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Editorial Advisory Board: The embarrassing Bar Foundation theft

At this point we don’t know how much money was pilfered from the Maryland Bar Foundation, allegedly by a state bar association employee. What we do know — or at least, what is stated in a police report — is that between May 2011 and July 2012 the former employee withdrew $65,984 from the foundation’s bank account, an amount well above what the organization earned during the fiscal year ending June 30, 2011.

An indictment handed up early last month accusing Nicole Earl-Hernandez, the former director of administration for the Maryland State Bar Association, suggests that the total taken from foundation funds may be higher. According to the indictment, thefts covered a period of five years; the indictment does not say what those thefts add up to.

This is more than a loss for the MSBA’s charitable arm and the worthy projects it supports. It’s an embarrassment to those in the state bar association whose role was to manage funds and employees and to those in charge of the management and finances of the Maryland Bar Foundation.

If the case is proven against Earl-Hernandez — and, of course, she continues to enjoy the presumption of innocence our system grants — it will show that she was able to get away with years of theft on an impressive scale. This is not the case of a low-level functionary who took a few dollars here and there from a corporate behemoth, knowing that the losses would be difficult to detect. The amounts listed in the police report add up to nearly 20 per cent of the foundation’s total assets as of June 30, 2011.

“Whenever an employee steals, it means there were not enough people paying attention,” the CEO of a company that consults with nonprofits after thefts by employees told The Daily Record’s Kristi Tousignant. It appears to us in this case that there was a serious failure to pay attention over an extended period of time. Who was watching the shop? Were there any warning signs? Did management commit the cardinal sin of allowing an employee to reconcile the account with no one taking a second look?

In the wake of Earl-Hernandez’s indictment, MSBA Executive Director Paul V. Carlin issued a statement saying that “aggressive steps have been taken by both the Foundation and the MSBA to ensure the integrity of Foundation funds,” including the hiring of an accounting firm “to determine the total loss.” Caroline County Circuit Court Judge Karen A. Murphy Jensen, outgoing president of the Maryland Bar Foundation, said that the foundation is doing well financially, having received about $80,000 in income for the fiscal year ending this month. With the accountants’ help, she said, measures have been taken so that losses like those that led to the indictment “won’t happen again.”

All that’s good to hear.

In the meantime, this episode provides a lesson not only for the MSBA but for all law firms in handling and safeguarding their accounts, as well as lawyers and business professionals who serve as directors and officers of charitable and membership organizations. Many people accept board memberships because they are interested in the substantive goals of the organizations but do not focus on the nuts and bolts of administration. Board members have a fiduciary obligation to see that their organizations have proper financial controls and to monitor regularly financial statements and audits.

Readers should know that several members of this Editorial Advisory Board are Fellows of the Maryland Bar Foundation. We all, however, support the foundation’s goals and want to know specifically how this happened, who and what are responsible, and what is being done to ensure that something like this will not reoccur. When the outside accountants make their recommendations, we urge the MSBA and the foundation to follow them religiously.

Editorial Advisory Board members Norman Smith and Ferrier R. Stillman did not participate in this opinion.

Editorial Advisory Board

James B. Astrachan, Chair

John Bainbridge

Wesley D. Blakeslee

Eric Easton

Arthur F. Fergenson

Elizabeth Kameen

Michelle Lipkowitz

C. William Michaels

William Reynolds

Norman Smith

H. Mark Stichel

Ferrier R. Stillman

Christopher West