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They were in the C suites and the boardrooms, and they were complicit in the control frauds in the FIRE sector, the MERS racketeering, accounting fraud, tax fraud, foreclosure fraud, securities fraud and more.

Everyone knows this, though it can not be easily proven because the evidence is shielded by attorney-client privilege. But if I am not mistaken there are exceptions to the privilege. Advising a client how to commit fraud makes the lawyer a co-conspirator and an accessory to a criminal offense. Such advice is not privileged.

If a client tells you she intends to commit a burglary and asks you the best way to do so, advising her to wear multiple pairs of surgical gloves when breaking in, or to melt down gold jewelry before fencing it, is not a privileged communication. In fact, you have an obligation, if the client can't be persuaded to renounce the intention to commit the crime, to report the client's communication to the appropriate authorities. It's not a privileged communication.

There is a related question. Where was bar counsel? The legal profession is supposed to be self-regulating for the most part. But the malfeasance of the lawyers who advised corporations which frequently and flagrantly violated laws and regulations has not, to my knowledge, been addressed by those responsible. The dereliction of duty of bar counsel is shameful.

When prosecution of a big bank like Wells Fargo, for blatantly disregarding banking laws in laundering billions of dollars of drug money, is deferred upon payment of fines and forfeitures amounting to a miniscule fraction of their annual profits, why aren't in-house and outside counsel to that bank hauled before the legal disciplinary authorities? Surely they should be asked to explain whether they sanctioned the illegal activities or turned a blind eye. Either way it is a violation of legal ethics and calls into question whether they should continue to be allowed to practice law.

When a big bank like Bank of America has to compensate investors for billions of dollars of losses on MBS because of the bank's failure to disclose material information, should the general counsel not have to explain to the disciplinary committee of the relevant bar association how such an egregious breach of fiduciary duty and well-established regulations could have happened? And should the general counsel not be sanctioned if the explanation is found wanting?

When a big bank, like all the TBTF institutions, repeatedly signs consent orders covering the same illegal conduct, each time promising not to do it again, how is it that the legal advisors who signed off on the consent order but repeatedly failed to implement agreed changes do not have to defend their failures, and their licenses, before their peers?

I could cite many examples of corporate misbehavior which has led to companies being fined many millions of dollars or to paying huge settlements for conduct which amounts to a pattern and practice of intentional law breaking. But I know of no instance where corporate counsel, in-house or outside, has faced disciplinary proceedings in connection with the flagrant and persistent illegal activity of their client.

So those are my questions. Where were the lawyers? And where are the lawyers who are supposed to enforce ethical and professional standards and the Code of Professional Responsibility?

Fri May 04, 2012 at 10:08 PM PT: I was mistaken about lawyers generally having a duty to report the criminal intentions of clients to the authorities. I consulted an expert. Mr John Steele, attorney and co-founder of the Legal Ethics Blog, graciously took the time to comment on the post and he indicates that it would rarely be the case that a lawyer would have such a duty. His comment can be found at:

http://www.legalethicsforum.com/...

I don't think my error undermines the main thesis of the diary, which is that corporate counsel seem to be immune from scrutiny by the disciplinary authorities. And Mr Steele does note that many people think the state bar associations have just enough resources to pursue easy-to-prove cases, but that "proving up the role of lawyers in something as complex as the mortgage-backed-securities scandals isn't easy to do."

Originally posted to paulbkk on Tue May 01, 2012 at 09:15 AM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  There is some data on Florida here (4+ / 0-)

    People to Wall Street: "LET OUR MONEY GO"

    by hannah on Tue May 01, 2012 at 09:33:40 AM PDT

    •  Those are just routine (10+ / 0-)

      disciplinary actions against small-time lawyers. Where are the investigations of the legal department of a Bear Sterns or an MF Global? The lawyers for the big companies don't seem to ever have to face the music.

      " 'In this world, Elwood, you must be oh so smart or oh so pleasant.' Well, for years I was smart. I recommend pleasant. You may quote me." Elwood P. Dowd

      by paulbkk on Tue May 01, 2012 at 09:44:16 AM PDT

      [ Parent ]

      •  I do not disagree. However, perhaps (3+ / 0-)
        Recommended by:
        Deep Texan, bnasley, ladybug53

        the authors of pieces like that should be asked your questions.
        Law enforcement responds to complaints; reporters respond to tips.  Reporters report what somebody tells them and somebody else "confirms."  For some reason, they don't consider a recommendation for another source from the original a conflict of interest. Perhaps they are convinced that they can tell when someone is lying.

        People to Wall Street: "LET OUR MONEY GO"

        by hannah on Tue May 01, 2012 at 10:01:31 AM PDT

        [ Parent ]

  •  Since prosecutors/legislators are lawyers.... (11+ / 0-)

    my guess is that it's a massive example of 'professional courtesy' at work. That is, most state legislators dream about being highly paid corporate attorneys and lobbyists when their legislator gig is over. Most prosecutors either move into politics or 'retire' to a corporate practice.

    So, they're not about to bite the hand they're hoping will one day feed them a cushy corporate gig. They're not about to crap in their own nest by going after other lawyers merely because these lawyers are serving as Consigliere to massive criminal enterprises. Cuz you never know who might be writing your paycheck down the line. Wouldn't want to limit your options. Just sayin.

  •  If you think the General Counsel runs the show (23+ / 0-)

    you are sadly mistaken.  Businesses are run by business people who take risks.  They pretty regularly ignore legal advice.  

    Don't get me wrong - stealing is stealing and I've told clients as such.  But in reality the conversation goes like this:

    - Can I do X?

    - The law is not clear on that point, but I'd think there is a signficant risk that X would be found in violation.

    - But you aren't positive?  

    - Not 100% but I wouldn't advise it?

    - What are the risks?

    - Likely a fine and an enforcment action

    - I'll make more money than the fine and I'll deal with the enforcement action if it ever comes.

     

    •  Yes, I think that's right (11+ / 0-)

      in most cases. But what if the dialogue goes like this:

      CEO of Wachovia: Can we blatantly disregard the banking laws in laundering more than US $ 300 billion in drug money?

      General Counsel: No.

      CEO: What are the risks?

      GC: Likely a fine, and the bank will have to promise not to do it again.

      CEO: I'll make more money . . . etc.

      There's no wiggle room for the lawyer here. The client advised that they intend to proceed with activity that is clearly illegal. The lawyer then has a duty to report that to the authorities. Saying "I advised the CEO that it would be illegal" just isn't good enough.

      Lawyers have a duty to be advocates, but they also have a responsibility to society to be gatekeepers and not to be enablers of illegal activity.

      " 'In this world, Elwood, you must be oh so smart or oh so pleasant.' Well, for years I was smart. I recommend pleasant. You may quote me." Elwood P. Dowd

      by paulbkk on Tue May 01, 2012 at 10:39:12 AM PDT

      [ Parent ]

      •  Except of course (7+ / 0-)

        they never say that they are going to blatently disregard the law.

        They say ... thank you, counsel, we will take that under advisement and throw you out of the room!

        You are right that if a client is knowingly violating the law and you know about it, there is an obligation to do something (what is of course the question) but, from my experience, that case is a rarity.  It is never that cut and dry, so to lay the blame on attorneys for the vast majority of the crisis seems to be a reach.

        Remember, of course, attorneys also have the duty to zealously represent their clients even if they have a personal opposition to what they are doing.  In addition, the client (not you) has the ultimate decision making authority regarding a course of action. So professional responsibility can cut both way.

      •  Absolutely NOT (7+ / 0-)
        The lawyer then has a duty to report that to the authorities. . . .
        Not only does a lawyer NOT have the duty to report this, if the lawyer DID report it he/she would likely be disbarred.  (In CA, you WILL be disbarred.)  Neither the ABA Model Rules nor state rules allow an attorney to share what has been discussed with his/her client except in extremely narrow circumstances.   Most of those narrow circumstances involve specific knowledge of an imminent threat of death or bodily injury to a third party, and even that exception has taken decades to carve out in most states.   Even when we're being accused of having lent our services in aid of the client's crime, what we can say about our client's secrets is extremely limited.  The ABA Model Rule allows you to speak only to avoid perpetuating a fraud, as well as the imminent bodily harm exception, but I believe that's it.

        The clearest way I've ever heard our professional duty described is as set forth in CA Business & Professions Code 6068:  "It is the duty of an attorney to do all of the following:
        . . .
        (e) (1)To maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Tue May 01, 2012 at 05:02:28 PM PDT

        [ Parent ]

  •  That is a very damned good question which I (8+ / 0-)

    have not heard anyone ask before.

    The corollary to it, is, I believe:

    What did they know, and when did they know it?

    h/t to the Nixon Administration for giving the nation this exemplary question about all things nefarious

    * * *
    I like paying taxes...with them, I buy Civilization
    -- SCOTUS Justice O.W. Holmes Jr.
    * * *
    "A Better World is Possible"
    -- #Occupy

    by Angie in WA State on Tue May 01, 2012 at 10:46:10 AM PDT

    •  Ford pardon Nixon in real time. (1+ / 0-)
      Recommended by:
      david78209

      Before he was even indicted. Or kicked around. Or anything.

      Like a "get out of jail free" card before the jail is even built.

      Bad bad. Double plus bad. h/t to Geo. Orwell.

      H'mm. I'm not terribly into this, anymore.

      by Knarfc on Wed May 02, 2012 at 04:41:54 AM PDT

      [ Parent ]

  •  but (9+ / 0-)

    if corporations couldn't use lawyers to get away with breaking the law, lawyers wouldn't be nearly as valuable to them.

    That would drive down the pay scale for the entire legal profession.

    It's no wonder they won't rein in the major abuses.  That's where the money is.

    •  Most lawyers (7+ / 0-)

      are not the ones getting paid the big bucks.  Indeed, most prosecutors get paid a lot less and aren't in it for the money.  If they wanted cash, they'd be on the other side.

      As a lawyer, I think this diary raises some very, very good questions.

      I think on thing that gives pause is that the approach implied here sounds a lot like leaning on the lawyers to get at the client.  I could see that people could be concerned about that kind of precedent.  For example, going after the lawyers of the Guantanamo detainees was done, and it sure left some bad feeling out there.

      Still, very very thought provoking!

  •  Isn't racketeering what's being discussed here? (1+ / 0-)
    Recommended by:
    Tom Anderson

    If honest lawyers do not 'turn in' their bosses to law enforcement, and if these honest lawyers do not 'turn in' dishonest lawyers, and if they all get richer for ignoring their clients' criminality, isn't this a form of racketeering?  

    •  lawyers can't turn in their bosses (6+ / 0-)

      the code of conduct requires that you keep your clients' secrets, and you can be disbarred for failing.  The exceptions are very narrow - like if you know your client is leaving your office and going straight to his ex-wife's house to murder her with the gun he just showed you.  And to be safe, you better know that he had matching bullets with him.

      Dishonest lawyering in an in-house shop is rarely provable.  There are always weasel memos that prove the lawyer advised against the illegal or unethical conduct.  They aren't responsible for clients who ignore their advice.

      There is a good reason for all of this protection.  Without it, no lawyer would ever defend an accused criminal.  Without strong criminal defense lawyers, the prosecution would have carte blanche, and they already get away with far too much.

      That said, individuals can and do abuse the system for personal gain.

      "None are more hopelessly enslaved than those who falsely believe they are free." - Goethe

      by jlynne on Tue May 01, 2012 at 12:39:52 PM PDT

      [ Parent ]

  •  Where was compliance? (0+ / 0-)

    How exactly are they listing fraud and money laundering in their SAS70 documents?

  •  Professional Liability (2+ / 0-)
    Recommended by:
    Spoc42, justintime

    ...is basically for engineers, geologists, doctors... but not lawyers.

    The ABA isn't very aggressive in policing the profession either.

    •  The ABA (4+ / 0-)
      Recommended by:
      ozsea1, auron renouille, shanikka, Adam B

      doesn't have the authority to police the profession.  The ABA is a professional membership organization only.  It is voluntary and does not have the power to affect your ability to practice law in any jurisdiction.

      •  Good luck with that. (0+ / 0-)

        I wrote a fairly long comment but then swallowed it.  I understand the OP's big picture question, that there needs to be meaningful compliance control, but there's a lot of misinformation here.

        "The first drawback of anger is that it destroys your inner peace; the second is that it distorts your view of reality. If you come to understand that anger is really unhelpful, you can begin to distance yourself from anger." - The Dalai Lama

        by auron renouille on Tue May 01, 2012 at 03:56:22 PM PDT

        [ Parent ]

        •  Uh-huh (1+ / 0-)
          Recommended by:
          farmerchuck

          here's a thought:

          There are many attorneys that post here at DK with their "concern" whenever the topic disrespectfully veers toward worker rights, the venality and corruption of the Supreme Court, Social Security, Occupy; any amount of topics that concern working families and the 99%.

          Ususally, these attorneys, oh so generous with their time, subtly infer about how uninformed the great unwashed are and how there's always SOME BETTER REASON why our opinions are naive and ill-advised.

          Where are these champions of the law now?

          * crickets *

          "What have you done for me, lately?" ~ Lady Liberty

          by ozsea1 on Tue May 01, 2012 at 06:32:44 PM PDT

          [ Parent ]

          •  Yup, it's a great big conspiracy. (0+ / 0-)

            I pick up my paycheck (made out to me in the amount of $0.02) once monthly.

            "The first drawback of anger is that it destroys your inner peace; the second is that it distorts your view of reality. If you come to understand that anger is really unhelpful, you can begin to distance yourself from anger." - The Dalai Lama

            by auron renouille on Tue May 01, 2012 at 07:10:01 PM PDT

            [ Parent ]

      •  Man, I was kind of commenting asleep, wasn't I? (0+ / 0-)

        The correct sentence would be:

        "The state bar associations aren't very aggressive in policing the profession either."

    •  Professional liability is for professionals. (0+ / 0-)

      Opps. Now I'm in trouble.

      H'mm. I'm not terribly into this, anymore.

      by Knarfc on Wed May 02, 2012 at 04:47:37 AM PDT

      [ Parent ]

  •  Where were the lawyers? Getting paid, of course. (2+ / 0-)
    Recommended by:
    justintime, ozsea1

    Slow thinkers - keep right

    by Dave the Wave on Tue May 01, 2012 at 01:23:10 PM PDT

  •  I could have had wealthy clients. (3+ / 0-)
    Recommended by:
    Seneca Doane, ozsea1, 714day

    Ther problem is that there are two opposing points of view:

    1.  The lawyer is there to advise what to do.
    2. The lawyer is there to figure out a way to do what the client wants to do.

    Both have their arguments.  I am of the first view.  But powerful people do not want to be told what to do by the help.

    A right answer to the wrong question is a wrong answer.

    by legalarray on Tue May 01, 2012 at 01:44:32 PM PDT

  •  There are plenty of "concern" attorneys here in DK (1+ / 0-)
    Recommended by:
    farmerchuck

    There is the faintest whiff of a call-out here. I will hie to the fainting couch.

    "What have you done for me, lately?" ~ Lady Liberty

    by ozsea1 on Tue May 01, 2012 at 03:22:40 PM PDT

  •  Let me tell you something (4+ / 0-)
    Recommended by:
    paulbkk, WheninRome, mungley, farmerchuck

    your local conveyancing attorneys are watching in stunned amazement as state legislatures all across the country are passing legislation to retroactively make all the corrupt practices of the big mortgage finance outfits legal.  All that stuff we could say a year ago was corrupt is now perfectly legal and on the up-and-up.  Robosigning?  Nooo problem, because your state legislators say so!  Requirements that only those that hold the note and the mortgage can foreclose?  thing of the past, by Act of Lege!  O Brave New World that has such leaders in it!

    The law, in its majestic equality, forbids rich and poor alike from sleeping under bridges. ~ Anatole France

    by ActivistGuy on Tue May 01, 2012 at 06:09:29 PM PDT

  •  the diary claims "everyone knows" (2+ / 0-)
    Recommended by:
    ozsea1, Argyrios

    that lawyers were complicit in a wide range of illegal corporate activity. That's a broad claim. I find it interesting that in the comments no one disputes it.

    " 'In this world, Elwood, you must be oh so smart or oh so pleasant.' Well, for years I was smart. I recommend pleasant. You may quote me." Elwood P. Dowd

    by paulbkk on Tue May 01, 2012 at 06:16:56 PM PDT

  •  When I saw the title, I thought the (1+ / 0-)
    Recommended by:
    mungley

    obvious answer was going to be "on the faculty of UC Berkeley"

    But this was about something else . . .

  •  You misunderstand attorney-client privilege... (2+ / 0-)
    Recommended by:
    shanikka, 714day

    An attorney's duty to keep communications with a client secret is almost absolute.  There are some very narrow exceptions discussed in some other circumstances.  

    I appreciate what that diarist is going for, but this diary is just off base.  Not only is an attorney ALLOWED to keep information confidential, he has a DUTY not to disclose.  

    The idea that lawyers should face "disciplinary proceedings in connection with the flagrant and persistent illegal activity of their client" is just totally repugnant to the concept of zealous representation of a client.  Lawyers aren't responsible for the actions of their clients.  

    •  And you wonder why an otherwise honorable (2+ / 0-)
      Recommended by:
      paulbkk, farmerchuck

      profession has such a bad odor:

      Lawyers aren't responsible for the actions of their clients.
       
      Are you an officer of the court? Or not?

      Attorney-client privilege is NOT absolute.

      Please.

      "What have you done for me, lately?" ~ Lady Liberty

      by ozsea1 on Tue May 01, 2012 at 09:45:57 PM PDT

      [ Parent ]

      •  Are You a Lawyer? (1+ / 0-)
        Recommended by:
        714day

        Or not?

        Obviously not.   Several lawyers here have expressed quite clearly what the issue is.  It is the almost inviolate duty we have where the secrets of our clients are concerned.  This means that even those of us who oppose the actions of our clients, outside of extremely narrow parameters, CANNOT say or do anything about that publicly.  We can't even confirm or deny what we have told our clients.   Since it's our clients who hold the attorney-client privilege preventing disclosure - NOT US.  (Please see the "at all peril to himself or herself" language I quoted from the CA rules in a comment above.)

        Other than quit client, and quit the practice of law.  And even THEN we still can't talk.

        Got it now?  Good.

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Wed May 02, 2012 at 03:44:46 AM PDT

        [ Parent ]

        •  Thanks (1+ / 0-)
          Recommended by:
          714day

          Again, no one comes to your office and says, "Hey, I'm doing something illegal!"  

          I actually had a client of one of my partners that was feeding me limited information and asking pointed questions enough to raise my concerns.  The only thing I could do was fire the client - and then, only after convincing the billing partner that it was the appropriate thing to do.  It took me months to do it ethically, as to withdraw from a client, you need to make sure you do so in a fashion that doesn't damage their interets.  You also then can't tell people why you quit.

          In almost any case of suspected malfeasance, that is really your only ethical option.  

        •  Thanks for the expansion (0+ / 0-)

          and the explanation.

          I know full well that attorney-client prvivilege is pretty damn near sacrosanct;  there are a very few narrow exceptions.

          That was my takeaway from the diary here.

          "What have you done for me, lately?" ~ Lady Liberty

          by ozsea1 on Wed May 02, 2012 at 08:34:51 AM PDT

          [ Parent ]

  •  Bill Clinton was debarred. I hardly know why. (0+ / 0-)

    Not like it was a precedent or warning or anything to anyone.

    H'mm. I'm not terribly into this, anymore.

    by Knarfc on Wed May 02, 2012 at 04:36:16 AM PDT

    •  Bill Clinton, in theory (0+ / 0-)

      was disbarred for his own malfeasance, not the malfeasance of his client.  

      I don't think any lawyer on this board would argue that a lawyer that engages in misconduct (eg steals clients trust funds, as linked above) isn't and shouldn't be subject to disciplinary proceedings.

      The notion that you are liable for a client's bad actions when you yourself have complied with your ethical responsibility is repugnant, however.

    •  He was disbarred because (0+ / 0-)

      he lied about a blow job.  He never should have been required to answer such a personal question.

      If any Democrat who thinks the same Ken Starr-type tricks won't be pulled again on other Dem POTUS is being incredibly naive.

      "We must not confuse dissent with disloyalty." Edward R. Murrow

      by Betty Pinson on Wed May 02, 2012 at 08:28:25 AM PDT

      [ Parent ]

  •  Lawyers very often only know what they have (2+ / 0-)
    Recommended by:
    ElaineinIN, psnyder

    been told. There are many instances where lawyers have been feed misinformation and they give advise based on that information.

    So while the facts point to different advise, when framed with the incorrect basis that advise is also incorrect.

    Essentially the client feeds what they know to sell the advise they want to justify the action they are doing.

    --Enlighten the people, generally, and tyranny and oppressions of body and mind will vanish like spirits at the dawn of day. - Thomas Jefferson--

    by idbecrazyif on Wed May 02, 2012 at 06:14:24 AM PDT

  •  Comments (0+ / 0-)

    This is hard to do with white collar crime, where the defendant can always claim that he's doing something legally and the laws are being enforced arbitrarily, especially since the lawyer can always claim that he thought it was ambiguous.   It's not like the client walked in and announced, "I am going to shoot that mofo x tonight with four rounds from this 9mm pistol, and I'm going to bury the body right under the New Jersey Turnpike overpass near Exit 14A.  How do I beat the rap?"

    •  Yes, most of the time there is some ambiguity. (0+ / 0-)

      But sometimes there is not. Wachovia, later part of Wells Fargo, blatantly disregarded the banking laws laundering money for Mexican drug cartels. Compliance is the responsibility of corporate counsel. Saying "They never told me" or "I didn't know" isn't going to cut it. It's counsel's responsibility to know and to ensure compliance. If counsel didn't know, that's negligence. If counsel knew and failed to put a stop to the illegal conduct, that's conspiracy. Either way, it seems to me that a review of counsel's fitness to continue to practice law is in order.

      My point is that even in those cases where there is no ambiguity, corporate counsel seems to be above the law, never having to face disciplinary action no matter how serious the illegal conduct or how often it is repeated.

      One other thing. Yes, it's hard to prosecute white collar crime and it's hard to hold to account the corporate lawyers who are complicit. So what? If one is a lawyer, doing stuff that's hard kind of comes with the territory. The fact that it's hard to enforce professional standards in the legal departments of TBTF institutions does not excuse the complete failure of the relevant disciplinary bodies to make the attempt.

      " 'In this world, Elwood, you must be oh so smart or oh so pleasant.' Well, for years I was smart. I recommend pleasant. You may quote me." Elwood P. Dowd

      by paulbkk on Fri May 04, 2012 at 01:01:27 AM PDT

      [ Parent ]

  •  After watching the horrifying Frontline series (0+ / 0-)

    that concluded, appropriately enough, last night on May Day, I'd say there is plenty of weasel room for the counsel of these barely legal predatory "lenders."
    Considering that such financial houses have regulatory arbitrage in action at all times, they are smug enough to believe that if they can float just barely beyond culpability, they are, for all intents and purposes, behaving legally.
    Tragically, they may be close to correct, technically speaking. Also, their shill in the Whitehouse, Tim Geithner, will shield them as long as possible. He wishes upon stars that plausible deniability will reign for his notion of 'market stability.'
    I was stunned to learn from Money, Power, and Wall Street, that even Larry Summers could be considered a fierce advocate of the consumer in comparison to Geithner, not to mention a proponent of prosecution for the most belligerent gonifs who drove the economy into the toilet.

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