BILL NUMBER: S9129
SPONSOR: BYNOE
 
TITLE OF BILL:
An act to amend the judiciary law, in relation to directing the chief
administrator of the courts to develop and implement a random audit
compliance program to conduct periodic audits of law firm financial
accounts; and to amend the state finance law, in relation to the funding
of the random audit compliance program
 
PURPOSE:
The purpose of this bill is to establish "The Random Audit Compliance
Program". Preserving identity of funds and property of others; fiduciary
responsibility; commingling and misappropriation of client funds or
property; maintenance of bank accounts; record keeping; examination of
records. This program has three main purposes.
Education. The central purpose of the program is to educate New York
attorneys on the proper method of compliance with the record-keeping and
ethical responsibilities under Court Rule 1.15(d) and Rule of Profes-
sional Conduct 1.15.
Deterrence. Just knowing that there is an active auditing program is an
incentive to keep good records and to avoid temptation to misuse trust
funds.
Detection of misappropriation. The random selection process will help
the state uncover lawyer theft.These cases will be investigated and
prosecuted in accordance with the rules, regulations, and procedures of
the respective Judicial Department where the suspected violation or
violations had taken place.
 
SUMMARY OF PROVISIONS:
Section 1 of this bill adds a new section (section 212-a) to the New
York State Judiciary Law, which would direct the chief administrator of
the courts to develop and implement a state-wide "random audit compli-
ance program" ("the program") to conduct periodic audits of law firms
that engage in the private practice of creating and managing Real Estate
Escrow Trust Accounts within the State of New York.
Section 2 of this bill would direct the chief administrator of the
courts to consult with the office of information technology services
director, or the director's qualified designee, to develop and implement
a software program that will be used to randomly select law firms for
such audit. The software program selection process must ensure that
every law firm, regardless of size, has an equal chance of being
selected for an audit. No law firm shall be selected for a random audit
under this law, within a five-year period from the most recent random
audit selection of such law firm.However, this law shall not limit the
ability to audit a law firm for cause during that same five-year period.
This section goes on to grant the chief administrator the authority to
enter into an agreement to license for use, an existing program provid-
ing such capability.
Section 3 of this bill establishes that if a law firm happens to have
more than one location within the state, the audit would include all
such offices within the firm.This section adds a provision which breaks
down what would be collected from a law firm during an audit under this
program, there being one or more auditors permitted to perform the
audit, who is eligible to represent the company during the process of
such an audit, and the rules and procedures which the auditors must
following during the audit process.
Section 4 of this bill would direct the chief administrator of the
courts to establish the random audit compliance program within the
office of the lawyers' fund for client protection, which shall coordi-
nate with the chief administrator to implement this program.This section
also allows the board of trustees within such office be responsible for
the hiring of auditors, provided that each of these auditors possess an
appropriate advanced degree and/or certification for the role, as deter-
mined by the board of trustees and in conjunction with such authorities
hiring procedures and criteria which predate the effective date of this
legislation.However, the board of trustees will still retain the author-
ity to alter or amend such criteria, as they see fit.
This section goes on to grant the chief administrator additional author-
ity to promulgate rules and regulations to implement the provisions of
this section and defines the terms "law firm" and "firm" within the
context of this bill.
Section 5 of this bill would establish that this program be funded by
moneys within the lawyer's fund for client protection.
Section 6 of this bill would establish the effective date.
 
JUSTIFICATION:
In 2025, a former real estate attorney was sentenced to up to ten and a
half years in prison for stealing a combined total of $1,791,600 collec-
tively from 32 of his clients, between March 2021 and November 2024.He
committed these thefts by withholding sale proceeds or down payment
funds from those individuals. Cases such as that one are not a new
occurrence. A recent report released by Newsday found that since New
York State established the "Lawyers' Fund for Client Protection" in
1982, more than $112 million in stolen real estate escrow money had been
reimbursed by the fund, to the victims of such a crime.
According to a 2025 report produced by the New York City Bar, New York
faces an upward trend in trust violations, with the Lawyers' Fund paying
out 94 awards totaling $11.6 million in 2024-a 31% increase in the
number of awards and a 90% increase in payouts from the previous
year.The New York City Bar continued that in 2024, real property escrow
losses accounted for $9.9 million in awards, while theft of settlement
proceeds accounted for another $415,476. In comparison, New Jersey (with
about one-fifth of the number of attorneys as New York) paid $1.1
million in client protection awards over a 12-month period.
Since 1981, The Supreme Court of New Jersey has operated their own
program for random audits of attorney trust and business account records
to determine compliance with New Jersey's recordkeeping rule, R 1:21-6,
and ethics rule RPC 1.15 ("Safekeeping Property").Since New Jersey began
this program, several other states have taken up similar legisla-
tion.These being: California, Connecticut, Delaware, Iowa, Kansas, North
Carolina, Vermont, and Washington State. Some examples of these states
that have proven this program to be successful.
New Jersey has completed over 18,000 audits since first enacting the
program in 1981. Only 4.5% of these audits referred for discipline due
to the nature of the violation. Connecticut saw a drastic improvement
in compliance rates, with the percentage of audits requiring no correc-
tive action increasing from 14% in 2017 to 30% in 2024.
 
LEGISLATIVE HISTORY:
New Legislation hundred eightieth day after it the addition, amendment
and/or the implementation of this act and completed on or before such
 
FISCAL IMPLICATIONS:
None to the state.
 
EFFECTIVE DATE:
This act shall take effect exactly on the one shall have become law.
Effective immediately, repeal of any rule or regulation necessary for on
its effective date are authorized to be made effective date.

Statutes affected:
S9129: 212 judiciary law, 212(2) judiciary law