Bressler Risk Blog

“Lawyer’s Racist Posts Test Conflict of Interest Standards” —

• “Massachusetts’ highest court is being asked to grapple this week with a question that some say could have impact far beyond a single case: Should a court-appointed lawyer’s racist, Islamophobic Facebook posts disqualify him from representing a Black, Muslim client?”
• “The issue is at the heart of an appeal from a defendant who said he deserves a new trial after discovering that his public defender made more than 20 bigoted social media posts while representing him.”
• “A lower court judge ruled that the appellant, Anthony Dew, hadn’t proven how his former defender’s racism amounted to ineffective representation.”
• “Dew told the court he was unaware of Doyle’s racism and Facebook posts until 2021, court records show. He asked to withdraw his guilty plea and get a new trial. Dew has argued that, among other flaws, Doyle failed to file a motion to suppress.”
• “Prosecutors counter that ‘the strength of the Commonwealth’s evidence gave Doyle good reason to recommend a plea, that the plea was not coerced, and that, by accepting the plea, the defendant validly waived his right to pursue any further motions.'”
• “A Suffolk County Superior Court denied the appeal, ruling that Dew couldn’t pinpoint specific ways in which the attorney’s representation impacted his case.”
• “The defendant, backed by Lawyers for Civil Rights, the Muslim Justice League, the Hispanic National Bar Association, and other groups, says he shouldn’t have to.”
• “They [The NAACP Legal Defense & Educational Fund and the New England Innocence Project] want the court to declare that this kind of racism and Islamophobia is an implicit conflict of interest, meaning there was a structural error in the case. Under Massachusetts precedent, once a conflict of interest has been established, the defendant doesn’t need to show specific harm, said Edward Gaffney, Dew’s new court-appointed attorney.”
• “Courts haven’t been previously asked whether a lawyer’s broad, public hatred of people of color disqualifies him or her from representing them.”
• “The closest parallel is a Ninth Circuit case called Ellis v. Harrison. There, a defense attorney made racist comments directed at Black clients, court staff, and lawyers, causing the state itself to concede that the defendant deserved a new trial.”

“Maine Reprimands Veteran New Hampshire Attorney for Conflict of Interest Over Office Space” —

• “A single justice of the Maine Supreme Judicial Court issued a reprimand for reciprocal discipline this month to a New Hampshire attorney accused of engaging in improper conduct due to his personal interest in opening an outfitters store and law office space at a property owned by beneficiaries to which he served as a trustee.”
• “The New Hampshire Supreme Court’s Professional Conduct Committee found in November 2021 that veteran attorney Thomas E. Dewhurst III, who was also admitted to the Maine Bar in 1987, violated rules associated with conflicts of interest and communications with persons represented by counsel while assisting the sisters in a property and trust dispute.”
• “The New Hampshire’s court sanctioned Dewhurst with requiring six additional hours of continuing legal education classes in conflicts of interest in the area of estate and trust work. He also was ordered to have no professional misconduct violations during a one-year period.”
• “The sisters claimed that Dewhurst engaged in improper conduct because of his personal interest in opening an outfitters store and law office space for himself at the trust-owned property, according to the New Hampshire disciplinary documents.”
• “After some discussion, the Cannell sisters agreed that the guns could be sold as part of a business. Dewhurst referred the Cannell sister to another attorney for the purpose of representing the CCT beneficiaries after Dewhurst recognized that it would be a conflict for him and his firm, the New Hampshire filing said.”
• “Dewhurst moved his law office into the plaza property in August 2019 while still being a trustee of the CCT which owned the property. An attorney for the trust prepared Dewhurst’s lease, but he did not provide the completed leases to their attorney and instead sent it to one of the sisters.”
• “Dewhurst’s installment the store’s White Mountain Firearms in October 2019 resulted in the relationship breakdown between Dewhurst and the sisters. The lease Dewhurst presented to Mary Ann Cannell listed the store as ‘Dewhurst Outfitters [doing business as] White Mountain Firearms’ despite the sisters’ insistence that firearms not be sold at the plaza property, the documents said.”

“Why Savvy Law Firms Are Prioritizing Risk-Aware Business Development” —

• “Rainmakers and business development directors will sometimes refer to risk and compliance departments as the place where new business goes to die.”
• “In reality, the opposite is true: Information managed by Risk and Compliance teams can significantly enhance business development. But only if it’s integrated with other enterprise data and accessible during the business development process.”
• “First, let’s start with an essential truth: Risk teams play a critical gate-keeping function, ensuring firms mitigate risk and remain compliant with client commitments when taking on new business. It’s an iron-clad law that new business flows through the new business acceptance process. That will always be the case.”
• “After spending hours developing a relationship to land a new client, how often has the risk department told a lawyer that she needs to obtain a conflict waiver from another client? Or told her about a commitment made to another firm client that prevents her from taking on the new business? Or told her that members of her proposed client team are conflicted from working on the new matter? All these issues could be addressed earlier and more efficiently if Risk and Compliance information were integrated into the early-stage business development process.”
• “Well-organized and tech-savvy law firms have already begun rethinking the relationship between BD and risk and compliance. BD teams and lawyers are starting to see the risk function less as traffic cops and more as BD collaborators. That means enlisting risk teams early in the BD process rather than waiting until the last minute.”
• “These changes can do more than make the BD process smoother. They can make a firm more strategic and cohesive. When more people inside a firm have access to discrete risk-related information, there is a higher likelihood that the firm’s strategy will be carried out consistently. That includes ensuring business acceptance aligns with broader strategic priorities.”
• “The time is ripe for more collaboration between risk and compliance and business development teams, and to adopt the appropriate technology to effectuate it. Law firms are complex organizations that are increasingly difficult to manage. The reputational, financial and legal risks of taking on the wrong kind of new business keep growing. The constant coming and going of lateral partners—who bring new clients, targets and commitments—has multiplied those risks. So has the rise of remote work, which places more importance on the use of technology, information-sharing and transparency.”
• “Risk and compliance professionals have built-in motivation for sharing as much as possible. They often grouse about receiving loads of conflict checks with short deadlines. Many would prefer to move risk decisions and assessments upstream to relieve pressure downstream.”

“Albright Spars With Lawyers Over Recusal in IBM’s Patent Lawsuit” —

• “Judge Alan D. Albright had sharp words Thursday for lawyers for a Swiss tech company who filed a motion to have the West Texas jurist disqualified from a patent infringement case filed by International Business Machines Corp.”
• “LzLabs and co-defendant Texas Wormhole LLC filed their disqualification motion on Jan. 17, saying Albright must relinquish the case because of past work he did as a lawyer in private practice.”
• “Specifically, Albright represented Neon Enterprise Software LLC, which was sued by IBM for IP theft more than a decade ago. Neon executives John Moores and Thilo Rockmann went on to found and run LzLabs, according to the complaint, and the two men ‘picked up where they left off, with LzLabs as the ‘new Neon.””
• “In a hearing on the disqualification motion Thursday, Albright said his past work for Neon would’ve been obvious to LzLabs’ attorneys from the start, given that one of those lawyers, Chris Reynolds, also represented Neon with him.”
• “He questioned why they waited until after he’d rejected their motions to dismiss, a motion seeking a protective order, and a motion to strike before asking him to recuse.”
• “Had LzLabs won on the motion, its lawyers ‘would be singing ‘Kumbaya,” but having lost, they wanted a new judge,” Albright said. ‘I cannot tell you how troubled I am by this, regardless of what I do with this motion.'”
• “Brandon Allen, a partner at Reynolds Frizzell LLP, said the timing was dictated by Albright’s decision to reject LzLabs’ motion to strike, but in the sense that that decision changed the nature of the case. That earlier motion had sought to exclude from the record ‘Neon-related statements’ made by IBM in its pleadings.”
• “Only after its rejection, Allen argued, was it clear that Albright’s past representation of Neon created an issue under a federal disqualification statute. Allen said LzLabs was taking a ‘pragmatic approach’ by waiting to see if there was a disqualification issue or not.”
• “IBM’s lawyer, Justin Wilcox of Desmarais LLP, said the delay was ‘completely inexcusable.'”

“At the Supreme Court, Ethics Questions Over a Spouse’s Business Ties” —

• “After Chief Justice John G. Roberts Jr. joined the Supreme Court, his wife, Jane Sullivan Roberts, gave up her career as a law firm partner to become a high-end legal recruiter in an effort to alleviate potential conflicts of interest. Mrs. Roberts later recalled in an interview that her husband’s job made it ‘awkward to be practicing law in the firm.'”
• “Now, a former colleague of Mrs. Roberts has raised concerns that her recruiting work poses potential ethics issues for the chief justice. Seeking an inquiry, the ex-colleague has provided records to the Justice Department and Congress indicating Mrs. Roberts has been paid millions of dollars in commissions for placing lawyers at firms — some of which have business before the Supreme Court, according to a letter obtained by The New York Times.”
• “In his letter last month, Kendal Price, a 66-year-old Boston lawyer, argued that the justices should be required to disclose more information about their spouses’ work. He did not cite specific Supreme Court decisions, but said he was worried that a financial relationship with law firms arguing before the court could affect justices’ impartiality or at least give the appearance of doing so.”
• “In a statement, a spokeswoman for the Supreme Court, Patricia McCabe, said that all the justices were ‘attentive to ethical constraints’ and complied with financial disclosure laws. The chief justice and his wife had also consulted the code of conduct for federal judges, Ms. McCabe said, including a 2009 advisory opinion that a judge ‘need not recuse merely because’ his or her spouse had worked as a recruiter for a law firm with issues before the court.”
• “Mrs. Roberts previously said that she handled conflicts on a case-by-case basis, avoiding matters with any connection to her husband’s job and refraining from working with lawyers who had active Supreme Court cases.”

“Former Allianz Fund Manager Accuses Firm and Its Lawyers of Double-Crossing Him” —

• “A former Allianz SE fund manager who was blamed for losses the firm suffered during a market meltdown sparked by the Covid-19 pandemic has accused federal prosecutors of committing ethical breaches by turning his own lawyers against him.”
• “Gregoire Tournant, who was a chief investment officer for one of Allianz’s U.S. investing divisions, said prosecutors encouraged lawyers that were acting both for the firm and for him personally to later switch sides and use his privileged communications to help build a false narrative against him.”
• “At the time of Mr. Tournant’s arrest, Allianz agreed to pay about $6 billion in penalties and restitution to investors as part of a deal with the government. The firm admitted to having deficient internal controls but said criminal misconduct was limited to a handful of individuals who no longer worked at the company. “
• “The breach described by Mr. Tournant allegedly arose as a result of an arrangement under which lawyers from the firms Sullivan & Cromwell LLP and Ropes & Gray LLP agreed to represent both Allianz and Mr. Tournant amid the investigations by the Justice Department and the U.S. Securities and Exchange Commission. Mr. Tournant was also represented by a third firm that wasn’t jointly retained by Allianz, according to his motion.”
• “Sullivan & Cromwell and Ropes & Gray said a joint representation would be more efficient, said Mr. Tournant. The arrangement appears to have been made at a time when both parties anticipated that their legal interests would be similar. The firms’ agreements required them to inform Mr. Tournant in the event that a conflict of interest arose, according to his motion.”
• “Allianz’s posture toward Mr. Tournant changed after Mr. Bond-Nelson broke ties with the firm’s defense team and began shifting blame to Mr. Tournant, according to his brief. Company lawyers continued meeting with Mr. Tournant in their capacity as his lawyer, but Sullivan & Cromwell had begun to conduct an investigation that would lead them to suggest to the government that he had committed wrongdoing, he said.”
• “Representatives for Allianz and Sullivan & Cromwell declined to comment. Ropes & Gray didn’t respond to a request for comment.”

And from Diana C. Manning, managing principal at Bressler, Amery & Ros [no relation]: “Serving 2 Masters? Conflicts of Interest in the Representation of Closely Held Entities” —

• “Among those issues are the challenges of representing closely held corporate entities and the conflicts that may arise from actual or perceived representation of the organization’s constituent members. A typical situation involves a lawyer being asked by a client to form an entity, and then at some future point, being asked to represent either the company or the member in a dispute with other equity holders. These situations are fraught with peril that can easily lead to disqualification, disciplinary action or potential malpractice liability. This article examines conflicts of interest in the organizational setting and discusses potential consequences from a failure to spot and adequately address such conflicts.”
• “The lawyer’s primary duty, therefore, is to the corporate entity and not to its directors, officers, employees or other constituents… Depending on the type of business entity and the jurisdiction, the representation of an organization itself may per se constitute representation of the individual constituents. This has increasingly been the case with respect to unincorporated business partnerships.”
• “The best defense in situations that present these potential conflicts is to be clear from the outset about who you do and do not represent, both with the client and others who may mistakenly assume they are a client. If approached by a client to assist in the creation of a business entity, the lawyer should be clear in his engagement agreement about who is the client. Is it the individual who approached the lawyer? Or is it the entity to be created? Clarifying this issue will assist in resolving conflicts down the road.”
• “Being clear about these issues will also help avoid future conflicts in the event you are asked to represent the individual member in a dispute with the company and its members.”
• “Although a lawyer who has represented an individual stakeholder in an entity is not per se precluded from later representing the company in litigation or other business transactions, considerations of actual and potential conflicts must be continuously assessed.”
• “Using the example of an attorney that had prepared operational documents on behalf of an individual client and who is then asked to represent the organization in litigation filed by a third party, the following, among other things, should be kept in mind: Will the representation of the entity implicate a conflict or perceived divided loyalty with the original client? Perhaps it would if the lawsuit arises from the original client’s conduct. But if the lawsuit presents a simple contract dispute with a customer, the risk is substantially less. Does the lawsuit present issues that would place the individual constituents at odds with one another? Under such circumstances, representation of the entity should likely be declined.”
• “Given the stakes, careful consideration of the potential conflicts arising from the representation of a closely held corporation must be taken in all instances. An opinion from ethics counsel can assist in determining the appropriate course of action and identifying potential circumstances that may require later withdrawal, the necessity and form of potential conflict waivers or other disclosures, and appropriately drawn engagement agreements.”

“Biglaw Firm To Dump Kanye West As Client By Publishing Ads About It In Local Newspapers” —

• “What’s a Biglaw firm to do when it wants to part ways with a celebrity client who’s completely MIA? It looks like the answer here is to treat that celebrity like an average joe and take to the local newspapers to dump him.”
• “That’s what’s currently going on between Greenberg Traurig and Ye (fka Kanye West).”
• “‘According to legal docs, obtained by TMZ, Greenberg Traurig, LLP claims there’s been ‘a breakdown in communication’ with Kanye, as they attempt to let him know they’re off of the case. They say Ye apparently deactivated the phone number they previously used to get in touch with him.'”
• “‘As a result, the docs say the company’s looking to use ‘alternative means’ to reach him … which includes putting ads out in 2 L.A.-based newspapers, and publishing the order from the judge, which allows them to withdraw from the case, for all to see.’
• “‘The docs say the goal is to inform the rapper about the order — and seeing as he’s incommunicado, this is the best option left to give him notice. The firm says it’s aware the publication would ‘likely garner significant media attention, resulting in broader publication.””

“Third Discussion Draft of Possible Amendments to Model Rules of Professional Conduct Concerning Lawyers’ Client Due Diligence Obligations” —

• “The Standing Committees on Ethics and Professional Responsibility and Professional Regulation have developed a Third Discussion Draft of possible amendments to the Model Rules of Professional Conduct concerning lawyers’ client due diligence obligations. This Third Discussion Draft addresses Model Rule Conduct 1.16 (Declining or Terminating Representation) and its Comments.”
• “Your comments will assist the Committees in determining whether and how to proceed when asking the House of Delegates to amend the Rules of Professional Conduct in August 2023.”
• [Information via the link on how to join their Feburary 28 zoom roundtable and call for commentary on this topic]

“View the Third Discussion Draft here.” Here are highlights from introductory commentary and context —

• “The impetus for the Committees’ work on this subject related to concerns about lawyers facilitating money laundering and terrorism financing. As noted in the memo accompanying the Standing Committees’ First Discussion Draft, the application of anti-money laundering and counter terrorism financing laws and regulations to lawyers is a complex subject that can generally be divided into three overarching topics:
  • a lawyer’s responsibility to know the client — essentially to conduct client due diligence — to ensure that the lawyer is not being used to assist a client in a crime or fraud;
  • whether, when, and how a lawyer might be required to disclose to the government information about the beneficial ownership of an entity the lawyer forms on behalf of a client or otherwise represents; and
  • whether, when, and how a lawyer might be required to report to the government ‘suspicious activity’ of a client.”
• “For example, the ABA urges lawyers to engage in a risk-based analysis to determine whether to accept a client or a matter as set forth in the ABA Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering.”
• “Many of the federal anti-money laundering (AML) legislation and regulations have and continue to seek to cover lawyers. However, depending on how the legislation and regulations are written, subjecting lawyers to the AML requirements could conflict with a lawyers’ obligations under Model Rule 1.6, the attorney-client privilege, and the ABA’s longstanding policy supporting state- based regulation of the legal profession. Therefore, the ABA has advocated to ensure that the legal profession is not, generally, subject to such federal legislation, rules, and regulations.”
• “Despite the ABA Good Practices Guidance, the Ethics Opinions, and the current text of the Black Letter and Comments to the Model Rules, some governmental and non-governmental entities, domestically and internationally, continue to urge that the legal profession create an enforceable client due diligence obligation in the Model Rules. The Committees believe that the Model Rules already include such an obligation, but that additional clarity will be helpful.”
• “In deliberating on the best approach to this issue after reviewing and discussing all comments and testimony, the Committees revisited where and when the Model Rules assume that the lawyer will conduct client due diligence5 and where such inquiry implicates and likely conflicts with other Model Rules and Ethics Opinions.6 The Committees evaluated how best to resolve ongoing concerns relating to mens rea and the inter-relationship between the possible changes to Model Rule 1.2 and other Rules.”
• “The result of these deliberations was the development of the attached Third Discussion Draft setting forth possible amendments to the Black Letter and Comments to Model Rule 1.16 (Declining or Terminating Representation). The Third Discussion Draft states specifically what is implicit by providing in Paragraph (a) that a ‘lawyer shall assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation.’ The Committee chose ‘assess’ because inherent in its definition is the weighing or evaluation as opposed to mere fact gathering.”
• “Proposed new language in the Comments to Model Rule 1.16, Declining or Terminating Representation, make clear that the duty to assess the facts and circumstances applies both before accepting a representation and continues throughout the representation. The lawyer’s assessment of the facts and circumstances should be informed by the risk posed by the representation. Exemplary factors to be considered by the lawyer in conducting the risk-based assessment are included in the Comment.”
• “On behalf of the Ethics and Professional Regulation Committees, thank you for your input. It is critical to our work, and to ensure that the ABA continues to provide current and optimal guidance to the profession.”

Careful with that administrator password, Eugene: “Connecticut lawyer faces disciplinary charges after firm network administrator allegedly accessed departing employee’s personal emails” —

• “According to the Presentment, in February 2021, the lawyer ordered his network administrator to improperly access the office computer of a departing associate to find his communications with the new law firm which hired him. The network administrator ‘retrieved, copied and downloaded personal emails’ from the associate’s personal gmail account. The emails were downloaded onto the law firm’s server.”
• “A lawyer from the associate’s new law firm contacted the lawyer to determine whether he wanted to send a joint letter to the clients. The lawyer is alleged to have responded with an email stating that the clients belonged to his firm and ‘I will say in unambiguous terms that should you proceed in this manner, we will not hesitate to sue Alex personally and your firm, as well as file grievances. If you act on your email and participate, we will include you and your firm in those grievances and lawsuits … By virtue of your email, you have in essence admitted to conspiring to commit a crime and exposed yourself and Alex to civil damages and potential criminal liability … Again, the clients are my firm’s, not Alex’s. DO NOT CONTACT THEM IN ANY MANNER.'”
• “The Presentment alleges, inter alia, that the lawyer committed a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer, used methods of obtaining evidence that violated the lawyer’s legal rights, engaged in improper solicitation, and engaged in conduct prejudicial to the administration of justice..”
• “Bottom line: This lawyer is alleged to have, inter alia, ordered his network administrator to improperly access a departing lawyer’s personal email account and committed a criminal act that reflected adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer, used methods of obtaining evidence that violated the lawyer’s legal rights, engaged in improper solicitation, and engaged in conduct prejudicial to the administration of justice. He partially admitted to misconduct and the court will determine whether the admission will be accepted and, if so, what discipline will be imposed.”

“IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE. No. 38363-6-III” —

• “Electronically stored information is ubiquitous in contemporary law practice. When an attorney responds to a discovery request by sending electronically stored information to opposing counsel, care must be taken to avoid inadvertent disclosure of embedded information that might be subject to a claim of privilege.”
• “Nevertheless, if an inadvertent disclosure happens, the receiving attorney must take corrective action, including notifying the sender. Sanctions must be imposed if an attorney fails to take corrective action, with the most severe sanction being disqualification.”
• “Counsel for Lloyd & Williams, LLC, and its members, Dewight Hall Jr. and Tod W. Wilmoth (collectively L&W), inadvertently disclosed information subject to a claim of privilege when it sent electronic discovery responses to opposing counsel that had been partially redacted but not scrubbed of embedded text. Instead of notifying counsel for L&W and sequestering the documents, opposing counsel cited portions of the embedded text in support of a summary judgment motion. This prompted L&W to move for opposing counsel’s disqualification.”
• “The failure of opposing counsel to take corrective action violated rules of civil procedure and professional conduct. Nevertheless, the trial court ruled disqualification was not an appropriate sanction because counsel’s rule violations were not intentional. Having accepted discretionary review of this matter, we find no abuse of discretion in the trial court’s choice of sanction. Accordingly, we affirm.”
• “Ms. Urness denied any wrongdoing. She provided various explanations for her conduct, including assertions that she did not understand metadata and that she had received at least some of the information from a third party.”
• “Ms. Urness was adamant she had not tried to uncover privileged information, but had simply performed a word search of the discovery materials.”
• “The court opined that some of Ms. Urness’s explanations were suspicious but credited Ms. Urness’s assertion that she did not knowingly search through privileged material. Furthermore, the superior court acknowledged that disqualification is an extraordinary remedy, imposed only in extremely rare circumstances. The court fashioned alternate remedies: it ordered Ms. Urness to destroy the files, promised to banish the e-mail excerpts from the court’s decision-making, and instructed the parties to not mention the excerpts again.”
• “The only material change caused by Ms. Urness’s rule violations is that L&W’s redacted materials have been made public. However, L&W has not articulated any reason why this revelation is prejudicial.”

“Growing Pains: Mid-Sized Auditing Firms Are Seeing an Influx of New Clients, But at What Cost?” —

• “The era of exponential growth among mid-tier accounting firms is upon us, driven largely by the trend of top-tier firms pushing to expand their advisory/consulting businesses. To manage the number of audits that could trigger independence impairments across service lines, they have taken steps to shed the bottom 10% to 20% of their audit clients.”
• “Meanwhile, mid-tier firms suddenly find themselves the recipients of these new business opportunities — opportunities that must be managed carefully.”
• “The environment is rapidly changing for mid-sized accounting firms and, possibly for the first time, introducing business triggers that force them to answer hard questions about risk processes.”
• “Finding independence impairments at various stages. Historically, mid-sized firms lacked focus on automating the evaluation of conflicts clearance and waivers. Some independence checks processes were simply emails asking if any partners had an independence issue with a new client the firm wanted to sign. These processes may have been sufficient when firms were smaller. But when a client windfall is created by a combination of industry split-ups, M&As and audit-needy clients who were denied or shed by the Big Four, the old method falls apart.”
• “The idea that risk processes need to be automated rarely arises until some conflicts start to occur. Whether as subtle as a general unease with the current process, or as traumatic as having a regulator find issue and force changes — conflicts take center stage during rapid growth. Mid-size firms are starting to ask: How will risk processes keep up?”
• “More private equity ownership of clients… And as private equity funds continue to buy more stakes in more companies, independence rules (which extend to all portfolio companies within PE funds) become more difficult to adhere to. Searching, tracking and monitoring complex private equity ownership data presents a perennial challenge to mid-tier accounting firms in their efforts to maintain independence with respect to a growing audit client base.”
• “Progressive mid-tier firms are beginning to employ third-party data sources to ensure structure around how they incorporate PE data into their risk management processes. Other firms are adopting a big-firm practice — namely, quarterly calls with the PE funds themselves to understand their changing portfolio company structure.”
• “Hitting the threshold number for audit companies. Accounting firms hit an increased level of scrutiny once their public audit client count crosses 100. For example, regulatory inspections increase from once every three years to once a year. As such, accounting firms try to balance their business between public and private companies.”
• “Accepting the wrong clients. If robust risk processes do not exist, an accounting firm might unintentionally take on the wrong clients, opening itself up to a malpractice suit. While accounting firms are often subject to expensive malpractice insurance premiums, they have the opportunity to cut costs by demonstrating that they have robust, centralized risk processes in place that ensure firms will take only the right clients.”
• “Effective processes help to confidently answer the big question at the heart of the acceptance issue: Who is the “right” client? To more easily answer this question in the future, the firm must define multiple factors: What is the ideal risk profile for a client? What is the firm’s risk appetite? What industries or geographies does the firm want to be involved in? Do the industries (such as cryptocurrency or cannabis) or geographies carry unique risks and unknowns? Anytime these questions are ill-defined or unable to be properly answered, the firm is opening the door to unidentified and therefore unmanageable risk.”

“Former PwC partner banned for 2 years in Australia for leaking information” —

• “A former partner at PwC has been banned from practising as a tax agent in Australia for two years in a scandal involving the sharing of confidential information about government plans to target multinational tax avoidance with the firm’s clients.”
• “Peter-John Collins, who was head of international tax for PwC’s Australian office, was a member of an advisory group involved in confidential discussions with Australia’s Treasury department about introducing laws targeting multinational tax avoidance and a diverted profits tax.”
• “Some of that information was later disclosed to PwC clients and potential clients, according to the Tax Practitioners Board, the industry watchdog, which on Monday deregistered Collins as a tax agent in the country for two years.”
• “The TPB also ordered PwC to improve its processes and training around potential conflicts of interest.”
• “A PwC official said the firm acknowledged that Collins had not complied with confidentiality agreements with the Treasury and that the company should have had specific conflict management procedures in place to prevent it from happening.”
• “Ian Klug, chair of the TPB, said: ‘Tax practitioners who breach this confidence will not be tolerated. Rules to manage conflicts of interest are equally important in protecting client interests, especially in a large firm.'”
• “Klug added that leaking information from confidential legal reform discussions ‘might be seen to elevate personal and commercial profit, breaching public interest, legal and ethical obligations.'”

“Auditors dialed back mandated disclosures: study” —

• “Auditors of large public companies disclosed fewer critical audit matters — a term for challenging or subjective material found in their client’s financial statements — in their audit reports after evidence emerged that investors interpreted increased CAM disclosures as an indication of business risk, according to a study completed this month by professors at the University of San Diego and Bucknell University.”
• “The new CAMs, or disclosures of key issues that surface during audits, were mandated by the Public Company Accounting Oversight Board for certain filers beginning in 2019.”
• “The ‘Disappearing Audit Disclosure Study’ provides “empirical evidence that auditors significantly dialed back the extensiveness of CAM disclosures in the second year of reporting,” and suggests the PCAOB and audit firms may need to rethink the approach to making audit reports more informative, the report states.”
• “The study also underscores the long-standing conflict of interest in the process whereby auditors are paid by the clients or companies they audit, even as they are responsible for disclosing potentially sensitive or negative information about those clients, Kate Suslava, one of the study’s co-authors and an assistant professor of accounting at Bucknell, said in an interview.”

“BDO in the spotlight over Home REIT audit” —

• “BDO is facing questions over its audit of troubled property investor Home REIT, after it was asked to look again at the social housing firm’s books amid accusations executives had been ‘round-tripping’ revenues and inflated the value of its property portfolio.”
• “Home REIT, which invests in housing for vulnerable groups, was forced to delay the publication of its annual accounts in December in order for BDO to deep-dive into its books with ‘enhanced audit procedures,’ following a slew of attacks from short seller Viceroy Research.”
• “However, BDO has now come under fire from activist investor The Boatman Capital which has laid out a series of demands to the firm and raised concerns over the independence of its audit process.”
• “The Boatman questioned the fact that Home REIT’s finance chief James Snape was previously a member of the BDO real estate audit team and asked for clarity on how the audit would be conducted ‘independently, without favour or undue influence.'”
• “‘We think it is reasonable for investors to ask for assurances that there will be appropriate professional distance and rigour between BDO as auditor and one of its ex-employees,’ the firm said.”

“‘Conflict of Interest’ in Bryan Kohberger Case Leaves Legal Experts Stunned” —

• “Bryan Kohberger’s court-appointed attorney was representing the mother of one of the four students he is accused of killing before taking his case, raising questions for legal experts about whether it poses a conflict of interest.”
• “Anne Taylor, the chief of the Kootenai County public defender’s office, began representing Kohberger, 28, after he was extradited to Idaho, where he is charged with four counts of first-degree murder and one count of felony burglary, earlier in January.”
• “Court records show Taylor filed an attorney withdrawal notice in Kootenai County Court for Kernodle’s mother, Cara Kernodle, on January 5—the same day Kohberger made an initial appearance in the Latah County courtroom. The substituted attorney, Christopher Schwartz, is listed as a ‘conflict public defender’ in the court documents.”
• “According to the Statesman, Taylor’s office has also represented another parent of a murder victim in four criminal cases since she became chief public defender. Taylor is named as an ‘inactive’ attorney in two of those cases, the newspaper reported.”
• “Legal experts say the details raise questions about possible conflicts of interest in what has become an extremely high-profile case.”
• “‘The mere fact that the public defender was forced to make a decision about which client to represent reflects a potential issue of competing loyalties,’ Michael McAuliffe, a former federal prosecutor and elected state attorney, told Newsweek.”
• “McAuliffe said Taylor ‘is surely acting in good faith, trying to navigate the applicable ethical obligations’ but the potential conflict of interest is ‘significant.'”
• “Taylor ‘may have withdrawn from the active case involving victim’s parent when she was assigned the Kohberger case, but she can’t unlearn the information she acquired in the course of those earlier representations,’ he said. ‘We have no idea to what extent that information might include the murder victim. Further, a murder victim’s relatives have a right to be heard in almost every jurisdiction in the U.S. in a charged homicide case. If the state files a notice of intent to seek the death penalty, the parent (the public defender’s former client) will have a specific right and special standing to be heard in the capital case including any proposed resolution or plea.'”
• “Neama Rahmani, an attorney and former federal prosecutor, said there is ‘a potential conflict of interest because Taylor presumably has to cross-examine the parent during the guilt or death penalty phase of the trial, if necessary… The parent is a former and not current client, so the ethical rules are very fact driven.'”
• “‘The analysis turns on whether Taylor received confidential information from the parent during her representation that may be relevant to Kohberger or the victim. If so, Taylor may have to ‘wall’ herself off and have another attorney handle the parent witness. If the wall does not effectively maintain the confidentiality of the parent communications, or if the wall would not allow Taylor to effectively represent Kohberger, Taylor would have to withdraw from the case entirely. If there is an actual conflict, it may be imputed to the public defender’s office, disqualifying anyone in the office from representing Kohberger.'”
• “[McAuliffe said] ‘The public defender’s assignment to the Kohberger case presents complicated scenario where the applicable code of professional conduct for Idaho lawyers provides guidance, but no easy or clear answers… The public defender’s role as the lawyer for a murder victim’s parent where she now represents the alleged murderer––at a minimum––presents an appearance of a possible conflict.'”

“How To Cost Your Biglaw Firm $62 Million. Not the best way to handle conflicts of interest.” —

• “You might suffer from imposter syndrome and feel like you have no idea what you’re doing, but at least you didn’t cost your Biglaw firm $62 million. So you’re doing better than Husch Blackwell partner Charles Renner.”
• “According to reporting by the Kansas City Star, Husch Blackwell found itself on the losing end of an arbitration against engineering firm Burns & McDonnell. The engineering firm blames Husch Blackwell and Renner for losing out on a contract to build the new Kansas City airport, arguing that Renner used his position as outside counsel for the city council to tank Burns & McDonnell’s bid in favor of Edgemoor Infrastructure and Real Estate, a company Renner represented.”
• “But the story gets even messier — that’s because Husch Blackwell and partner Ken Slavens have represented Burns & McDonnell since 1981. In fact, between 2007 and 2017, Husch Blackwell sought conflict of interest waivers 11 different times from Burns & McDonnell, something that weighed in the engineering firm’s favor, according to the arbitration panel.”
• “Renner was quoted in a May 12, 2017, KSHB story on the airport proposal and was critical of it. This raised the attention of Burns & McDonnell’s in-house counsel who asked Slavens about it. However, internal documents quoted in the arbitration panel’s decision reveal Renner denied talking to the press about the airport project, writing to Slavens, ‘I never spoke to that reporter other than to decline an interview. I have made no comment about the bidding process on this deal to the media at all.'”
• “But that’s not what the documents reveal. In fact, the panel wrote, ‘Renner intentionally misled Husch’s client about his activities,’ because he certainly seemed to have a lot of opinions on the project he was sharing with the press.”
• “These actions were particularly noteworthy to the arbitration panel, as they wrote, ‘There is no dispute that Renner knew that Burns & McDonnell was a client of the Husch law firm. His failure to disclose comments he had made to members of the City Council is a violation of his duty of loyalty to the firm’s client.'”
• “Renner’s work on both sides of the negotiations — as the city’s outside counsel while at the same time doing work on the airport project for Edgemoor — was in conflict with the firm’s longstanding obligations to Burns & McDonnell.”
• “Edgemoor was awarded the airport contract with members of the city council testifying that they were told by Renner they couldn’t vote for Burns & McDonnell’s proposal since it was out of compliance with city’s master bond ordinance. That master bond ordinance was later amended when it was discovered the winning bid from Edgemoor was out of compliance with it.”
• “Because the dispute was resolved via confidential arbitration, neither party has offered a comment on the case.”
• “The arbitration panel awarded Burns & McDonnell $62 million, which equals the profit they expected if awarded the airport contract.”
• “And professional responsibility law professors were gifted a wild set of facts they can pull hypos out of for years to come.”

January 19: “All 6 of Marilyn Mosby’s defense lawyers ask to be removed from case” —

• “The six defense attorneys representing former Baltimore State’s Attorney Marilyn Mosby against federal mortgage fraud and perjury charges asked Thursday to be removed from her case.”
• “Mosby’s lead attorney, A. Scott Bolden, and three others from his firm — Rizwan Qureshi, Kelley Miller and Anthony Todd, all of Reed Smith LLP — said that an order from U.S. District Judge Lydia Kay Griggsby that found Bolden violated the Maryland rules governing attorney conduct created a conflict of interest for them.”
• “At a pretrial hearing Tuesday, Griggsby ordered Bolden to explain in writing by Jan. 31 why she shouldn’t hold him in criminal contempt of court for using profanity to criticize the court, why he divulged confidential juror information in a legal motion, and why he filed that same motion without a Maryland lawyer’s signature. Based in Washington, D.C., Bolden is not licensed to practice in Maryland and needs to co-file all papers with someone who is, per the court’s rules of attorney conduct.”
• “Mosby, a Democrat who served two, four-year terms as state’s attorney ending earlier this month, is charged with two counts of perjury and two counts of making false statements on loan applications for down payments on a pair of properties in Florida.”
• “Her attorneys said in the filing she consented to their withdrawing from her defense. Griggsby has to approve the lawyers’ request to withdraw from the case.”
• “The reason Bolden would withdraw from the case is because he may no longer feel he can properly represent his client with possible criminal punishment hanging over his own head, said David Jaros, faculty director of the University of Baltimore School of Law’s Center for Criminal Justice Reform.”
• “‘While it’s not an inherent conflict, there are reasons to be concerned and you certainly wouldn’t want the attorney to be reluctant to challenge the decisions of the judge and argue on behalf of their client because they didn’t want to further anger the judge,’ Jaros said. ‘We don’t want the attorney to be thinking about what the judge thinks about them at trial. We want the attorney to be focused on the best defense for their client.'”

January 25: “Marilyn Mosby’s lead attorney in federal case says he can’t represent her because he might be in trouble, too” —

• “A. Scott Bolden, the lawyer leading former Baltimore State’s Attorney Marilyn Mosby’s federal criminal defense, can no longer represent her because he might soon be in legal trouble too, he said in a court filing Wednesday explaining why he wants off the case.”
• “Last Thursday, all six attorneys representing Mosby asked to be removed from the case and to have the city’s former top prosecutor represented by the federal public defender.”
• “Federal prosecutors said they’re fine with Bolden withdrawing from the case but argued the remaining five attorneys — including three from Bolden’s firm, Reed Smith LLP — should remain on the case to avoid another postponement of Mosby’s trial, slated for March.”

January 25: “Mosby’s lead attorney argues potential contempt charges present case conflict” —

• “The lead defense attorney representing Marilyn Mosby in a federal perjury trial filed a new motion Wednesday arguing why he and other colleagues of the Reed Smith law firm should be allowed to withdraw from the case.”
• “A. Scott Bolden suggests there is an existing conflict of interest since he personally faces potential criminal contempt of court charges.”
• “He states Mosby or his colleagues could be called as witnesses in future proceedings against him, and that would put the firm in an untenable position to fairly represent Mosby.”
• “‘As a general matter, the possibility of criminal sanctions against Mr. Bolden and the divided loyalties that it creates do not only affect Mr. Bolden, but the other Reed Smith attorneys as well,’ the new filing reads.”

“Reed Smith asks to drop representation of former Baltimore state’s attorney after judge threatens sanctions” —

• “During the press conference, Bolden criticized the government in a dispute over expert witnesses and referred to government action as ‘all bulls- – -.’ He also said: ‘If you’re in the federal government, you’re in the state government, you’re an African-American politician working for the government, you are at risk because of the U.S. attorney’s office’ in Maryland.”
• “Bolden apologized in court for his use of profanity.”
• “Bolden said he had used ‘anonymous quotations’ from jury questionnaires to respond to government arguments and to show that pretrial publicity had tainted the jury pool. The local rule didn’t specifically ban use of quotations from jury questionnaires, and if it did, there was no reasonable likelihood that it would interfere with a fair trial, the response said.”

“MSG probed over use of facial recognition to eject lawyers from show venues” —

• “The operator of Madison Square Garden and Radio City Music Hall is being probed by New York’s attorney general over the company’s use of facial recognition technology to identify and exclude lawyers from events. AG Letitia James’ office said the policy may violate civil rights laws. Because of the policy, lawyers who work for firms involved in litigation against MSG Entertainment Corp. can be denied entry to shows or sporting events, even when they have no direct involvement in any lawsuits against MSG. A lawyer who is subject to MSG’s policy may buy a ticket to an event but be unable to get in because the MSG venues use facial recognition to identify them.”
• “James’ office sent a letter (PDF) Tuesday to MSG Entertainment, noting reports that it ‘used facial recognition software to forbid all lawyers in all law firms representing clients engaged in any litigation against the Company from entering the Company’s venues in New York, including the use of any season tickets.”
• “‘We write to raise concerns that the Policy may violate the New York Civil Rights Law and other city, state, and federal laws prohibiting discrimination and retaliation for engaging in protected activity,’ Assistant AG Kyle Rapinan of the Civil Rights Bureau wrote in the letter. ‘Such practices certainly run counter to the spirit and purpose of such laws, and laws promoting equal access to the courts: forbidding entry to lawyers representing clients who have engaged in litigation against the Company may dissuade such lawyers from taking on legitimate cases, including sexual harassment or employment discrimination claims.'”
• “The AG’s office also said it is concerned that ‘facial recognition software may be plagued with biases and false positives against people of color and women.’ The letter asked MSG Entertainment to respond by February 13 ‘to state the justifications for the Company’s Policy and identify all efforts you are undertaking to ensure compliance with all applicable laws and that the Company’s use of facial recognition technology will not lead to discrimination.'”
• “‘To be clear, our policy does not unlawfully prohibit anyone from entering our venues and it is not our intent to dissuade attorneys from representing plaintiffs in litigation against us,’ said an MSG spokesperson in a statement. ‘We are merely excluding a small percentage of lawyers only during active litigation. Most importantly, to even suggest anyone is being excluded based on the protected classes identified in state and federal civil rights laws is ludicrous. Our policy has never applied to attorneys representing plaintiffs who allege sexual harassment or employment discrimination.'”