A British Columbia lawyer recently admitted to siphoning over $8 million in client funds to feed his problem gambling. As a result, Russell Sean McDonough is facing a seven-year ban from practicing law.
The now-suspended lawyer entered a consent agreement with the Law Society of B.C. in late January. The document is available online after being released Friday.
Its contents show that McDonough acknowledged misappropriating $8,075,152.80 from 30 clients across 34 instances. This all took place in the 20 months between Jan. 6, 2021, and Oct. 3, 2022.
“The conduct I engaged in is inexcusable and contrary to the fundamental values that our legal system is based upon and those that I firmly believe in,” said McDonough in his letter to the Law Society, which was reproduced in the consent agreement.
“I take full responsibility for my actions and intend to remain accountable to those affected directly or indirectly.”
McDonough says misdeeds solely driven by gambling addiction
A closer look into McDonough’s letter reveals that his misdeeds were purely a method of fuelling his gambling endeavours. In certain instances, the stolen funds went directly to gambling. In others, they went towards outstanding debts incurred as a result of his gambling.
The majority of the $8-plus million came from clients’ real estate transactions, and on 29 occasions, McDonough’s conduct led to him violating the undertakings he arranged in relation to said transactions, per the consent agreement.
Further, he also confessed to making false and misleading representations to a client. In particular, McDonough told them that a “statutory holdback” of $50,000 was necessary when it wasn’t. He used this tactic so that he could obtain funds discreetly and direct them towards gambling activities.
Former lawyer’s M.O. involved moving clients’ funds in continuous loop
In an effort to cover his tracks, documents say McDonough’s pattern involved paying expenses on misappropriated funds held in trust by redirecting funds from other clients to cover them. But, that’s not all. He also injected $308,000 in gambling winnings to help cover the deficit.
This unsustainable solution helped recoup $6 million of the $8-plus million shortage in his trust account, per the consent agreement. Meanwhile, the outstanding balance was paid out by the law society’s Lawyer Indemnity Fund.
All clients and entities affected by McDonough’s misuse of his trust account eventually received their payments.
McDonough diagnosed with gambling addiction in October 2022
Following the legal proceedings, McDonough received a gambling addiction diagnosis in October 2022. Soon after, the lawyer attended a residential treatment program in November and December that same year.
Based on indications from the consent agreement, McDonough’s prognosis and subsequent discharge from the facility bodes well for “long-term abstinence” from gambling in the future. An excerpt from the document reads:
“The Lawyer is remorseful and is committed to his recovery. He does not intend to ever gamble again. The Lawyer accepted responsibility for his actions at an early stage of the investigation, and candidly admitted all of his misconduct. He has continued to engage in various treatment programs and monitoring, and has successfully abstained from gambling since October 2022.”
On top of agreeing to not practice law for seven years, McDonough also agreed not to apply for admission to the law society of B.C. or any other law society in Canada until Aug. 30, 2030. The final condition of McDonough’s consent agreement is that he will not apply to any law society without first notifying the B.C. branch.