Walter Chet Little.
Walter Chet Little. (Courtesy photo)

Insider trading charges and an arrest on Thursday of lawyer Walter “Chet” Little set off a quick dismissal from his most recent law firm, Bradley Arant Boult Cummings. But Little’s alleged misconduct relates back to his days at Foley & Lardner. Did that firm, or the federal government, have a duty to warn Bradley Arant about an investigation before it hired Little?

In short, the answer is no, according to lawyers versed in professional liability and legal ethics issues. They said the burden fell on Bradley Arant, as the firm that hired Little in July 2016, to fully vet him.

“No ethics rules required disclosure, so long as Foley did not misrepresent the reason for the departure,” said Stephen Gillers, a professor at New York University Law School who teaches professional responsibility courses. “A new firm, simply for self-protection, should investigate any lawyer it hires, whether a lateral or entry level lawyer.”

Little, 43, faces criminal charges that he used confidential information on a number of Foley & Lardner’s clients—including Oshkosh Corp., Whiting Petroleum Corp. and Harley-Davidson Inc.—to make illicit profits through options and stock trades, according to a 26-page criminal complaint released by the Manhattan U.S. attorney’s office.

A real estate and banking lawyer, Little did not work for thos Foley & Lardner clients, but he is accused of making more than $320,000 in illicit profits by trading on inside information he accessed through the firm’s internal computer network between February 2015 and May 2016.

Little also is accused of passing information to a neighbor, Andrew Berke, 49, who allegedly used it to trade, as well. Federal prosecutors and the U.S. Securities and Exchange Commission, which filed a parallel civil complaint, said the two men collectively raked in more than $1 million through the alleged scheme.

After the government announced the case on Thursday, a spokesman for Foley & Lardner said in a statement that it had opened an internal investigation after learning of trading activity involving a firm lawyer in June 2016.

“During that review, it was determined that firm policies were violated, which led us to immediately take action,” the spokesman, Daniel Farrell, said. “As a result, the partner is no longer at the firm. We also reported our findings to the relevant authorities and cooperated fully with them throughout their investigation.”

But the firm didn’t say whether it also alerted Bradley Arant, where Little landed last summer after his departure from Foley & Lardner. Bradley Arant, for its part, said it knew nothing about the investigation prior to Little’s arrest on Thursday. Bradley Arant also said that Little is no longer with the firm, as of Thursday.

The situation involving Little is unusual, though not unprecedented, and it raises questions about the obligations of a lawyer or his prior firm when he joins a new firm as a lateral hire. It also serves as a cautionary tale for firms looking to pick up new business by bringing on a new lateral partner, according to lawyers who focus on professional liability and ethics issues.

Those lawyers said that Foley & Lardner—which alerted and cooperated with investigators and provided them access to internal documents, according to the government complaints—likely didn’t have to tell Bradley Arant anything.

“I can’t really see Foley having an affirmative duty to reach out to people,” said Elliot Peters, a name partner at Keker, Van Nest & Peters whose practice includes legal malpractice litigation.

Peters added, however, that Bradley Arant certainly would have had an interest in giving Little a thorough look before hiring him.

“There’s a bunch of questions for them about what kind of diligence they did on this guy,” Peters said. “It’s just hard for me to believe that they didn’t or shouldn’t have asked him questions that would have caused him … to truthfully describe the circumstances of his departure from Foley.”

Gillers, the NYU professor, had a similar take.

“Bradley could have—and some firms would have—required the lateral to consent to have his prior firm respond to questions about the reason for the departure,” Gillers said. “If the lateral declines to consent, or Foley, even with consent, declines to respond, that would have been a rather loud danger sign.”

The SEC and federal prosecutors also could have alerted Bradley Arant about their investigation into Little. But Gillers and Peters, who is a former Manhattan federal prosecutor, said it wouldn’t be the normal course of business for the government to disclose the investigation.

On Friday, Bradley Arant managing partner Beau Grenier said the firm did perform “significant” due diligence on Little, as it does on all lateral hires. However, “we did not learn or know of any misconduct by, or any investigations of, Mr. Little prior to hiring him, and until yesterday,” he said.

There’s also one other party who likely knew about the investigation and could have told Bradley Arant: Little himself.

According to Lawrence Fox of Schoeman Updike Kaufman & Gerbe, Little wouldn’t necessarily have had an ethical duty to disclose to his prospective firm that he was under investigation. But, if Little was asked about pending investigations and lied, that would be a different story, said Fox, who also teaches professional responsibility at Yale Law School.

“He has an obligation to be truthful,” Fox said. “A lot would depend on what he was asked at the new firm.”

Copyright The American Lawyer. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Insider trading charges and an arrest on Thursday of lawyer Walter “Chet” Little set off a quick dismissal from his most recent law firm, Bradley Arant Boult Cummings . But Little’s alleged misconduct relates back to his days at Foley & Lardner . Did that firm, or the federal government, have a duty to warn Bradley Arant about an investigation before it hired Little?

In short, the answer is no, according to lawyers versed in professional liability and legal ethics issues. They said the burden fell on Bradley Arant , as the firm that hired Little in July 2016, to fully vet him.

“No ethics rules required disclosure, so long as Foley did not misrepresent the reason for the departure,” said Stephen Gillers, a professor at New York University Law School who teaches professional responsibility courses. “A new firm, simply for self-protection, should investigate any lawyer it hires, whether a lateral or entry level lawyer.”

Little, 43, faces criminal charges that he used confidential information on a number of Foley & Lardner ‘s clients—including Oshkosh Corp., Whiting Petroleum Corp. and Harley-Davidson Inc. —to make illicit profits through options and stock trades, according to a 26-page criminal complaint released by the Manhattan U.S. attorney’s office.

A real estate and banking lawyer, Little did not work for thos Foley & Lardner clients, but he is accused of making more than $320,000 in illicit profits by trading on inside information he accessed through the firm’s internal computer network between February 2015 and May 2016.

Little also is accused of passing information to a neighbor, Andrew Berke, 49, who allegedly used it to trade, as well. Federal prosecutors and the U.S. Securities and Exchange Commission, which filed a parallel civil complaint, said the two men collectively raked in more than $1 million through the alleged scheme.

After the government announced the case on Thursday, a spokesman for Foley & Lardner said in a statement that it had opened an internal investigation after learning of trading activity involving a firm lawyer in June 2016.

“During that review, it was determined that firm policies were violated, which led us to immediately take action,” the spokesman, Daniel Farrell, said. “As a result, the partner is no longer at the firm. We also reported our findings to the relevant authorities and cooperated fully with them throughout their investigation.”

But the firm didn’t say whether it also alerted Bradley Arant , where Little landed last summer after his departure from Foley & Lardner . Bradley Arant , for its part, said it knew nothing about the investigation prior to Little’s arrest on Thursday. Bradley Arant also said that Little is no longer with the firm, as of Thursday.

The situation involving Little is unusual, though not unprecedented, and it raises questions about the obligations of a lawyer or his prior firm when he joins a new firm as a lateral hire. It also serves as a cautionary tale for firms looking to pick up new business by bringing on a new lateral partner, according to lawyers who focus on professional liability and ethics issues.

Those lawyers said that Foley & Lardner —which alerted and cooperated with investigators and provided them access to internal documents, according to the government complaints—likely didn’t have to tell Bradley Arant anything.

“I can’t really see Foley having an affirmative duty to reach out to people,” said Elliot Peters, a name partner at Keker, Van Nest & Peters whose practice includes legal malpractice litigation.

Peters added, however, that Bradley Arant certainly would have had an interest in giving Little a thorough look before hiring him.

“There’s a bunch of questions for them about what kind of diligence they did on this guy,” Peters said. “It’s just hard for me to believe that they didn’t or shouldn’t have asked him questions that would have caused him … to truthfully describe the circumstances of his departure from Foley.”

Gillers, the NYU professor, had a similar take.

“Bradley could have—and some firms would have—required the lateral to consent to have his prior firm respond to questions about the reason for the departure,” Gillers said. “If the lateral declines to consent, or Foley, even with consent, declines to respond, that would have been a rather loud danger sign.”

The SEC and federal prosecutors also could have alerted Bradley Arant about their investigation into Little. But Gillers and Peters, who is a former Manhattan federal prosecutor, said it wouldn’t be the normal course of business for the government to disclose the investigation.

On Friday, Bradley Arant managing partner Beau Grenier said the firm did perform “significant” due diligence on Little, as it does on all lateral hires. However, “we did not learn or know of any misconduct by, or any investigations of, Mr. Little prior to hiring him, and until yesterday,” he said.

There’s also one other party who likely knew about the investigation and could have told Bradley Arant : Little himself.

According to Lawrence Fox of Schoeman Updike Kaufman & Gerbe, Little wouldn’t necessarily have had an ethical duty to disclose to his prospective firm that he was under investigation. But, if Little was asked about pending investigations and lied, that would be a different story, said Fox, who also teaches professional responsibility at Yale Law School .

“He has an obligation to be truthful,” Fox said. “A lot would depend on what he was asked at the new firm.”

Copyright The American Lawyer. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.