ST. LOUIS – A recent 8th Circuit Court of Appeals ruling may put more pressure on legal associations and banks to reign in accounts that lend themselves to illegal activity by lawyers, a researcher says.
The court upheld a lower court's summary judgment in a case that included 69 plaintiffs. The plaintiffs called into question the actions of the St. Louis Bank in the Ponzi scheme of local lawyer Martin Sigillito.
Sigillito has already been found guilty of using investors' funds for his personal gain, and the courts have vindicated the bank of any illegal activity despite holding several commercial accounts for him.
One researcher at the Association of Certified Fraud Examiners said this ruling was helpful in determining how courts view banks’ responsibilities.
“It sort of sheds some light on what kind of conduct by a bank would constitute conspiracy to sort of engage in this fraudulent activity that he was engaging in,” Jordan Underhill told The St. Louis Record. “The court says, 'No. They didn't know about this.’ Their level of conduct didn't rise to that level that they were actually conspiring with him or aiding him in any way.”
Underhill also said he believed the types of cases would put pressure on legal groups to curb accounts that allow easy mingling of clients' money such a lawyer trust accounts.
“There has actually been a few instances at least where lawyers have used these accounts to launder money, either into the United States or out of the United States, because it is difficult to track the source of the money.
“It is possible that in the future, pressure will build on for example, the American Bar Association to do something more about interest on lawyers trust accounts because these accounts basically there is very little regulation around them and that is one of the reasons why they are an attractive resource for people looking to engage in illegal conduct.”