fierceredpanda wrote: ↑Mon Mar 15, 2021 10:27 amAs others have stated, the law has changed slightly. Also, since he was not teaching a law school course, I think he was oversimplifying. The crime-fraud exception is a thing that exists, and privilege doesn't attach to criminal conduct just because an attorney is party to it. Now, if you fudge your numbers first, and then bring in the lawyer/accountant and tell them the truth, then they're expressly forbidden from telling anyone as long as the harm is already done.noblepa wrote: ↑Sun Mar 14, 2021 4:05 pm I am not an accountant, but my undergraduate minor is in Accounting and Business Law. I also worked for Ernst & Whinney (now Ernst & Young) for almost ten years, although not as an accountant or auditor.
I remember, about 30 years ago, taking a course in tax accounting. It was taught by a guy who was both a CPA and an attorney.
At the time, he made what may have been an overly broad statement that "there is no such thing as client-accountant priviledge, so if you're going to commit tax fraud, hire an accountant who is also an attorney". It is true that the AICPA's code of ethics requires that an accountant maintain confidentiality regarding his/her dealings with a client, but that, in court, an accountant can be compelled to testify against his/her client.
Was he wrong, or oversimplifying the situation? Has the law changed in the last 30 years?
(I related this tale on old Fogbow, but it's so good that I must share it again.) When I was in law school, my legal ethics professor directed our attention to something that was in the news around that time and was very helpful in illustrating the limits of the attorney-client privilege with regard to this sort of criminal or fraudulent conduct.
A nightclub burns down in Western Wisconsin under somewhat suspicious circumstances. However, if I recall correctly, the evidence of arson was thin or inconclusive, sufficiently so that it was probably unlikely that anyone was going to be prosecuted. The owner has a business attorney already, and he works with that attorney to file a claim with his insurer for the value of the club. At some point in that conversation, the owner out-and-out tells the lawyer (believing the conversation to fall within the scope of attorney-client privilege) that he hired a torch to burn the place down. I don't recall if the attorney filed the claim or slow-walked it, but the key thing is that the client told the lawyer this fact before the (fraudulent) claim was to be submitted by the lawyer. I do recall that the attorney was sufficiently concerned that he contacted the Wisconsin State Bar's ethics hotline. Their advice isn't definitive or dispositive, but getting their opinion and following their advice in a good-faith effort to do the right thing is a pretty good defense to a malpractice suit or a bar complaint. The bar ethics people told the lawyer he had a duty to contact the local DA's office and divulge what his client had told him. After he does so, the club owner is prosecuted for being a party to arson and (I think) a charge of insurance fraud. Club owner's criminal defense attorney immediately moves to suppress the incriminating statements from the business attorney citing attorney-client privilege. Eventually, the court denies the motion, the statements come in, and the guy gets convicted.
The key thing here was that the client's admission to burning down his own club was simultaneous with his soliciting the attorney to file an insurance claim that he knew to be fraudulent. Now, even had the attorney not found out until later that the claim was bogus, you could still make an argument that the right thing to do would be for the attorney to come clean and not be a party to the crime of insurance fraud. But in this case, the client's admission made the lawyer an active participant in the fraud, and no privilege could attach. If the client had filed the insurance claim on his own, gotten the proceeds, and then told the whole story to his lawyer, the lawyer would have had to shut up about it until the heat death of the universe, and (assuming the insurance company didn't find something the original investigation missed) the client would have gotten away with the fraud.
tl;dr: If you're going to involve an attorney in a fraud, you can only expect them to keep it secret if you do so after the fact.
Crap. Did this turn into a "how to get away with criming" lecture?
If the client had waited until after the claim was submitted before admitting to the arson, would the lawyer's ethical problem be changed? I was always taught that an attorney can not make a false statement to the court, nor can he knowingly allow his client to do so. Theoretically, wouldn't if be perjury for the lawyer to submit a not guilty plea on behalf of the client, if he knows that the client is guilty? If a not guilty plea is not perjury, doesn't the lawyer then have to be careful to avoid making statements at trial about the clients guilt/innocence that could be shown to false and that he knew they were false when he made them? Granted, it would be difficult to prove such perjury.
I've heard that some criminal lawyers won't ask a client if they are guilty or innocent, to avoid this ethical dilemma. In fact, they will tell the client that they don't want to know. That way, it can never be shown that the lawyer knowingly made false statements.
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