Lawyers ponder changes in ethics

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SAN FRANCISCO (AP) -- Lawyers who learn that a client is cooking the books or looting a company's till could snitch to authorities with a clear conscience under proposed changes to lawyers' ethical rules.

The American Bar Association traditionally has refused to place society's concern over financial crimes above a lawyer's duty to keep client confidences. Corporate scandals such as those at Enron and Tyco, which have harmed the finances of many thousands of workers and shareholders, might now force a change.

The ABA's policy-making board is considering changes to ethics guidelines during the organization's annual meeting in San Francisco.

The changes do not go as far as regulators want but would bring the nation's largest lawyers' group in line with state rules that already bind many lawyers.

"In this post-Enron, post-Tyco age, I get the question all the time: 'Where were the lawyers on this? Why couldn't they do anything to stop it?'" said Alfred P. Carlton Jr., whose term as ABA president ended yesterday.

The ABA's model ethics rules are not law, but they often are the basis for state mandates and policies on lawyer conduct.

The new rules would affect in-house lawyers for corporations as well as outside lawyers who learn of current or planned wrongdoing.

One proposed change would clarify when corporate lawyers should report fraud or other lawbreaking up the chain of command and when those lawyers should take their concerns to authorities outside the company.

Another would permit lawyers to disclose confidential client information if it would head off fraud, accounting deceptions or other wrongdoing that the lawyer thinks would harm other people, including shareholders. Lawyers also could rat out a client without violating ethics in instances where a client had used or abused a lawyer's services to commit a crime in the past.

"Although the public interest is usually best served by a strict rule requiring lawyers to preserve the confidentiality of information relating to the representation of their clients, the confidentiality rule is subject to limited exceptions," lawyers who support the proposed ethics revisions wrote in a report accompanying the proposal.

Lawyers already can breach a client's confidence to save lives or prevent serious injury. An ABA ethics panel used the example of a hypothetical lawyer who knows that a client has accidentally discharged toxic waste into a town's water supply and alerts authorities to try to head off a health crisis.

Likewise, it makes sense that lawyers disclose information that could head off a financial crisis, and a client who uses a lawyer's services to commit fraud is not entitled to the protection that the confidential lawyer-client relationship affords, the panel said.

The ABA previously has tried and failed to make many of the same changes. Opponents say any loosening of the traditional expectations of confidentiality would make clients reluctant to confide in lawyers. Lawyers have a higher ethical duty to protect and defend clients no matter what, lawyer Lawrence Fox told colleagues when the ABA last considered similar changes in 2002.