State bar files suit over lost money

Friday, Sept. 21, 2007 | 12:41 p.m.

The State Bar of Nevada is reeling after the discovery that hundreds of thousands of dollars it invested in certificates of deposit have virtually disappeared.

The Bar Association announced Aug. 17 that it was suing the company that handles its investments after the firm reported the disappearance of at least $300,000.

The Bar Association believes the money has been embezzled and has notified the district attorney, the Nevada attorney general, the U.S. attorney, and the Nevada Supreme Court.

The firm, Rate Search, its president, Scott Luster, Clayton Analytical Services and its president, Clark Schultz, are all named in a lawsuit filed by the State Bar Aug. 31 in St. Louis, where they are all based.

Clayton Analytical and Schultz acted as agents for Rate Search during the questionable transactions.

The State Bar has accused the defendants of fraud, embezzlement and breach of contract, among other things. The organization alleges that the company or its employees improperly placed names of other people or entities as the owner of CDs purchased using the State Bar's money.

Some CDs purchased with State Bar of Nevada funds are registered only to "State Bar," the orgnaization alleges in the suit.

The bar also accuses them of making false CD acquisition confirmations, false statements, and early liquidation of CDs contrary to the State Bar's direction.

The Bar Association has assured members that the incident will not affect the day-to-day operations of the organization and that it is careful with the organization's funds.

"What it means to the bar is we've realized we're a potential victim of crime," said State Bar President Nancy Allf. "We have reacted proactively and swiftly to the situation. ... We are very careful to account for our members money and we are responsive to our members."

The State Bar has used Rate Search's deposit brokerage services since 1999. Rate Search has for years purchased insured high-yield CDs for the Nevada Bar from banks and financial institutions throughout the country, seeking out the best rate of return on behalf of the bar.

The bar currently has approximately $3.2 million invested in CDs through the firm.

"We have done business with them for years. It was a successful relationship until now," Allf said. "We've never had any problems before."

Rate Search first informed the State Bar last month that it could not account for three CDs, each worth David Clark, counsel for the organization.$100,000, according to

Rate Search has not denied that the funds were embezzled and has been working with the State Bar to recover its funds, according to Albert Watkins, an attorney representing Rate Search in the matter.

"I think the lawsuit was well taken," Watkins said. "We're completely supportive of (the State Bar's) efforts and are cooperating to help them do everything they need to do to recover the CDs that are rightfully the property of the State Bar."

He said Rate Search believes the money was stolen by a former employee who resigned unexpectedly earlier this year and that the company is cooperating fully with the State Bar and with Federal authorities investigating the matter.

The State Bar is seeking restoration of all the money it invested, access to the companies' records to determine its location and exactly how much is missing, the cost of bringing the lawsuit and damages.

It is also asking that the presidents of the two companies be held personally liable.

The State Bar has already been granted a temporary restraining order and preliminary injunction against the companies, freezing the State Bar funds in Rate Search's care and forcing it to contact banks and other financial institutions notifying them of the true owners of the CDs purchased on behalf of the State Bar.