Law Practices at risk of losing client money, and their reputation

The recent sentencing of Victorian paralegal Athena Razos to over five years in prison for embezzling $1.56 million from a prominent Australian law firm has sounded alarm bells across Victoria’s legal community. This incident underscores the critical vulnerabilities within law practices regarding the hiring and oversight of non-legal staff. The Victorian Legal Services Board and Commissioner (VLSB+C) has taken this opportunity to issue a stern warning to law practices about the importance of conducting thorough background checks and maintaining vigilant supervision over all employees.

Razos, who worked at the firm’s Melbourne office from 2013 to 2017, managed to execute over 100 fraudulent transactions by exploiting her knowledge of the firm’s accounting systems. Shockingly, she had prior convictions for similar offenses, including theft and fraud from another law practice. Despite this, she was able to secure and misuse her position within the firm, leading to significant financial and reputational damage.

In response to this breach of trust and security, the VLSB+C has taken steps beyond just the criminal sentencing. They have disqualified Razos from working as a lay associate in any law practice, reinforcing the necessity for law firms to rigorously vet potential employees.

The VLSB+ C also highlighted the essential need for robust internal processes for supervising staff, especially those handling trust money. Law practices with trust authority should never delegate their trust responsibilities and must manage their trust accounts in strict accordance with statutory requirements. This incident not only highlights the risks to client funds and firm reputation but also casts a shadow over consumer trust in the legal profession, underscoring the broader implications for practice management and ethical operations within the industry.

The Victorian regulator also took the opportunity presented by this case to reiterate the professional and ethical obligations of principals in law practices to be effective supervisors. This includes adhering to guidelines laid out by the VLSB+C, ensuring they are not just familiar with but are proactive in implementing effective supervision of all staff, including newly admitted lawyers. This case serves as a cautionary tale for law practices everywhere, illustrating the severe consequences of inadequate hiring practices and supervision.

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