In ’60 Minutes,’ ethical problems in the legal profession exposed
By John Leubsdorf and William H. Simon From The National Law Journal
OPINION: Professors whose work was featured in the news program share take-away lessons.
What should a lawyer do when a prospective client asks for help in secretly transferring large sums of money that appear to be proceeds of foreign government corruption? Some lawyers caught on tapes made secretly by the human rights organization Global Witness and broadcast on “60 Minutes” last week gave a disturbing answer. They volunteered strategies to disguise the ownership of assets in international transfers or locate banks and countries with lax controls.
Sixteen lawyers heard a story indicating that the client received the money as bribes for mineral concessions. Only two clearly refused the assignment. Most failed to insist on knowing key facts relevant to whether the assignment would violate the U.S. anti-money laundering statute, including even the identity of the client and his country.
We concluded in a report to Global Witness that the conduct of the lawyers in three interviews would violate the Rules of Professional Conduct had the client been real. (You can find our report, with the tapes of five of the interviews, on the organization’s website.) The Rules of Professional Conduct are not clear, but we think they contain three implicit principles that should guide practice.
First, lawyers should conduct reasonable factual inquiry before offering assistance in situations of potential illegality. This means insisting that clients disclose basic information about the participants in the transaction. It means not accepting conclusory characterizations, such as the assertion of the putative client representative in one Global Witness interview that bribes were lawful in his (unidentified) country. And it may mean verification of especially crucial or implausible factual assertions.
The one lawyer on the Global Witness tapes whose behavior was exemplary — Jeffrey Herrmann — while refusing the offered assignment outright, gave an example of the kind of due diligence appropriate in a more ambiguous situation. He said he might ask for $5,000 to retain an investigator to verify key facts before he agreed to the representation. Where the risks and stakes are high enough, this may be the appropriate course.
Reasonable inquiry is virtually always necessary to fulfill both the duty to the client to give sound advice and the public duty not to assist illegality. In some areas, however, practice norms have evolved requiring relatively extensive and specific effort. Securities and tax law provide examples. Banks have likewise accepted extensive due diligence requirements to combat money laundering, as part of the international effort to fight terrorism and corruption.
The American Bar Association has begun to acknowledge the need for enhanced due diligence with its “Voluntary Good Practice Guidelines for Lawyers to Detect Money Laundering and Terrorist Financing.” These are designated “voluntary”, but if, as we believe, the Rules of Professional Conduct imply a requirement of reasonable due diligence, the guidelines are likely to inform judgments of what is reasonable in the situations they cover.
RATIONALE FOR CONFIDENTIALITY
Second, lawyers must not encourage disrespect for law. Clients are often attracted to lawyers because they can offer more confidentiality than other professions. The rationale for giving lawyers this marketing advantage is that legal advice will induce compliance with law. Yet, most of the taped lawyers did nothing to vindicate this expectation. They explained how clients could hide assets but not the likely illegality of that course. The way for lawyers to encourage respect for law is not by preaching. It is by making clear that lawyers will not cross legal boundaries coupled with explanation of what those boundaries are. A difficult set of questions concerns advice about enforcement practices. Is it acceptable to advise a client, as one of the taped lawyers did, to incorporate in Delaware rather than New York, because Delaware enforces corporate disclosure more casually? Clearly such advice is often appropriate, but the more likely it is that the underlying conduct is illegal, the more improper it seems.
Third, the duties of due diligence and respect for law kick in as soon as the lawyer is asked for assistance. Defenders of the taped lawyers say that the rules speak of the “client” and that a person does not become a client until the lawyer has agreed to represent her. They think lawyers ought to have some latitude for sales pitches that involve a kind of “puffing” but will be followed by more questions and admonitions once the client is taken on.
Clearly, what we can reasonably expect of the lawyer will vary with the stage of the relationship, but it is not plausible to draw a bright line at the point of client acceptance. Professional-responsibility doctrine has recognized that for some purposes prospective clients are “clients.” Moreover, the harms that the duties are designed to prevent can readily occur prior to acceptance, especially where the lawyer gives tips to prospective clients about how to reach their goals. Lawyers in many other nations must now report certain financial transactions to the authorities, and there will be increasing pressure to impose such requirements here. Lawyer behavior like that documented by Global Witness can only increase the likelihood of more stringent regulation.
See also iNews Cayman Editorial Published February 3 2016 “The Editor Speaks: One good apple in a barrel” at: The Editor Speaks: One good apple in a barrel” at: http://www.ieyenews.com/wordpress/the-editor-speaks-one-good-apple-in-a-barrel/
