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B.C. lawyer misappropriated $8M from clients to fund gambling addiction

Russell Sean McDonough banned for 7 years, says he never intends to gamble again

A B.C. lawyer is banned from practising for seven years after he misappropriated more than $8 million in client funds to feed his gambling addiction.

Russell Sean McDonough admitted to the malpractice in a consent agreement with the Law Society of B.C., which was published on Jan. 28.

According to the agreement, McDonough took a total of $8,075,152 in client funds from trust accounts over 34 instances between January 2021 and October 2022. During that period, he was working primarily as a real estate lawyer for a small firm with offices in Surrey, Langley and Vancouver.

McDonough told the Law Society he took the client money to fund a severe gambling addiction and cover the debt he had accumulated as a result of it. He said he believed at the time he could pay back the money he took by winning even more through gambling.

He said anytime he needed gambling money he would find the holdback file of a non-resident and issue a trust cheque to his personal law corporation for the entire holdback amount. When a request came in for that holdback money and McDonough didn’t have the cash to cover it, he would pull funds from another non-resident holdback file.

He eliminated $6,036.692 of the shortages that way and and another $308,000 with money he gained through gambling. More than $2 million of the misappropriated money remained outstanding as of October 2022, which was later reimbursed by the Lawyers Indemnity Fund.

In a separate incident, McDonough produced false documents to create a $50,000 holdback for a client, telling them it was necessary when it wasn’t, and then misappropriated it.

No clients lost money in the end, according to the agreement.

McDonough wrote a letter to the Law Society in November 2022, in which he took full responsibility for his misconduct and expressed remorse and shame for his actions. He said he was suffering from a gambling addiction at the time, as well as anxiety and depression, and is now “appalled” at his behaviour.

“I appreciate that my thought processes that resulted in the actions and the conduct itself do not seem rational. However, at the time I was making these decisions, I felt as if I had no other choice. It was true compulsion.”

A psychiatrist who evaluated McDonough told the Law Society in a letter that a gambling addiction activates reward systems in a person similar to what someone addicted to substances may experience.

“Empirical evidence suggests that gambling can activate ventral striatal structures in the brain…that mediate a type of hijacking phenomenon that reduces the individual’s capacity for appropriate response inhibition, turning gambling into the central focus of their life.”

McDonough attended a residential treatment centre in November and December of 2022, where he was further diagnosed with other mental health disorders. A discharge report from the centre said McDonough had a good prognosis for abstaining from gambling in the long term.

Since then, he has been attending after-care programs and told the Law Society he doesn’t intend to gamble ever again.

He is set to be permitted to practise again beginning in February 2031.

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About the Author: Jane Skrypnek

Hi, I'm a provincial reporter with Black Press Media, where I've worked since 2020.
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