Scots conveyancing lawyer fined £2,500 for ‘professional misconduct’ over ‘blatant rip off’ of mortgage lenders

Sheena Savage, a former anti-money laundering partner with the firm Turner MacFarlane Green LLP (TMG), was censured by the Scottish Solicitors’ Discipline Tribunal (SSDT) and fined £2,500 for what was described as a “blatant rip off” of the lenders in the 14 transactions.

The tribunal heard that the respondent was a partner with TMG from June 1994 to July 2007, when the firm amalgamated with Optima Legal Services, where she continued to work until March 2010.

However, Optima reported a number of alleged irregularities in conveyancing transactions and reported the matter to the Law Society of Scotland in November 2013, as a result of which an inspection was carried out which disclosed several transactions involving the respondent which caused concern.

There were 14 transactions relating to the purchase of either new build or new conversion properties carried out between February and June 2007 where the respondent was designated as the supervising solicitor and acted for the purchasers and lenders, with the work being carried out by a paralegal, in which concerns were identified.

One of the concerns was that the price stated in the missives and in the disposition in favour of the purchasing client “substantially exceeded” that paid by the purchasing client.

The difference in price was described as a deposit or discount which was deducted by the seller when requesting settlement, on the alleged basis that the balance had been paid direct by the purchaser to the seller or paid by the seller as an “incentive”.

But the price disclosed to the lender client was the disposition price, not the actual price nor the price paid at settlement and the lender was not advised that part of the purchase price was not being paid through the firm, nor that any discount had been granted or might have been granted by the seller, nor that the purchaser was paying no part of the purchase price.

The inspection found that the loan advanced by the lender client “significantly exceeded” the actual price paid to the seller and that the unused part of the loan funds and/or the price paid at settlement, after deduction of fees and outlays, was paid either to the purchaser or to some person other than the seller.

The respondent failed to check the source of funds of any deposits allegedly paid by purchasers and to check any incentives allegedly granted to any of the purchasers and allowed a system to be operated where no checks were carried out in respect of any deposits allegedly paid by her clients in the said transactions.

The complainers pointed out that the total funds received by purchasers and others amounted to £250,000 if you added up the sums in all the cases where the price paid was less than the loan, in what was alleged that this was a blatant rip off of the lenders.

There was no suggestion that the paralegal was conniving in what was going on and accordingly the respondent had to take responsibility as her “complete failure” to check on any of the alleged deposits allowed this to occur.

At the time the respondent was the partner in charge of the remortgaging and conveyancing department and had a number of assistants and paralegals working for her.

However, the respondent said that 2007 was “boom time” and the firm was very busy so it was not unusual for the respondent to receive 12 new sets of instructions a day, often in connection with new build properties.

She would do the title examination but after that the transactions were formulaic in nature so she considered appropriate for a paralegal to do the work.

The respondent accepted that she should have carried out “more rigorous supervision” and she accepted culpability, but asked the tribunal to judge this against the background that at the time she was not aware of any fraudulent scheme.

It was also pointed out that the respondent “unblemished” record for 25 years and had left the profession in 2010 to start a new career in education.

She applied to have herself removed from the solicitors’ roll in 2014 as she had no intention of returning to a legal career.

But the SSDT had “no hesitation” in making a finding of professional misconduct”.

In a written decision Malcolm McPherson, vice chairman of the tribunal, said: “In this case there were 14 transactions where the respondent failed to disclose material information to the lenders which information would have clearly affected the lenders’ decision to lend. The failure to disclose this information resulted in the lenders providing funds in excess of the price actually paid by the purchasers for the properties.

“The tribunal has made it clear on numerous occasions that a solicitor when acting for a purchaser and a lender has a professional duty to act with utmost propriety towards the purchaser and the lender clients.

“The respondent was the partner responsible for these transactions and had a duty to exercise proper supervision over the paralegal who was working for her. If solicitors fail to protect the interests of lender clients it is very damaging to the reputation of the legal profession.”

The tribunal considered that the respondent’s conduct was at the “middle of the scale” of misconduct and that it was necessary to impose a fine in addition to a censure to show how seriously it takes such matters.

Mr McPherson added: “The tribunal considered that the respondent’s conduct is likely to damage the reputation of the legal profession.

“The tribunal however took into account the fact that there had been early plea of guilty that the respondent had shown remorse and insight, had a previously unblemished record, had produced supportive references and had removed herself from the profession and indeed taken her name off the roll of solicitors.

“The tribunal also noted that the respondent had no intention of returning to the profession. Given the respondent’s income the tribunal considered that a censure plus a fine of £2,500 was an appropriate penalty.”