Legal Ethics for New Lawyers: Do Not Be Drawn Into Criminal Activity: Guidance from ABA Formal Opinion 513
The last thing a lawyer wants to learn is that the lawyer has been providing legal services to a client who has used those services to commit fraud or a crime. No lawyer wants to have to deal with a grand jury subpoena, or have a couple of FBI agents on the doorstep. At the same time, we all need clients with problems who come to us looking for solutions.
California’s Rule of Professional Conduct 1.2.1 prohibits counseling a client to engage in, or to assist a client in conduct the lawyer knows is criminal, fraudulent, or a violation of any law. That sounds straightforward, but the rule does not tell us how to avoid that outcome.
In August 2023, the American Bar Association amended ABA Model Rule 1.16(a) to provide, “A lawyer shall inquire into and assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation.”
The ABA Model Rules, and ABA Formal Opinions related to them, do not govern the conduct of California lawyers. They can, however, provide useful guidance where they do not conflict with California’s ethics rules. Hence, the revision of Model Rule 1.16(a), and the recent Formal Opinion 513 discussing it, may assist California lawyers from inadvertently getting caught up in a client’s criminal or fraudulent conduct.
The purpose of revising Model Rule 1.16(a) was to reduce the risk of a lawyer counseling or assisting a client’s crime or fraud. The rule revision explicitly requires some level of inquiry and assessment before a lawyer undertakes each representation. Then, the lawyer must undertake additional inquiry and assessment when the lawyer becomes aware of a change in the facts or circumstances relating to the representation that raises questions about whether the client is using the lawyer’s services to commit or further a crime or fraud.
If a lawyer determines the representation is unlikely to involve assisting in a crime or fraud, the lawyer may undertake or continue the representation. As discussed in Opinion 513, when a lawyer has “actual knowledge” the lawyer’s services will be used to commit or further criminal or fraudulent activity, the lawyer must decline or withdraw from the representation. California Rules 1.2.1 and Rule 1.16(a)(2) (mandatory withdrawal) require the same.
If an initial inquiry leaves the lawyer with unresolved questions as to whether the representation may involve the commission or furtherance of a crime or fraud, Opinion 513 advises the lawyer to inquire further to resolve those questions before accepting or continuing the representation. The lawyer does not need to resolve all doubts and, if some doubt remains even after the lawyer has conducted a reasonable inquiry, the lawyer may proceed with the representation so long as the lawyer concludes that doing so is unlikely to involve assisting or furthering a crime or fraud.
Opinion 513 makes the point that, typically, such inquiries may include getting more information about all parties related to a representation, even if they may be indirect. The lawyer would need to check all parties for conflicts of interest, and confirm billing and other arrangements related to the client, among other things. If the matter is risky but the client is not, the lawyer should consider referral sources and double-check the client’s identity, then confirm that information using reliable, independent sources like a passport, a driver’s license or other government-issued identification.
Per Opinion 513, if there is a change in facts or circumstances that calls an initial risk-based inquiry into question, that is reason to conduct another inquiry about an existing client. A lawyer’s need for further inquiry can arise when the lawyer has actual knowledge of a change – such as when a client tells the lawyer of the change – or the lawyer becomes aware of changed facts and circumstances over the course of meeting obligations imposed by other rules, e.g., checking for conflicts; accepting funds for a client trust account. A single, small change may not warrant further inquiry into a matter or the client, but if changes require review, the lawyer should apply the same standards used at the outset.
Opinion 513 identifies a very useful document, “Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering and Terrorist Financing.” Published in April 2010, it is available on the ABA website. The pamphlet identifies and discusses various risk categories that can be helpful in implementing a risk-based approach to client assessment.
As the saying goes, an ounce of prevention is worth a pound of cure. Thorough and thoughtful due diligence to avoid inadvertently being drawn into assisting a client with the commission or furtherance of criminal or fraudulent activity is your ethical responsibility.