Over the past fifteen years, lawyers have embezzled more than half a billion crowns from their clients. And we are only talking about cases that are traceable from open sources. During that time, there are perhaps hundreds of defrauded clients, the vast majority did not receive compensation, and some also lost their life savings. Recently, for example, we have been following the case of lawyer Hana Suková in the media, who embezzled 153 million crowns from her clients. You are probably wondering, just like me, why the Czech Bar Association is not able to solve the embezzlement problem and protect clients all the time?
On average, we hear about something similar in the media every other year. We won’t remember names like Šťastný, Holomek or Suková in a while. But what stuck in our memory is people’s distrust of the profession of lawyer. In other words, distrust of an expert whose job, according to the law, is to provide legal assistance and who has the obligation to perform his profession honestly, conscientiously and decently.
How do lawyers actually “succeed” in embezzling money? Their crime is based on the trust that their clients feel in their lawyers, which they then abuse in their transformation into criminals. At the same time, they say to themselves: “We will pay from something else, we will have additional income.” But the catch is that this is not true. The shortage of these fraudster lawyers keeps growing and eventually it becomes so fat that one day the chain of debt and lies will burst. This is such a Ponzi scheme.
Nine years for a quarter of a billion
Our office tried to get the money back from one such. Sometime in 2011, a client approached us saying that he had deposited a hundred thousand in safekeeping with a certain lawyer from Zlín named Holomek. But he did not settle the matter and did not return the money kept. Immediately it turned out that JUDr. Holomek is behind the biggest embezzlement of client money in the history of the Czech legal profession.
In a few years, he embezzled almost a quarter of a billion crowns from his clients. We found out from the public file of the insolvency administrator that the account where the client sent the money, JUDr. It didn’t even belong to Holomek. There was nothing to be surprised about, the bailiffs seized all his accounts, but the lawyer continued to do business and took money from people for safekeeping and as a reward for legal services.
Holomek’s money went to an account that belonged to the Zlín lawyer at the time, who, to our surprise, led the execution against him, so she knew that he was unable to pay his debts. She collected the money and gave it to him in cash, charging a fee for it. Thanks to this vicissitude, we recovered several million for the clients, because it was unjust enrichment. However, the vast majority of the money was never returned to the victims.
The local police investigated the case for more than a year, in custody JUDr. Holomek was not, the lady colleague helped him selfishly. After the misappropriation of the clients’ money, the country failed, neither the public prosecutor nor the court thought of prosecuting his colleague for damaging or favoring the creditor as an accomplice. As late as 2015, Holomek was free and “helping” people, allegedly with the aim of paying off debts. In 2016, he went to prison for nine years, but his colleague was acquitted by the court and continues to practice law today.
At most once every 10 years. Or more often?
The Czech Bar Association responded by stating that a few years after the announcement of the accusation against JUDr. Holomka introduced a central deposit book and the rule that each deposit must be in its own separate account. It also introduced notification obligations for lawyers and began to control the fulfillment of these obligations. Any administrative or other partial misconduct is severely punished in disciplinary proceedings.
That’s all well and good, but it still doesn’t stop lawyers from embezzling client money, nor does it discourage them from doing so. Miloš Vlasák – 65 million, Marian Šťastný – 84 million, last year Hana Suková went to prison – the damage from her embezzlement has so far reached 153 million crowns.
In 2017, the Financial and Analytical Office of the Ministry of Finance notified Hana Suková’s chamber about the fact that it was violating its obligations and withdrawing stored money. The Chamber sent an inspection, first one, then another, and found nothing.
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The Suková case forced the chamber to take further measures this year. At first, it was the obligation to immediately report the termination of custody in the electronic custody book and to offer clients custody with the possibility of tracking movements on the custody account via mobile phone and immediate notifications about movements. This is a good measure because in the case of monetary transactions, time is of the essence and is very short.
The chamber should do more
In most cases of embezzlement, it is obvious that the thief turned colleagues into an opportunity. Which in no way excuses them, but it does offer us an answer to the question of what the problem is. Is it, as the President of the Bar Association, Robert Němec, claims in response to the recent Suková case, only the failure of individuals? Clients can avoid harm by going to lawyers with integrity and good reputations. That’s probably what they’re trying to do now, isn’t it?
For example, both Suková and Holomek were very experienced lawyers with excellent reputations. JUDr. At one time, Holomek was in the bodies of the bar association itself, he was even a member of the control board. The gardener’s goat, one would like to say. Of course, in cases of embezzlement by lawyers, it is the failure of individuals, and out of tens of thousands of escrows annually in the Czech Republic, embezzlement has occurred in only a few per thousand cases. But this is a misleading statement in a way, because in this sense every crime is a failure of the individual. If the police chief made such an argument about the homicide statistics, it certainly wouldn’t sound right to us.
However, the regularity with which embezzlement occurs despite the Chamber’s measures suggests that this is a systemic problem and that it will continue to occur in the future. There are roughly thirteen thousand lawyers, the competition is great. We have high inflation here, and the attorney’s fee rates, which are supposed to finance both ex-offo defenses and private law disputes, are ridiculously low. There is no improvement in this current situation.
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When you read over ten years of information about embezzlement between colleagues, you keep asking why the Chamber does not solve the problem in other ways. Above all, why doesn’t he focus on the damaged clients and regain public trust. It is obvious that the person who is most affected by the matter is the client, because it is not possible to insure against the embezzlement of the lawyer and in the vast majority he will remain uncompensated. Hana Suková, for example, has no traceable assets. The embezzled money was also not found at Holomek.
It is shocking and very sad that the injured clients do not receive even an apology. I know this is very difficult and a big problem for the chamber, but I expect much more from my state organization. Above all, in relation to victims of lawyers’ criminal activities.
A path to compensation
How do chambers abroad solve these problems, preferably to the west of our borders? The chamber did not tell us that either. We do know, however, that she requested embezzlement insurance, a kind of liability insurance. And guess what – she didn’t find any.
According to the media, the Chamber was considering a solidarity fund for victim compensation, but it is said that in the end it would be paid by the clients, because the lawyers would charge them the contributions to the fund for individual deposits, thus making the service more expensive. If the new measures on the side of lawyers’ duties do not take effect, they will return to that idea.
I consider such a fund a necessity. It will provide a spread of risk and if the contribution was shared between the client and the lawyer, it would be a tolerable burden. For example, this year the total number of attorney deposits is around 50,000. If the levy into the fund amounted to one thousand crowns for each deposit, we would fill the fund with fifty million crowns in a year. In addition, it can be expected that as soon as the real estate market recovers, the number of escrows will again grow rapidly.
For example, with each payment to such a compensation fund, we lawyers will realize that we are a self-governing organization where the interest in the good name of the legal profession is a concern of each of us.