What ethical obligations do lawyers have if they harbor serious doubts about the legality of their client’s plan of action?  What if that client is the federal government (the Treasury Department and the Federal Reserve Bank of New York) and the plan of action is bailing out A.I.G. to avert (or mitigate) a nationwide financial crisis?

Yesterday (June 15, 2015), Judge Thomas C. Wheeler of the United States Court of Federal Claims issued a ruling, which–among other things–rebuked the law firm of Davis Polk for blessing the transaction which gave the government a nearly 80 percent equity stake in A.I.G. The ruling cites an email from a Davis Polk lawyer in which the lawyer noted that the government “is on thin ice and they know it.”

The full story and the link to the 75 paged ruling are here.