Legal aid scams could cost millions: Hundreds of solicitors' firms face fraud investigations. Jason Bennetto reports

Morethan 100 firms may be involved in legal aid system in scams that may be costing the taxpayer millions of pounds a year, it was disclosed yesterday.

So far, four companies have been closed down and their solicitors suspended while police and the Serious Fraud Office carry out inquiries.

The alleged legal aid frauds were among a record number of complaints made in 1993 about dishonest solicitors and shoddy work. Compensation payments to victims of fraud and dishonesty are expected to rise by a third this year to more than pounds 30m, according to the Solicitors Complaints Bureau, which published its annual report yesterday. Last year a record pounds 23m was paid out. Complaints are also expected to increase to more than 26,000 in 1994 from 19,582 last year.

One of the most disturbing abuses of power is the fraud involved in the country's legal aid scheme. Under the 'green form' system, which cost pounds 21.6m last year, people at income support level can get up to two hours of free advice. Solicitors can claim pounds 43.25 an hour or pounds 45.75 in London. A form signed by the client shows the amount of time spent on advice, but there are no systematic checks on whether the work was done.

Allegations against the 100 firms of solicitors, located throughout England and Wales, include claims that some lawyers have been paying pounds 5 to pounds 10 for signatures from unemployed people or those on low pay.

Veronica Lowe, director of the Solicitors Complaints Bureau, the independent investigative wing of the Law Society, said: 'It appears that people have been paid cash for their signatures.'

In other cases solicitors have been deliberately overestimating the amount of time spent with each client or illegally charging for non-legal advice. There have been no criminal charges yet, but several cases are being considered. However, the bureau is unable to estimate the level of fraud.

Mrs Lowe said: 'They (the firms involved) will have submitted thousands of applications for legal aid, but we don't know whether there are thousands or hundreds of thousands of applications involved (in fraud).'

The Legal Aid Board revealed in June that suspected fraud cases under investigation rose from 362 to 957 in 1993-94. One solicitor was convicted after claiming pounds 180,000 for advising prostitutes on the law.

Meanwhile, the number of firms which have been closed down because of corruption has increased from 70 in 1992 to 85 last year, although the Solicitors Complaints Bureau emphasised this was only a tiny proportion of companies run by the 64,000 solicitors in England and Wales. In one case, bureau investigators visited a firm and found the owner had run off and dumped all his clients' files in a skip.

Last year, 230 solicitors were struck off, suspended, and fined up to pounds 5,000, for dishonesty, misconduct, fraud and poor work.

Frauds included stealing money from clients' accounts, keeping money from house sales rather than passing it on to building societies, raising multiple mortgages on a single house, using forged property deeds to take out a mortgage, and money laundering.

In most of the cases, solicitors involved were forced to reduce fees and pay compensation.

Of the 19,500 complaints last year - a 15 per cent increase on the previous year - 80 per cent were about inadequate service, including rudeness, poor communications and delays. In all, 70 per cent of the complaints did not need formal investigation, and more than 20 per cent were referred back to firms for resolution.

Earlier this year, the Legal Services Ombudsman criticised the bureau's emphasis on tracking down fraudsters, which he said was taking resources away from dealing with the mass of complaints about poor service and delays. The bureau has defended its actions, saying it has greater funding to investigate corruption.

Chris Heaps, chairman of the bureau's adjudication and appeal committee, said: 'Those solicitors involved in serious misconduct only relate to a minute percentage of the total number working in England and Wales - the vast majority are honest professionals committed to the highest standards.'

Part of this year's increase in complaints has been blamed on the recession and the slump in the housing market, which has resulted in lawyers becoming increasingly desperate to make up the shortfall in income.

Ms Lowe, the bureau's director, added: 'We are working in the age of the empowered consumer. The public is making higher demands of its professional advisers as it does with all service providers.'