Illicit practices by legal representation

SMEs can be victims of illicit practices by their legal representation.

Risk type: Practice

Risk driver: External

DESCRIPTION

Legal representation can take advantage of the SME through overstaffing or excessive billing. Lawyers may also bribe judges to win a case on behalf of the SME without its knowledge, and just pass on the extra costs to the SME, stating more billable hours.

RED FLAGS

• Costs are higher than usual.
• The number of lawyers working on the case is high compared to the level of complexity of the case.
• The law firm asks for money to pay for works or research that does not appear to be relevant to the case.
• Legal representatives are living above standard levels.

KEY GUIDING DOCUMENTS

Stansbury, C. and Stansbury, N., 2008, Examples of Corruption in Infrastructure, Global Infrastructure Anti-Corruption Centre (GIACC)

TARGETED EXAMPLES

Overstaffing by law firm¹

Target group: SMEs

Location: n.a.

A contractor appoints a law firm to act in an arbitration on its behalf. The partner in the law firm who is head of construction sees the arbitration as a major opportunity to make money and allocates four lawyers to the arbitration when he knows that two lawyers would be sufficient. The partner advises the contractor that this number of lawyers is necessary owing to the complexity of the case and the volume of the work. The contractor accepts this advice. The partner quotes the contractor an hourly rate for each of the lawyers. Monthly bills are submitted by the law firm to the contractor and these are paid by the contractor.

FULL REFERENCES

1. Stansbury, C. and Stansbury, N., 2008, Examples of Corruption in Infrastructure, Global Infrastructure Anti-Corruption Centre (GIACC)