What are the obligations of a lawyer who finds out that a client is engaged in fraud? The question troubles a lot of lawyers, but the answer is not as obvious as many people think, i.e., that the lawyer should simply warn the victim of the fraud. Lawyers, after all, are supposed to keep their conversations with their clients confidential. This week in Atlanta, the American Bar Association grappled with the problem and, in adopting a new model code of ethics, came up with a solution. Though far from ideal, it does improve on the present situation.
Confidentiality would still be required, but lawyers would be allowed to breach a confidence if they thought a client were about to commit a violent crime or (the priorities here are interesting) in order to establish a defense for a lawyer in a lawsuit that might arise out of his representa- tion of a client. There is nothing here allowing, much less requiring, disclosure of continuing fraud. But the model code would allow a lawyer to withdraw from representing a client if he became convinced his services would be used to further a crime or fraud. And, in a comment to this rule, the ABA says the lawyer could notify potential victims of his fraud of his withdrawal and disavow statements he made previously while representing the client.
So the proper course for a lawyer who finds he is representing someone engaged in a continuing crime would be: withdraw and wink. The hope is that potential victims might be alerted that something fishy was going on. Probably many would be. A better way to protect innocent victims would have been to allow, or require, lawyers to disclose fully their clients' illegal plans. Now that the ABA has acted, we hope that some of those laboratories of reform--the states--will put this new model code, or something stronger, into effect and see what happens.