The California State Bar is once again facing criticism over mismanagement and misspending – this time, state auditors say the agency is overpaying its employees, all while the bar's fund to repay victims of corrupt lawyers is millions of dollars short.
The California legislature created the public agency 89 years ago to protect consumers from dishonest attorneys, however, a recent state audit is highly critical of the bar, citing a “lack of transparency" and “inappropriate financial decisions” that the agency tried to keep hidden from lawmakers.
The agency’s largest expense includes salaries for its more than 500 employees. Top executives at the bar get paid far more than other state employees in similar positions. In fact, 13 employees at the bar, including Executive Director Elizabeth Parker, receive bigger salaries than Gov. Jerry Brown.
Parker was brought in last year to reform the bar. Critics, however, say new leadership over the years has never been enough to turn around the beleaguered agency. For her part, Parker says salaries at the agency are comparable to what is offered at other state bars, and adds changes won’t be made overnight.
“It may not be correct to assume that there is just a one-size fits-all set of pay structures throughout California,” Parker said. “That, in fact, is not the case.”
Parker, who received a $32,500 housing and moving allowance in 2015 and 2016 and an annual salary of $267,500, is one of three top executives at the bar who were brought in last year to help transform the agency after years of harsh criticism from lawmakers, state auditors, and government watchdog groups. The governor makes $182,784.
“We have challenges, there’s no question,” Parker said. “We've got the right team in place…to really make some of the changes that are needed and that have long been mentioned.”
State Bar Offers Employees Pricey Salaries, But Can’t Afford to Pay Victims
Critics believe it’s hard to justify those employee salaries when the bar can’t even afford to carry out its own basic responsibilities. The state bar has a fund to pay back clients who were ripped off by dishonest attorneys. That fund, however, is dangerously low.
According to a May 2016 state audit, “not only did [the California State Bar] fail to take steps to address the problem or to communicate the fund’s true financial situation, it did the opposite.”
The Client Security Fund totaled $2.2 million last year, but the bar needed $18.9 million to pay out its backlog of claims – that’s a shortfall of $16.7 million.
The audit also determined the bar tried to keep that gap hidden from state lawmakers, even though the lack of funds doubled the amount of time it took to process consumer claims. Victims, including those who were overcharged by attorneys or defrauded out of money or property, are now forced to wait up to five years before they receive compensation from the state, according to the audit.
“That’s a real concern,” Parker said. “It’s been a concern from the minute I learned about it.”
The bar has since transferred $2 million into the fund from other resources, but Parker says a long-term fix might mean raising annual membership dues for attorneys throughout the state. Currently, fees total nearly $400.
“But we don't want to make that request before we're certain that every dime we spend and, indeed, every charge we make is calibrated with public protection in mind,” Parker said.
Private consultants have been hired to study the bar’s spending, including employee salaries and benefit packages. Those findings are scheduled to be released on Oct. 30, but Parker maintains the bar has already taken steps to reduce wasteful spending. The agency’s 2016 budget reflects a 29 percent decrease in travel and a 24 percent drop in catering, representing a savings of $1.5 million, according to an analysis by the State Assembly’s Judiciary Committee.
In written responses submitted to the California State Auditor, the bar said it agreed with many of the findings and described the audit as a “balanced analysis of the myriad of issues facing the State Bar.”
The agency, however, did criticize the report for not making “a clearer demarcation between past management issues faced by the State Bar and the efforts of new leadership” over the last seven months. The bar also rejected the assertion that it attempted to conceal the lack of money in its victims’ fund, arguing that information was “reported to the Board of Trustees via public board reports.”
State Bar Acknowledges Long History of Problems
Earlier this month, the bar released its own 57-page report highlighting recommendations on how to “enhance the protection of the public.” The report also acknowledged the bar’s own sordid history, saying “the problems at the state bar are not recent in origin: indeed, decades of studies, reports and statutory provisions reflect efforts to reform the state bar, most with only modest impact.”
The bar’s report, however, should have been completed and released to the public two years ago. In 2011, the California legislature instituted a requirement that the bar complete the analysis every three years, beginning with an inaugural report in 2014.
“I Have to Thank That News Report”
In May, the Investigative Unit revealed how the bar was accused of failing to keep watch over some of the state’s worst attorneys. In trying to clear its backlog of consumer complaints against attorneys, the bar allowed some lawyers to continue practicing, even though they should have been disciplined or disbarred,” according to another state audit released in June 2015.
“I have to thank that news report,” said Assemblyman David Chiu, D-San Francisco.
Chiu says reporting by the Investigative Unit pushed him to co-author legislation to reform the California State Bar.
Chiu is now calling for a larger percentage of non-attorney representation on the state bar’s Board of Trustees by reducing the number of attorney members. Chiu also supports enlisting an independent enforcement monitor, appointed by the Attorney General, who would watch over the bar.
“Through scandal after scandal, [the state bar] has shown that they are not focused on its core mission, but instead spending monies in all sorts of different ways that I think are abusing its public responsibility,” Chiu said. “We've been finding out there's a lot that's crawling underneath the surface that is not what it should be.”
Chiu is also pushing to create a commission to study whether the bar should split into two separate organizations, since it currently serves as both a trade group for lawyers, as well as a regulatory agency that is supposed to discipline attorneys.
“We would separate those two functions, as is the case for every other major profession in the state of California,” Chiu said.
“The Foxes are Guarding the Henhouse”
While most states across the country share a similar bar structure to California, 18 states, including Colorado, Illinois, Massachusetts, Minnesota, New Jersey, New York, Ohio and Pennsylvania, have non-unified bars, according to an analysis by the Assembly’s Judiciary Committee. Those states have private trade associations, which are not regulated by the state. California should follow the lead of those states to eliminate an inherent conflict of interest, reform advocates say.
“The foxes are guarding the henhouse,” said Ed Howard, Senior Counsel for the Center for Public Interest Law, a non-profit group that serves as a watchdog for government boards and agencies.
“What we need is a state bar that doesn’t have conflict of interest baked into the very fabric of its DNA,” Howard said. “That’s when we’ll start to see a real change in the state bar’s behavior, but until then it’s just a scandal machine.”
Parker won’t say whether she supports the idea of dividing the state bar, but acknowledges the agency’s notorious legacy of dysfunction and questionable financial decisions.
“I guess I'd say that I think we're turning this ship around,” Parker said. “I think we're going in the right direction…it is a big ship and it won't turn in a day.”