California Bar External Audits Criticized, Fee Increase Needed

The California State Bar needs to improve its disciplinary process when using contracted investigators, the state auditor said Thursday, also recommending a hike to lawyer licensing fees to deal with increased personnel costs.

The legislatively ordered report criticized the agency’s failure to formalize a process to ensure external investigators—who are hired when there’s a potential conflict of interest in the Office of Chief Trial Counsel—are themselves free from conflicts.

The report is the latest to fault bar oversight as the agency contends with the fallout from investigations and revelations that disbarred plaintiffs’ attorney Thomas Girardi had hundreds of complaints against him over a four-decade career, including complaints alleging millions of dollars in awards that weren’t given to clients. Girardi was found to have manipulated relationships with bar executives and board members in a decades-long scheme to avoid discipline.

The bar has a team of about 20 special deputy trial counsel hired as independent contractors to probe and prosecute disciplinary cases. The audit found “multiple errors and omissions” in centralized data related to such cases through its case management system, “impeding its ability to effectively monitor external investigations.”

External investigators also didn’t consistently conclude their investigations within six months, the auditor said.

“The State Bar should immediately review the accuracy of the data in its case management system related to its external disciplinary cases and correct any errors. Unless required to do so, it should not report data from the system to the public and the Legislature until it verifies the data’s accuracy,” the report said.

Bar Board of Trustees Chair Ruben Duran said in a statement that the agency agrees with all of the auditor’s recommendations. “We especially appreciate the audit’s recognition that a licensing fee increase is needed to sustain State Bar operations.”

Fee Argument

The State Auditor’s office report boosts the bar’s quest to increase mandatory fees annually charged to attorneys in California. The state legislature, which oversees attorneys under the state Business & Professions Code, uses the annual fee bill to exert pressure on the bar. The California Supreme Court administers admission and discipline.

The report said lawmakers should set the maximum 2024 licensing fee at $414 for active attorneys and $103 for inactive ones. “However, before the Legislature finalizes the maximum annual licensing fee amounts for 2024, it should request that the State Bar provide it with an itemized, program-by-program listing of the mandatory licensing fee revenue necessary to fund its operations in 2024.”

The auditor said by October the bar should identify and increase any service fees that don’t fully cover costs of providing services “unless it determines that doing so would limit the public’s access to the services.”

The bar has been running a deficit between fee collections and expenses as personnel costs rise, with the agency tapping into the general reserve fund to make up the difference. “The financial health of the general fund is therefore critical to the State Bar’s ability to fulfill its public protection mission,” the auditor’s report said.

But bar Executive Director Leah Wilson told the auditor’s office that legislative leaders and staff reject fee increases, the report said. “Given this feedback, the executive director believes it is not in the best interests of the State Bar to destabilize these relationships by continuing to request fee increases,” the report said.

Senate Judiciary Committee Chairman Thomas Umberg (D) said in an email that he “has this statement about whether he will consider increasing the State Bar’s fees in response to today’s audit: “No.”