Use Of Flawed 'Honor System' Approach To Oversight In Connection With Judge-Appointed Lawyers & Their Handling Of Million$ In NY Foreclosure Sale Surplus Proceeds Now Under Review By State Office Of Court Administration

In New York City, the New York Daily News reports:

• The case of a Brooklyn state senator charged this week with embezzling $440,000 in escrow funds has exposed a stunning flaw in how sales of foreclosed properties are handled.
  
  Lawyers appointed by judges to oversee foreclosure cases are handling millions of dollars, with no oversight.
  
  Stunned by the indictment of state Sen. John Sampson (D-Brooklyn), charged with embezzling $440,000 from sales of foreclosed properties, the state Office of Court Administration launched a review Tuesday of how foreclosure sales are handled.
  
  Changes are likely.
  
  “Clearly there is a statutory weakness that needs to be strengthened for greater accountability,” said OCA spokesman David Bookstaver. “In the interim, we’re examining ways to add accountability.”
  
  Prosecutors say Sampson, an attorney, was appointed by Brooklyn judges to serve as a referee in several foreclosures.
  
  His job was simple: to receive the proceeds from sales of foreclosed properties, and then pay off the mortgage, lawyers and any other creditors. Any remaining money was supposed to be turned over to the homeowner.
  
  But beginning in 1998, prosecutors say, he kept surplus funds from four foreclosure sales — $440,000 in all — and used some of it to bankroll a failed campaign for Brooklyn district attorney in 2005.
  
  Courthouse insiders say the honest disbursement of this surplus cash is up to the lawyers appointed as referees. There are no audits. “We rely on the referee to be truthful about the amount of surplus funds,” said Brooklyn County Clerk Nancy Sunshine.(1) “The clerk has no authority to question that. It’s on the homeowner and creditor to check on what’s left over.”

Source: State Sen. John Sampson embezzled $440G in foreclosure funds: prosecutors (Sampson has been indicted for taking the funds from sales of foreclosed properties as the state Office of Court Administration reviews the process. Sampson was an attorney and appointed referee to handle foreclosure sales).

(1) While the "honor system" may have a place when one deals with 5-year olds in a kindergarten classroom,  it generally tends to be somewhat less ineffective when dealing with other "grown-ups," especially if they're handling substantial sums of money, in my view.