Former Lawyer of Martin Shkreli Convicted of Fraud

In case you missed the news over the winter holidays, in late December 2017, Evan Greebel, who was outside counsel to Martin Shkreli’s former pharmaceutical company, Retrophin, was found guilty by a jury in Brooklyn of charges that he conspired to commit wire fraud and securities fraud.  In August 2017, a different jury found Shkreli guilty of defrauding hedge fund investors but cleared Shkreli of conspiring with Greebel to steal from Retrophin.  This conviction offers a stark reminder that lawyers cannot use their legal expertise to facilitate the commission of a crime or fraud.

 

The news story can be found here.

“This sounds like my ethics class in law school…” Justice Sotomayor

The Supreme Court heard arguments today in McCoy v. Louisiana, which presents the question of whether it is unconstitutional for defense counsel to tell the jury that a client is guilty when the client insists he is innocent. It also raises interesting questions about the ethical obligations under ABA Model Rule 1.2 that “a lawyer shall abide by a client’s decisions concerning the objectives of representation” and ABA Model Rule 3.3, Candor Toward the Tribunal.

As Justice Sotomayor observed in questioning McCoy’s attorney, “this sounds like my ethics class in law school, and this very hypothetical of what do you do with a lying client?” Full oral argument transcript is here.

Adam Liptak noted in the NY Times that the justices seemed likely to side with McCoy: “Several justices said a decision as fundamental as admitting guilt in a capital case belonged to the client rather than the lawyer.” Full article here.

Cross-posted at the Legal Ethics Forum

Ethics of In-House University Counsel

The Chronicle of Higher Education (August 11, 2017), as well as social media, has been covering the unfolding story relating to the UF General Counsel Jamie Keith.  The saga began with a Title IX investigation which involved UF wide receiver Antonio Colloway, represented by attorneys Huntley Johnson and Amy Osteryoung. The article below focuses on the report of the internal audit conducted by UF, now that Ms. Keith has resigned her post. But this entire case provides an opportunity to explore the role of the in-house counsel, and the multiple ethical duties and challenges faced when working for a large and complex institution. Note also that Ms.Keith threatened to report the attorney who initially complained about her actions to the Florida Bar for discipline.  We will need to keep a watch on this case to see if any bar investigation or discipline results for any of the attorneys involved.

http://www.chronicle.com/article/Public-Records-Appear-to-Have/240908?cid=wcontentlist_hp_latest

 

Dewey & Leboeuf Retrial Ends in a Split Verdict

For those of you following the Dewey & LeBoeuf criminal trial, you know that the jury deadlocked in October 2015 after nearly six months of deliberations on dozens of charges against Steven H. Davis, the former chairman of Dewey, and two other former executives of the law firm, Stephen DiCarmine and Joel Sanders. The three men were accused of being the architects of an accounting fraud that enabled Dewey to defraud its lenders and creditors during much of the financial crisis.

In January and February 2016, Manhattan Prosecutors reached deferred prosecution agreements with Steven H. Davis and Zachary Warren, one of the original defendants.

The Manhattan prosecutors retried the case against DiCarmine and Sanders, the remaining defendants, in the New York State Supreme Court in Manhattan.  In May 2017, the jury delivered a split verdict.  Joel Sanders, the law firm’s former chief financial officer, was convicted on three criminal counts.  He could be sentenced up to four years in prison. Stephen DiCarmine, the former executive director, was acquitted of the same charges.

Update on the case can be found here.

Manhattan Prosecutors Plan to Retry Remaining Dewey and Leboeuf Defendants

For those of you following the Dewey & LeBoeuf criminal trial, you know that the jury deadlocked last October after nearly six months of deliberations on dozens of charges against Steven H. Davis, the former chairman of Dewey, and two other former executives of the law firm, Stephen DiCarmine and Joel Sanders. The three men were accused of being the architects of an accounting fraud that enabled their law firm, Dewey & Leboeuf, to defraud its lenders and creditors during much of the financial crisis.

In January and February of this year, Manhattan prosecutors reached deferred prosecution agreements with Steven H. Davis and Zachary Warren, one of the original defendants.

The Manhattan prosecutors are now planning to retry the case against DiCarmine and Sanders, the remaining defendants. The trial is expected to begin early next year in the New York State Supreme Court in Manhattan – just in time for your spring semester 2017 P.R. classes. Apparently, DiCarmine has communicated that he wants to replace his longtime lawyer, Austin Campriello.

Update on the case can be found here.

 

Inside (Inhouse) Lawyers: Friends or Gatekeepers?

Those of you teaching Chapter 6—The Lawyer’s Duties to the Legal System, the Profession, and Nonclients—might be interested in an article of mine just published by the Fordham Law Review for its Lawyering in the Regulatory State Symposium.  In the paper, using the GM ignition switch scandal as a point of departure, I critique the common assertion that our legal system is best served if the corporate in-house lawyer conducts his/her relationships with senior corporate managers according to the “lawyer as friend” model. I argue that there are numerous problems with the model, not the least of which is the invariably (and perhaps intentionally) vague way in which the model is invoked.  Those who invoke the “lawyer as friend” model repeatedly assert that the senior corporate manager needs to be able to repose “trust and confidence” in the inhouse lawyer. Unfortunately, they never explain: trust and confidence in what?

As a matter of professional responsibility and fiduciary obligation, the lawyer cannot reassure the manager that his communication will remain confidential or that the manager will be shielded from adverse consequences. If the corporate senior manager is engaged in material wrongdoing that may harm the corporate entity, that manager will usually not be entitled to those assurances.  As William Simon has explained, the authority to invoke or waive the organization’s confidentiality rights usually belongs to the organizational agents different from those who made the confidential communications. Because the lawyer may be required to testify against the manager in a court of law, it would be entirely inappropriate for the lawyer to reassure her colleague of her continuing loyalty or confidentiality.  The lawyer’s duty of confidentiality will not block disclosure within the organization, and it will not prevent the organization from divulging information outside of the corporation, no matter how harmful internal or external disclosure is to the manager. Indeed, the only thing that the lawyer can properly promise the manager is that she will listen carefully and not rush to judgment, which is the behavior that anyone would reasonably expect of a competent professional (irrespective of any preexisting friendship). To suggest that lawyers should invite the manager’s trust and confidence and then—if the lawyer encounters evidence of material misconduct—turn around and report that manager to higher-ups basically advocates a bait and switch model. This “bait and switch” does not sound like friendship, which is precisely why the “lawyer as friend” analogy should be abandoned.

To be sure, in the best possible world, the senior corporate manager backs down from his illicit plan. This good result may be reached through some form of moral dialogue that legal scholars are right to recommend. What many folks ignore, however, is the sobering reality that persuasion does not always work. Not all lawyers will be skillful in the art of moral suasion, and—frankly—most law schools do not train students in moral suasion. Also, sophisticated senior managers, who find themselves in desperate enough situations to be considering wrongdoing in the first place, may not be receptive to the lawyer’s (perhaps feeble) attempts at moral suasion.

Perhaps those invoking the “lawyer as friend” model are merely saying lawyers should be “friendly”?  Unfortunately, that commits the fallacy of confusing “friend” with “friendliness.”

If you’d like to read the whole article, it can be downloaded from SSRN here:

The entire issue of the Fordham Law Review Lawyering in the Regulatory State Symposium can be found here.

 

Lawyer Suspended for Using Info Divorce Client Obtained via Guessing Wife’s Password

The ABA Journal reports today that the Missouri Supreme Court suspended a lawyer for using the information obtained by the lawyer’s divorce client, who obtained the information by accessing the wife’s email without permission (husband guessed his wife’s email password).  The information obtained included:

  • current payroll documents of wife; and
  • a list of direct examination questions prepared by wife’s lawyer.

The court found that the lawyer violated the following Missouri Rules of Professional Conduct:

  • Rule 4-4.4(a), which prohibits a lawyer from using “methods of obtaining evidence that violate the legal rights” of a third party;
  • Rule 4-8.4(c) which prohibits a lawyer from engaging “in conduct involving dishonesty, fraud, deceit, or misrepresentation;”
  • Rule 4-3.4(a) which provides, in part, that a lawyer shall not “unlawfully obstruct another party’s access to evidence or unlawfully alter, destroy, or conceal a document or other material having potential evidentiary value;” and
  • Rule 4-8.4(d), which prohibits a lawyer from engaging “in conduct that is prejudicial to the administration of justice.”

The court noted that the lawyer had been disciplined five times previously.

You can find the opinion here.

Former Prosecutor Disciplined for Contacting Alibi Witnesses through Fictitious Facebook Account

The Ohio Supreme Court in Disciplinary Counsel v. Brockler recently imposed a stayed suspension on an ex-prosecutor who used a fictitious Facebook account to contact alibi witnesses in a criminal case that he was prosecuting. The discipline came after the prosecutor had been fired for “his unethical conduct in creating false evidence, lying to witnesses and another prosecutor, and damaging the prosecution’s chances in a murder case . . . .”

The Court found that the prosecutor doubted the alibi witnesses’ stories and created a fictitious Facebook account to contact the witnesses.  In setting up the account, the male prosecutor used a pseudonym, posed as a woman, and added pictures, group affiliations, and “friends” that he based on the defendant’s jailhouse telephone calls and Facebook page.  He contacted the witnesses claiming that he was romantically involved with the defendant, and he discussed the alibi as if it were false.  He had separate Facebook chats with two witnesses, and he tried to get them to admit that they were lying for the defendant, or would lie for him, and he tried to convince them to talk with the prosecutor.  After chatting with them for several hours, he thought that they were becoming suspicious so he printed out copies of the chats, put them in the case file, and deleted the Facebook account.

Subsequent to being fired and before his disciplinary hearing before the Board of Professional Conduct, the prosecutor gave press interviews in which he claimed that such ruses where common among prosecutors to get at the truth and that he did this to keep a murderer behind bars.  A year after he was fired, the defendant was convicted of aggravated murder and other related charges.

Prior to the hearing, the prosecutor entered into a stipulation that he had violated Rule 8.4(c), which prohibits a lawyer from engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation.  He urged the disciplinary board to carve out an exception for “prosecutorial investigation deception.”The board refused to do so, noting that it had  previously disciplined three non-prosecutors for engaging in dishonest conduct involving contact with witnesses in their clients’ cases.  The board also found the former prosecutor guilty of Rule 8.4(d), engaging in conduct prejudicial to the administration of justice.

The Ohio Supreme Court upheld the board’s findings, but split 4-3 on the sanction of a stayed one year suspension from the practice of law.  Two of the dissenting justices favored the one year suspension without a stay, and one justice favored an indefinite suspension.  In the prior cases involving non-prosecutors, two lawyers received stayed six-month suspensions for making misrepresentations to a client’s former landlord to see if the landlord would slander the client, and one lawyer received a one-year suspension, six months stayed, for intimidating a deposition witness by creating the false impression that the lawyer had compromising person information that could be used against the witness.

This case, and other cases, should serve as warnings about the limits of advocacy.  While seeking truth is noble, using deceit and misrepresentations in an effort to help one’s case is going beyond what the ethics rules allow.

Former GE General Counsel Ben Heineman Gives Advice to In-House Counsel

The April 2016 issue of Corporate Counsel Magazine (subscription required) features an article by Ben W. Heineman, Jr., who served as GE’s senior vice president-general counsel from 1987 to 2003 and then senior vice president for law and public affairs from 2004 until his retirement at the end of 2005. Heineman is currently a senior fellow at Harvard’s schools of law and government. The article contains excerpts from Heineman’s much-anticipated forthcoming book, The Inside Counsel Revolution: Resolving the Partner-Guardian Tension (Ankerwycke, 2016).

In the book, Heineman makes the case for his ambitious vision of the modern general counsel: “a lawyer statesperson who is an outstanding technical expert, a wise counselor and an effective leader, and who has a major role [in] assisting the corporation [to] achieve the fundamental goal of global capitalism: the fusion of high performance with high integrity and sound risk management.” In carrying out this role, the general counsel must resolve “the most basic problem confronting inside lawyers: being partner to the board of directors, the CEO and business leaders but ultimately being guardian of the corporation.” Accordingly, the book provides some guidance on how to resolve the partner-guardian tension that is inherent in the role.

The book can be pre-ordered here.

Deferred Prosecution Agreements Reached with Former Dewey & LeBoeuf Lawyers

It’s always a good idea to remind your students to be careful if they should ever take on the responsibility of managing a law firm, especially in times of financial bust. If you have been following the Dewey & LeBoeuf criminal trial, you know that the jury deadlocked in October of last year on dozens of charges against Steven H. Davis, the former chairman of Dewey, and two other former executives of the law firm, Stephen DiCarmine and Joel Sanders. The three men were accused of being the architects of an accounting fraud that enabled Dewey to defraud its lenders and creditors during much of the financial crisis.

In January of this year, Manhattan prosecutors reached a deferred prosecution agreement with Steven H. Davis. The agreement runs for five years and prohibits Davis from practicing law in New York during that period.

In February, prosecutors reached a deferred prosecution agreement with Zachary Warren, one of the four original defendants, just weeks before he was supposed to go on trial in the New York State Supreme Court in Manhattan. Notably, Warren was not a lawyer when he worked as the client relations manager at Dewey & Leboeuf. After leaving Dewey, he went on to graduate from Georgetown Law Center and clerked for a federal judge.  He plans on working at Williams & Connolly in the fall.   The agreement requires Warren to perform 350 hours of community service as part of a one year agreement.

The Manhattan prosecutors are planning to retry the case against DiCarmine and Sanders.

Articles about the agreements reached with Davis and Warren can be found here and here.

New ABA Opinion on Ethical Duty when Client Documents are Subpoenaed

In Formal Opinion 473 (Feb. 17, 2016), the ABA provides new guidance to lawyers receiving subpoenas for client documents or information.  The opinion states that whenever a lawyer receives a subpoena or any other compulsory process for documents or information relating to the representation of a client, several obligations are implicated.  First, the lawyer must consult with the the client, if the client is available.  Next, unless the client instructs otherwise, the lawyer must assert all reasonable claims against disclosure and seek to limit the scope of any disclosure.  Next, if ordered to produce any information, the lawyer should consult with the client on whether to appeal the ruling.  Finally, if the client and the lawyer disagree on how to proceed, the lawyer should consider whether to withdraw from the representation pursuant to Rule 1.16.

The new opinion goes into some detail to explain what the lawyer should do if the client is unavailable, and to the duty to take steps to protect client confidentiality.  The opinion should be a very helpful resource to any lawyer facing attempts to pierce client confidentiality.

The new opinion is also a useful addition to Formal Opinion 10-456 (July 14, 2010), which addressed the disclosure of client information to a prosecutor when a lawyer’s former client brings an ineffective assistance of counsel claim.  Formal Opinion 10-456 makes clear that a lawyer may only disclose confidential information that the lawyer believes is reasonably necessary for the lawyer’s self-defense.

 

Prosecutorial Accountability – An Optimistic Future

Bruce Green and Ellen Yaroshefsky recently posted a new article on SSRN, Prosecutorial Accountability 2.0.  They identify several rhetorical and regulatory shifts that they claim are leading to an era of new prosecutorial accountability.  In their carefully crafted article, they argue that information technology is the main driver behind this shift to hold prosecutors accountable for their actions. They claim that the pendulum long fixed on courts and the media presuming that prosecutors could do no wrong has swung to a more skeptical position.  Let’s hope they are right. Anyone interested in the criminal justice system should read this article.

New Study Out: The Prevalence of Substance Use and Other Mental Health Concerns Among American Attorneys

As a former Lawyer Assistance Program Executive Director at Lawyers Concerned for Lawyer in Massachusetts, I was distressed by the new study that reveals: (1) young lawyers are at an increased risk of problem drinking and mental health issues; and (2) overall these issues in the legal profession may be higher than previously thought.  The study was conducted jointly by the ABA Commission on Lawyer Assistance Programs (CoLAP) and the Hazelden Betty Ford Foundation.

According to the study:
  • 21% of licensed, employed attorneys are problem drinkers;
  • 28% struggle with some level of depression; and
  • 19% demonstrate symptoms of anxiety.
Each semester, I take a few minutes in PR to address the availability of LAPs for lawyers and law students.  And, I include coverage of Rule 8.3 at the same time. If you’re interested in talking points, feel free to email me – murphyme@wfu.edu.  I also have had LAP staff and members speak with my class, with great success.  Video conferencing makes this even easier today.  In addition, CoLAP has a range of resources, including links to LAPs in each state, speaker lists, and articles.

More on the study from the ABA here; from the ABA Journal here; and from the NYTimes here.  A copy of the study from the Journal of Addition Medicine is available here.

Jury in Dewey & LeBoeuf Criminal Trial Acquits on Some Charges, Deadlocks on Others

A Manhattan jury today (October 7, 2015) cleared three former executives of Dewey & LeBoeuf on falsifying business records charges. However, the jurors remained deadlocked on dozens of other charges. The three executives, all trained as lawyers, are being accused of masterminding a four-year scheme to manipulate the finances of the once-prominent law firm in an effort to keep it afloat during the financial crisis.  They were charged with a range of crimes including grand larceny, scheme to defraud, and falsifying business records. Prosecutors working under Manhattan district attorney Cyrus R. Vance, Jr. called more than 40 witnesses to support the prosecution’s case. Recent update on the case is here. Prior blogposts can be found here.

Okay to Advise on Setting Up Medical Marijuana Business? States Differ

On the heels of a recent disciplinary decision finding that the Hawaii Rules of Professional Conduct prohibit attorneys from counseling clients to commit a crime or assisting in a crime – specifically that lawyers can’t provide legal services to help set up a medical marijuana business – the Hawaii Supreme Court is seeking comments on a proposed rule change to allow lawyers to counsel clients on conduct permitted under state law, but prohibited under federal.  More here from Law360.  More on how other states have approached the issue (inconsistently) here.
H/T to Marilyn Forbes Phillips @ Duke Law.

Jury Deliberations Begin in Dewey & LeBoeuf Accounting Fraud Case

Yesterday, on September 16, 2015, in the New York State Supreme Court in Manhattan, the jury began deliberating whether the three former executives of the now defunct law firm of Dewey & Leboeuf conspired to manipulate the finances in an effort to defraud investors and bank lenders.  In a daring move, defense lawyers chose not to call any witnesses and rested their case. For more detailed information about the trial, it is reported that one legal newswire, Law360, has been live blogging the event. Warning: the testimony “has often been dull and focused on arcane accounting treatments.” Latest news of the trial can be found here. Prior posts can be found here and here.

Defense Plans to Rest in Dewey & LeBoeuf Criminal Trial

Those of you who are teaching Chapter 6, Part II (Duties to Third Parties and to the Law) may want to refer to the ongoing criminal trial of three former executives of Dewey & LeBoeuf, who are being tried for larceny, fraud and falsifying business records. The trial began in late May and the defense team plans to formally rest its case on Tuesday without calling a single witness. Prosecutors working under Manhattan district attorney Cyrus R. Vance, Jr. have called more than 40 witnesses to support the prosecution’s case. Recent update on the case can be found here. Prior blogpost can be found here.

Judge should have removed juror for bias: New Jersey Appeals Court

Adam Liptak recently  reported in the New York Times that racial strike patterns in jury selection is widespread – and often without consequence.

In the days before Batson v. Kentucky(1985) when I was trying cases for the Public Defender and Joseph Donahue was an Assistant County Prosecutor in Newark New Jersey we (defenders and prosecutors) with scarcely a second thought peremptorily struck jurors on the basis of their race and gender.  Blacks were routinely stricken by the prosecutors, and we struck anyone who had a third cousin who was a cop, or was Italian from a town we considered racist.

When we once got the bright idea to object – in a case where Joe (now Judge) Donohue was the prosecutor – the judge brushed our objection aside saying “I will not have attorneys in my courtroom accusing each other like that”.   Now –  over 30 years later – an Appellate Division panel in New Jersey has reversed car jacking convictions won in Donohue’s courtroom,  In a pointed message they instructed the judge and prosecutor that a casual attitude toward racial prejudice is unacceptable.  The lesson is as apt for civil cases as it is for criminal cases.

The harm of sterotyping is not merely to the parties – plaintiff or defendant.  As Louisiana attorney James Doyle argued to the Supreme Court in Edmonson v. Leesville Concrete [501 U.S. 614 (1991)] the insult, the equal protection violation, extends to the excluded juror, as this film from the Annenberg Center explains.

The Rules of Professional Conduct provide little guidance. In fact the Comments to MRPC 8.4 specifically state that a judge’s finding that a peremptory challenge was “exercised on a discriminatory basis does not alone establish a violation of this rule.”  Does such a soft touch explain in part Judge Donohue’s “we all have some prejudice in us” approach?

– gwc

Source: OTHERWISE: Judge should have removed juror for bias: New Jersey Appeals Court

The Appellate Division of the  Superior Court in State of New Jersey v. Brown the Appellate Division has reversed two convictions for first degree carjacking

“because the trial judge failed to remove a deliberating juror who disclosed her racial bias to two of her fellow jurors and to the judge. Specifically, on the second day of deliberations, Juror 4 told Jurors 5 and 12 she was “concerned” and “nervous” because she had seen two African-American men that morning in the neighborhood where she lives. Juror 4 noted, “[t]hey certainly don’t live around there, and they don’t hang around there.” Juror 5, who works in that area, agreed that this seemed strange because that area “mostly is Italian and White people. There really are no Black people around there.” Because both defendants are African-American, Juror 4 feared the presence of two African-American men in her neighborhood may have had some kind of sinister connection to the trial.”

Jurors 5 and 12  enouraged her to express her concerns – which she did to the Sheriff’s officer who advised the judge Joseph Donohue.  After perfunctory questioning of jury number 4 the judge ruled on the motion to remove the juror, saying in open court in the presence of the jury:

I want to make one comment, and I’ve already ruled on this, but in terms of creating the record, there’s been an expression by [Juror 4] — and also [Juror 5] to a certain extent – – expressed some racial consciousness and potential racism by their comments. However, what they both said was that the circumstances were unusual, that the area in which they were, it would be unusual for someone who was Black to be in that area. I can’t say — I can’t say that myself. I don’t know whether any counsel can say it, but these individuals said that that was unusual. And [Juror 4] expressed some initial concerns with it. I don’t think that that’s even an expression of racism. [(Emphasis added).]

The Appellate Division harsh in its assessment of the judge:

These remarks coming from a sitting judge in a criminal trial are plainly inappropriate under any circumstances, but especially when they are uttered in a trial involving two African American defendants. A juror’s expression of “racial consciousness and potential racism” must be immediately repudiated, and the juror must be removed from the jury. Thereafter, the trial judge must conduct a thorough, comprehensive, and probing investigation to determine what influence the juror’s noxious sentiments had on other jurors. Here, the judge’s voir dire of Jurors 3, 5, and 12 was completely inadequate and fell far short of what was required.
“When Juror 4 inferred a sinister conspiratorial purpose from a facially innocuous event, based solely on the race of the participants, she revealed a deeply rooted, latent racial bias that required her removal from the jury… Her initial instinctive, subliminal association of race with criminality or wrongdoing far trumped her subsequent assurances of impartiality.”

Read more: http://www.njlawjournal.com/id=1202736097797/Judge-Should-Have-Removed-Racially-Biased-Juror-Court-Says#ixzz3kRKqYdd

Attorney-whistleblowing

Hello, all! Thanks for welcoming me as a guest blogger. I’m happy to share my recent articles in my two-part project on attorney-whistleblowing. The first, entitled Advocate or Adversary? When Attorneys Act as Whistleblowers, examines whether attorneys may receive whistleblowing bounty rewards from the SEC under Dodd-Frank and the ethical concerns surrounding this issue. This article is forthcoming in the Georgetown Journal of Legal Ethics and available on SSRN by clicking here.

In my second piece, Conflicted Counselors: Retaliation Protections for Attorney-Whistleblowers in an Inconsistent Regulatory Regime, I examine a separate but related issue of retaliation protections for attorney-whistleblowers under Dodd-Frank in light of their reporting requirements under Sarbanes-Oxley. This article places special focus on in-house counsel and examines the various (and conflicting) regulatory regimes that govern attorney-whistleblowers in the corporate sector. You can access the article on SSRN by clicking here.

I hope you find these fruitful as this issue develops! If you would like to discuss more, please feel free to email me at jennifer.pacella@baruch.cuny.edu.