B.C. lawyer suspended for misconduct after employees stole $7.5M in client funds

Scales of justice. (Shutterstock)

Vancouver -

A Richmond, B.C., lawyer has been suspended from practicing for one year as a result of actions she took in 2016 after two employees stole $7.5 million she had been holding in trust for clients.

A hearing panel of the Law Society of B.C. suspended Hong Guo in a disciplinary decision issued this week. The panel had previously concluded that Guo had committed professional misconduct and misappropriated funds.  

The misconduct stemmed from failing to supervise her employees, failing to comply with trust accounting rules and leaving a series of blank, signed cheques with her bookkeeper while she was on vacation in March 2016, according to the panel.

The panel concluded that the misconduct allowed her bookkeeper - identified in the decision as JL - and another employee identified as QP to work together to steal the $7.5 million in client funds.

The two artificially inflated the balances of the trust accounts while using the blank, signed cheques to funnel money into a separate account, according to the panel's decision. They then took bank drafts from that account, cashed them at a B.C. casino, and flew to China with the cash, the panel said.

The bank caught the final cheque when it was cashed, according to the decision, meaning the thieves got away with roughly $6.6 million.

Guo was not aware of or involved in the theft, according to the panel, and after it happened she contributed $2.6 million of her own family's money to the trust accounts to help make up for the shortfall caused by the theft.

She told the panel she flew to China after the theft and hired investigators there to catch the thieves. She also testified that the pair had been tried and imprisoned in China for their alleged fraud and theft.

"We note that no evidence of any Canadian criminal charges against JL and QP was presented to the panel," the panel wrote in its decision.

"Further, no independent evidence was provided to the panel to show that JL and QP were convicted in China for the alleged offences. We take notice that China and Canada have different legal systems and that no evidence was presented to the panel to explain how the Chinese criminal system would have prosecuted individuals in China for alleged theft or fraud committed in Canada."

In addition to depositing her own money after the theft, Guo also reappropriated funds from other clients' trust accounts to replace missing funds that were needed to complete pending real estate transactions, the panel found. 

Though it was done with the intention of minimizing harm from the theft and ensuring the transactions could continue, the use of other clients' funds in this way constituted further misconduct, according to the decision.

"There are no circumstances where any encroachment upon those funds can be permitted," the panel wrote. "In our view, the misappropriation of client trust funds can never be found to be anything but professional misconduct."

The law society sought to have Guo disbarred for her misconduct, but the panel declined to administer that punishment.

Guo argued in her defence that the theft led to "exceptional circumstances" that explain and mitigate her misconduct. The panel agreed, noting three specific mitigating factors:

• First, she provided her own money to help make up for the stolen funds.
• Second, she misappropriated the funds out of a sincere belief that it was the right thing to do given the massive theft that had occurred.
• And third, most - if not all - of the clients affected by the theft were eventually "made whole" through a combination of Guo's personal funds and insurance payments.

"To be clear, we do not condone the respondent’s actions in this case," the panel wrote. "However, for the purposes of deciding whether the presumptive sanction of disbarment should apply in this case, we find that the three circumstances viewed collectively amount to exceptional circumstances that explain and mitigate against an order of disbarment."

The panel also noted that Guo is currently practicing under the supervision of another lawyer and does not have access to trust accounts.

Guo's suspension will begin on Dec. 1, according to a news release from the law society.