As Richards read the two letters, his confusion was quickly superseded by horror. The first piece of mail was from Michael Fielding, a respected property partner at the firm. It was dated 2 June 2001 and began by stating that Fielding had “withdrawn very substantial monies from clients’ funds without authority.”
In his letter to Gowar, Fielding admitted there was “no possible excuse” for what he had done, but claimed he had been “under enormous and mounting financial pressures for some time”. Fielding wrote that he, “could not face the shame of all this, or indeed the immediate pressures” the disclosure would cause, and added he was “extremely concerned to protect my family”, and so had decided to go abroad for some time.
In the letter Fielding stressed that he wanted to assist the investigation and named several accounts from which he had withdrawn cash. The affected companies were all major clients of the firm: Chicago-based Strategic Hotel Capital (SHC), London & Regional Properties (L&R) and Hestia.
The second letter Gowar showed to Richards revealed the extent of the nightmare. It was from SHC, and was dated 1 June 2001. It stated that Fielding had acted for an affiliate of Strategic Hotels in the sale of St Ermins Hotel and that, out of $7.5m (£4.4m) due to SHC, only $3m (£1.7m) had been delivered.
SHC was owed some $4.5m (£2.6m) and was holding Lawrence Graham and Fielding jointly responsible for the loss. The letter said: “Mr Fielding has since admitted to us that he embezzled in excess of $4m of funds properly belonging to SHC, and used the funds for his personal benefit.”
Even as the meaning of the words sank in, Richards had no idea the contents of the letters would result in a police investigation and legal proceedings spanning more than four years. Nor did he realise the toll it would take on the City firm or the efforts required to protect it from being tarred with the same brush as its rogue partner.
On 3 November this year, Michael Fielding was sentenced to eight years in jail for stealing more than £5.8m from client accounts. Just one month earlier, Fielding had pleaded guilty to 24 counts of theft from clients. He was then struck off the solicitors’ roll and declared bankrupt.
When Fielding appeared before Southwark Crown Court for sentencing, Judge Geoffrey Rivlin told the court that Fielding was involved in “about as bad a case of its kind as one can imagine.”
Addressing Fielding, Judge Rivlin added: “Considering your role as a solicitor and as a partner in a leading law firm, the figures are almost beyond comprehension.”
Prosecutor Helen Malcolm told the court that Fielding, who returned to the UK this year after spending four years in the US, had used the stolen money to “fund an opulent lifestyle”, and purchase property abroad.
But Fielding’s lawyer, Edmund Lawson QC of 9-12 Bell Yard, argued his client had intended to repay the money.
In the meantime, L&R pursued a negligence claim against Lawrence Graham after the Court of Appeal ruled that a joint venture agreement drafted by Fielding between L&R and airport operator TBI was not binding. (The action was settled in February, but the terms of the settlement remain strictly confidential.)
In all cases Lawrence Graham equity partners and the firm’s insurers have paid back the money Fielding stole. According to court documents, that money totalled a staggering £6.9m, including interest. In addition to the actual loss, the firm’s professional indemnity policy increased dramatically.
Senior partner Bill Richards tells The Lawyer that he breathed a huge sigh of relief when the court proceedings finally came to an end earlier this month. “The majority of the repayments were covered by insurance, but our premium did take a few years to reduce,” he says. “I was just glad it was all over, to be honest.”
Richards claims that Lawrence Graham has continued to act for some of Fielding’s clients, but the relationships have mostly fizzled out now.
“Michael did not have a huge client base, and he serviced much of the work himself,” says Richards. “To a great degree, the relationships with those clients were personal to him. Accordingly, it wasn’t a surprise to us that the relationships ebbed away.
“Had the events that happened not happened, I’m sure our revenues would be higher and so too would our profits, but it’s impossible to put a number on that.”
Four years on from that terrible day, Richards is still bruised by the whole affair. “Yes we had one rotten apple, but thankfully it hasn’t infected the barrel,” he argues. “We all just feel as though it’s finished now and we want to get on with life.”
Lawrence Graham has learnt some lessons since Fielding’s departure. Richards says a number of preventative measures have been enforced since Fielding left, but he insists all successful partnerships must operate on a foundation of good faith.
“Our accounting practices are in accordance with the Solicitors’ Accounts Rules and aligned with other law firms, as they were back in 2001. If someone really wanted to take advantage of the system they probably could.”
That said, at the time it was a different story altogether. Richards admits Fielding’s resignation sparked a period of upheaval within the firm. “A lot of people were extremely angry,” he says. “We had to reassure staff and we had to reassure clients. It took a lot of work and it wasn’t easy.”
Despite Fielding’s actions, Richards maintains a dual view of his former colleague. On one hand he argues Fielding was an intelligent, highly capable lawyer and valued property partner at the firm. But on the other, he says Fielding simply pulled the wool over the partnership’s eyes.
“When I found out [what Fielding had done] I was shocked,” he says. “I don’t think anyone saw it coming. He was a sophisticated manoeuvrer. It was said in court that he duped his partners, and so he did.”
Richards’ mixed feelings are understandable. Fielding had worked at Lawrence Graham for five years. He was originally a fixed-share partner, but became a full equity partner on 1 May 1997.
Fielding was an experienced property and property finance solicitor. He had set up the firm Grangewoods, where he was a senior partner, before becoming a partner at Brecher & Co in 1989.
He left Brecher three years later, and joined property company Minerva & Co in 1992. There he acted as legal adviser to Minerva on property deals and became a director. It would be another four years, however, before he was employed by Lawrence Graham, taking up a position at the firm on 1 March 1996.
A lawyer who worked with Fielding on several occasions claims Fielding embellished his career success and became obsessed with “keeping up with the Joneses”.
“If the rich and famous were holidaying in the South of France, so was he,” says the lawyer. “If there was a well-to-do society cocktail party, he was there. He mixed with the rich and famous to give the illusion of making the same kind of money.”
Fielding bought property in the US and also owned a luxury apartment in Regent’s Park – city accommodation so spectacularly opulent that prosecuting lawyers took photographs of it to illustrate in court their claims of his lavish lifestyle.
Aside from direct purchases that he made with the money, Fielding also set up Beta Real Corporation as a vehicle to receive money sent abroad for his own benefit. The corporation had a bank account in Miami, Florida, but Fielding’s name was concealed in the company documents.
While Lawrence Graham partners remained oblivious to Fielding’s criminal activities, there are several external lawyers who, after coming into contact with Fielding during the course of their work, say they were not surprised by news of the stolen cash, given Fielding’s behaviour.
The reason it took many years to detect that funds were being siphoned off can be explained, in part, by Fielding’s elaborate and well executed scheme. Court documents obtained by The Lawyer state that Fielding was able to appropriate funds by using his ability as a partner to sign requests for payments, and hoodwinked his partners into countersigning these requests when there were particularly large amounts involved that might have aroused their suspicions. On many occasions he requisitioned several sums of money on the same day; the highest amount stolen in a 24-hour period was £1.1m.
In accordance with the usual rules regarding client accounts, when a client asked Lawrence Graham to act on their behalf, a new file would be opened and monies received would be kept in the Lawrence Graham client account. It was this account that Fielding plundered.
Investigations showed repeated, systematic use of the firm’s client account. In order to cover up the losses, individual accounts were frequently tampered with to make up for shortfalls on others.
The Lawyer contacted all of the parties involved in the court proceedings against Fielding, leaving messages in each case, but no one returned the calls.
And what of the firm he abandoned? Lawrence Graham has weathered the storm and retained a solid position within The Lawyer UK 100 top 50, with a turnover of £61.1m. Core clients – aside from Fielding’s own – remained loyal, and the firm did not suffer too many departures in the wake of the scandal. “As far as we’re concerned, we have moved on,” says Richards.
And indeed, things certainly appear to have progressed. Last year Lawrence Graham became a limited liability partnership. Somehow, it is hard to imagine that there was much internal opposition to the decision.
What the Fielding saga shows is that a partnership can be a fragile beast. As Richards says, it is held together by intangibles. “We’ve maintained a system that is based on trust,” he says. “A partnership is a relationship based on openness and honesty.” Something that Michael Fielding did not understand.