Proposal would turn legal services fund over to state

March 28, 1991|By David Conn | David Conn,Annapolis Bureau of The Sun

ANNAPOLIS -- State lawmakers will propose today that control over a growing pool of money that funds legal services for the poor should be shifted from a private-sector corporation to the state, with some of the money ending up in state coffers.

The money -- $4.9 million last year -- is the interest law firms accrue on trust accounts set up for their clients. Since 1989, lawyers have been required to give the money, known as Interest on Lawyer Trust Accounts, or IOLTA, to the private, non-profit Maryland Legal Services Corp.

But a plan by House Judiciary Committee Chairman John S. Arnick, D-Baltimore Co., would set up a state fund to disburse money to the private corporation, with any remaining money going into the statetreasury. Depending upon how much the General Assembly decides to give to the legal services agency, as well as the strength of the real estate market, since most of the money comes from lawyers who conduct real estate settlements, the state treasury could end up $3 million to $5 million richer.

"The disturbing thing about that is if the legislature in any given year doesn't like the type of cases [that Maryland Legal Services Corp. supports] . . . they could curtail its funding to penalize it," said J. Michael McWilliams, a Baltimore attorney who is president-elect nominee of the American Bar Association.

"The corporation ought to be independent enough to be able to take the types of cases that benefit the poor," he said, "and not that please the General Assembly."

Mr. Arnick said the IOLTA program had proved far more successfulthan anyone suspected, leaving large amounts of state-authorized donations completely out of the state's hands.

"We should have had more input and control over $5 million of someone else's money that we gave away," Mr. Arnick said.

But Robert Rudy, the private legal corporation's executive director, said that Mr. Arnick's plan is "a major break in faith with the leadership of the bar that asked for the [IOLTA] fund."

Mr. Arnick also will propose that title insurance companies for the first time be required to pay their client trust accounts' interest to the state.

Because lawyers are required to give up interest on client trust accounts, they have argued that title companies, especially those run by lawyers, should have to do the same. But the title companies say taking their trust account interest merely would raise the cost of buying a house in Maryland, already among the highest states in terms of real estate closing costs.

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