LEO: Confidentiality - Disclosure - Fraud  LE Op. 1272

 

Confidentiality - Disclosure - Fraud: Attorney Must

Determine If Fraud Has Been Committed Before

Revealing Client's Confidences.

 

October 3, 1989

 

You have advised that your client, an attorney who served as in-house

counsel and ethics officer for a company which sought contracts from a

public contracting agency, believes that a certificate filed by the

company with the agency was misleading. In order to obtain uninhibited

access to business, the company was required to prepare a procurement

integrity certification apparently indicating that the company did not

have contact with consultants whose activities were in question. Although

your client was not directly involved in the certificate's creation, he is

aware that the certificate was limited only to contact the company may

have had with consultant A but made no mention of the company's two-year

relationship with consultant B. You indicate that the contracting agency

did not ask about consultant B directly. You further advise that the

activities of both consultants are currently being investigated for fraud.

During the pendency of the investigation, the company has provided the

investigation agency with a list of all consultants. It appears that the

information has not been shared with the contracting agency since the

contracting agency has not revived the certificate requirements for the

company, which would inhibit its access to business.

 

You indicate that your client is of the opinion that the certificate

filed with the contracting agency was misleading since management ignored

the relationship with consultant B because of a belief that it would not

be able to sign an integrity certification regarding B. You have asked the

Committee to consider your client's ethical responsibilities to either

protect the confidentiality of the information or to reveal the

information to the appropriate authorities.

 

The appropriate and controlling disciplinary rules to the circumstances

you have described are DR:4-101(B)(1) and (2), DR:4-101(C)(3) and DR:

7-102(A)(7). Canon 4 requires that a lawyer generally should preserve the

confidences and secrets of a client and specifically may not knowingly

reveal or use a confidence or secret to the disadvantage of the client. (

 DR:4-101(B)(1) and (2)) However, a lawyer may reveal confidences or

secrets when required by law or court order ( DR:4-101(C)(2)) and may

also reveal information which clearly establishes that his client has, in

the course of the representation, perpetrated upon a third party a fraud

related to the subject matter of the representation. ( DR:4-101(C)(3)) (

emphasis added) Furthermore, a lawyer may not counsel or assist his client

in conduct that the lawyer knows to be illegal or fraudulent. ( DR:7-102(

A)(7)) (emphasis added)

 

The question of whether the failure of the company to certify as to the

integrity of consultant B was an illegal act without having specifically

been asked about consultant B is beyond the purview of this Committee

since it raises a legal question for a finder of fact.

 

Assuming that there was no illegality involved, the attorney is mandated

to protect the client's confidentiality since the disclosure of the

information would be likely to be detrimental to the client. The Committee

has earlier opined that absent fraud or a statute requiring a government

attorney who serves as counsel to a public body, which is required under

the Virginia Freedom of Information Act to certify that nothing improper

was discussed in an executive or closed meeting, to reveal a false

certification, the attorney must preserve the client's confidences and

secrets. (See LE Op. 1205)

 

The Committee is of the view that in order for the attorney to disclose a

client's secrets and confidences, as permitted under DR:4-101(C)(3)

which does not, however, include a definition of "clearly established,"

the attorney must abide by the definition of that term as found in DR:4-

101(D)(2): information is clearly established when the client acknowledges

to the attorney that he has perpetrated a fraud (upon a tribunal). The

question of the client's acknowledgment is similarly a factual one which

must be resolved by the attorney's judgment of whether, in this case, such

an admission was made by the parent company's corporate counsel. If the

information does not clearly establish the client's fraud, the lawyer must

maintain the client's confidentiality unless required by court order to

reveal the information. (See Maryland Ethics Opinion 87-8 (10/23/86))

 

Furthermore, the Committee would direct your attention to the Ohio Bar's

Opinion 87-10 (9/17/87), which found that a lawyer serving as corporate

counsel, who learned that the corporation has failed to report certain

facts to the Internal Revenue Service and as a result received a favorable

ruling from the IRS, was ethically required to withdraw from the

representation if the corporation would not consent to disclosure of the

fraud. Again, however, whether your client's corporation's omission of

information was clearly established as fraud is a question of fact. The

Ohio Opinion, in addition, required the lawyer to determine whether the

IRS (in your client's situation, the contracting agency) would be

considered a "tribunal" to whom disclosure was mandatory rather than

permissive.

 

Thus, the Committee opines that unless the former company counsel/ethics

officer determines that a fraud has been perpetrated, information he

possesses regarding the company's failure to voluntarily disclose

information about consultant B must be maintained as confidential.

 

Committee Opinion October 3, 1989

 

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