The story of Griffiths Energy’s unlawful payments to the Chad ambassador’s wife led last month’s news. Attention focused on the company’s self-disclosure and investigation, and also on the involvement by high profile Canadian lawyers in the original unlawful transaction. Based on the media reports so far, it seems that Griffiths was originally represented by the Heenan Blaikie firm. That firm advised Griffiths that the company “could not make or offer or give an advantage or do anything directly or indirectly with [Chad] Ambassador Bechir”. Griffiths then retained the MacLeod Dixon firm, and had MacLeod Dixon paper the transaction in which the money was paid to Ambassador Bechir’s wife. MacLeod Dixon has stated that it “had no knowledge that there were foreign public officials involved in the payment … We were directed to make a payment to Chad Oil Consulting LLC that already had a consulting agreement with Griffiths” (See, “Bay Street Law Firms advised Griffiths on Chad Deal”, Globe and Mail, January 26, 2013).
The media reports thus suggest that the first law firm advised its client that the course of action it was proposing was unlawful, at which point the client retained other counsel and, without advising that counsel of its unlawful purpose, used their services to accomplish it.
This set of facts poses an ethical and risk management problem. Specifically, what are the lawyer’s obligations with respect to prevention and disclosure of a client’s unlawful conduct, particularly where the client has retained new counsel?
The various Canadian codes governing lawyer conduct clearly prohibit a lawyer from knowingly assisting a client to engage in criminal, fraudulent or other unlawful activities (See, for example, Federation of Law Societies Model Code of Professional Conduct, (“FLS Code”) Rule 3.2-7). They also impose obligations on counsel to follow up on suspicions that the client’s purposes are improper, mandating that the lawyer “make reasonable inquiries to obtain information about… the subject matter and objectives of the retainer.”
Generally speaking a lawyer may not disclose a client’s planned misconduct. A request for assistance in an unlawful plan may fall outside of the solicitor-client privilege or the lawyer’s duty of confidentiality where the request is part of a scheme to dupe the lawyer into assisting in that plan (see Alice Woolley, Understanding Lawyers’ Ethics in Canada (Toronto: LexisNexis Canada, 2011) pp. 113-115). Normally, however, the request would be treated as both confidential and privileged (FLS Code Rule 3.3-1). Assuming that to be the case, the communication may then only be disclosed if it creates “imminent risk of death or serious bodily harm” or if the lawyer is now alleged to have acted unlawfully and must defend herself (FLS Code Rules 3.3-3 and 3.3-4).
The problem is, as the Griffiths case illustrates, a client may manipulate the legal obligations that bind lawyers to attain legal services for an unlawful end. Once a client has an opinion that a legal scheme is unlawful it can use the lawyer’s duties of confidentiality, and the fact that lawyers are only prohibited from knowingly assisting an unlawful scheme, to switch counsel, confident that the first counsel won’t disclose what happened since that lawyer was not duped, and making sure not to disclose information to the new counsel that might preclude his assistance.
Griffiths is certainly not the first client to take advantage of this loophole in the regulatory scheme. In a famous American case, the law firm Singer Hutner was unwittingly involved in helping their client, OPM Leasing, to paper fraudulent lease transactions. When they realized the scheme, after first unsuccessfully trying to dissuade their client from persisting in it, Singer Hutner withdraw from the representation. OPM Leasing promptly retained new counsel and continued in the fraudulent activities, while Singer Hutner felt constrained from disclosing information to the new lawyers. For Singer Hutner the consequences of their unwitting assistance and non-disclosure were unhappy – they were required to pay $10M in damages to the defrauded parties (See: Alice Woolley, “Integrity in Zealousness: Comparing the Standard Conceptions of the Canadian and American Lawyer” (1996) 9 Can JL & Juris 61 at 64-65).
How ought a lawyer or law firm respond to this problem? This question has two parts –how can a lawyer or law firm satisfy their ethical obligations, and how can a lawyer or law firm successfully manage the risks and liabilities that situations like this present? No one wants to end up like Singer Hutner. Or to have the media coverage and RCMP investigation that have arisen from the Griffiths affair.
For the first law firm the answer includes maintaining excellent records to ensure they can demonstrate that proper advice was given. In addition, if the client has retained new counsel, and the law firm becomes aware that the new counsel is proceeding with the unlawful scheme, the first law firm should seriously consider disclosure to the new counsel. The propriety of such disclosure is uncertain where the client has not requested it (See FLS Code Rule 3.7-9, Commentary 4). At that point, though, the client is arguably duping both sets of lawyers to achieve an unlawful end, such that the information may no longer be privileged. Further, the disclosure is being made to counsel who can protect the information from broader disclosure if privilege is found to exist. This makes disclosure seem justifiable and more prudent than the alternative.
For the second law firm the answer is to be alert to any indication that its legal services are being used for improper purposes. While that sort of alertness seems unattractive at the time – at best it leads to an uncomfortable conversation with the client, and at worst it leads to the termination of the lawyer-client relationship – it prevents the serious longer term consequence of having to explain the lawyer’s role to the police, the courts and the public.
Ultimately no regulatory scheme can perfectly address or anticipate the ethical challenges and legal risks that the lawyer-client relationship occasionally poses. Individual lawyers and law firms need to remain alert to these sorts of challenges, and respond in ways that maximize their accomplishment of their ethical duties while minimizing their legal risks.