Most estate planning attorneys go into the practice area because they are ethical and caring individuals who enjoy helping people. However, whenever any professional, an attorney, a financial advisor or a CPA, asks clients to transfer money to them personally, this should be a warning sign.
An estate planning attorney from Wisconsin is now facing 33 federal charges from fraudulent activity, including stealing millions from two wealthy clients. Sarah E.K. Laux had an estate planning firm and an insurance agency. She targeted older, wealthy clients through seminars and free luncheons.
For several years, there were complaints that her estate plans were not very effective. However, it was the alleged theft of nearly $3 million that landed her in trouble with federal investigators. Two of her wealthy clients claimed that she converted their money for her own personal use.
Apparently, she would convince her elderly clients to transfer their money to her so she could invest in annuities supposedly offered by her insurance business. However, she spent the money on herself. Laux was indicted on 33 charges and has agree to plead guilty to five of them, one count each of bank fraud, mail fraud, wire fraud, money laundering and filing a false tax return.
The Milwaukee Wisconsin Journal Sentinel reported this story in “Estate planning lawyer facing prison in fraud plea deal.”
While the overwhelming majority of estate planning attorneys are honest and work in their clients’ best interests, there are bad apples such as Laux that people need to watch out for.
It is not uncommon for estate planning attorneys to provide their clients with financial advice, and some attorneys even hold active securities licenses. State Bar of California Formal Opinion No. 1995-140 states that a lawyer ethically may advise a client to purchase insurance and also to accept compensation from the insurance agent for the referral if the lawyer: (1) makes a full disclosure in writing of all the relevant circumstances surrounding the referral arrangement and all reasonably foreseeable consequences to the client form the arrangement, (2) obtains written consent from the client; and (3) competently advise the client of the circumstances.
One big clue that Laux was not on the up and up that her clients missed was that she was also running an insurance company and asking her clients to invest with it. It is always advisable to seek a second opinion if an attorney requests that you invest in a business he or she owns. The attorney cannot give you unbiased legal advice about investing in her own business.
Reference: Milwaukee Wisconsin Journal Sentinel (September 27, 2015) “Estate planning lawyer facing prison in fraud plea deal.” THE STATE BAR OF CALIFORNIA STANDING COMMITTEE ON PROFESSIONAL RESPONSIBILITY AND CONDUCT FORMAL OPINION NO. 1995-140 (1995)