The report, by Veronica Lowe, director of the Solicitors' Complaints Bureau, says it cannot find 'any light at the end of the tunnel'.
Last year, the Law Society paid more than pounds 15m out of its compensation fund to people who had suffered at the hands of dishonest firms, the report says. The number of people applying to the fund rose by a 'staggering' 65 per cent, from 1,337 in 1991 to 2,257 in 1992, according to Ms Lowe. The total value of their claims came to pounds 34m.
A spokesperson for the bureau said last night that the rise was largely attributable to small-scale fraud perpetrated on individuals, rather than on banks and building societies.
The compensation fund is used when clients have lost money to dishonest firms that cannot afford to pay it back and have no insurance. Last year, 75 solicitors defaulted in this way, compared to 60 in 1991, the report says.
The growth in fraud prompted the Law Society to announce tough measures last month, including the setting up of a central intelligence network and more frequent spot- checks on firms thought likely to be dishonest.
A former policeman was recently appointed as the society's first intelligence officer. He has been asked to make contact with mortgage lenders, police and the Crown Prosecution Service, while accountants have been told to report any suspicions they may have after certifying solicitors' books. Last week, Francis David Sachs, a solicitor practising in west London whose mortgage frauds ran to more than pounds 8m, was struck off by the profession's disciplinary tribunal.