5 Year Prison Term for a Lawyer Using his IOLTA Account to Launder Money

The ABA Journal and Law.com have reported the story of a San Diego lawyer who was sentenced to five years in prison for using his IOLTA account to facilitate money-laundering activities.  In his plea agreement, attorney Medina admitted  that he used his IOLTA account for the receipt, transport, and transmission of cash to international destinations and that he  “knew or had reason to know that the cash transactions described [therein] were proceeds of unlawful activity, or were intended to promote unlawful activity.”

This new story can be used in Chapter 2 when teaching Rule 1.2(d), which states that a lawyer “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent….”   Although PR profs cannot possibly teach the substantive law of all crimes, I think it is important to make sure that our students are familiar with 18 U.S.C. § 1956.  Among other things, § 1956 makes it a felony “to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity.”   This means that activity that is perfectly legal in one context (such as forming one or more corporations) may be illegal if the purpose of that otherwise legal conduct is to hide the location or source of the proceeds of crime.  (The 60 Minutes/Global Witness videos and the Panama Papers leak can provide useful hypos for discussion).

The San Diego case shows students that lawyers who assist money laundering activity face criminal law sanctions, as well as disciplinary sanctions under Rule 1.2(d).   I found it noteworthy that the plea agreement with Attorney Medina recited that he knew or had reason to know that the money in his IOLTA account were proceeds of unlawful activity, or were intended to promote unlawful activity.

For additional information about the role of lawyers in preventing money-laundering, see this ABA Task Force webpage and the guidance provided by the ABA and jointly by the IBA, CCBE, and ABA about how to identify money-laundering red flags.  (I give my students a 2-page summary of the ABA’s red flags guidance.)

My other work about lawyers and money-laundering includes these slides about the potential impact on US lawyer regulation of FATF’s 4th Mutual Evaluation of the US; slides that focus on US efforts to educate lawyers about money-laundering; and slides and a 2 page handout that discuss how US lawyer regulation could be affected if US lawyers don’t recognize money laundering situations. My most recent article about this topic is available here.

New DC Data & Recommendations About Global Practice

In May 2016, the DC Bar issued the Interim Report of its Global Legal Practice Task Force.  In June 2016, the Board of Governors of the DC Bar approved the report’s recommendations.  As the DC press release noted, “D.C. Bar members practice in 83 countries, and nearly 1,500 of the Bar’s 101,500 members live and work abroad. Fifty-four percent of the Bar’s domestic members were very or somewhat interested in expanding their international practices within the next five years …with 57 percent of that number indicating that they expect to expand their practices during that time.”

The DC Bar sent separate surveys to bar members located in the US, bar members located outside the US, and Special [Foreign] Legal Consultants.  To my knowledge, this is the first survey of its kind, in which bar members were asked demographic data about their practices and qualifications, as well as questions about the ways in which they currently interact with the DC Bar and the services they would like.   Anyone who is interested in the globalization of legal practice will find the Interim Report an interesting read.

The DC Bar press release announcing Board approval of the recommendations summarized the Task Force work as follows:

To best achieve its charge, the Task Force divided its study into three areas: examining how best to serve domestic Bar members with international practices and clients, and Bar members who live and work overseas (outbound); studying the rules by which lawyers from foreign countries can be admitted and licensed to practice in the District (inbound); and studying developments in alternative business models being employed by law firms domestically and in other countries. The interim report reflects the recommendations of the outbound subgroup and a recommendation to conduct ongoing study of alternative business structures and multi-disciplinary practice. The Task Force’s work continues on issues about the regulation, admission, and practice of foreign-educated lawyers in the District of Columbia.

 The Task Force’s proposals for outbound members fell into three broad categories: connections or networking, resources, and education and professional development.

Highlights of the proposals for short-term implementation recommend that the Bar should:

• Develop networking opportunities with substantive content for smaller groups of domestic Bar members with international legal practices.

• Improve the exchange of information about resources, education, and networking for all members engaged in the practice of cross-border and international law.

• Create varying “expertise” levels of educational programming in international law topics for all members and develop marketing for this programming.

• Develop educational programming about issues in international practice that all members often encounter: multi-country litigation; record keeping; e-discovery training and tools; conflicting legal ethics rules; attorney-client privilege abroad; and data security and privacy.

Highlights of the proposals for long-term implementation recommend that the Bar should:

• Facilitate informal gatherings of its members residing in specific regions of the world where these members commonly live and practice, such as Canada, China, France, and the United Kingdom.

• Facilitate networking between members who reside and practice outside the United States and local business groups.

• Partner with international groups and organizations based in Washington, D.C., for hosting networking events with domestic members with international practices.

• Develop and maintain a list of volunteer “resource attorneys” by international law subject matters or by conducting business in specific regions of the world.

Second Circuit Finds New York’s In-state Office Requirement Constitutional

On April 22, 2016, the Second Circuit decided SCHOENEFELD v. SCHNEIDERMAN, et. al.  In a 2-1 decision, the Second Circuit reversed the district court and remanded the case with instructions to the court to award judgment to the defendants.  The Second Circuit majority upheld the constitutionality of New York’s rule that requires an instate office.  Relying on

McBurney v. Young, 133 S. Ct. 1709 (2013), the Court held, inter alia, that “in the absence of any proof that that statute’s instate office requirement was enacted for a protectionist purpose”, plaintiff could not prevail.

The suit was filed in 2008 by Ekaterina Schoenefeld, who was a New Jersey resident. She had cited the Privileges & Immunity Clause and argued that the policy, which blocked her from practicing in New York despite passing the bar there and meeting all other requirements, served no substantial state interest.  She had noted that New York residents need not have a physical office in New  York and may practice from their homes.   This argument was not successful.  The opinions are quite lengthy – 31 pages for the majority and 25 pages for the dissent. The ABA Journal has a story about the case here about and there is Wall Street Journal article here.

Although the Court held that it was constitutional for New York to have an in-state office requirement, the decision does not require such a rule.  At some point, New York might want to revisit this issue.   In addition to its domestic implications, this ruling has the potential to reduce the number of foreign-admitted lawyers who annually sit for New York’s bar exam. See Diane Bosse, Testing Foreign-Trained Applicants in a New York State of Mind.   New York’s in-state office rule could affect the attractiveness of the New York license as a global credential.

Chapter 4, Confidentiality, and a New EU Case on Lawyer Surveillance

If you are looking for a way to introduce cutting-edge issues into Chapter 4 on lawyer confidentiality, you can refer to a CCBE press release about an October 27, 2015 decision from the Dutch Court of Appeals regarding lawyer surveillance.  The CCBE is the acronym for the Council of Bars and Law Societies of Europe, which represents the bars and law societies in the EU. The press release included the following summary of the background of the case:

“In May of this year the CCBE successfully intervened before The Hague District Court in a challenge brought against the Dutch State by the law firm Prakken d’Oliveira and the Dutch Association of Criminal Defence Lawyers (NVSA). The Court was questioned on the legality of eavesdropping by domestic intelligence agencies on lawyers’ calls and communications. In its verdict delivered on July 1st, the court recognised that the ability to communicate confidentially with a lawyer is a fundamental right which is currently being breached under Dutch surveillance policy. The court therefore ordered the Dutch government to stop all interception of communications between clients and their lawyers under the current regime within six months. In response, the Dutch State fast-tracked an appeal against the judgement.  On 25 August, the CCBE challenged the grounds of the appeal.”

The CCBE press release reported that the Dutch Court of Appeal had upheld the trial court’s ruling, noting that:

“In its ruling, the Dutch Court of Appeal dismissed all the grounds of appeal alleged by the Dutch State. The Court indicates that according to case law of the European Court of Human Rights surveillance activities must be subject to review by an independent body with the power to prevent or terminate potential infringements of professional secrecy.”

The CCBE press release contains links to the court decisions (in Dutch) and news stories.  Additional information is found on this CCBE Surveillance Working Group webpageThis CCBE webpage also has confidentiality-related information.

NOBC Posts Resources on Global Developments

The National Organization of Bar Counsel (NOBC) is an organization “of legal professionals whose members enforce ethics rules that regulate the professional conduct of lawyers who practice law in the United States, Canada and Australia.”  When she was president of the NOBC, Tracy Kepler created an International Committee, which decided to create 4 subcommittees to investigate and provide information to NOBC  members about four areas of inquiry: Alternative Business Structures; Entity Regulation; Alternative Licensure ; and State and International Reciprocity

The work product from these committees has now been posted on a new NOBC “Global Resources” webpage.  These new pages contain useful information.  For example, the FAQ document about Entity Regulation was prepared with input from current or former US, Australian, Canadian and UK regulators, along with academics.   (The Entity Regulation Committee plans to update its materials periodically.)  These materials can be particularly useful when teaching Chapter 2, Chapter 3 (fee splitting) and Chapter 9.

Regulator(s) for English barristers approve changes to the “cab rank rule” regarding the “duty to accept” cases

The Bar Standards Board (BSB) is the “frontline” regulator for barristers in England and Wales; the overarching regulator is the Legal Services Board (LSB).

Yesterday the LSB approved a proposal from the BSB to change the “cab rank rule” which says, in essence,  that barristers are required to accept clients who request their services.  (In other words, they are similar to “taxi cabs” and have to accept the person who “hailed” their services.)

The new rule allows barristers to refuse work from a professional client who, in the reasonable opinion of the barrister, presents an unacceptable credit risk.  (The previous rule only allowed barristers to decline work from solicitors on a specified list.)  For information on the history of this rule and the consultations, see here and here.

For those teaching Professional Responsibility, the English cab rank rule, even as amended, can be contrasted with the ABA Model Rules.  The only mandatory ABA Model Rule that contains a “duty to accept” cases is found in ABA Model Rule 6.2 regarding court appointments. (Rule 6.1 encourages but does not require the acceptance of a certain number of pro bono cases).

July 2015 International Conference of Legal Regulators’ materials online

The International Conference of Legal Regulators is a group of regulators that first met in London in September 2012.  The idea behind the ICLR is that those who regulate lawyers face similar issues and would benefit by global conversations on these topics.  (For example, regulators around the world face issues related to the impact of technology, globalization, & market disruption and issues of substance abuse by lawyers).

The ICLR met in San Francisco in 2013 (in conjunction with the NOBC meeting), London in 2014, and Toronto in 2015.    You can access the materials from the 2015 Toronto ICLR Conference here; the materials from prior conferences are available as links from the current ICLR homepage.   For more information about the creation of the ICLR, see this article about its formation. Legal profession regulators have been slower to form international networks than have some other types of regulators – for example, there are international networks of banking, antitrust, and medical regulators.