Bressler Risk Blog

“Avoiding the Confidentiality ‘Trap’: Helpful Suggestions” —

• “While virtually all partners are aware of their fiduciary duties to their law firm, including when they are considering departure, and hopefully act in good faith to comply with these duties, they sometimes overlook an aspect of this duty—confidentiality. In this column we analyze the complications that occur in this important undertaking and offer some hopefully helpful suggestions to avoid being ensnared in this potential trap.”
• “The confidentiality issue is difficult because it contains inherent tensions between the confidentiality rights of both law firms and clients and the commercial needs and interests required to determine the merits of a lateral move. An additional tension is caused by the interplay of the ethical rules and commercial law, including the law of trade secrets.”
• “The departure of a partner from their law firm is naturally fraught with tension as the participants (the current firm, the potential lateral partner and the acquiring firm) have divergent interests. Sometimes those tensions are amicably resolved and others (too often) they are not—but they are inevitable, nonetheless. The same is true concerning confidentiality.”
• “In his well-respected treatise, Simon’s New York Rules of Professional Conducted Annotated (‘Simon’), Prof. Roy D. Simon describes a cause of this tension: ‘disclosure … of [potentially confidential] information [is] needed to enable a law firm and lawyers to assess the financial and strategic concerns relevant to going forward with a prospective lateral hire…'”
• “A partial relief from all these tensions can be found in the New York Rules of Professional Conduct, in particular, Comment [18B] to Rule 1.6, entitled “Lateral Moves, Law Firm Mergers, and Confidentiality.” The existence of these comments, in and of itself, is further evidence of the proliferation and importance of lawyer mobility. But, independent of that, the comments are hugely helpful and worthy of being quoted in quoted in full:
  • [18B] Disclosure without client consent in the context of a possible lateral move or law firm merger is ordinarily permitted regarding basic information such as: (i) the identities of clients or other parties involved in a matter; (ii) a brief summary of the status and nature of a particular matter, including the general issues involved; (iii) information that is publicly available; (iv) the lawyer’s total book of business; (v) the financial terms of each lawyer-client relationship; and (vi) information about aggregate current and historical payment of fees (such as realization rates, average receivables, and aggregate timeliness of payments). Such information is generally not “confidential information” within the meaning of Rule 1.6.”

Fascinating read on conflicts in this space: “National climate group asks: Should Md. lobbying firms take fossil fuel clients?” —

• “What do these three major Maryland institutions [the city of Baltimore, Johns Hopkins University, Prince George’s County government] working to improve the environment have in common? They have all, in recent years, paid Annapolis lobbyists who also work for the fossil fuels industry.”
• “Baltimore City, Hopkins and Prince George’s are hardly alone. Across Maryland, scores of institutions, nonprofit groups, and even clean energy organizations use State House lobbyists who are also representing fossil fuels interests.”
• “Most high-priced Annapolis lobbying firms, which usually hire teams of politically savvy generalists, tend to work a range of issues for a broad variety of clients.”
• “But now a new national climate advocacy group is beginning to ask whether major lobbying firms ought to be taking on fossil fuel clients at all — especially if the aims of those clients run counter to the goals of the institutions, nonprofits and clean energy businesses that these lobbyists also represent.”
• “This new advocacy group, known as F Minus, is also questioning whether various businesses and organizations of all types ought to be spending their money on lobbying firms that also choose to represent fossil fuel interests.”
• “Browning first became interested in the potential conflict of interest that statehouse lobbyists may face two decades ago, when he noticed that a prominent Maryland lobbyist, Laurence Levitan, who was a former state Senate committee chair, was registered to represent both the American Lung Association, which was pushing for an indoor smoking ban, and the Maryland Auto Dealers Association, whose cars were creating air pollution. That seemed like a contradiction to Common Cause.”
• “But now, Browning believes he has encountered hundreds of similar potential conflicts of interest in all 50 state capitals. That’s what he’s hoping to spotlight with F Minus. The organization has compiled a database of lobbyist registrations in all 50 states, tracking lobbyists and the clients they take on.”
• “In Maryland, those registrations can be looked up on the website of the Maryland State Ethics commission, which regulates the lobbying industry. [Direct link here: Maryland Lobbying Registrations]”
• “In Maryland, lobbying state government is big business. According to the ethics commission’s 2022 annual report, businesses, professional associations, labor unions, law firms, educational institutions, government agencies, and advocacy groups spent $71,241,236.38 to influence Maryland lawmakers between Nov. 1, 2021 and Oct. 31, 2022. In that same period, 15 lobbying firms earned $1 million or more, led by Perry White Ross & Jacobson, which took in $6,505,549.86, and Rifkin Weiner Livingston LLC, which earned $5,084,315.99.”
• “Dozens of lobbyists represent fossil fuel interests in Annapolis. Several also represent clean energy companies, environmental groups, public health organizations, and institutions that have tried to do their part to reduce greenhouse gas emissions.”
• “In Annapolis, as in many state capitals, lobbying firms have a large portfolio of clients. While in Washington, D.C., there is a degree of specialization in the lobbying corps — though some large K Street firms also thrive as generalists — the big money firms in Annapolis are generally populated with lawyers, operatives, and government veterans who have a broad range of political contacts and are able to represent their clients’ interests on just about any issue. ‘The model of representing widely divergent interests is more prevalent at the state level than it is at the federal level,’ Browning said.”
• “Consider: Two companies are pushing to build offshore wind energy installations off the coast of Ocean City. One of those companies, Ørsted North America, uses the lobbying firm Rifkin Weiner Livingston LLC, one of the oldest and most powerful lobbying shops in Annapolis. The firm also represents Berkshire Hathaway Energy, an energy company with a broad portfolio of clean energy and fossil fuel businesses. It also represents Colonial Pipeline, an oil pipeline company, and TC Energy, a diverse energy and pipeline company.”
• “Michael V. Johansen, Rifkin’s managing partner, declined to comment. Maddy Voytek, Ørsted’s head of government affairs and market strategy for Maryland, said the company runs “a conflict check every time we hire policy advocates and it is our assessment that these relationships [the Rifkin firm maintains] are appropriate.””
• “In fact, the one registered lobbyist who agreed to speak on the record was Sushant Sidh, a principal in the Annapolis firm Capitol Strategies LLC. His firm represents the Maryland Geothermal Association, a clean energy group, but also Covanta Energy LLC, an operator of trash incinerators and gas plants, and Constellation Energy LLC, a gas and electric company with a varied portfolio.”
• “Sidh said his firm runs ‘an exhaustive conflict check’ whenever it signs a new client, and routinely reaches out to other clients that could take an opposing position from the new client. ‘If both sides agree that there’s no conflict, we’re free to take on the client and we represent clients based on individual goals,’ he said.”
• “Sidh said he understands F minus’ argument about climate change and representing potential polluters, but argued that clean energy technologies aren’t ready for widespread use, meaning fossil fuels must still be part of the energy mix.”
• “Some lobbyists described their firms’ procedures for ensuring there are no conflicts of interest between clients, and two lobbyists who are lawyers said they follow more formal state guidelines for attorney conflicts. Some of the lobbyists said they are reluctant to give up longstanding clients, and said they’re proud to help them navigate the ever-changing legislative and regulatory environment on climate and energy. Others sought to draw distinctions between representing an oil or gas company that is that is drawing fossil fuels from the earth, and a utility or pipeline company that is distributing energy to power plants and consumers.”
• “Still others conceded that F Minus had a point — but asserted that taking an absolutist position on clients and energy producers was at least a decade or more premature, because a full transition to renewable energy is still years away. ‘This is not the way the world works,’ Sidh said.”

“Kirkland & Ellis, K&L Gates, Proskauer Rose Affected in Wide-Ranging Data Hack” —

• “The data of three Am Law 50 firms was accessed in a global data theft operation, according to the ransomware group claiming responsibility for the attack that has compromised the data of millions of individuals.”
• “Kirkland & Ellis, K&L Gates and Proskauer Rose are among the latest organizations to be identified in the breach, finding themselves in the company of a growing list of more than 50 other global corporations and banks targeted by the ransomware group known as CL0P.”
• “More than 16 million individuals have been affected by the breach, according to a tweet Friday by Brett Callow, a cybersecurity threat analyst at Emsisoft tracking the breach.”
• “The group behind the attack, also known as TA505, reportedly began exploiting a vulnerability in file transfer software known as MOVEit, developed by Progress Software, in May, the U.S. Cybersecurity & Infrastructure Security Agency said in a post this month.”
• “For Proskauer, the MOVEit breach isn’t the first compromise of internal information reported this year. The New York-based firm began investigating a data breach after large tranches of sensitive client information were found to be publicly accessible from its cloud-based site.”
• “Proskauer said in April that a third-party vendor who was contracted to set up the cloud site on Microsoft Azure ‘misconfigured’ the site’s security, which left the client data on the site vulnerable to an unauthorized actor and anyone else with access to the internet.”

“Law Firm Cyberattacks Grow, Putting Operations in Legal Peril” —

• “Law firms that rake in dollars defending companies against cyberattack lawsuits are increasingly finding themselves targets, with five class actions filed so far this year alleging the legal operations failed to protect client data.”
• “Bryan Cave Leighton Paisner and other firms facing suits represent a sweet spot for corporate cyberattackers because valuable data is stored there—from employee information such as health and financial data, to Social Security numbers, to patent specifications and merger and acquisition plans.”
• “The five class action cases filed this year against Bryan Cave; Cadwalader, Wickersham & Taft; Smith, Gambrell & Russell; and two smaller firms—Cohen Cleary and Spear Wilderman—claim that they didn’t sufficiently guard against the possibility of cyberattacks. The suits against Cadwalader and Smith Gambrell were later dropped. “
• “Other firms, such as Covington & Burling, are facing action from government regulators over divulging the extent to which clients have been harmed by cyberattacks. The Securities & Exchange Commission subpoenaed Covington in January over a 2020 cyber hack that may have resulted in client data being stolen.”
• “Kevin Rosen, a Gibson, Dunn & Crutcher partner, said large law firms have sought him out in recent months about responding to the damage both they and clients may have suffered from cyberattacks and how to handle potential lawsuits.”
• “Firms are ‘very much focused’ on allocating resources to combat the threat, Rosen said. They are in a unique situation, as they must defend their own internal data plus that of their clients, he said.”
• “Law firms are among industries scrambling to keep up with an increasingly unsafe cyber landscape. The rate of global weekly cyberattacks rose by 7% in the first financial quarter of 2023 compared with the same period in 2022, according to an April report by cybersecurity firm Checkpoint Research.”

“Cybersecurity Risk and Liability: Hot Button Issues for Lawyers” —

• “It is worth noting at the outset that cybersecurity risk should be discussed with the client and disclosed in the engagement letter with the client. For example, the letter should explain in some degree the risks associated with cybersecurity in respect of the client’s confidential information, especially where highly sensitive client data is involved.”
• “Even absent an actual data breach, law firms have been sued for alleged weaknesses in their information security systems. To illustrate, in Shore v. Johnson & Bell, No. 16-CV-4363, 2017 WL 714123, (N.D. Ill. 2017), an action seeking class arbitration was filed in 2016 against a Chicago-based law firm alleging that it put at risk the confidential information of its clients by using a computer time entry system recognized as particularly vulnerable to hacking, causing such information to be ‘unsecured and unprotected,’ despite there being no actual allegation of a security breach having occurred.”
• “Although the court’s decision addressed the plaintiffs’ request for class arbitration, which the court denied, and did not resolve their claim that the security vulnerability left them under ‘a heightened risk of … injuries,’ the lawsuit was litigated for almost a year in court, undoubtedly resulting in cost, effort and potential reputational harm to the firm.”
• “This case serves as a reminder that lawyers are obligated under Comment [8] to Rule 1.1 to keep abreast of the benefits and risks associated with technology lawyers use to provide services to clients or to store or transmit confidential information, and under Rule 1.6(c), to make reasonable efforts to prevent inadvertent or unauthorized disclosure or use of, or access to, such information.”
• “…it is important to bear in mind that each of the fifty U.S. states has a data security breach notification law that requires the notification of affected individuals and, in certain instances state Attorneys General or agencies, of the unauthorized access to or use of certain types of personal information.”
• “With rapidly evolving technology and sweeping developments in data security and in privacy laws and regulations, lawyers and law firms need to be acutely aware of the risks associated with cybersecurity. Alongside those concerns, attorneys must observe their ethical duties under the Rules, as well as their legal obligations under data protection laws and applicable regulatory regimes.”

Andrew Powell, CIO of Macfarlanes notes: “The UK Cyber Threat Report – ‘If you only read one cyber report this year, read this one’” —

• “The National Cyber Security Centre (NCSC) released a Cyber Threat Report on Thursday 22 June, focused on the UK Legal Sector. At the launch event at NCSC’s London offices on Thursday, CEO Lindy Cameron took the opportunity to highlight the range of threats faced by the UK legal sector, from criminals seeking financial gain through ransomware, to nation states looking for the upper hand through theft of IP. The report looks to help UK law practices of all sizes to be more resilient to the main methods of attack.”
• Much has changed in the world since the report was last published in 2018, though many of the cyber risks identified in the report are depressingly familiar. The 2023 version benefits from input from the NCSC (including its i100 industry programme that includes CISO’s co-opted from several law firms), Action Fraud, the NCA, and also what NCSC refers to as its amplification partners: the Bar Council, Law Society and SRA.”
• “The report pulls together research, information and guidance from numerous sources and is an excellent resource for raising awareness of the specific cyber risks facing law firms, and what to do about them. Essential reading for every law firm’s (and chambers) executive team and IT professionals. If you only read one cyber related report this year, read this one.”
• Click here to access the pdf of the report.

“Ethical Considerations for Lawyers Regarding Email Encryption” —

• “For example: When should lawyers use encryption to secure emails or other electronic communications with clients? What discussions should lawyers have with their clients about sharing communications and files? And are there better alternatives to emailing clients when privacy and security are paramount?”
• “Most recently, the Pennsylvania Bar Association’s Formal Opinion 2022-400 comes short of mandating that lawyers use encrypted email, but provides guidance on what lawyers may and must do when transmitting client information, discusses the applicable Rules of Professional Conduct, and offers various practice tips on the topic. Also, it includes a helpful appendix of related opinions from other states.”
• “Several of the Illinois Rules of Professional Conduct are relevant to email encryption for lawyers as they can be applied to safeguarding client information, including Competence (Rule 1.1, Comment 8), Communication (Rule 1.4), Confidentiality of Information (Rule 1.6), and Supervision (Rules 5.1 and 5.3).”
• “Lawyers must make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, client information. This may require using encryption, passwords, or other security measures when sending or storing email messages or attachments.”
• “Lawyers must also be aware of the risks of sending emails to or from public or shared computers, networks, or devices, and take appropriate precautions to avoid unauthorized access or interception.”
• “Lawyers should have an expectation-setting discussion with clients as to their preferred method of communication and the degree of sensitivity of the information related to their representation, including the use of email and text messages.”
• “Lawyers must ensure that the people under their supervision comply with the ethical rules and standards when using email as a means of communication.”
• “The Pennsylvania Bar’s Formal Opinion 2022-400 also recommends the following practices for email security.”

“LA County Cuts Ties With Lewis Brisbois After Racist Emails” —

• “The County of Los Angeles is ending its relationship with Lewis Brisbois after the law firm released racist, sexist, and antisemitic emails from two of its former senior partners.”
• “LA County told Lewis Brisbois Bisgaard & Smith June 16 that it will get ‘no new matters from our office,’ county counsel Dawyn Harrison said in a statement Monday. The county also will review matters the firm is currently handling and decide whether to switch to other outside lawyers on an “individual case basis,” she said.”
• “Harrison did not directly address the emails released by the firm in early June. The messages showed a pair of former partners who led a mass exodus from the firm in May using racist, antisemitic, and anti-LGBTQ remarks over the course of more than a decade.”
• “‘Our office expects that law firms with whom we contract actively promote and practice inclusion, diversity, equity, and anti-racism, and treat everyone in their workforce with dignity and respect,’ she said. ‘It is critical that firms handling our most sensitive matters are empathetic to and compassionate toward the constituents we serve,” she said.”
• “The LA County counsel’s office, which represents various government departments, assigns cases to contract law firms in areas such as litigation. The office’s apportioned budget for the current fiscal year is about $186 million, according to LA County records. “
• “Lewis Brisbois has represented the LA County’s Metropolitan Transportation Authority, Sheriff’s Department and Board of Supervisors, according to court records.”
• “‘We are in a dialogue with our longtime client and have no additional comment at this time,’ Lewis Brisbois spokesperson Chris Coffey said.”

“Lewis Brisbois Email Scandal Is Instructive for General Counsel” —

• “Rob Chesnut, former general counsel and Justice Department prosecutor, writes on in-house, corporate, and legal ethics issues. In this column, he analyzes lessons learned from Lewis Brisbois emails revealing racist and sexist behavior of two partners.”
• “The investigation and outcome at Lewis Brisbois are interesting to track. The firm apparently found the emails in response to an anonymous complaint but then took the extraordinary step of intentionally publishing redacted versions of the offensive emails.”
• “On one level, the decision to share these publicly was an act of transparency. But it might also be characterized as a costly act of revenge that backfired, with clients leaving the firm and turmoil within as leadership considers how no one spoke up.”
• “It’s also an educational moment for general counsel everywhere who should always look for lessons from other companies’ mistakes. If a managing partner and head of the employment practice at a large national ‘woke’ California firm has the audacity to send such emails, is it inconceivable that offensive emails could be written by anyone at any company?”
• “I think three steps are warranted in the wake of the Lewis Brisbois emails, all of which involve a close partnership with your company’s head of HR… Remind everyone that emails, Slack channel messages, and other company communication methods are part of company records that can be pulled up and searched for purposes of lawsuits and investigations—these things are hard to delete. Make sure you’re proud of your messaging and wouldn’t be ashamed to see it reproduced online.”
• “Second, talk to the rest of the leadership team about the Lewis Brisbois case. Share the story and some of the emails. Discuss how leaders set the tone about what’s acceptable to say and do at any company. Barber was a member of the firm’s national management committee, and Ranen the youngest partner in the firm’s history.”
• “People notice and are deeply influenced by the actions of an organization’s most successful people. Remind leaders that they need to protect their own personal brand and the company’s culture and set the right tone, because it likely will be emulated.”
• “Third, think about how you manage and store communications. Many companies have alerts that screen emails and other company-controlled communication channels for offensive words and language—such tools can help detect problems before they go too far.”
• “Make smart decisions around email and document deletion. Companies that retain emails and documents for years without a specific purpose make it challenging and dangerous, when lawsuits and investigations crop up. If you do have to conduct an investigation into employee misconduct, keep a tight circle of those involved in reviewing communications, and think carefully about how you share your findings.”
• “And lastly, remember there are a patchwork of state privacy laws that may restrict when and how far you can go in looking for problems. While company-controlled communication channels like email are generally fair game for searches, looking into texts, private social media pages, or other areas may be legally problematic. Check applicable law before you hunt for problems.”

“I did Alito’s ethics prep for his confirmation hearing. His new excuses are nonsense.” —

• “As the chief White House ethics lawyer from 2005 to 2007, my [Richard W. Painter] job included screening potential Supreme Court nominees for compliance with ethics rules when they were court of appeals judges. I supervised a painstaking process of cross checking a judge’s financial holdings with every case in which the judge participated to detect any actual or apparent violation of recusal requirements under federal law.”
• “Two judges who made the cut, and who otherwise were deemed exceptionally well qualified by the president and his advisers, were Judge Samuel Alito of the 3rd Circuit Court of Appeals and Judge John Roberts of the District of Columbia Circuit.”
• “I helped prepare both for their confirmation hearings, focusing on the judicial ethics questions likely to be put to nominees by the Senate Judiciary Committee. We covered recusal from cases, gifts and financial conflicts of interest. Both confirmation hearings — Roberts’ in 2005, and Alito’s in 2006 — were almost entirely free of controversy over judicial ethics.”
• “It’s been more than 15 years since I prepared Alito and Roberts for confirmation, but my recollection is that I asked both about any gifts, including travel that they could have received from people with interests appearing before them in their circuit courts. Although my concern at the time was free junkets offered to federal judges by corporate-sponsored judicial education programs, the questions I remember asking were inclusive of all trips. After all, I knew senators would ask similar questions at confirmation. As I recall, neither nominee had accepted such trips.”
• “In the Journal, Alito argues that he did not need to recuse himself because he didn’t have a close relationship with Singer and that he had no reason to be aware of Singer’s connection to any case. He also claims that he did not need to report ‘personal hospitality,’ and that his seat on Singer’s plane ‘would have otherwise been vacant.'”
• “Had Alito made these types of arguments while I was preparing him for his confirmation, I would have told him in no uncertain terms that he was wrong.”
• “In my ethics meetings with senior White House staff, I emphasized repeatedly that free travel on a private plane is almost always an impermissible gift for a government official. Even in the rare instance that it is permissible because the host is a close friend, it must be disclosed.”
• “But Alito says that he had spoken only a few times with Singer, meaning Singer was not a close friend, and Alito should not have accepted a free trip on his plane to begin with.”
• “In ethics meetings my staff and I also discussed and poked fun of the empty seat theory. No American who is not a Supreme Court justice (or perhaps an ethically challenged governor) can just hitch a ride on a billionaire’s private plane. Try using the empty seat theory to board a plane or a cruise ship without a ticket and see what happens.”
• “I have written before about how Congress should fix this issue: Pass legislation installing an ethics lawyer and an inspector general for the Supreme Court. The inspector general would investigate and report to Congress on alleged violations of ethics rules by justices and other Supreme Court employees.”
• “The Supreme Court cannot be the only branch of government without accountability to the other two. Just because the justices hold themselves to a lower ethical standard does not mean the public does. Reform must come, or Americans’ confidence in the court will plunge still further.”

“Pace-O-Matic Potential Victim Of Legal Misconduct In PA Skill Games Battle” —

• “Pace-O-Matic (POM), a Georgia-based skill games manufacturer, is in the midst of a lawsuit against former legal partner Eckert, Seamans, Cherin & Mellott, LLC (Eckert), claiming the firm also represented a Pennsylvania casino at the same time. The United States District Court for the Middle District of Pennsylvania ruled in favor of POM, allowing it to review Eckert’s privileged logs.”
• “In a detailed press release, POM is alleging Eckert worked with a PA casino while representing POM. Eckert’s actions would be considered a conflict of interest.”
• “After citing several instances where PA courts have overturned a law firm’s confidential information, Jennifer P. Wilson, United States District Judge Middle District of Pennsylvania, ruled that POM could access Eckert’s documents to determine any wrongdoing.”
• “Eckert has denied the allegations, and even swore to a Federal District Court it would not engage in a conflict of interest. However, POM is accusing Eckert of secretly representing Parx Casino, an opponent of POM.”
• “This isn’t the first time a court has ruled against Eckert in this case. POM is alleging Eckert worked simultaneously with Parx Casino and ‘actively participated in and covertly manipulated litigation.'”
• “When confronted about the conflict of interest, Eckert then reportedly withheld emails to protect itself from any dealing with Parx. In November 2021, US Magistrate Judge Joseph Saporito, Jr. concluded that Eckert acted in ‘bad faith’ by withholding those emails.”
• “Saporito stated that Eckert: ‘Actively and clandestinely managed and participated in the representation of Parx in the Commonwealth Court litigation against its other client, POM. Moreover, based on our in-camera review of the purportedly privileged documents, it did so with full knowledge that the conflict asserted by POM precluded its active and continuing representation of Parx in the Commonwealth Court litigation.'”

“Arroyo pays penalty in conflict of interest case” —

• “Boston City Councilor Ricardo Arroyo has paid a $3,000 civil penalty and admitted to violating the conflict of interest law by continuing to represent his brother in a civil lawsuit against defendants that included the city of Boston after he became a city councilor, according to ethics law regulators.”
• “The State Ethics Commission announced on June 27 that Arroyo signed a disposition agreement in which he admitted to the violation. The commission said Arroyo ‘entered an appearance’ as an attorney on behalf of his brother in the civil lawsuit prior to becoming a city councilor in January 2020, and then ‘did not withdraw from the case and instead continued to participate in it as an attorney, including in the deposition of a City of Boston employee.'”
• “The commission noted that the state’s conflict of interest law prohibits municipal employees, including elected officials, from ‘acting as agent or attorney for anyone other than the municipality in connection with matters in which the municipality is a party or has a direct and substantial interest.'”
• “‘The law required Arroyo to cease acting as attorney for his brother in the lawsuit when he became a City Councilor,’ the commission said in a press release. ‘While an appointed municipal employee may, with the approval of their appointing authority, act as agent or attorney for their immediate family member in a matter involving the municipality, this exemption is not available to elected municipal employees like Arroyo.'”

“Ex-McKinsey Partner Who Traded on Goldman Deal Seeks Release From Prison” —

• “A former McKinsey & Co. partner who pleaded guilty to insider trading on a Goldman Sachs Group Inc. acquisition said conflicts of interest and mistakes by his defense lawyers merit his release from prison.”
• “Puneet Dikshit, who is currently serving a two-year sentence, said in a May 30 Manhattan federal court filing that he received a particularly harsh penalty because his lawyers at the law firm Kramer Levin Naftalis & Frankel failed to highlight his immediate remorse over his conduct and earlier efforts to turn himself in.”
• “According to Dikshit, 42, this was partly because the lead prosecutor in his case, Joshua Naftalis, is the son of Kramer Levin name partner Gary Naftalis. Kramer Levin lawyers showed deference to Joshua Naftalis, who sometimes worked out of the firm’s offices and had ‘much greater than normal access to and influence over the law firm and the defense counsel,’ Dikshit said.”
• “His petition for release, in which Dikshit is representing himself, is a longshot. But his filing paints a picture of an insider trader’s gnawing fear as well as the close ties between Manhattan federal prosecutors and the white-collar defense bar.”
• “Prosecutors said in the filing that Dikshit was an active participant in his own defense and that there was strong evidence that he was fully aware of the relationship between the Naftalises.”
• “Dikshit was sentenced last year after admitting in December 2021 that he bought short-term options on GreenSky Inc. while leading a McKinsey team advising Goldman on its acquisition of the financial technology company. According to prosecutors, he made around $450,000 on his illegal trades.”
• “The former consultant said he quickly regretted his conduct and contacted another law firm, Ford O’Brien, four days later to explore reporting himself to the Securities and Exchange Commission… He said he went to Kramer Levin after the Ford O’Brien lawyers strongly discouraged him from turning himself in. Dikshit said he was arrested before he could take action.”
• “Though his Kramer Levin lawyers had been supportive of his desire to self-report, Dikshit said they failed to raise it during his sentencing and didn’t challenge prosecution statements suggesting he only sought to turn himself in after he knew that he was under investigation.”
• “This ‘resulted in the court getting an unfavorable, one-sided, and untrue perception of the petitioner and his offense conduct and his subsequent actions,’ Dikshit said. The judge then gave him ‘one of the harshest, if not the harshest’ insider-trading sentences in years”

“Judge Disqualifies Lawyer and Jones Walker Firm From Federal Case” —

• “A federal district court in Florida disqualified ‘very well respected counsel’ and the partner’s law firm in Miami, over a ‘unique situation’ in a case in which the U.S. government indicted a financial asset manager for his alleged role in a $1.2 billion international money laundering scheme.”
• “Shohat represented defendant Luis Vuteff over ‘an actual conflict of interest’ involving the attorney’s prior attorney-client relationship with a witness that would ‘jeopardize defendant’s right to effective assistance of counsel.'”
• “U.S. Chief Magistrate Judge Edwin Torres concluded the 31-page order with ‘one final but important point.'”
• “Torres held that it was not the court’s intent to ‘prevent parties and counsel from entering joint defense agreements in multi-defendant criminal cases,’ since JDAs allow counsel to pool resources in complex cases against the ‘power of the federal government.'”
• “‘But that beneficial purpose implicates important judicial interests that must be safeguarded. And one such important interest is illustrated by the circumstances involved here,’ the court ruled. ‘A criminal defendant will conclude that defense counsel pursuing a common interest and sharing privileged discussions will do so with the understanding that he or she should not be able to turn around and use those confidences against him, directly or indirectly.'”
• “Now, the court instructed the defendant, who is facing up to 20 years in prison, that he could retain substitute counsel, given the early stage of the case—disqualification was the ‘most responsible and appropriate remedy.'”
• “But the court found that Shohat did not commit an ethics violation.”
• “But the court wrote in the order that the alleged disqualifying conflict arose from the confidences that Shohat obtained from his former client’s brother during a pre-indictment representation that involved a JDA from 2018.”
• “The U.S. argued that Brother 2 will testify about Vuteff’s role in the same bribery and money laundering scheme, and that the confidences that Brother 2 shared with Shohat during the 2018 JDA precluded counsel from representing Vuteff in the current case, court records show. The U.S. noted that Shohat disclosed the conflict in Vuteff’s case, but still went forward with the representation.”

“Dogecoin plaintiffs lawyers move to oust Musk, Tesla counsel after ‘leaked’ sanctions letter” —

• “On its face, the motion, filed by plaintiffs counsel Evan Spencer of Evan Spencer Law, seeks to disqualify Quinn Emanuel Urquhart & Sullivan and Tesla in-house lawyer Allison Huebert from representing either Tesla or its CEO. Right now, Quinn Emanuel and Huebert represent both Musk and the electric carmaker in the securities fraud case.”
• “Spencer argues that Musk and the company have conflicting interests because Musk allegedly acted alone, mostly through his Twitter account, to manipulate the Dogecoin market. Spencer asserts that Tesla, which he accuses of owning a crypto wallet that sold Dogecoin, might have a cause of action against Musk, making their conflict irreconcilable even though New York allows lawyers to represent companies and their officers concurrently.”
• “That’s not the most intriguing part of the filing, though.”
• “A big chunk of the motion is dedicated to Spencer’s rebuttal of a June 15 New York Post story that he attached as an exhibit. The Post story, in turn, describes a June 9 letter to Spencer from Musk and Tesla defense counsel Alex Spiro of Quinn Emanuel, who threatened to seek sanctions against Spencer for filing a ‘demonstrably false’ amended complaint.”
• “In the June 9 letter, which Spencer also filed as an exhibit to his new motion, Spiro said Spencer was well aware, before he filed a third amended complaint earlier this month, that there was no factual basis for the allegation that Musk and Tesla owned crypto wallets that sold Dogecoin when prices were peaking. Spiro claimed that neither Musk nor Tesla owned the wallets cited in Spencer’s complaint — and that the complaint was fatally flawed because neither the company nor its CEO have ever sold Dogecoin.”
• “Spencer’s new disqualification motion accused Spiro of leaking his June 9 letter to the New York Post. That conduct, Spencer said, ‘violated a myriad of ethics rules and demonstrated that [Quinn Emanuel’s] continued defense of this case poses a serious risk of trial taint.'”
• “Spencer said that after the Post story ran, he “needed to perform considerable damage control” with a client who read the article because his client could not believe ‘that Mr. Spiro, who is a partner in Quinn Emanuel and a lawyer for celebrity A-list clients, would lower himself to lying in the press.'”
• “Spiro’s June 9 letter threatened that Musk and Tesla would sock Spencer with a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure if he did not withdraw the amended complaint by June 12. As of Tuesday afternoon, there’s no such motion in the docket.”