Attorneys Must Be Willing to Expose Complicit Clients

Monday, October 7, 2002
by Marc J. Lane

Reprint permission from the October 7, 2002 issue of Crain's Chicago Business.

The Sarbanes-Oxley Act, the sweeping federal assault on corporate fraud, threatens to punish self-serving lawyers who sit by silently when their clients cook up crimes. And that has American Bar Assn. President Alfred P. Carlton Jr. up in arms.

The bar association has always resisted any effort to require lawyers to expose their criminal clients and, morally equivocating yet again, the association is pressing Congress to rethink the efficacy of the law it just passed with overwhelming bipartisan support.

The statute seems easy enough to live with. It doesn't demand that the lawyer swear out a warrant, or even appear on Larry King's show, but only that he report evidence of wrongdoing to senior officers of a corporate client and, if their response doesn't seem appropriate, then to the company's outside directors or to its entire board. A lawyer who doesn't comply runs the risk of being barred from practice before the Securities and Exchange Commission (SEC).

The SEC has been given the job of spelling out a lawyer's responsibilities under the new law. Chairman Harvey L. Pitt understands that lawyers who represent public companies are supposed to serve their shareholders, not just corporate management, or they become complicit in their clients' frauds.

Despite the corporate crime wave, the American Bar Assn. (ABA) bemoans the enactment of ethics rules into law. And it's already lobbying Congress to adopt "corrective legislation" that would rescind the recently passed act's intrusion into the state-by-state regulation of lawyers.

But the organized bar can't be trusted to do the right thing.

Months ago, the ABA's governing body decisively rejected a model ethics rule that would have permitted a lawyer to blow the whistle on a client who plans to use the lawyer's services to perpetrate a fraud. The watered-down model rule, which was eventually passed, does nothing more than perpetuate a lawyer's right to reveal information he deems necessary to prevent bodily harm.

Everyone agrees that preserving client confidences is indispensable to the fair administration of justice. If a client is afraid to tell his lawyer all he needs to know, the lawyer can't possibly represent his interests as vigorously as he should or mount the most effective defense.

But a client who is out to hurt people forfeits the right to secrecy. And it's not enough that a lawyer be permitted to speak out when a client is about to commit a crime. As a public citizen, the lawyer should be duty-bound to turn the client in, lest he become an unwilling accomplice.

Fortunately, the ABA's model ethics rules aren't binding on lawyers. And 41 jurisdictions, Illinois among them, have adopted a fraud exception to the attorney-client privilege. The Illinois rule lets lawyers here turn their clients in if they believe they're about to commit a crime, but even in Illinois, disclosure is not mandatory.

The ABA and other opponents of a compulsory disclosure rule talk a good game. They fear that clients won' t trust their lawyers as much as they should, and might withhold the information that lawyers need to do their jobs.

But the ABA's thinking is colored by self-interest. The association sees the ban against publicly disclosing confidential information as a shield protecting lawyers from claims that they should have taken steps to safeguard victims from their clients' fraud. And the ABA isn't eager to impose new duties on lawyers; particularly duties that might open them up to lawsuits or compromise their livelihoods.

Without the threat of disclosure, it's tough to persuade miscreant clients to follow the law. Now that the profession has had its chance to police itself and failed, the government's first step at policing lawyers is the right step.


Marc J. Lane is a Chicago lawyer and financial planner and an adjunct professor of law at Northwestern University School of Law. He can be reached at


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Copyright © 2002 by Crain Communications Inc.

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