If a South American investor asks you to take delivery of $1 million cash in your law office, to deposit it into a client account and then wire it to different designated accounts, all to supposedly “leverage” additional funds to produce a movie — should you do it? A New York lawyer who did was charged with money laundering, allowed to plead to a lesser offense, and earlier this month was suspended from practice for three years based on the conviction.
“Didn’t feel good about it”
The lawyer in the case was assured by the client that the money was “clean.” He testified that under the irregular circumstances he “didn’t feel good about it,” but went ahead with the arrangement anyway. For his role in the transaction, the lawyer was paid $25,000.
In hindsight, the lawyer should have listened to his tingling Spidey sense, and run the other way, because several years after the transaction, he “learned that the money was ‘drug money,'” according to the court of appeals opinion.
The lawyer was immediately suspended from practice after his guilty plea in the criminal case; regulations in New York as in other systems provide for such interim suspensions upon conviction for serious crimes.
Later, in imposing the three-year suspension, the appeals court quoted the remark of the judge at the lawyer’s criminal sentencing: “People usually don’t walk into an office with a million dollars in cash” and ask that it be converted into another form, and therefore, the court said in the disciplinary case, the lawyer “should have been on notice that this was not a legitimate transaction.” In fact, the lawyer acknowledged that something was not right but decided to participate anyway, the court said.
Duty to inquire
If you find yourself with a cool million bucks that a client wants you to move around, like this lawyer did, you should first read the ABA’s Opinion 491, which was issued April 29. Model Rule 1.2(d) prohibits a lawyer from advising or assisting a client in conduct the lawyer “knows” is criminal or fraudulent. The extensively-footnoted opinion discusses when you “know” that, and spotlights some circumstances that require lawyers to inquire further before they provide their services. The opinion includes some hypotheticals.
The knowledge that a deal is criminal or fraudulent may be inferred from the circumstances, “including a lawyer’s willful blindness to or conscious avoidance of facts,” the ABA Committee said. Therefore, if you have facts that “establish a high probability that a client seeks to use the lawyer’s services” for a crime or fraud, you have “a duty to inquire further to avoid advising or assisting” the wrongdoing.
Even if information you get (whether from an intake interview or during the representation) doesn’t meet the “high probability” standard under Rule 1.2(d), the Committee advised, other rules on competence, diligence, communication and honesty may require you to inquire further.
If the client or prospective client refuses to give you information necessary for you to assess the legality of the proposed transaction, you “must ordinarily decline the representation or withdraw” from an existing representation, the Committee concluded.
Listen to your Spidey sense
“A lawyer may not ignore the obvious,” the ABA Committee wrote. We’ve commented before (here and here) on the 2016 TV exposé that captured secretly-taped intake interviews in which lawyers appeared to be willing to use “gray money” to carry out transactions proposed by fake “clients.” In each set-up, there were clues that should arguably have prompted further inquiry.
Bottom line: If your nose tells you something is fishy about a client transaction you are asked to help with, then as the ABA opinion quoted, you have “an ethical responsibility to find out whether the proposal [is] above-board before performing the services.”