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Some confidences are so sacred that it’s almost heresy to argue they should not remain secret — doctor-patient; priest-confessor; Vice President Dick Cheney and his energy task force. And for years, attorney-client privilege seemed just as inviolable. It is, after all, a core principle of the justice system that communication between an attorney and client should be unfettered and shielded from public view. But the run of corporate scandals in recent years has even the American Bar Association looking at the possibility of allowing lawyers to spill the beans if their clients commit financial crimes. When delegates to the ABA’s annual convention meet in San Francisco next week, they will debate a trio of proposals that could crack the door for lawyers to pierce the attorney-client privilege. It’s likely to be a lively — if largely academic — confrontation between lawyers who believe the profession has an ethical duty to society to reveal crimes and attorneys who say clients deserve their counsel’s silence no matter what. “That’s a very important thing. It’s one of the most fundamental things in the justice system, in both criminal and civil courts,” said Scott Vernick, a legal ethicist and partner at Philadelphia’s Fox Rothschild. “The problem is, once you start relaxing and making exceptions, you start down a very slippery slope.” The ABA has actually considered two of the three proposals before. They deal very specifically with reporting financial crimes in a corporate environment — including alerting senior management that something within a company is afoot. Similar proposals were defeated last year. But a third, new proposal has stirred controversy. It would allow lawyers to report financial crimes outside of their clients’ corporate structure — in essence, to inform on their clients to law enforcement or regulatory bodies. “These are people who think that the attorney-client privilege is so sacred that [the resolution] should be opposed,” said Bruce Alan Mann, a partner at Morrison & Foerster who sits on the ABA’s ethics committee and is a supporter of the proposal. “They’re very bright, very articulate people, and I don’t think anyone should count on the result until it happens.” At least 42 states have already included a so-called “crime-fraud exception” in their state bar rules. The rules generally don’t require lawyers to report financial crimes, but the rules do give them an option in instances where, as Mann puts it, a lawyer is “used” to commit a crime. Mann said people are losing sight of what the proposal actually does — or more accurately, what it doesn’t do. “The resolution doesn’t require a lawyer to report anything,” Mann said. “What they seem to lose sight of, when you start arguing with them, is that the proposal doesn’t apply for the client who comes for help.” Mann used an example of a lawyer who attests to a Securities and Exchange Commission filing, only to later find that it was fraudulent. Under the proposal, the lawyer could inform the SEC if the company does not retract the document. The proposal is actually stronger than rules adopted by the SEC for securities lawyers who practice before the commission. After outcry from the legal profession, commissioners dropped a proposal that would have required lawyers to publicly withdraw representation if they suspect clients of wrongdoing. The SEC, however, did adopt requirements forcing attorneys to report concerns “up the ladder” within a corporation until the concerns have been addressed. ABA members are focusing on a fundamental argument about the role of lawyers in society. Some argue the rules require attorneys to shift their priorities from protectors of individual rights to guardians of society’s interests. Yet, if the majority of states have already implemented crime-fraud exceptions, why all the hullabaloo? “It is a symbolic vote, and I think what [the controversy] reflects is the view of a fairly small minority of the litigation bar that anything that interferes with the attorney-client privilege should be opposed,” Mann said. “I’m sorry, but I think the bar has an obligation to society that is greater than its obligation to crooks.” A lawyer has obligations not only to their client, but to courts as well. However, many don’t want lawyers to exploit their positions in an effort to uncover fraud and other criminal activity. Otherwise, they argue, the justice system won’t work. “If you don’t build into the justice system something that protects them — and in our system, it’s pretty much the lawyer — then individual rights are going to go by the wayside,” said Robert Hawley, chief assistant general counsel for the State Bar of California. Though the Bar won’t take political stances on issues — the state’s delegates to the convention have not even been told how to vote — the Bar Association of San Francisco has no such reservations. “It is unlikely the proposed amendments would effectuate the desired result of improving corporate compliance with the law, but rather would discourage full and open communications between a corporation and its attorney and deprive the attorney of the ability to guide the corporate client’s conduct,” wrote Jeffrey Bleich, president of BASF and a partner at Munger, Tolles & Olson. Bleich said the confidentiality privilege allows frank discussion between parties. If corporate clients see a lawyer as a possible leak, they simply won’t consult with the lawyer anymore, he said. “The best way to keep corporations honest is to have a lawyer at the table when they’re contemplating questionable conduct,” Bleich said. That the vote will take place in California is somewhat ironic. California’s bar doesn’t even recognize an exception to the privilege in order to prevent death or serious bodily injury — though a bill authored by Assemblyman Darrell Steinberg, D-Sacramento, would change that. But anyone waiting for a crime-fraud exception to hit California’s books shouldn’t hold their breath. “The whole ABA rules process is certainly something we watch,” Hawley said, “but it’s not something that binds us.”

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