Surrey Lawyer Suspended for Failing to Recognize Mortgage Fraud

[Wetcoaster]

The Law Society of BC has sent a clear message that lawyers must actually look at the transactions they are involved with, not just push paper.

A Surrey lawyer has been suspended for being duped in a mortgage fraud scheme.

Sanjeev Sanj Rai was suspended for three months by the Law Society of B.C. for failing to recognize that a series of deals put together by a realtor, identified only by the initials S.K., between 2004 and 2005 amounted to mortgage fraud.

The scheme involved property flips of over-valued the properties.

The law society concluded after a hearing that Rai "ought to have known" the scheme was fraudulent because the transactions had a number of similar characteristics, including the real estate agent acting for both the seller and buyer.

Stuart Cameron, the law society's director of investigations, called Rai's actions "serious misconduct."

"The Law Society requires that lawyers be on guard and avoid being used or taken in by fraudsters," Cameron said in a statement.

As part of the disciplinary action, Rai must tell all his clients about the suspension. He also has to pay part of the $11,500 cost of the Law Society's investigation and discipline process

"The suspension is designed to send a message to this lawyer and all other lawyers in the province that this conduct will not be tolerated, and will result in action being taken to protect the public" Cameron said.

A citation of alleged impropriety was issued by the law society in June 2009, which listed a dozen real estate transactions.

The law society plans to issue a written ruling on the discipline imposed on Rai, who has been practising law since 1993.

Lawyer Amrik Mattoo has taken over Rai's law practice while suspended.

http://www.vancouversun.com/business/Surrey+lawyer+suspended+involvement+mortgage+fraud/3947129/story.html#ixzz17Z77PV9u

It can easily happen if lawyers do not stay on their guard. In fact it nearly happened to me shortly after I finished my articles and was called to the Bar. I was approached by a businessman who had been a client of the firm at which I had articled. I had done some securities work involving his companies so I knew him.

He asked me to meet with his wife and give her independent legal advice regarding a guarantee that the his bank was asking for to back up multi-million dollar loan and revolving line of credit for his business. Pretty standard stuff for a lawyer.

He brought his wife in the next day and I asked him to wait outside while I went over the bank documents with his wife. I explained to her that she was in effect on the same ground with her husband in the event of default and the bank could call the loan and execute on her guarantee. She assured me that she fully understood the risks. I was about to complete the "Certificate of Independent Advice" when I asked her for her identification - although I knew her husband I had never in fact met her before. She claimed to have no ID with her which was strange as she had her purse. I pressed and she finally admitted that she was not in fact his wife but someone he had hired to play the role.

I threw them both out of my office and immediately called a senior Bencher of the Law Society for advice on how to proceed. What were my obligations? Was there a solicitor-client relationship between myself and the "wife"? What about the husband? The Bencher said he was going to check with a couple of other senior lawyers. He did and called me back shortly stating that it was their opinion that because of the attempted fraud practised upon me no solicitor/client relationship had been formed and I was free to act howsoever I saw fit. I asked him to fax me a letter confirming the advice which he did. I then contacted the regional Loans Manager for the bank and told him what had occurred. He was much appreciative and I ended up doing a fair bit of work with the bank in future transactions.

Had I not asked for ID and simply signed the certificate, I would have been exposed to full liability. Can you imagine trying to recall the facts of minor transaction months or even years down the road when the real wife said hey that's not my signature???

My neck would have been on the chopping block and while I would have been covered by professional liability insurance I would have paid a large deductible and my future insurance premiums would have gone up sharply. And I would certainly have expected to have been called before the Law Society to answer for my conduct.

From that point on for any and every document I signed for non-clients, I always demanded government issued photo ID that I copied and kept in a general file along with the certificate or other document. You cannot be too careful. It is a tale I tell to young lawyers and law students when I am lecturing on law office management and legal ethics.

And people wonder why the practise of law is considered a high stress occupation.