Compensation fund left depleted by rising fraud

CONTRIBUTIONS: scams leave solicitors facing fees hike

The amount the profession contributes to the Solicitors Compensation Fund should be doubled to compensate for fraud, the Law Society's Council will be told this week.The Society's investigation and enforcement unit (IEU) - which was set up last year to investigate and deal with serious misconduct - will also call for a review of the fund when it presents its report to council.

The report shows that over the past four years the fund's reserves have dropped by 13 million to 40 million.

It expects to pay out 22.5 million for the year 2001.

If this trend continues, the overall value of the fund will fall below that of its gross liabilities, the IEU said.

It suggests that the problem is down to large-scale frauds, and in particular, last year's Brandons case - where the client accounts of 13 firms were brought together to maximise the amount available to steal.

The fund has paid out almost 8 million, with 3.5 million worth of applications still under consideration.However, novel frauds are increasingly rearing their heads, the report warns.

In one case it highlighted, 15 million of client money was taken to provide loans for commercial mortgages in a scheme which would have cost up to 30 million had it collapsed.

The IEU argues that to cover liabilities, contributions should rise from 200 to 400 for solicitors applying for their seventh or subsequent practising certificates, and to 200 for those applying for the fourth, fifth or sixth time.The IEU review of the scope and operation of the fund would benchmark it against similar arrangements applying to other professional and quasi-professional services.Paula Rohan