Can a lawyer hold embezzled money a client deposited in trust, and must the lawyer turn it over to authorities?

Plain-English summary

A person seeking advice told a lawyer that he had embezzled money from his employer and wanted to admit the wrong and make partial restitution. He then asked the lawyer to hold the remaining embezzled funds in the trust account "for safekeeping" to evidence his intent to make restitution while he consulted his family. The lawyer accepted the money. The client later changed his mind in writing, said he no longer wanted to disclose the facts, and demanded the funds back.

The Committee analyzed the problem under SCR 156 (confidentiality, Nevada's version of Model Rule 1.6) as modified by SCR 152(4) (a lawyer may not assist a client in conduct the lawyer knows is criminal or fraudulent). It concluded that the confidentiality of the attorney-client relationship is not absolute and that the common law forbids a lawyer from holding the fruits of a crime except for the limited purpose of turning them over to the proper authority. Surveying decisions from several jurisdictions (including In re January, State v. Olwell, and People v. Meredith), the Committee found uniform agreement that a lawyer in possession of the proceeds of a crime must disclose them to the appropriate authority.

The Committee noted that the authorities split on whether the lawyer must also reveal the communications surrounding the lawyer's possession of the property. It adopted the rule of State v. Olwell and Anderson v. State: although the lawyer must turn over the property, the lawyer cannot be compelled to testify when, how, and from whom the property was received. The Committee quoted In re January's policy rationale that the privilege does not make a lawyer "the privileged repository of the fruits of a crime."

Currency note

This opinion was issued in 1988, before Nevada's 2006 adoption of the current Nevada Rules of Professional Conduct (the renumbered Rules 1.0 et seq. that replaced the former Supreme Court Rules) and the related Ethics 2000-based revisions. The confidentiality rule is now Rule 1.6 and the scope-of-representation/assistance limit is now Rule 1.2(d); the handling of property and contraband also implicates Rule 1.15 and Rule 3.4. Treat this page as historical context, not current guidance. Verify against current rules and case law before relying on any specific rule mentioned here.

Common questions

Q: Can a lawyer keep stolen or embezzled money a client deposited in trust?

A: No. The opinion concluded that a lawyer cannot use the attorney-client privilege to retain the fruits of a crime; the funds must be surrendered to an appropriate law enforcement official, with the rightful owner identified if known.

Q: Must the lawyer return the funds to the client who demands them back?

A: No. Per the opinion, once the lawyer holds the proceeds of a crime the proper course is to surrender them to the appropriate authority and identify the rightful owner, not to return them to the client.

Q: Does the lawyer also have to explain how the money was received?

A: No. The opinion adopted the rule that, while the property must be turned over, the lawyer cannot be compelled to testify when, how, and from whom the property was received, so the surrounding communications stay protected.

Background and rules framework

The opinion interprets former SCR 156 (confidentiality, now Rule 1.6) as limited by former SCR 152(4) (the bar on assisting criminal or fraudulent conduct, now Rule 1.2(d)), reading both against the common-law rule that a lawyer may not serve as a repository for the fruits of a crime.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / former Nev. SCR 156 (confidentiality of information)
• Model Rule 1.2(d) / former Nev. SCR 152 (limits on assisting criminal or fraudulent conduct)

Cases:

• In re January, 534 F.2d 719 (7th Cir. 1976) (lawyer not a privileged repository for fruits of a crime)
• State v. Olwell, 394 P.2d 681 (Wash. 1964) (turn over property; lawyer not compelled to testify on its source)
• People v. Meredith, 29 Cal. 3d 682, 631 P.2d 46 (1981) (physical evidence obtained through privileged communication)

See also

• NV Ethics Op. 9: insurance defense counsel and the insured's disclosure of fraud
• NV Ethics Op. 3: handling unclaimed funds in a lawyer's trust account

Source

• Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
• Original PDF: https://nvbar.org/wp-content/uploads/opinion_10.pdf