Can a lawyer who learns a client is running a financial scam report the client to law enforcement, and must the lawyer do so?

Plain-English summary

A lawyer learned, in the course of representing an individual client, that the client is running an ongoing financial scam the lawyer believes would be a crime, though the lawyer is not involved in it and does not believe the client used the lawyer's services to further it, and never represented the client before a tribunal. The lawyer asked whether he may volunteer information about the scam to law enforcement.

The committee concluded that, on these facts, the Rules of Professional Conduct do not require disclosure, because the scam does not appear to carry a risk of reasonably certain substantial bodily harm (the mandatory-disclosure trigger of RPC 1.6(b)(1)). However, RPC 1.6(b)(2) permits the lawyer to reveal information relating to the representation to prevent the client from committing a crime. The committee emphasized that Washington's Rule 1.6(b)(2) is significantly broader than the Model Rule: where the Model Rule limits disclosure to crimes reasonably certain to cause substantial financial injury and in furtherance of which the client used the lawyer's services, Washington's rule permits disclosure to prevent the commission of any crime (Comment 20).

The committee held the disclosure must be no greater than the lawyer reasonably believes necessary to accomplish the law enforcement purpose (Comments 14 and 23 to RPC 1.6), and noted that it may not be practicable here to first counsel the client to take suitable action to obviate the need for disclosure, since doing so might undercut the law enforcement purpose. Finally, the committee concluded that if the lawyer elects to disclose, the lawyer will likely be compelled to withdraw under RPC 1.16(a)(1), because the disclosure would likely create a concurrent conflict of interest under RPC 1.7, materially limiting the representation by the lawyer's responsibility to third persons (law enforcement and victims) or the lawyer's own personal interest in disclosing.

In practice

Under the Washington rules as they stood at the time of the opinion, the committee held that reporting a client's non-violent financial scam is discretionary, not mandatory: RPC 1.6(b)(1)'s mandatory trigger requires a risk of reasonably certain substantial bodily harm, which was absent, while Washington's broad RPC 1.6(b)(2) permits disclosure to prevent any client crime. The opinion identifies two limits on the permitted disclosure: it must be confined to what is reasonably necessary (Comments 14 and 23), and electing it will likely require withdrawal under RPC 1.16(a)(1) because of the concurrent conflict it creates under RPC 1.7.

Common questions

Q: Must a Washington lawyer report a client who is running a financial scam?

A: No. The committee held the RPC do not require disclosure where the scam does not carry a risk of reasonably certain substantial bodily harm, the mandatory-disclosure trigger under RPC 1.6(b)(1).

Q: May the lawyer report it anyway?

A: Yes. The committee held Washington's RPC 1.6(b)(2) permits the lawyer to disclose information to prevent the client from committing a crime, and noted that Washington's exception is broader than the Model Rule, reaching any crime.

Q: How much can the lawyer disclose?

A: Only what the lawyer reasonably believes necessary to accomplish the law enforcement purpose, per Comments 14 and 23 to RPC 1.6.

Q: What happens to the representation if the lawyer discloses?

A: The committee held the lawyer will likely be compelled to withdraw under RPC 1.16(a)(1), because the disclosure would likely create a concurrent conflict of interest under RPC 1.7.

Background and rules framework

The opinion interprets Washington RPC 1.6 (Model Rule 1.6, confidentiality), distinguishing RPC 1.6(b)(1) (mandatory disclosure to prevent reasonably certain death or substantial bodily harm) from RPC 1.6(b)(2) (permissive disclosure to prevent a client crime, broader in Washington than the Model Rule per Comment 20), with Comments 14 and 23 on limiting disclosure. It applies RPC 1.7 (Model Rule 1.7, concurrent conflicts of interest) and RPC 1.16(a)(1) (Model Rule 1.16(a)(1), mandatory withdrawal when continued representation would violate the rules or other law).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / Washington RPC 1.6(b)(1) (mandatory disclosure to prevent substantial bodily harm)
• Model Rule 1.6 / Washington RPC 1.6(b)(2) (permissive disclosure to prevent a client crime; Comment 20)
• Model Rule 1.6 / Washington RPC 1.6 Comments 14, 23 (limiting disclosure)
• Model Rule 1.7 / Washington RPC 1.7 (concurrent conflicts of interest)
• Model Rule 1.16 / Washington RPC 1.16(a)(1) (mandatory withdrawal)

See also

• ABA Formal Op. 463: client due diligence and money laundering
• WA Ethics Op. 2218: client files in a Department of Revenue audit

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1672

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 2229
Year Issued: 2012
RPC(s): RPC 1.6, 1.6(b)(1). 1.6(b)(2), 1.7, 1.16(a)(1)
Subject: Reporting Client to Authorities and Client Confidentiality

Facts:

Attorney has an individual client who is involved in an ongoing financial scam (a confidence game or other fraudulent scheme), the facts of which attorney believes would constitute a crime under applicable state and/or federal law. Attorney learned of the scam in the course of representing the client, but attorney is not directly involved in the scam, nor does attorney believe the client has used his legal services to further the scam. Attorney has never represented the client in any formal proceeding before a tribunal. Attorney wants to volunteer information related to his client’s scam to the appropriate law enforcement authorities. May he ethically do so?

Analysis:

RPC 1.6(b)(2) states:

(b) A lawyer to the extent the lawyer reasonably believes necessary:

(2) may reveal information relating to the representation of a client to prevent the client from committing a crime. . . .

Comment [20] to RPC 1.6 provides:

Washington's Rule 1.6(b)(2), which authorizes disclosure to prevent a client from committing a crime, is significantly broader than the corresponding exception in the Model Rule. While the Model Rule permits a lawyer to reveal information relating to the representation to prevent the client from "committing a crime . . . that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used the lawyer's services," Washington's Rule permits the lawyer to reveal such information to prevent the commission of any crime.

Comment [14] to RPC 1.6 provides:

Paragraph (b) permits disclosure only to the extent the lawyer reasonably believes the disclosure is necessary to accomplish one of the purposes specified. Where practicable, the lawyer should first seek to persuade the client to take suitable action to obviate the need for disclosure. In any case, a disclosure adverse to the client’s interest should be no greater than the lawyer reasonably believes necessary to accomplish the purpose.

Comment [23] to RPC 1.6 provides:

. . . A lawyer must make every effort practicable to avoid unnecessary disclosure of information relating to a representation, to limit disclosure to those having the need to know it, and to obtain protective orders or make other arrangements minimizing the risk of avoidable disclosure.

Conclusion:

On these facts, where the client’s financial scam does not appear to carry the risk of reasonably certain substantial bodily harm, the Rules of Professional Conduct do not require the attorney to disclose information about the scam to law enforcement. See RPC 1.6(b)(1). RPC 1.6(b)(2) does, however, allow the attorney to disclose information about the scam to law enforcement, as long as the attorney only shares that information he reasonably believes necessary to accomplish the law enforcement purpose of the disclosure. See Comments 14 and 23 to RPC 1.6. Here, it may not be “practicable” for the attorney to attempt to avoid disclosure by counseling the client to take “suitable action to obviate the need for disclosure,” and – in fact – any such attempt by the attorney may undercut the law enforcement purpose of the disclosure.

In these circumstances, it is likely that the attorney will be compelled to withdraw from continued representation of the client per RPC 1.16(a)(1), which provides that the attorney must withdraw if:

(a) . . .

(1) the representation will result in violation of the Rules of Professional Conduct or other law; . . .

Here, if the attorney elects to disclose information about the client’s scam, the attorney’s disclosure is likely to create a concurrent conflict of interest under RPC 1.7, in that it would likely create a substantial risk that his representation of the client would be materially limited by the attorney’s responsibility to a third person (e.g., law enforcement and/or victims of the client’s scam) and/or by the personal interest of the attorney (in determining to make the disclosure to law enforcement).