some going back 10 years or more. He will file a report with the judge in late March, but it may be sealed, pending Conrad’s criminal case.
Would the proposed rules have prevented Conrad’s misdeeds?
That was debated last month by the State Bar’s executive committee in Richmond.
Irving M. Blank, a Richmond lawyer on the committee, said “there’s no question in my mind”
Conrad would have been caught sooner had his clients known he was settling their cases and getting their checks. The misappropriation, he said, would have been much less than $3 million.
“The bar has an obligation to protect the public from something like this,” Blank told the committee. “If we don’t do something, members of the Fourth Estate are going to roast us.”
Another committee member, Edward L. Chambers Jr. of Yorktown, said if the public found out the bar rejected the insurance plan in October, followed by Conrad’s arrest on embezzlement charges , it would look terrible.
Virginia Beach lawyer Judith L. Rosenblatt said she was less concerned with public perception than in public protection. She cited the cases of Conrad and Troy A. Titus, a Virginia Beach lawyer who was disbarred in 2005 and is accused in lawsuits of misappropriating more than $2 million belonging to clients and investors.
“We look horrible, and we should look horrible, because we are not policing ourselves,” Rosenblatt said.
The proposal has its critics.
Some lawyers said requiring insurance companies to communicate directly with clients would interfere with the attorney-client relationship. They said insurance companies are adversaries with clients and should communicate through their lawyers.
One lawyer, George E. Allen III of Richmond, wrote to the State Bar last year:
“The problem is not significant enough in Virginia to justify the intervention in the attorney-client relationship.”
Other lawyers complained that the plan would invade a client’s right to privacy and confidentiality, and might invite relatives to steal the client’s settlement check.
One lawyer wrote that a plaintiff’s physical safety might be endangered if his location were revealed to a third party by the insurance company’s letter.
Twelve states have rules or laws requiring insurance companies to notify clients directly when they make a payment to a lawyer. The American Bar Association recommends that every state pass such a law.
In response to critics, Christopher J. Habenicht, a suburban Richmond lawyer who chairs the bar’s Public Protection Task Force, defended the insurance notification plan.
“The task force considers the intrusion into the attorney-client relationship to be minimal and outweighed by the salutary effect of the recommended statute at negligible cost,” he wrote in October. “The task force is of the opinion that if the statute prevented one theft … it would well serve its purpose.”
After Conrad’s arrest, the Virginia Trial Lawyers Association agreed to reconsider the issue.
“We will work with the bar to try to come up with some type of solution,” Zauzig said. “We’re not closing the door on anything.”