Trust fund fiddle

A Vancouver lawyer has admitted to misappropriating more than CA$8m (US$5.9m) from his clients’ trust funds to bankroll his gambling addiction.

The Law Society of British Columbia (LSBC) took to X to share real estate lawyer Russell Sean McDonough’s admission of guilt which earned him a seven-year practice ban:

McDonough signed his consent agreement with the British Columbia lawyers’ regulator LSBC last week. He confessed to professional misconduct in 34 cases of misappropriation over a 22-month period starting 2021.

McDonough admitted he started pocketing money from his clients after racking up a significant gambling debt and maxing out all his lines of credit.

Audit reveals ruse

According to the regulator’s summary, McDonough’s ruse came to light “on or about October 16, 2022” when the LSBC’s Trust Assurance Department audited his practice. The compliance audit and McDonough’s confession revealed he paid back over CA$6m (US$4.4m) of the CA$8,075,152.80 (US$5964913.49) in misappropriated funds, including CA$308,000 (US$227,511) he won gambling.

he would issue trust cheques to his law firm and then use the money to gamble

During the compliance audit, McDonough told an LSBC auditor that he had a severe gambling addiction and had used the trust funds to bankroll his compulsion to gamble. The lawyer confessed he would issue trust cheques to his law firm and then use the money to gamble in the belief he’d have a “breakthrough” win that would cover his debts and the misappropriated funds.

In a letter to the LSBC in April 2023, McDonough stated gambling had “completely consumed” his life. He explained that while his thought processes and actions at the time didn’t seem rational “I felt as if I had no other choice. It was true compulsion.” McDonough also stated he was “full of remorse and shame” over his actions.

Turning over a new leaf

In October 2022, a physician diagnosed McDonough with Gambling Disorder/Pathological Gambling. According to the summary, he hasn’t gambled since and checked in for residential treatment in November 2022.

can “cause an otherwise honest person to misappropriate client funds.”

The physician who diagnosed McDonough told the LSBC that gambling addiction can “cause an otherwise honest person to misappropriate client funds.”

A Vancouver psychiatrist who treated the lawyer told the LSBC McDonough’s “general intelligence level, education as a lawyer, and understanding of the risks of his behaviour both to himself and his family were completely effaced” during his gambling addiction.