Trust is a solicitor's most valuable asset. By stealing clients' properties and using them to extract €52 million from the banks – a scheme that amounted to the biggest fraud ever to come before the Irish courts – Thomas Byrne abused that trust so thoroughly that the aftershocks of his crime will ripple widely through the profession. The damage Byrne has done to solicitors in general, as Judge Patrick McCartan remarked yesterday, "must be considerable".
It was doubtless with that in mind, and with an eye to the serious questions that fall to it as the representative and regulatory body for solicitors, that the Law Society’s public statements yesterday focused heavily on the steps it took to shut down Byrne’s practice and compensate his victims.
Whistleblower complaint
In an email to solicitors last night, Law Society president John Shaw said it took two working days from a whistleblower complaint of forgery being made to Blackhall Place on October 18th, 2007, to the Law Society completing initial investigations and changing the locks of Byrne's Walkinstown practice.
Taking into account the compensation it has paid out (€7.2 million) and costs of external legal and accountancy services (€1.1 million), Byrne has cost the profession €8.3 million – making it by far the largest amount the society has had to pay to the clients of a dishonest solicitor.
Yet the level of compensation given to Byrne's victims is one of several questions raised during and since the trial. As Det Sgt Paschal Walsh, the senior investigating officer, told the court yesterday, compensation was not paid to Byrne's clients but directly to their new solicitors so as to cover the legal fees they incurred in trying to get their houses back.
Opportunity cost
Some victims feel aggrieved that they have not been compensated for the large amounts of money they lost as a result of their properties being tied up in the courts for five years. In one case, a house that attracted an offer of €430,000 in 2007 was eventually sold for €190,000 earlier this year.
In response, the Law Society says its compensation fund is a statutory scheme that by law cannot compensate for consequential loss. It says it does not know of any compensation scheme in any other sector in Ireland, or any lawyers' scheme in the world, that would cover such losses.
As to whether the society owes Byrne’s victims an apology, it says that all the fraud, forgery and theft were Thomas Byrne’s, adding: “It is he who should apologise.”
A separate issue is whether the Law Society should have uncovered the problems in Byrne’s practice earlier. In the witness box, Byrne said the Law Society was aware of problems at his practice from 2004 and had him under “constant monitoring”, including by inserting an accountant into his office for two years before it was closed down.
He said this began when it came to the society’s attention that the same properties were being used as security for loans from different financial institutions. This is rejected by the Law Society, which says Byrne is “a proven liar” and that all these assertions are false.
It was known that there were problems at Byrne’s practice. He appeared before the solicitors’ disciplinary tribunal in 2006 after a Law Society investigation found a deficit of €1.7 million in his client account.
The tribunal found him guilty of misconduct and fined him €15,000 but did not recommend that he be struck off. Given that Byrne was clearly on the Law Society’s radar, should it not have detected the large-scale fraud that was going on at his practice?
Poor bookkeeping
In response to questions from The Irish Times, the society said that because of his "very poor standard of bookkeeping", the society did place a special requirement on Byrne from May 2006 to submit two monthly accounts reports. These reports never showed a deficit. "In October 2005, two investigating accountants did investigate Byrne's practice; however, there was no evidence of fraudulent multiple mortgaging," the statement said.
The society says that since discovering Byrne’s crimes, it has taken steps to strengthen its own regulations. New rules have been adopted which, for example, restrict solicitors giving undertakings to financial institutions for their own transactions, which should make it more difficult for crimes such as these to be committed in future.
But it also insists no regulator can know everything that happens in every solicitor’s practice in the country.
“In relation to the fraudulent transfers committed by Byrne, these are almost impossible to discover in the absence of a client complaint being made to the Law Society.”
