“SEC Sued for Failing to Reveal Records Involving Simpson Thacher Attorney” —

• “Empower Oversight sued the U.S. Securities and Exchange Commission in Washington, D.C., federal court over its failure to respond to a Freedom of Information Act request involving records in connection to former high-level officials, including William Hinman, now a senior adviser at Simpson Thacher & Bartlett.”
• “‘We discovered from an earlier FOIA request that Hinman had a financial conflict of interest and could not work on any matters that impacted his firm, which he still retained a financial interest in,’ Leavitt alleged. ‘His firm was a big promoter of Ether and Ethereum, and those are some of the circumstances that caused us to request the inspector general investigation.'”
• “‘Simpson Thacher had no involvement with EEA until several months after Mr. Hinman joined the SEC and, as Mr. Hinman testified under oath in a third-party deposition, he was unaware while at the SEC of the firm’s membership in the organization,’ Simpson Thacher alleged in a statement. ‘The firm has never had a financial interest in nor derived any revenue from EEA, and the firm’s minimal engagement with EEA was purely educational, to gain a better understanding of blockchain technology.'”
• “The controversy dates back to June 2018, when Hinman, as former director of the SEC division of corporation finance, took to the stage at the Yahoo Finance Crypto Summit in San Francisco and declared that Ethereum’s native token, Ether, was not a security.”
• “However, as Empower Oversight tells it, annual financial disclosures appeared to show that Hinman was receiving millions of dollars in payments from Simpson Thacher and that Simpson Thacher was a member of the Enterprise Ethereum Alliance, a group whose aim is to promote Ethereum.”
• “In August 2021, Empower Oversight filed a FOIA request and, later, a lawsuit that led the SEC to produce emails that revealed Hinman sought out millions of dollars in payments from Simpson Thacher, court records show. In doing so, Hinman was repeatedly warned he faced ‘criminal financial conflict’ if he had contact with the firm.”
• “The emails also appeared to show that Hinman had direct contact with one of the highest-profile third-party promoters of Ether leading up to the 2018 speech, as court records show. In May 2022, Empower Oversight sent a letter to the SEC’s Office of the Inspector General requesting a comprehensive review of the agency’s failure to properly manage Hinman’s alleged conflict of interests surrounding crypto issues.”
• “In the complaint filed Tuesday, Empower Oversight alleged that the latest FOIA request will reveal that the SEC mitigated or failed to mitigate conflicts of interest. And, to date, the SEC has allegedly failed to provide any substantive response to the May 2022 letter.”
• “‘A lot of the crypto community, particularly holders of XRP, want to see some explanation for what happened,’ Leavitt said. ‘Even if there are no specific accountability repercussions, the inspector general report is important to have a public accounting of what exactly happened and how conflicts of interest like this will be prevented in the future from impacting SEC enforcement decisions.'”

“Trump’s New Federal Attorney Withdrew Jan. 6 Charges Against His Own Client” —

• “Donald Trump’s top federal prosecutor for the District of Columbia requested that a court withdraw charges against a Jan. 6 insurrectionist he personally represented — a move that experts decried as a clear ethical violation.”
• “Shortly after taking office, Trump pardoned 1,500 of individuals who were convicted of offenses or faced charges relating to the insurrection at the U.S. Capitol on Jan. 6, 2021, and he called on the Justice Department to dismiss all Jan. 6-related cases that were still pending in court. “
• “Trump also appointed Ed Martin, a Missouri lawyer who represented several Jan. 6 defendants, as the interim D.C. U.S. attorney. Martin, who quickly fired dozens of federal prosecutors who were involved in Jan. 6 cases, quickly moved to withdraw charges in those cases, too. “
• “As Reuters reports, on Jan. 21, Martin put his name on a motion to withdraw charges against Joseph Padilla — his own client. “
• “In 2023, Padilla was sentenced to 6.5 years in prison for his alleged actions during the Capitol insurrection, which included assaulting two police officers. The Justice Department said in a press release that Padilla ‘threw a flagpole, striking an officer in the helmet.’ His case, though, was still ongoing.”
• “Ethics experts told Reuters that Martin’s participation in this motion violated the Justice Department’s conflict of interest rules, which require lawyers to recuse themselves from cases involving their former clients for at least a year.”
• “John Sciortino, a former lawyer in the Justice Department’s Office of Professional Responsibility told the outlet it represented ‘a violation of the conflict of interest rules, and the sort of thing OPR might investigate.'”
• “Missouri rules similarly prohibit state attorneys from handling cases involving their clients. “
• “According to Reuters, Martin sent an email to staffers in his office Wednesday saying that he ‘stopped all involvement’ in the Jan. 6 cases over a year and a half ago, wasn’t paid for them, and had been ‘under the impression that I was off the cases.'”
• “Court records indicate Martin was still listed as an attorney for Padilla in his case.”
• “Outside of his advocacy for Jan. 6 rioters, Martin recently drew attention for posting an unusual letter on X to Elon Musk, in which he told the world’s richest man that his office would ‘pursue any and all legal action against anyone who impedes your work’ with the so-called Department of Government Efficiency, or DOGE, as it works to gut federal agencies.”

“Fla. Judge Won’t Recuse Over ‘Adverse Ruling’ In CBD Row” —

• “A Florida federal magistrate judge has refused to step down from a case where she recommended sanctioning an attorney representing a franchisee in a contract dispute with CBD American Shaman LLC, saying adverse rulings are not grounds for recusal.”
• “In an order published Friday [1/24], U.S. Magistrate Judge Amanda Arnold Sansone of the Middle District of Florida rejected plaintiff Thomas O’Neal’s motion to disqualify her. That motion came after she recommended granting in part the defendants’ motion for sanctions against O’Neal’s attorney, Kevin Graham.”
• “‘Along with the report and recommendation on the Shaman defendants’ motion for sanctions, Mr. O’Neal lists other orders throughout this case he believes I decided incorrectly… Mr. O’Neal insists each ruling should have been favorable to him, which he submits as evidence of my ‘pervasive bias,” Judge Sansone said. She added, ‘Adverse rulings are not grounds for recusal.'”
• “According to the report, Graham filed ‘multiple baseless, duplicative arguments’ during the proceedings, chiefly four motions for reconsideration of the court’s order granting the Shaman entities summary judgment, and three motions for the court to determine if the crime-fraud exception applied in this case.”
• “‘His first attempt at reconsideration may be considered zealous advocacy,’ the judge wrote. ‘Filing three additional requests for reconsideration while knowing no new circumstances or arguments exist that would change the denial ruling from the first attempt constitutes bad faith litigation conduct warranting the imposition of sanctions.'”
• “U.S. District Court Judge Kathryn Kimball Mizelle approved Judge Sansone’s recommendation for sanctions in an order Monday. She said Graham and O’Neal are liable for $14,105 in attorney fees and admonished Graham for ‘his failure to uphold professional standards throughout the course of this litigation.'”
• “The suit originated from a contract O’Neal signed in 2018 with Nevada-based franchiser American Shaman Franchise, which sells franchises of CBD stores, that called for him to open and operate an American Shaman store in Tampa, Florida, and entitled him to open a second store in the area.”
• “In July 2022, Judge Mizelle granted judgment on the pleadings on O’Neal’s supplemental complaint in favor of American Shaman, and later denied his bid to dismiss the counterclaims.”
• “In his motion to disqualify Judge Sansone, O’Neal pointed to her ‘overtly biased and prejudicial comportment’ in connection with the sanction motion.”
• “‘An objective, disinterested, lay observer fully informed of the facts about Judge Sansone’s most recent failure to consider evidence at an evidentiary hearing favorable to Mr. O’Neal’s lawyer, together with the cumulative effect of the pervasive biased and prejudiced actions taken by Judge Sansone during the pendency of Mr. O’Neal’s supplemental proceedings, ‘would entertain a significant doubt about’ Judge Sansone’s ‘impartiality’ towards Mr. O’Neal and his lawyer,’ O’Neal said.”

Hat tip to George Bremner, Conflicts Attorney at Cooley, for sending this detailed analysis of an incident we noted several weeks ago: “Firing (and Shaming) a Client” —

• “A prominent IP professor and lawyer is getting a lot of attention for terminating his representation of Meta. Mark Lemley posted this on his LinkedIn account: ‘I have struggled with how to respond to Mark Zuckerberg and Facebook’s descent into toxic masculinity and Neo-Nazi madness… I have fired Meta as a client. While I think they are on the right side in the generative AI copyright dispute in which I represented them, and I hope they win, I cannot in good conscience serve as their lawyer any longer.'”
• “Apart from its impact as a political statement, Lemley’s post raises some interesting ethics questions, both in the narrow sense of ‘does this rule apply?’ and in the broader and possibly more interesting sense of ‘should a good lawyer do that?'”
• “In the Meta case, Lemley apparently believed he could not, in good conscience, continue to contribute his talent and experience to Meta’s causes, given his assessment of Zuckerberg’s recent changes at the company. As a matter of his personal integrity, he could not continue in a fiduciary relationship of trust and confidence with the client.”
• “Fair enough. But he had an option to preserve his integrity, which was to withdraw from the representation. David Wilkins’s discussion of the Anthony Griffin case suggests that integrity-preserving actions by lawyers ought to be narrowly tailored to be minimally intrusive on the client’s reasonable expectations of loyalty and confidentiality.”
• “It’s not necessary to the preservation of one’s moral agency to take gratuitous swipes at the client on the way out the door. My point here isn’t so much to criticize Lemly, however, as to use this as a case study of the tension between moral agency and the duties of lawyers. There is often not a clear priority between them, and lawyers may go wrong by thinking that if something is the right thing to do from a personal perspective then acting on that reason is a sufficient justification from the legal point of view.”