The Spring 2008 Managing Partner Advocate is in the mail.  Highlights include an interview with a managing partner from a Louisiana firm and an article from a tax attorney on the tax implications of a withdrawing member of the firm.  Like our past issues, the Spring '08 Advocate is full of articles focused on increasing income as well.

The Managing Partner Advocate is a complimentary publication for Juris (and soon PCLaw) clients, but is available for free to anyone requesting a subscription.  To be placed on our mailing list, please click here to send an email request.

Registered users to this blog may also download the Advocate from this site.  To download, please visit the downloads page by clicking here.  If you haven't already registered, it is free and gives you access to downloadable files and now the Managing Partner Advocate. 

We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here. 

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The Estrin Report is a great resource for paralegals and other legal support professionals.  The March 22nd post quotes a Maryland Daily Record article where an attorney has been suspended twice - TWICE - for mismanagement of client trust funds.  He never took one penny, however.  Instead, he was the victim of two consecutive bad hires.

The Maryland solo practitioner hired a paralegal, among other things, to manage a client trust account.  The paralegal, without oversight, embezzled nearly $150,000 before being caught.  After being disciplined, the attorney hired another paralegal to "clean up the financial mess left by " the predecessor.  This one took over $170,000 from his clients.

The attorney complained that he had several hundreds of cases he managed and was in court a lot.  "You’ve got to delegate things. You can’t be there to sign every check.”   

Whether these were paralegals or not isn't the point.  What is noteworthy is the exposure attorneys have, especially in small firms, when trusting unmanaged staff to control firm finances.  Embezzlement is more common than we'd like to believe.  (Admin charged with embezzling over $200,000 from firm; Bookkeeper embezzles over $400,000 from firm;  New Orleans firm dissolves after Chief Financial Officer embezzles $2 million;  Office Manager embezzles $700,000 from firm;  Bookkeeper accused of taking over $4.3 million from escrow accounts)  

Ignorance is no defense.  You can't spend all day watching your staff either.  “You’ve got to have some trust in your employees,” the aggrieved attorney said. “You pay them good money.”  In his case, you'd think a little skepticism would have been prudent.

What are some things that can be done to avert a would-be-embezzler?  Tom Collins wrote the following in his September 6, 2006 post:

First, select business software with built-in audit trails and controls. Remain alert to the reality that it can happen in your firm. Keep your eyes and ears open. Obtain professional assistance to implement appropriate internal controls including segregation of duties. Insist that employees take vacations on consecutive days under an arrangement where others assume their duties. Do not let a crisis take over and circumvent normal controls and procedures. Budgeting, comparative financial results, and detailed review and questioning of monthly financial statements are an essential function of law firm management and play a vital role in protecting and preserving the assets of the firm.

Scott Barrett wrote an article in 2004 that addresses ways to avoid being a victim of embezzlement.  Read it by clicking here.

 We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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Law is famously known to those who practice as the "jealous mistress" (I'm not sure how well this analogy works with the growing number of women attorneys).  The phrase adds a new dimension when used in association with virtual reality.   Davis, LLP, a Canadian firm made the focus of the cover story in the March 2008 Canadian Lawyer (New Frontiers), has set up real estate in a virtual world called Second Life.  Second Life, an online place where, according to the article, over nine million people live.  Second Life's own website claims the number is closer to thirteen million.  Thirteen million!  From there, two resident Davis, LLP attorneys can talk to prospective clients and recruit new lawyers. 

Says Pablo Guzman (PabloGuzman Little, for those reading this in a virtual coffee shop), an attorney with Davis:  "Lawyers go where their clients are or where they think they can get clients.  For us, Second Life is a great marketing tool and a recruitment tool." 

Thirteen million people.  I wonder if there are internet cafes in this place?  Would logging into the internet there peek back into reality, or look into infinity?

The world within the web doesn't end with Second Life.  Besides this blog, myriads of other lawyers are following Kevin O'Keefe's lead in starting blogs (www.lexblog.com). Vendors such as LexisNexis (Martindale Hubbell's blog) and Thomson West (westblog.net) have taken advantage of the running online dialogue.  And now a consortium of marketing consultants and lawyers have created the webspace known as JDSupra.com, where attorneys can share work product (documents) and market their services.  And, of course, there is Facebook.

But what is this "Web 2.0" anyway?  According to Tim O'Reilly, the term was coined at a conference brainstorming session after the dot.com crash.  Contemplating the future of the internet, the name was given as a way to mark the next generation of tools on the web.  For example, Web 1.0 used Brittanica Online for encyclopedic information; Web 2.0 uses Wikipedia.  Web 1.0 used personal websites for running online dialogue; Web 2.0 uses blogs.  Web 1.0 used creepy AOL Chatrooms; Web 2.0 uses creepy virtual worlds ("creepy" in a mystifying sense).

Thirteen million people.  In one large online world.  Can you afford to avoid real estate in this vast empty space?  I have not visited this world of Second Life, but I can only expect that there is no housing market crash or credit tightening going on - but then, I am probably wrong.  Surely virtual life imitates "real" life?

According to Mr. Guzman, Second Life "is not necessarily somewhere were we can practise law, because we do not practise law in cyberspace".   Perhaps not now.  But with thirteen million people walking like virtual zombies in a world conceived by code sentries, it surely is only a matter of time when independence is claimed, wars are fought, and lawyers are brought in to restore justice. 

The IRS isn't waiting for attorneys to set up shop.  Accoring to a May, 2007 CNN story, the IRS wants to tax profits made while inside Second Life.  The currency , the Linden, has an exchange rate and can be converted to US Dollars.  Where there is money, there is potential for disagreement.  And need for contracts.  And perhaps a lawsuit ensues.  

The pieces are there for the ability (dare I say need?) to practice law.  Maybe that comes with Web 3.0.

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In the coming weeks, there will be some new contributors added to the blog.  I met with several members of the Redwood Analytics team in Virginia today and am happy to announce that their expertise will be added to More Partner Income.

Redwood Analytics is a new acquisition to LexisNexis.  They focus on benchmarking and business intelligence tools for law firms.  They also have a staff of consultants who work with law firms to measure performance as well as provide granular analysis on both matter and attorney metrics.

The addition of Redwood's expertise to the blog will provide unique insight gained from experience in working with law firms in the large law segment that demand high levels of analysis related to the business aspects of their practice. 

Redwood also hosts a Think Tank, made up of law firm leaders.  From Redwood's website: 

[Redwood's Think Tank] is comprised of forward thinking industry leaders assembled to study and formulate cogent solutions to significant law firm management issues. Individuals are invited to join the Think Tank based on their demonstrated ability both to think strategically and to take action to promote change.

For more information on Redwood Analytics and the products and services they provide, please visit www.redwoodanalytics.com.

We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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I have suggested utilizing a non-equity partnership tier as a way to reward attorneys who are not yet ready for firm ownership.  Jim Cotterman has made an argument against it.  In my assessment, non-equity partnership can be a tier to place attorneys who excel in some things, such as working files, but don't have the skills to bring in new clients or matters or don't have the requisite discipline to be a firm owner.  Cotterman, however argues that non-equity partner tiers can end up being dumping grounds for the mediocre.

Cotterman cites a May 2006 study, An Empirical Study of Single-tier Vs. Two-tier Partnerships in the AmLaw 200, by Professor William Henderson at the Indiana School of Law.  The study documents that average per equity partner income in single tiered partnerships are significantly higher than two-tiered partnership firms.  The study noted:

The higher profitability of single-tier firms appears to be a function of higher levels of prestige, which enable single-tier firms to (a) attract and retain a more lucrative client base, and (b) run a more rigorous promotion-to-partnership tournament in which associates work longer hours and are less secure in their futures with the firm. 

Cotterman does believe there are certain situations where establishing income partners could be a good idea, including the reasons I mention above.  How do you feel about this?  In the 2008 Law Firm Economic Survey, we are asking respondents if they have a non-equity partnership system in place.  With this information, we will be able to determine whether equity partners in two-tiered partnership firms make more or less than those in one-tier firms.  It will be interesting to see if our results, which focus on small and mid-size law firms, mimic or contrast the findings in the Amlaw 200.

We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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