Former MP Tasmina Ahmed-Sheikh admitted making an error over finances at the law firm she ran with an ex-colleague as the pair faced claims of professional misconduct.
The SNP member and solicitor appeared with Alan Mickel before a hearing of the Scottish Solicitors’ Discipline Tribunal (SSDT) at Perth Concert Hall on Monday.
The Law Society said they showed “disregard for the rules” when administering a trust as partners at Hamilton Burns, including failing to keep proper accounts.
The panel heard the trust was set up by Mr Mickel in May 2012 on behalf of his sister after the siblings received a lump sum from their parents.
Loans were made to the struggling company from the trust, said to constitute a conflict of interest.
Mr Mickel believed the account was a “private, family matter” but in legal terms it was considered a client of the firm, the panel was told.
Ms Ahmed-Sheikh was a partner at Hamilton Burns and held the title of cash room manager before her resignation in May 2015, when she was elected MP for Ochil and South Perthshire.
She lost the seat in the 2017 general election.
A financial inspection of the firm raised concerns in October 2015 and the society’s financial compliance department was alerted.
Mr Mickel resigned after being advised there had been a conflict of interest, his lawyer William McCreath said.
All parties agreed Mr Mickel and Ms Ahmed-Shiekh’s belief that the trust was not a client of the firm was “genuine but erroneous”.
“Both respondents believe that this was a family trust”, Mr McCreath told the hearing, and the actions “shouldn’t be stigmatised as professional misconduct”.
He said: “There’s been no dishonesty, no lack of probity or integrity. It’s for you to determine whether the threshold has been crossed.”
He added: “The biggest losers in all of this are the two people appearing here.”
The panel heard the money from Mr Mickel’s parents was to be used to purchase a property in Chamonix between them to rent out to skiers but that the sister had changed her mind.
Dorothy Bain QC, acting for Ms Ahmed-Sheikh, said it was her understanding the aim of the fund was to ensure Mr Mickel’s sister, who was having personal difficulties, “received the value of the cashed-in insurance policy when she reached retirement age”.
Ms Bain said her client considered Mr Mickel a trusted colleague and liked and respected his parents so she agreed to be a trustee.
She said: “It was never understood by the second respondent (Ms Ahmed-Sheikh) that the trust was a client of the firm. This was a genuinely held belief, albeit a mistaken one.”
“It’s clear now she should have analysed the state of the firm with more vigour vis-a-vis the trust.”
She added: “The tribunal should be clear that, but for her erroneous belief, the second respondent would not now be facing proceedings.”
“No-one involved in the trust, including the beneficiary and her family, have raised any concerns about how it was run,” Ms Bain said.
Grant Knight, fiscal for the Law Society, told the panel: “Both of the respondents should have known what the account rules were.
“This is a disregard for the rules set down by the solicitors’ regulatory body in relation to how you manage client funds.”
He added: “While the Society accepts the view held by both respondents was genuine ... they should have known better.
“All the material was available for them to have known better.”
The hearing was adjourned until 11am on Tuesday when the panel is expected to give its ruling on the case.