Bar Counsel’s Message

Turning the Fiduciary Relationship on its Head: Fiduciary Misconduct and Lawyer Discipline

WITHIN THE LAST TWO YEARS, disciplinary tribunals have suspended or revoked at least nine attorneys’ licenses to practice law in the Commonwealth of Virginia for ethical misconduct committed while the lawyers served in a fiduciary capacity. In some cases, the lawyers exploited, instead of protected, individuals the lawyers agreed to protect. In all cases, the lawyers abused the trust and confidence reposed in them by the principals. The lawyers’ misconduct harmed not just those they agreed to protect, but the profession at large.

“When an attorney assumes the responsibility of acting as a fiduciary and violates his or her duty in a manner that would justify disciplinary action had the relationship been that of attorney/client, the attorney may be properly disciplined pursuant to the [Virginia] Code of Professional Responsibility.”1 See also Comment 5 to Rule of Professional Conduct 8.4, discussing lawyers’ abuse of positions of private trust, including as trustees, executors, administrators, and guardians, as indicative of an inability to fulfill the professional role of attorney.

The Rules of Professional Conduct at issue in these cases implicate serious— and sometimes criminal— conduct, including the duty not to disburse, use, or convert funds or property of a client2 without their consent, and the duty not to commit criminal or deliberately wrongful acts.

Lynchburg attorney Cherie Washburn4 consented to revocation of her license based on allegations that she had misappropriated substantial funds that she held as a fiduciary for the benefit of an elderly ward.

Fairfax attorney Clifford John Shoemaker5 held the power of attorney for an 86-year old woman suffering from dementia. Shoemaker deposited $142,506.82 in life insurance proceeds for her benefit into his trust account and then used $57,000 to pay his credit card bill. Shoemaker altered his bank statements to conceal his misappropriation. After initially claiming he was not charging the client a fee, Shoemaker billed his client $30,450 in legal fees. Shoemaker eventually repaid the money. He was charged with felony embezzlement and pled nolo contendere to a reduced charge of misdemeanor embezzlement of less than $500. Shoemaker was sentenced to a 12-month jail sentence with 12 months suspended. Shoemaker consented to revocation of his license in February 2020.

Norfolk lawyer Philip Farthing6 served as the trustee for a set of related trusts. The trust beneficiary sued him for breach of fiduciary duty and sought his removal as trustee. The Circuit Court for the City of Chesapeake removed Farthing as trustee and later found, after a bench trial, that Farthing was liable for $1,382,653 for breach of fiduciary duty and $770,471.33 for unreasonable fees. The Supreme Court of Virginia refused Farthing’s appeal. Farthing consented to revocation of his license in January 2020.

A three-judge panel suspended the license of Manassas attorney David Wilks7 who transferred $11,000, which he held in trust for a blind, disabled client, to his personal account. Wilks created a revocable trust for the benefit of, and held the power of attorney for, this disabled client. The trust made monthly payments into a bank account, which Wilks managed. Throughout a six-month period, Wilks made 17 transfers totaling nearly $11,000 from his client’s account to his personal account. Wilks periodically repaid some of the client’s money. Wilks was not honest with his law partners when they confronted him about the transfers. It was not until the partners pressed the issue that Wilks admitted what he had done and fully repaid the client.

Loudon County attorney James Christopher Chamblin8 consented to revocation of his license for misappropriating more than $850,000 from trusts for which he was trustee. Chamblin had repaid approximately $250,000 at the time he consented to revocation in October 2019. Chamblin represented that depression was a contributing factor to his misconduct.

Most recently, effective November 17, 2020, the Disciplinary Board accepted Richmond attorney Bruce Matson’s9 affidavit consenting to revocation of his license. Matson served as the former liquidation trustee for the liquidation trust for LandAmerica Financial Group, and then as wind-down trustee. The bankruptcy decree prohibited Matson from disbursing funds from the trust until 2021. In 2019, Matson disbursed $1,000,000 to himself and $1,500,000 to another attorney who was assisting with the liquidation. A few months later, Matson disbursed an additional $341,000 to himself. He held the funds in an account in his own name. Matson maintained that he disbursed the $2,500,000 as “discretionary bonuses” and that the additional $341,000 was being held in escrow in his name. The $2,800,000 that Matson disbursed to himself and the other attorney were ultimately returned to the trust account.

We are a self-policing profession. “Every lawyer is responsible for observance of the Rules of Professional Conduct. A lawyer should also aid in securing their observance by other lawyers. Neglect of these responsibilities compromises the independence of the profession and the public interest which it serves.”

The mission of the Virginia State Bar is to protect the public. The Bar cannot effectively protect the public, nor can it ensure consistent discipline, if lawyers fail to report substantial misconduct for fear of damaging another lawyer’s reputation, or in hopes that someone else will report the misconduct.

Rule 8.3(a) requires a lawyer to report misconduct if they have “reliable information” that another lawyer has committed a violation of the Rules of Professional Conduct that raises a “substantial question” as to that lawyer’s honesty, trustworthiness, or fitness to practice law. Per Comment 3 to Rule 8.3, the term “substantial” refers to the seriousness of the possible offense and not the quantum of evidence of which the lawyer is aware.

Not every report has to be formal— when in doubt, call the Bar. Once reported, the VSB will thoroughly assess the concerns or complaint, and if necessary, investigate; not every report will result in discipline. Early reporting may prevent further harm. The Bar’s disciplinary procedure allows one-way, confidential reporting of concerns of depression, substance abuse, or cognitive impairment to Virginia’s Judges and Lawyers’ Assistance Program (Virginia JLAP). The Bar strives to be proactive.

The stakes are particularly high — and the obligation to report is critical— in cases where a lawyer misappropriates funds that he or she has been entrusted to safeguard. We must act to protect the integrity of the profession, for without the trust of the public and our clients, what do we have?