If a lawyer's nonlawyer employee steals from the trust account and the lawyer restores the funds, must the lawyer report it to clients or the bar?

Plain-English summary

The lawyer's receptionist forged checks on the lawyer's IOLTA account. The committee was unanimously of the opinion that where a lawyer learned that an employee had misappropriated client trust funds, and had immediately contacted the bank and had the missing funds replaced in the trust account, the lawyer had no ethical obligation to advise any of the clients, or any legal or bar authorities, of the employee's misconduct.

Currency note

This opinion was issued in 1985, before the 2006 revisions to the Washington Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Does a lawyer have to report a nonlawyer employee's theft from the trust account?

A: On these facts, no. The committee concluded that the lawyer had no ethical obligation to report the employee's misconduct to clients or to any legal or bar authorities.

Q: What had the lawyer already done?

A: The lawyer had immediately contacted the bank and had the missing funds replaced in the trust account after learning that the employee had misappropriated client trust funds.

Q: Did the lawyer have to tell affected clients?

A: The committee said the lawyer had no ethical obligation to advise any of the clients of the employee's misconduct, given that the funds had been restored.

Background and rules framework

The committee did not cite a rule by number. The questions it addressed, a lawyer's duty to safeguard client funds, to supervise nonlawyer staff, and whether a duty to report misconduct extends to a nonlawyer employee's act, are addressed today by Model Rules 1.15, 5.3, and 8.3 and their Washington counterparts. The committee's conclusion turned on the lawyer's prompt restoration of the funds.

Citations and references

Rules of Professional Conduct:

• The opinion cites no rule by number. It addresses safekeeping of client funds, supervision of nonlawyer staff, and the scope of any duty to report misconduct (now addressed by Model Rules 1.15, 5.3, and 8.3 and their Washington counterparts).

See also

• WSBA Ethics Op. 845: ownership of interest on a trust account
• ABA Formal Op. 04-433: reporting misconduct of a non-practicing lawyer

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=23

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 912
Year Issued: 1985
RPC(s):
Subject: Reporting of unethical conduct of employees to clients or bar authorities

The lawyer's receptionist forged checks on the lawyer's IOLTA account. The Committee was of the unanimous opinion that where a lawyer learned that an employee had misappropriated client trust funds, and had immediately contacted the bank and had the missing funds replaced in the trust account, he had no ethical obligation to advise any of his clients or any legal or bar authorities of the misconduct of his employee.