June 18, 2015 2015-030
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As required by the California Business and Professions Code, Section 6145 (b), the California State Auditor presents this audit report concerning the system that the State Bar of California (State Bar) uses to impose discipline on attorneys who fail to meet their professional responsibilities and its actions leading up to the purchase of a building in Los Angeles. This report concludes that the State Bar has not consistently fulfilled its mission to protect the public from errant attorneys and lacks accountability related to its expenditures.
The State Bar has struggled historically to promptly resolve all the complaints it receives, potentially delaying the timely discipline of attorneys who engage in misconduct. A primary measurement of the effectiveness of the State Bar’s discipline system is the number of complaints it fails to resolve within six months of receipt, which it refers to as its backlog. In 2010 the backlog reached 5,174 cases, prompting the State Bar to take steps to quickly reduce it. Although the State Bar succeeded in decreasing the backlog by 66 percent within a year, it may have compromised the severity of the discipline imposed on attorneys in favor of speedier types of resolutions. In particular, in 2010 and 2011, the years the State Bar focused on decreasing the backlog, the State Bar settled a total of 1,569 cases; more cases were settled in each of those years than in any of the other four years in our audit period. The level of discipline that the State Bar recommended as part of these settlements was, in some cases, inadequate. For example, the California Supreme Court returned for further examination 27 cases that the State Bar settled in 2011 due to the appearance of insufficient levels of discipline. Upon further consideration by the State Bar, 21 of the 27 cases resulted in greater discipline recommendations, including five disbarments. Thus, to reduce its backlog, the State Bar allowed some attorneys whom it otherwise might have disciplined more severely—or even disbarred—to continue practicing law, placing the public at risk.
Moreover, instead of focusing its resources on improving its discipline system—such as engaging in workforce planning to ensure it had sufficient staffing—it instead spent $76.6 million to purchase and renovate a building in Los Angeles in 2012. The Legislature approved a temporary five-year $10 special assessment charged to members between 2009 and 2013 as a means to partially finance a new building for the State Bar in Southern California, which generated $10.3 million—about $66 million short of the final cost of the Los Angeles building. To finance the remaining cost, the State Bar secured a $25.5 million loan, sold a parking lot in Los Angeles for $29 million, and transferred $12 million between its various funds, some of which the State Bar’s Board of Trustees (board) had set aside for other purposes. We also found that the State Bar did not present to its board an analysis of whether it was financially beneficial to purchase a building rather than continuing to lease space. Further, in its April 2012 report to the Legislature—four months before purchasing the building—the State Bar underestimated the total cost by more than $50 million.
Finally, the State Bar’s fund balances over the last six years indicate that the revenues from annual membership fees exceed the State Bar’s operational costs—which in part gave the State Bar the flexibility to purchase the Los Angeles building. Although that purchase temporarily decreased the State Bar’s available fund balances, we found that they are again beginning to increase. This situation provides an opportunity for the State Bar and the Legislature to reassess the reasonableness of the annual membership fee to ensure that it better aligns with the State Bar’s operating costs.
ELAINE M. HOWLE, CPA