A boutique Toronto law firm at the centre of a $7-million embezzlement case appears to have passed a financial spot check by the Law Society of Ontario years after the managing partner admits she began stealing client money to fund a lavish lifestyle.
In the summer of 2022, when the Law Society of Ontario (LSO) did a routine financial check-up on Cartel & Bui LLP, it didn’t raise any red flags — even though the firm’s bank statements showed nearly $140,000 of client money had been withdrawn from the firm’s trust account in just one month for payments to American Express, while another $2,090 was paid to a child-care centre.
Filings in court and at the LSO’s disciplinary tribunal show that the embezzlement at the firm, founded by Singa Bui and her husband, Nicholas Cartel, continued for another seven months before someone complained to the law society about possible misappropriation of money.
It took yet another seven months before a law society investigator visited the firm’s offices and requested its financial records, and then another five months before the firm was put into trusteeship. At that point, more than $7 million had been stolen from clients, mostly homebuyers and sellers across Southern Ontario.
All that raises serious questions about the ability of the LSO to protect the public against fraud by lawyers, a number of lawyers and victims of the Cartel & Bui embezzlement say.
“They didn’t do their job,” said Nancy Marsilla, a former client who was out more than $200,000 that the firm had been holding onto after the sale of her home in 2021 while she settled her divorce.
“Had they looked at the transactions deeper, and audited them the way that they should have been audited, then … a lot of heartache, a lot of problems would have been avoided.”
But David Debenham, a lawyer and forensic accountant who has sued other lawyers for fraud, says the bigger problem is that, even though the LSO’s auditors will specifically ask for a law firm’s bank records, the spot checks on trust accounts aren’t designed to catch embezzlement.
“They just want to know if you have the documents,” he said. “They presume honesty. They’re really trying to catch people who can’t do accounting and are making bona fide mistakes … It does not catch fraud, and it happens all of the time for millions and millions of dollars.”
The concern is especially acute in areas like real estate, where almost everyone buying or selling a home in Ontario is legally required to use a lawyer for the transaction, meaning millions of dollars will typically flow through trust accounts belonging to lawyers for both the buyers and the sellers. This introduces a risk that a solicitor on either end of the deal could steal the funds, real-estate law experts have previously told CBC News.
The Cartel & Bui case isn’t the only recent example of alleged misappropriation of money held in trust: In April, a now-retired lawyer was charged with fraud related to the proceeds from the sale of a client’s business.
Asked what, if any, routine verifications are done on the trust accounts of lawyers to protect the public against potential theft, Debenham answered succinctly: “Sweet f–k all.”
The LSO told CBC News that, in general, its audits of law firms “involve a review of financial records to confirm compliance with the regulatory requirements under the bylaws. Any misconduct related to financial matters identified through a licensee’s records considered in the spot audit would be escalated to professional regulation.”
But the LSO said it was legally prohibited from commenting on any specifics of its audit of Cartel & Bui LLP in 2022, including responding to questions about why no concerns appear to have been raised about the firm’s trust account.
Records filed as part of preliminary disciplinary proceedings against Bui and Cartel reveal that an auditor emailed the firm in August 2022 to say it had been selected for a financial “check up” as part of the LSO’s spot audit program.
The auditor gave Bui, a real estate lawyer and the firm’s managing partner, a week to provide a number of financial records, including bank statements for all the firm’s trust accounts for the month of June 2022 and the ledger of client trust account balances.
The LSO wouldn’t say whether the firm actually handed over those documents, but generally, failure to heed such requests leads to disciplinary action against lawyers, and there is no record of that against Cartel & Bui or its partners at the time.
What those documents showed should have prompted further inquiry, according to both Debenham and Marsilla.
CBC News obtained part of the firm’s trust account bank statement for June 2022, as well as a list of certain key transactions for the entire month, from civil lawsuits brought by former clients.
The records show 28 withdrawals from the trust account, for amounts varying from $1,000 up to $20,000 and totalling $138,800, labelled simply as “AMEX.”Another two payments, totalling $2,090, are to a child-care centre in midtown Toronto.
Trust accounts are tightly regulated lawyer bank accounts that only hold money belonging to clients and not the firm, so it’s unusual — though not unheard of — for them to be used to pay off a credit card.
“Credit cards do not come off of trust accounts in the ordinary course,” said Debenham, who is also president of the Association of Certified Forensic Investigators of Canada. While it’s possible a client could direct a lawyer to pay a credit card bill using money from a trust account, he says there would have to be a written request to do so, and a law society auditor should have asked to see those requests.
Another victim who lost money in the embezzlement at Cartel & Bui said “it’s crazy that somebody with a degree in accounting looked at these bank records with … signs of fraud — one being having child care debited straight from the lawyer’s trust account — and did not notice anything.”
CBC News agreed not to identify this person because they are still in discussions with the LSO for compensation from a fund that can help mitigate losses arising from lawyer dishonesty.
“It’s beyond understanding, and is very frustrating.”
Bui has already admitted in a civil court affidavit that she started stealing from the trust account as early as 2014. She said she initially took smaller amounts “to make ends meet,” but was eventually embezzling tens of thousands at a time to fund “luxurious vacations,” fine dining, private-school tuition for their children and “elegant furnishings and expensive art.”
Cartel, who focused on class-action lawsuits and litigation, has repeatedly denied having any hand in the embezzlement and has blamed his wife, who he says managed finances for both their firm and their household.
Both lawyers were provisionally suspended from practising law in April 2024 while the law society continued to investigate.
The LSO then brought disciplinary charges against Bui in March of this year. Last week, the LSO also brought disciplinary charges against Cartel, alleging 20 counts of misappropriating client money, misleading clients about what was happening with their money, and failure to act honourably and with integrity.
No hearing dates have been set on those accusations. If the charges are upheld by the Law Society Tribunal, the presumptive punishment for misappropriation of client funds is disbarment.
Bui and Cartel are also facing criminal charges, announced in July.
Both lawyers already spent time in jail last year after they were found in contempt of court for disobeying a judge’s orders, issued in the various lawsuits against them, to explain what happened to the missing money.
