Risk Update

(Virtual) Risk Round Table — Session Focusing on Risk Staffing, Hiring & Training

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In May, I attended a virtual risk round table presented by my friends at InOutsource. While remote, the attendee discussion and exchange was quite real, revealing, collaborative and constructive.

With a second session scheduled, I’ve registered to be in the room where it happens: “VIRTUAL ROUND TABLE: Navigating Today’s Pressing Risk Challenges” —

  • “Building on the great turnout and feedback after our last event, we’re pleased to host our second virtual risk round table on Thursday, July 23rd at 1pm EDT. In this session, we’ll focus on hiring and training risk staff — two challenges we learned many firms are currently facing.”
  • “We’ll look for participant discussion and exchange with respect to firm strategies, challenges and best practices. We also hope to hear how you think pre-Covid thinking compares with today’s shifting landscape.”
  • “This session will be moderated by:
    • Rabiya Hirji – Director of Risk Consulting
    • Max Welsh – Senior Risk Management Consultant
    • Matt Ruggieri – Development and Technology Manager”
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Risk Update

Webinar (Confidentiality & Compliance) — Data Loss Prevention: ILTA Survey Results and Peer Discussion

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Likely on the technical side, but definitely relevant for those looking at the intersection of software, human factors and risk, comes webinar overview from ILTA: “Data Loss Prevention: Survey Results and Peer Discussion” —

  • TIME: JULY 16, 2020, 11:00 AM ET, 8:00 AM PT
  • DETAILS: “Please join us for a roundtable discussion around the DLP survey as a result of COVID-19 and the new working from home conditions. With the COVID-19 crisis, increased cyber threats to firm systems and data have been reported. This roundtable will hopefully provide additional tools, procedures, or other controls to decrease this emerging risk.”
  • “Over 70 firms participated in the DLP survey. Some of the roundtable topics for discussion based on survey results:
    • What technical solutions firms are using to decrease the risk of Data Loss/Leak prevention(DLP).
    • Does your organization use a tool for data discovery?
    • Where is a data loss prevention tool deployed?
    • Does your application and website URL filtering apply outside of your network?
    • Is printing from home allowed?
    • What policies or procedures can be put in place or updated as part of information governance?

SPEAKERS

  • Marcos Marcal – Information Security & Risk Manager at Nutter McClennen & Fish LLP
  • Abraham D. Miller-Barbarow – Information Governance Risk Manager at Ropes & Gray LLP

 

 

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Risk Update

AML Rules — ABA Leader Notes Anti-Money Laundering “Absolutely Not a Dead Issue,” Lawyer Expert Notes Appearances, Debate Continues

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ABA Debate On Money Laundering Rule Lives On After Alert” —

  • “Despite concerns among anti-money laundering advocates, the American Bar Association’s recent warning on “willful blindness” to clients’ financial malfeasance didn’t end the group’s long-standing internal debate over a black-letter ethics rule cementing the profession’s duty to help deter money laundering, according to a bar committee member.”
  • “Lynda Shely, who sits on the ABA’s Standing Committee on Ethics and Professional Responsibility, said a money laundering rule proposal is ‘absolutely not a dead issue,’ and will remain on the table after she takes over as chair later this year. ‘The committee will continue to look at this because people do keep bringing it up,’ Shely said. ‘There are concerns that an opinion is not enough, even if the committee believes it provides very useful guidance.'”
  • “The ABA Model Rules ‘are designed to address broad concerns of professional responsibility, not specific situations, and that’s where we’ve been struggling to craft something that works,’ said Shely, who emphasized that she doesn’t speak for the bar or the committee as a whole. She is set to become the standing committee chair in August.”
  • “Despite the ABA’s policy position, many in the anti-corruption community said they’ve maintained at least modest optimism that the bar’s influential ethics committee, which is wholly distinct from the group’s D.C.-based lobbying arm, would still propose a rule amendment that would explicitly require lawyers to try to determine if clients are engaged in money laundering or terror financing and provide guidance on next steps.”
  • “But that optimism was shaken in April when the committee released an advisory telling lawyers to “inquire further” when faced with circumstances showing a ‘high probability’ that a client wants to use their services for criminal or fraudulent activities.”
  • “The ABA’s position on beneficial ownership and in the rule debate ‘makes it look like an industry out to protect itself as opposed to doing what’s in the best interests of the public and the general welfare,’ he said [Bruce Zagaris, an international enforcement expert at Berliner Corcoran & Rowe LLP and member of the ABA’s gatekeeper task force]. ‘Increasingly, it is finding itself more and more isolated on this issue.'”
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Risk Update

Lawyer Extortion Case with Conflicts Twist — Monsanto/Bayer RoundUp Gambit Goes Awry

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Charlottesville, Glen Allen attorneys plead guilty to extortion scheme targeting multinational chemicals company” —

  • “‘This is a case where two attorneys blew well past the line of aggressive advocacy and crossed deep into the territory of illegal extortion, in a brazen attempt to enrich themselves by extracting millions of dollars from a multinational company,’ said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. ‘Today’s pleas underscore that when crimes are committed, members of the bar, like all members of the public, will be held accountable for their actions.'”
  • “As part of their guilty pleas, Litzenburg and Kincheloe admitted that in approximately October 2019, Litzenburg approached a company (Company 1) and threatened to make public statements alleging that Company 1 had significant civil liability for manufacturing a purportedly harmful chemical used in a common household product used to kill weeds.”
  • “Litzenburg and Kincheloe also admitted that after describing the possibility of damaging lawsuits against Company 1, Litzenburg proposed, in sum and substance, that he and Kincheloe enter into a ‘consulting arrangement’ with Company 1 that would create a purported conflict-of-interest that would effectively stop them from representing their clients as plaintiffs in litigation against Company 1.”
  • “Thereafter, Litzenburg and Kincheloe admitted that Litzenburg, with Kincheloe’s knowledge and agreement, demanded that Company 1 pay Litzenburg, Kincheloe, and others, a total of $200 million in purported ‘consulting fees.'”
  • “Litzenburg also admitted that, during other communications with Company 1, he told Company 1 that if he received the $200 million in ‘consulting fees’ he would not discuss Company 1 or its parent company with his current clients, and that he was willing to ‘take a dive’ during a deposition of a toxicology expert to deter potential future claims related to litigation against Company 1.”

More: “Anti-Monsanto Lawyer And USRTK, Carey Gillam Collaborator Possibly Headed To Prison For Extortion

  • “Unbelievably, they also admitted that they weren’t going to give any of this money to their clients — you know, the cancer patients they claim to be helping. Instead, they intended to keep all the money for themselves and their associates.”

And more generally on the broader topic: “Bayer settles lawsuits from cancer patients over Roundup weed killer in $10 billion agreement” —

  • “The settlement of Roundup cases in the US ‘will bring closure to approximately 75% of the current Roundup litigation involving approximately 125,000 filed and unfiled claims overall,’ Bayer said in a news release.”
    “Potential future cases will be governed by a class agreement that’s subject to court approval, the company said. Bayer said the settlement agreements ‘contain no admission of liability or wrongdoing.'”
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Risk Update

Covid-19 + Remote Work = Several Law Firms Pushing to Prevent Paper Risks

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A Paperless Future? Top UK Law Firms Ban Printing During Pandemic” —

  • “Clifford Chance and DWF have banned their lawyers from working from printed documents during the coronavirus pandemic, as other firms implement new measures for hard copy usage while their lawyers work from home.”
  • “Client confidentiality is at the heart of many of these measures, according to several firms, with CC having banned the unnecessary printing of documents since March in a bid to discourage lawyers from leaving sensitive documents accessible within their home working spaces.”
  • “Pinsent Masons’ chief information security officer Christian Toon meanwhile said that the firm had taken a ‘flexible approach’ to printing, which includes implemented a range of measures to improve data security. ‘This includes central monitoring and oversight of what is being printed and where, advice and training on confidential destruction, and looking at specific client requirements and safeguarding data — all key components of data loss prevention strategies,’ he said in a statement.”
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Risk Update

When Client Payment Terms Cause Conflicts Concerns (During Covid Times or Not)

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Many ages ago, during the heady days of the dotcom boom when I worked at a firm — and certainly today — it was not unheard for law firms to take client stock in lieu of cash payment. (At that time, even commercial landlords insisting on the same.) There was even a fresh-at-the-time Silicon Valley firm built on that premise. (Spoiler alert: dotcom crash.)

So Karen Rubin’s latest did indeed bring back some memories: “Take stock instead of legal fees? Take a hard look and mind the ethics rules” —

  • “One market effect of the ongoing COVID-19 pandemic is that transactional clients might be eager to offer you stock or some other form of participation in a deal in lieu of your legal fees. An uptick in proposals like this could come as clients try to limit cash outlays until the business climate and their operations become less unpredictable. In an arrangement like this, the client preserves cash and if the deal works out your investment in a client might increase in value, even above the cash fee you might have earned. It would seem like a win-win situation, right? Not so fast. Deals like this can raise risk for firms, and the ethics rule governing transactions between lawyers and clients has several requirements.”
  • “Taking stock or having a personal financial stake in a client’s transaction can potentially create a conflict of interest between your personal interest in the investment and the client’s interests, particularly if you will also be acting as a legal adviser in the deal. The optics by themselves can raise risk — namely the appearance that you might structure the transaction or advise in a way favoring your own interests over the client’s.”
  • “The real life risks are illustrated by a complaint filed last week here in Cuyahoga County (Cleveland), Ohio. The complaint’s allegations set out a complex transaction, but include the claim that the lawyer in the deal accepted a two percent ownership interest in the plaintiff at the same time he was representing the plaintiff, but without meeting the requirements of Ohio’s Rule 1.8(a). The relief sought includes a declaration that the defendant’s ownership interest was not lawfully obtained and is void. (No responsive pleading has been filed as of yet.)”
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Risk Update

Risk Roundup — Judicial DQ Denied, Client Communication Curated

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Don’t ‘Reply All’ If Client of Opposing Counsel CC’ed, Bar Says” —

  • “Attorneys who get an email from opposing counsel with that counsel’s client cc’ed shouldn’t hit “reply all” because this likely violates professional ethics rules, the Illinois State Bar Association recently advised.”
  • “Such a reply is deemed a communication with a person represented by counsel in a matter, which is prohibited unless the sending lawyer consents, according to the bar ethics committee’s opinion.”
  • “The opinion, which was approved in October and recently published, stemmed from questions posed by a lawyer representing condominium associations. The lawyer had said they sometimes copy the association board president when communicating via email with opposing counsel during association disputes.”
  • “The ethics committee agreed with other jurisdictions like Kentucky and New York that the act of copying the client doesn’t imply consent.”

Campaign contribution not a reason to disqualify judge from case, Court of Appeals rules” —

  • “A prominent attorney donated more than $200,000 against an Adams County judge’s retention election. But that did not mean the judge should have recused himself from a case involving the firm’s lawyers, the Colorado Court of Appeals ruled on Thursday.”
  • “‘[W]e conclude that the motion to disqualify did not, as a matter of law, allege sufficient facts supporting a reasonable inference of actual or apparent bias or prejudice to require disqualification,’ wrote former Justice Alex J. Martinez, who sat on the appeals panel at the chief justice’s direction.”
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Risk Update

Risk News — Lawyer Insider Trading Update, Disqualification Denied

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Ex-Hunton Partner Agrees to 3-Year Suspension After Insider Trading Conviction” —

  • “Robert Schulman, a former Washington, D.C., intellectual property litigation partner at Hunton & Williams and Arent Fox, has agreed to a three-year suspension from the D.C. bar following his 2017 insider trading conviction.”
  • “Schulman was convicted by a New York federal jury on securities fraud and conspiracy charges for tipping off an investment adviser about Pfizer Inc.’s $3.6 billion acquisition of King Pharmaceuticals Inc. in 2010. A partner at Hunton & Williams at the time, Schulman was privy to information about the merger several months before it was publicly announced.”
  • “Schulman argued at trial that he didn’t intentionally inform Klein about the deal, and told The American Lawyer that he was ignorant about the trades Klein made on his behalf.”
    “He received three years’ probation, a $50,000 fine and 2,000 hours of community service. In January 2019, the U.S. Court of Appeals for the Second Circuit rejected his appeal.”

Judge Denies Cooley’s Bid to DQ King & Spalding in WhatsApp Case” —

  • “King & Spalding can continue to defend a surveillance technology firm accused of deploying malware targeted at WhatsApp Inc. users after a federal judge blocked the Facebook subsidiary’s attempt to boot the firm from the case.”
  • “Three of the four King & Spalding lawyers who represented WhatsApp in the sealed matter, including current FBI Director Christopher Wray, are no longer with the firm. But Hamilton said she didn’t need to delve into whether the lone remaining attorney, Paul Mezzina, gained knowledge of confidential information if the cases were not related.”
  • “Hamilton noted the difficulty of comparing the two cases given that one of the matters is entirely under seal and both are mired in technical coding language. Yet, her analysis found that WhatsApp ‘has not demonstrated that the two matters are substantially related and absent such a relationship, there is no presumption that K&S acquired material confidential information.'”
  • “The judge also found that WhatsApp has not demonstrated that any King & Spalding attorney has access to confidential information, since the firm’s general counsel and his staff stores and blocks access to the relevant files.”
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Risk Update

Virtual Law Firm, Real Conflicts Allegations & Controversy (Or: #Altlaw #Regularconflicts)

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Recently (April 2020): “UpRight’s Fee-Splitting Win A Boon For ‘Virtual’ Firm Model” —

  • “While the decision for UpRight Law focused on a narrow question of federal bankruptcy law, the court’s obvious tolerance for a firm in which hundreds of “partners” simultaneously run similar solo practices will support the move toward innovative business models in the broader legal industry.”
  • “According to the trustee, UpRight’s model is essentially an elaborate referral network that doesn’t qualify as a law firm under Section 504 — and thus is not covered by the fee-split exception — or the state ethics rule against fee-splitting.”
  • “Judge Limbaugh also rejected the trustee’s argument that UpRight’s lack of a national conflict system — UpRight lawyers do their own checks against their individual client lists — was evidence that the firm is not really acting like a firm at all.”
  • “UpRight lawyers ‘are bound by the conflict of interest rules regardless of whether a conflict check system is in place,’ the court reasoned. ‘The presence or absence of such a system — and whether the partners actually abide by the conflict rules — has no bearing on whether the partners have combined to form a law firm in the first place.'”
  • “The case also illustrates a fundamental risk management question for any group of lawyers who organize to share information or expertise, and whether that cooperation inadvertently creates a ‘firm’ for purposes of imputed conflicts and client information.”
  • “David Menditto, associate general counsel for litigation at UpRight Law, said the court was rightly focused on all the aspects of how the business operates, both publicly and internally. ‘What matters is how we act, and we act like a law firm,’ he said. ‘There is an ongoing relationship through the representation of a client, there is support provided to the lawyer if its needed, and the lawyer can be replaced if they’re not performing. So it’s really not just some loose affiliation of people who get clients from the same source.'”

Earlier (February 2018): “When #Altlaw Is Bad, It Is Truly Horrid” —

  • “Upright is an #Altlaw fantasy come to life — a new business model with a self-proclaimed mission of promoting access to justice through ‘cutting edge technology’ and 24/7 online access… Upright farms out most of its cases to local attorneys called “partners” who maintain their own practices.”
  • “Earlier this month, a Louisiana bankruptcy court sanctioned Upright and its local attorney for professional negligence. Worse, this past week, the darker side of Upright’s practices came to light in a blistering ruling by a federal bankruptcy court Virginia in response to a complaint filed by the Region Four Bankruptcy Trustee against Upright Law, several of its principals and two solo attorneys who acted as Upright’s local partners.”
  • “Upright would contract with local attorneys with independent practices to handle cases received for a given jurisdiction. Upright provided the local attorneys with a separate ECF number to use when filing cases for Upright clients. Although participating attorneys had their own firms, they became limited partners of Upright and were held out to the public as partners;”
  • “The court found that the local attorneys knew that Upright’s non-lawyer consultants were giving legal advice to clients, and that the Upright-Sperro deal violated bankruptcy laws and raised serious conflicts of interest. Thus, the court revoked one of the local lawyer’s privileges to practice before the court for one year and fined him $5000, while a second less remorseful local attorney was similarly fined and suspended for 18 months.”
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Risk Update

Relationship Conflicts — Girlfriends Edition

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Nebraska Lawyer Who Helped Girlfriend With Case Gets Reprimand” —

  • “A Nebraska county attorney who prepared legal documents for his girlfriend relating to her firing from a job at the county sheriff’s office without initially indicating his involvement in the case was publicly reprimanded by the state’s highest court.”
  • “Brandon B. Hanson was working as county attorney for Valley County in 2018 when his girlfriend was fired from her job. Soon after, she filed a suit against someone who commented on social media that she was dismissed for being drunk at work.The comment came from a supporter of Hanson’s rival for the county attorney seat.”
  • “The case was the first in which Nebraska’s Supreme Court had to rule on a violation of a local rule requiring a ‘Prepared By’ notation on court filings worked on by an attorney, so it had ‘no comparative cases’ to help determine a sanction, it said in its April 17 opinion.”
  • “Hanson’s rival filed a grievance with the state disciplinary board alleging that Hanson had prepared pleadings for his girlfriend without including the required notation. His involvement in her case was also a conflict of interest with his position as the Valley County Attorney, the rival said.”

Convicted murderer to get new hearing since his trial lawyer started dating, later married, state witness” —

  • “A convicted murderer that that has been in prison for six-and-a-half years will get a new evidentiary hearing after he won an appeal that says the timeline of the romantic relationship between his trial lawyer and a witness needs to be explored further.”
  • “Furthermore, the three judges ruled that an evidentiary hearing is necessary to determine if there was in fact a conflict of interest for Rubas… ‘“There is no sworn information as to that alleged fact and, to date, defendant has not had an opportunity to cross-examine his trial counsel or others with relevant information. We also reject the fixation on the first date or the notion that the first date is the critical date in considering when the conflict arose. The relationship or communications leading up to the relationship may have commenced earlier.'”
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