Saturday, February 25, 2012

Law Society of Scotland report on Esto Law Ltd row ‘clears’ insider committee members ‘attempt to siphon off legal aid money from other lawyers’

THE Law Society of Scotland has finally produced a report on complaints regarding the actions of its former Legal Aid Negotiating Team Committee members who sped off to form their own private firm in what many solicitors said was an organised attempt to grab legal aid money. The report is the typical whitewash rubbish produced by the Law Society of Scotland, illustrating that even when solicitors complain about their own regulatory & representative body, there is little impartiality on the Law Society’s part to investigate itself and actions which, according to several people in the know, were clearly backed by senior elements of the Law Society of Scotland, otherwise they simply wouldn't have been able to take place.

Among many things the Law Society's report omits, is a claim from a senior Scottish Legal Aid Board official that at least one SLAB member of staff appeared to be under the impression he was being offered a job with a higher salary “to jump ship” from SLAB to the new concern, with all his inside knowledge of the legal aid board’s workings.

The former directors of Esto Law Limited issued a statement, saying they were happy the Law Society of Scotland had managed to write a report clearing them of any wrongdoing (Law Society clears someone of wrongdoing, how unusual, not ! – Ed)

Ian Bryce, Director, said "We welcome this report which entirely vindicates our position. It is regrettable that the need for the Review arose from concerns which were based on misconception and misinformation. A small number of vocal critics chose to ignore or misrepresent information provided to them, and we agree with the Law Society that some of the conduct which followed was "deplorable". A number of our critics have told us privately that they never doubted our integrity, and we regret that they did not see fit to state that publicly. Esto Law now intends to work with those solicitors who recognise the challenges faced by the profession and seek innovative solutions to them.”

John Scott QC, former Director, said: “This report confirms what we said at the outset - we did nothing wrong. Esto Law was an attempt to help criminal law firms who were, and are, still struggling to adapt to the challenges of the Cadder case and 24 hour police station cover. The report clears us of any “wrongdoing” and states specifically that there were no conflicts of interest and no potential conflicts of interest. I welcome that. This has been a deeply unpleasant experience as a result of professional colleagues who have chosen to make allegations of impropriety which have proven to be unfounded. Despite their false claims our reputations remain intact.”

This is the full text of the Law Society's report into the investigation of Esto Law Limited.

On 16 December 2011, the Council of the Law Society of Scotland agreed to establish a review which looked into the concerns that had been raised by members about the legal practice Esto Law Ltd and the Society’s Criminal Legal Aid Negotiating Team(CLANT). It was agreed that the results of that review should be reported to Council. This review was remitted to the President, Cameron Ritchie, and the Vice President, Austin Lafferty, who enlisted the assistance of non-solicitor Council member John Reid to advise on the review. The following is the joint report to the Council on our review and our subsequent conclusions and recommendations.

B. Background

On 28 October 2011, four former members of CLANT – Ian Bryce, Ken Dalling, Vincent McGovern and John Scott - along with two other solicitors, agreed in principle to form a new limited company. One of the purposes of the new business would be to provide out-of-hours access to police station legal advice on behalf of solicitors who were contacted by the police. One existing member of CLANT – Stuart Munro - was later invited to become a director of the new company on 1 November and it was later agreed that the name of the new firm would be Esto Law.

The decision to set up the new firm followed earlier discussions at the end of September which involved some although not all of the aforementioned solicitors in which they considered how they could work together to service their own firms’ police station interview work. According to Companies House, Esto was incorporated on 10 October 2011. However, it is worth noting that the entity itself was simply incorporated as an ‘off the shelf’ company on this date and without any involvement of the solicitors who later purchased the company following their in principle decision of 28 October. The new firm was publicly launched on 12 December 2011. The out-of-hours police station duty advice service was then withdrawn a matter of days later following criticism from a number of different sources within the profession, criticism which related to a number of different issues of different natures.

Of the members of CLANT involved, Vincent McGovern resigned from the team on 21 July 2011, John Scott on 18 October, Ian Bryce on 27 October (he intimated his intention to resign to the president of the Law Society on 25 October), Ken Dalling on 27 October (he intimated his resignation to the president by email on 31 October), Stuart Munro on 13 December, having previously been advised on 7 November by the Society’s legal aid convener Oliver Adair that there was no need for him to resign at that time.

Iain Paterson, who was another member of CLANT but not involved with Esto, resigned on 11 December. In his letter of resignation to the President, Mr Paterson noted the decision of a number of his former CLANT colleagues to establish a new firm. Mr Paterson made clear his belief that the solicitors involved were working with honourable intentions and that the service the new firm proposed to offer would be useful to members. However, he expressed concern at the perception of the move and the possible impact on his reputation as a member of CLANT.

The general issue of the setting up and operation of a police station duty scheme (PSDS) was first discussed in April 2011 in meetings involving CLANT, the Scottish Government and Scottish Legal Aid Board (SLAB), before any member resigned. Vincent McGovern resigned from CLANT at a relatively early stage in those discussions.

The directors of Esto have advised us that the idea of establishing a new firm for the provision of out-of-hours police station advice came about after Lord Carloway gave a speech at the Law Society’s annual conference on 6 September. We have already explained that the solicitors who subsequently became involved in Esto, with the exception of Stuart Munro, met at the end of September to consider how they could work together to service their police station interview work. Further discussions following that meeting led to the development of the Esto model. By the time of the first meeting, the negotiations with the Scottish Government and SLAB over the PSDS had concluded. Vincent McGovern was not a member of CLANT at this point having resigned two months earlier. Of the other four members of CLANT involved in Esto, only Stuart Munro remained a member of CLANT by the time of the launch of the new business in December.

It is also worth noting that Ian Moir, who was not involved in any way with the formation of Esto, was a member of CLANT throughout the period in question. Indeed, he remains a member of CLANT. We are not aware of any concerns having been raised with the Society by Mr Moir with respect to the actions of his former committee colleagues.

We were informed by the Esto directors that market research was conducted, and was overwhelmingly favourable to the idea of a business service similar to that offered by Esto. Even following the public controversy over the scheme, we were told that many firms have indicated a desire to participate, citing the positive effect on their work and home lives. We have been told that the solicitors who were to be recruited to carry out the work remain extremely enthusiastic. The Esto scheme had no downside for solicitors, or their clients. If solicitors did not wish to use the service, their position was not affected. The model allowed access to the PSDS by individual firms and practitioners who otherwise, for example by reason of family commitment or disability, would have been unable to participate.

C. The issues raised

Concerns and allegations have been expressed by various parties over the involvement of the five former members of CLANT (Vincent McGovern, John Scott, Ian Bryce, Ken Dalling and Stuart Munro). These vary in nature and seriousness and are that the solicitors involved:

• used the position of being CLANT members and information made only available to such members during negotiations with SLAB and the Scottish Government to further their business venture;
• used the position of being CLANT members and information made only available to such members during negotiations with SLAB and the Scottish Government, thereby misleading members of the profession by withholding relevant information from them and by inducing those members not to support the public police duty scheme with the sole intention of establishing a competing business;
• continued to act as members of CLANT and negotiate on behalf of the profession where there was a significant conflict of interest or potential conflict of interest.

The issues raised have the potential to undermine the reputation of the Law Society of Scotland, its committees and sub-committees as well as those who volunteer their to serve on these committees. Apart from establishing the facts around the establishment of Esto and the actions of its directors in relation to the work of CLANT, the purpose of this review has been to determine from evidence what happened, to address the concerns raised and to recommend any actions that the Council of the Society may wish to take to address any systemic issues.

We were informed by the Esto directors that they expected that the profession would behave in accordance with the standards expected of members of the Society and that members would assess the merits of the product, and the integrity of those who sought to provide it, in a rational manner, without personal animus or prejudice. It was not anticipated that solicitors to whom the history of CLANT engagement had been communicated and publicised would ignore or misrepresent the facts and it was noted that CLANT had in fact been commended by the Glasgow Bar Association (GBA) for its communication during the PSDS issue. The criticisms, which the directors argue were wrong in assumption and fact, were directed to the Society, and indeed the Scottish Parliament, and copied to the press, without ever being communicated directly to those involved in Esto. It is a matter of enormous regret that, among the criticisms made, some solicitors have chosen to attack the Esto directors in unduly personal terms, and we are advised of physical threats and warnings made in some cases. Such conduct is deplorable no matter what the issues.

CLANT is a committee of the Council, convened by Oliver Adair. The work done by this committee is difficult, time consuming, sensitive and constantly in the public and profession’s critical gaze. The members of the team have given long hours and hard work over a number of years and achieved considerable success in the eyes of most of their professional colleagues. Nevertheless, the establishment of Esto has been perceived as the five CLANT members taking advantage of their position as committee members to gain personal commercial advantage. It is arguable, given the highly charged atmosphere that surrounds criminal legal aid negotiations, the Cadder aftermath and the knowledge that a small number of practitioners have been consistently critical of CLANT, that the establishment of any relevant commercial activity by a number of CLANT members would be met with suspicion, even outcry by some members, however openly and above board that establishment was conducted. Criminal legal aid practitioners work in a constantly pressurised environment and there have been views and opinions vehemently expressed verbally, in writing and in various media outlets in the recent past, on various aspects of criminal legal aid.

We carefully considered how to approach this review. We have looked at matters in four stages.

1. We reviewed all the correspondence received by the Society from members with respect to Esto and considered all of the concerns raised.

2. We considered the information available to us from sources other than the five former CLANT members, to establish what can and cannot reasonably be proved to have happened and at what point in time. To this end, and with the assistance of a senior member of the Society’s staff, we have reviewed a number of sources, including: records of meetings; correspondence; press statements; records regarding the establishment of Esto. That information is annexed hereto but will not be published.

3. Thereafter, we have sought and obtained further information and comment from the five directors and considered that information.

4. We have considered general information from the chief executive regarding how the Society manages the risks to reputation arising generally from conflict of interest situations at Council, committee and sub-committee levels.

In carrying out the first stage of the review, namely the consideration of the concerns raised by members, we developed a series of questions that we believe the review needed to answer in order to address all of the issues and
concerns raised.

1. Is there evidence that any of the Esto directors used their positions on CLANT, negotiating on behalf of the profession on legal aid or any ancillary schemes, to benefit their own businesses or any proposed business in a way which would not be open to persons not part of CLANT?

2. Is there evidence that members of CLANT deliberately misled fellow members of the Society about the subjects of negotiations to further their own business objectives?

3. Was there a potential or actual conflict of interest between the actings of CLANT on behalf of the Society and the intention and steps taken to set up Esto?

4. If there was a potential or actual conflict of interest, was it appropriate for members of CLANT to continue as members of CLANT and be involved in discussions with SLAB etc?

5. Could conflict of interest arise in the workings of other committees and, if so, how is such conflict managed?

6. Were the actions of the legal aid convener appropriate in informing Stuart Munro that there was no conflict of interest? If not, should they be subject to criticism?

D. Questions 1 and 2 – The Criminal Legal Aid Negotiating Team

As mentioned, we asked a senior member of the law reform team at the Society, who had no involvement in the work of the CLANT, to review the minutes of both internal and external meetings involving the team. The member of staff also reviewed all correspondence sent on behalf of the team to the profession and other stakeholders to determine whether there were any discrepancies between information received and subsequently circulated to the profession or whether any proposals considered by the team were not otherwise made public.

In anticipation of the decision in Cadder v HMA, which was issued in October 2010, the Lord Advocate issued interim guidelines for police station interviews in June 2010. This led to proposals for changes to how interviews should be conducted, new regulations for out-of-hours payments and the introduction of a PSDS. It also gave rise to numerous concerns about the impact of the new guidelines on legal aid practitioners and legal aid costs and began a long process of negotiation by CLANT with the Scottish Government, Crown Office and SLAB.

In April 2011, the government, through SLAB, proposed a PSDS as a means of satisfying its perceived requirement to satisfy article 6 of the European Convention on Human Rights. The proposal led to lengthy negotiations and involved a number of nationwide faculty meetings. The discussions were difficult but were concluded following a meeting with the Cabinet Secretary for Justice on 3 August.

The Society was notified of the existence of Esto on 16 November, when the new firm was discussed with a member of the Society’s Registrar Department with a view to establishing a limited liability partnership. The chief executive of the Society along with a number of other members of staff were told, in confidence, about the plans to establish a new firm.

The two members who personally informed the president of their intention to resign from CLANT in late October did not inform him Esto, quoting a desire to focus more time on their families and businesses.

The minutes of the meetings, particularly when considered in conjunction with coordinated press releases and/or correspondence, indicates no discrepancies between information received by CLANT and information subsequently shared with the profession.

Certain aspects of the meetings do indicate that issues were identified which may have given rise to the identification of a potential unmet need, which the proposed purpose of Esto Law Ltd was intending to address. There is nothing sinister in that fact, indeed the wider profession was equally aware of the existence of that unmet legal need. One effective way of identifying this purpose, in this case in addition to the existing professional knowledge of the individuals involved, would be by participating in a programme of negotiation and thereby examining in detail the key issues giving rise to the identification of the potential for a business venture. In addition, the evidence we have indicates:

1. The members of CLANT did not volunteer to negotiate on behalf of the profession with the intention of developing a business idea. Indeed, most of the members concerned joined CLANT long before the Salduz and Cadder cases which ultimately led to the changes involving police station advice.
2. They developed a business idea based on information that came to light during the process of these negotiations but which was information already in the public domain.
3. They made efforts to draw this information to the attention of the profession at faculty meetings and through regular and publicly available correspondence.
4. The potential for unmet need, and therefore the proposed service to be provided by Esto, was arrived at after the Scottish Government and SLAB chose not to proceed with a scheme which was promoted by CLANT and would have been operated by the Law Society. Before the decision was taken to establish Esto, CLANT also successfully negotiated a number of favourable
changes to the duty scheme as set up by SLAB, in particular the removal of subsumption of fees.
5. The proposed service was intended to alleviate genuine concerns which arose from within the profession about the challenges of servicing police station interview work and the risk of losing clients.

Question 1.
Is there evidence that any of the directors used their positions on CLANT, negotiating on behalf of the profession on legal aid or any ancillary schemes, to benefit their own businesses or any proposed business in a way which would not be open to persons not part of CLANT.
Conclusion 1.
There is no evidence that any of the directors misused their positions on CLANT.

Question 2.
Is there evidence that members of CLANT deliberately misled fellow members of the Society about the subjects of negotiations to further their own business objectives?
Conclusion 2.
In light of our conclusions above, we believe there is no evidence that any of the directors misled fellow members of the Society.

E. Question 3, 4 & 5 – Conflicts of interest and managing those conflicts

At the end of the meeting which took place on 3 November between the Society, SLAB and the Scottish Prison Service in relation to video conferencing, Stuart Munro informed a member of the Society’s staff that he would need to resign from CLANT due to his involvement with Esto. There is no doubt that issues of actual and potential conflict of interest can arise in the relations between volunteer members of the Council, committees and sub-committees and the interest or connections from their non-Society work. It is inevitable that people who freely give their time and expertise to the work of the Society, on behalf of the profession, will become privy to information and develop skills that other non-participating members do not obtain. There are other situations where the Society work may compromise the day job, or be compromised by it, or where personal knowledge of circumstances or persons involved raises a similar issue.

The issue is how to assess the level of risk and, once determined, how damaging that risk could potentially be. Being too risk conscious could paralyse the Society, but the level of risk will be dependent on the area of work in which it arises. It becomes a case of how the risk is managed and that will be different in every instance. The chief executive of the Society has been asked to look at how we as an organisation manage that risk generally and to consider whether it is appropriate to take formal steps to set in place a standard set of measures to allow the risk from conflict of interest to be properly managed in each case.

It is fair to say that committees and working groups, as well as members of staff working on papers or projects, are already tasked to have an eye to conflict of interest, and reports brought to the Board and to the Council in recent times have routinely had a headed section dedicated to considering any conflicts of interest arising out of the work or the personnel involved. We have already described the timeline of events, which shows that the negotiations surrounding the PSDS had concluded before the directors of Esto chose to establish their new business. As a result, we believe that there was neither an actual nor a potential conflict of interest. Nevertheless, in the case of Esto, we recognise that there was a significant issue around a perception of conflict of interest.

In our view, the establishment of Esto was bound to result in members raising reasonable concerns there had been or was a conflict of interest. It was therefore incumbent upon those establishing the enterprise and the Society to anticipate such concerns and take the necessary steps to address them. The failure to do so has placed the Society and the former CLANT members at risk of reputational damage. That such a risk was recognised by the five directors is evident. Nevertheless, we believe they did not assess that risk as being as serious and significant as it ultimately turned out to be.

We are also aware of the concerns that have been raised with respect to the knowledge and involvement of the Society in the formation of Esto.

We are aware that the Society’s registrar’s team and the professional practice team were both approached formally by the directors of Esto for technical advice on the incorporation of the firm as a LLP. Such advice is routinely given by both teams to firms on a strictly confidential basis and all such information is bound by data protection laws. We believe the assistance and advice provided by these teams to the Esto directors was therefore entirely appropriate in the circumstances and consistent with the role and responsibilities of those teams in assisting members.

The president of the Society along with a number of members of the Society’s executive, including the chief executive and director of communications, were also given advanced notification by the directors of Esto of the intention to establish a new firm. This information, which included some details of the services the new business would offer, was again provided on a strictly confidential basis. It is common practice for office bearers and senior members of the Society’s staff to be provided with advance confidential information with respect to changes in firms, whether they be new business ventures or, as has been seen more recently, mergers and takeovers. It is crucial that the Society is alive to upcoming changes in the profession and that member firms feel they can trust the Society with such confidential information. It is also worth emphasising that, whilst any member of staff can offer advice or guidance in such circumstances, those staff have no power to either approve or prevent such business changes. To even attempt to do so would be wrong in principle and stray beyond the powers of the Society. We are therefore comfortable that the way this advance and confidential information was handled by the Society in the case of Esto was appropriate.

Question 3.
Was there a potential or actual conflict of interest between the actings of CLANT on behalf of the Society and the intention and steps taken to set up Esto? Conclusion 3. In looking at the timeline of events, we believe there was neither an actual nor a potential conflict of interest involving the directors of Esto who were involved in CLANT.

Question 4. If there was a potential or actual conflict of interest, was it appropriate for members of CLANT to continue as members of CLANT and be involved in discussions with SLAB etc. Conclusion 4. Our conclusion in answering Question 3 means we believe Question 4 is now irrelevant.

F. Question 5 – How the Society manages conflict We have already concluded that there is no evidence to suggest that the Esto directors in any way misused their positions on CLANT. Similarly, we have concluded that there was no actual or potential conflict of interest. However, in having been tasked with this review by the Council of the Society, we have also looked at the processes in place within the Society for dealing with conflicts of interest.

The Society does have structures in place for identifying such conflict. In our view, the failure on the part of the CLANT members to act timeously and appropriately to a perceived risk was partly caused by the Society’s lack of a structure to manage in a consistent and structured way this potential or actual risk and a lack of a code of conduct for Council and committee members. There needs to be work done by the Council to prevent such happenings again.

Question 5. Could conflict of interest arise in the workings of other committees and, if so, how is such conflict managed? Conclusion 5. It is right that this review considers how the Society deals with risk to the reputations of the Society, the Council, the individual Council members and committee members. It would appear that there are some mechanisms in place for identifying risks but some doubt as to whether we adequately identify the magnitude of risk. There remains no consistent means of managing such risks. We recommend this is addressed urgently by the Council.

G. Question 6 – The legal aid convener Finally, we considered concerns that were raised with respect to the advice given by the legal aid convener to Stuart Munro namely that there was no conflict of interest in Mr Munro remaining a member of CLANT. Question 6. Were the actions of the legal aid convener appropriate in informing Stuart Munro that there was no conflict of interest? If not, should they be subject to criticism? Answer 6. We have already concluded that there was no actual or potential conflict of interest for the directors of Esto who were previously members of CLANT. We therefore believe the advice from the legal aid convener to Stuart Munro was correct at that time.

H. Conclusions We have carefully considered the concerns that were raised with respect to Esto and CLANT. We have also thoroughly reviewed the timeline of events and the facts surrounding the setting up of the new firm.

As we have detailed, we have made the following conclusions.

1. There is no absolutely no evidence that members of CLANT:
• had information that was not made available to other members of the profession;
• in any way withheld information from members of the profession;
• misled members of the profession;
• conducted discussions with other parties in regard to criminal legal aid in any way with intention other than the general interests of the profession and the public.

2. There was no actual or potential conflict of interest arising as a result of the establishment of Esto by former and current members of CLANT.

3. A perception of conflict of interest by members of the Society was inevitable unless steps were taken by those establishing Esto to ensure that such perception was negated at an early stage. Such steps as were taken were inadequate. In our view, the relevant members did not anticipate the level of criticism and concern which would and was raised by members of the Society.

4. Although there is no evidence of any wrongdoing, we recommend that the Society considers establishing a code of conduct for Council and committee members which will help address potential and perceived conflict of interest situations in the future and better protect the reputation of both the Society and the individuals who volunteer their time and energy as members of Council and its committees.

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