An Abbotsford lawyer has been suspended for 10 weeks for using a trust account to save funds – including $45,000 in $20 bills – and disburse them for the purchase and operation of a sawmill operation in Surrey.
The Law Society of B.C. approved the consent agreement on Feb. 15 involving Randle Howarth, who has been practising law since 1978 and as a sole practitioner since 1996. The suspension is effective March 15.
According to the consent agreement summary, there is no evidence that Howarth committed or facilitated any crime. However, the Law Society determined that his “misconduct is serious.”
The issue began in 2014, when a client of Howarth’s approached him about an opportunity to purchase a sawmill.
According to the documents, Howarth discussed the opportunity with others, and 13 investors gave him $25,000, which he deposited to his trust account.
A trust account is to be used for the deposit of payments from clients. The lawyer withdraws from the account as work is done and is billed to the client. Any unused funds are to be returned when the work is complete.
The sawmill began production in March 2016.
Between September 2014 and August 2017, Howarth used the trust account to receive and disburse more than $776,000, “in circumstances where no substantial legal services were provided,” the documents state.
Howarth used the trust account to directly pay for the sawmill’s expenses, as well as provide $200,000 to the operating company and to reimburse himself for payments which he had previously paid using his credit card.
The documents state that of almost $97,000 received from the investors, around $45,000 was paid in $20 bills.
No proof was provided that Howarth questioned the source of the cash, the Law Society stated.
“He was not, but should have been, aware that large amounts of $20 bills were understood by some to be commonly generated in illegal activities,” the agreement states.
The documents indicate that Howarth later became aware of an allegation that one of the investors was a drug dealer, but he “did not regard this allegation as credible and was not aware of any legitimate basis for it having been made.”
The documents state that, in total, Howarth invested more than $124,000 of his own funds in the sawmill venture to keep it afloat when the investors pulled out. The business ultimately failed.
The consent agreement states that Howarth acknowledged that he should not have accepted and deposited the cash for the sawmill to the trust account because the money was not received for professional legal fees.
The documents also state that he lied to the Law Society about several issues, including when he said he had not received more than $7,500 in cash into trust.
“The admitted misconduct is serious and engages several professional conduct issues,” the consent agreement states.
“While the conduct arises out of a single matter (the purchase and operation of a sawmill business), the specific instances of the admitted misconduct are repetitive and lengthy in nature.”