Bressler Risk Blog

“COA reverses disqualification of Fishers attorney representing ex-wife in child support matter” —

• “An Indiana attorney who was disqualified from representing his ex-wife in her post-dissolution matter from a previous marriage was not prevented from doing so a second time because the basis for his first disqualification no longer existed, the Court of Appeals of Indiana has ruled.”
• “Fishers attorney Robert E. Duff of Indiana Consumer Law Group entered an appearance for Lydia in the matter in 2020 before Brian moved to disqualify Duff on grounds of violation of professional conduct rules. Lydia was married to Duff from 2013 to 2019 and at the time was pregnant with Duff’s child.”
• “Specifically, Brian alleged that Duff’s representation of Lydia violated Professional Conduct Rule 3.7 and that Duff had spoken to the GAL on Lydia’s behalf about parenting time and would likely be a ‘necessary’ witness at the parenting-time hearing.”
• “The Hamilton Circuit Court disqualified Duff and the parties subsequently came to an agreement about parenting time, eliminating the need for a hearing.”
• “Eight months later, in June 2021, Brian sought reimbursement for his alleged overpayment of child support. Duff again entered an appearance for Lydia, to which Brian moved to disqualify Duff on the sole basis that he had been ‘previously disqualified from representing’ Lydia. However, he raised no new grounds to support his motion.”
• “The trial court again entered an order disqualifying Duff and certified the issue for interlocutory appeal. But the Court of Appeals of Indiana in a Tuesday decision reversed and remanded, finding the trial court abused its discretion in Robert E. Duff and Lydia Rockey v. Brian Rockey, 21A-DR-1750.”
• “‘…Because the second post-dissolution matter is different from the first post-dissolution matter and the basis for the first disqualification no longer existed, the trial court abused its discretion in disqualifying Attorney Duff from representing Mother in the second post-dissolution matter,’ Vaidik concluded.”

“Norton Rose Avoids DQ In $340M COVID Coverage Suit In NY” —

• “A New York federal judge gently chided Norton Rose but said it was time to move on from an issue that’s been delaying an insurance case…U.S. District Judge John G. Koeltl said that while a conflict certainly existed, Gartner had failed to show that it was likely to have any effect on the insurance coverage litigation. Judge Koeltl also noted there were several signs that ‘tactical considerations may have played a role’ in Gartner’s decision to highlight the issue.”
• “U.S.-based Gartner Inc.’s disqualification bid centered on the fact that while Norton Rose’s Australia unit was helping subsidiary Gartner Australasia with pandemic-related layoffs in spring 2020, Norton Rose Fulbright US LLP was representing U.S. Specialty Insurance Co. and another insurer that sued Gartner Inc. in May in Texas federal court.”
• “Those Texas lawsuits, as well as the New York lawsuit filed by Gartner, concern whether or not the insurers must cover up to $340 million worth of losses caused by the cancellation of dozens of Gartner events due to COVID-19.”
• “‘While [Norton Rose US] should have obtained a waiver from Gartner Australasia or Gartner when it undertook to represent [U.S. Specialty], that conduct does not warrant disqualification on the facts of this case,’ Judge Koeltl said.”
• “Judge Koeltl said under the relevant guidelines the situation laid out by Gartner does technically amount to a conflict, due to how closely Gartner and its Australasia unit are interconnected, the research giant failed to show that it amounts to anything in practice.”
• “Judge Koeltl said there was no evidence that any information had been shared between the attorneys handling the insurance dispute and the Gartner Australasia layoff work, and in any case the layoff information isn’t relevant at all to the insurance litigation.”
• “Judge Koeltl also noted Gartner had floated the idea of dropping the disqualification issue if U.S. Specialty would agree to move all the cases to New York, among other things, and concluded that ‘tactical considerations’ were at least in part driving the disqualification dispute.”

I guess it was only a matter of time before Elon appeared on the risk blog… and maybe he’s just created his own new conflicts category. Here’s the latest: “Elon Musk’s Tesla asked law firm to fire associate hired from SEC” —

• “A partner at law firm Cooley LLP got an unexpected call late last year from a lawyer for one of the firm’s most famous clients, Elon Musk’s Tesla Inc., with an ultimatum.”
• “The world’s richest man wanted Cooley, which was representing Tesla in numerous lawsuits, to fire one of its attorneys or it would lose the electric-vehicle company’s business, people familiar with the matter said.”
• “The target of Mr. Musk’s ire was a former US Securities and Exchange Commission lawyer whom Cooley had hired for its securities litigation and enforcement practice and who had no involvement in the firm’s work for Tesla. At the SEC, the attorney had interviewed Mr. Musk during the agency’s investigation of the Tesla chief executive’s 2018 tweet claiming, wrongly, to have secured funding to potentially take the electric-vehicle maker private.”
• “Cooley has declined to fire the attorney, who remains an associate at the firm, the people said. Since early December, Tesla has begun taking steps in several cases to replace Cooley or add additional counsel, legal documents show. Mr. Musk’s rocket company Space Exploration Technologies Corp., also known as SpaceX, has stopped using Cooley for regulatory work, according to people familiar with the matter.”
• “The interaction with Cooley points to a bigger pattern for Mr. Musk: Long dismissive of regulators, he has recently aimed his ire at individuals with ties to regulatory agencies with which he has sparred.”

Bloomberg Opinion Columnist Matt Levine offers his always fresh commentary:

• “One assumes that Musk was operating out of pure emotional grudge here, but I suppose it’s worth asking if that phone call was a good strategic move. Of course Cooley can’t actually fire the associate, which would be disastrous for its reputation. But that’s not the goal here. Other law firms that do a bunch of work with Tesla might have to ask prospective hires, like, ‘hey you haven’t done anything to annoy Elon Musk have you?’ And so current government regulators might think ‘hmm, I should go easy on Elon Musk so he doesn’t ruin my future career.'”
• “But, look, if a regulator started an investigation into Elon Musk, and Musk called her up and said ‘do you know who I am, I will ruin your career,’ that would definitely make things worse for him, don’t you think? Like she’d tell her bosses and they’d throw the book at him, add charges of interfering with an investigation, etc. Threatening to ruin a regulator’s career for investigating you is a very bad look! Of course Musk didn’t do that. Instead he actually tried to ruin a regulator’s career for investigating him. Arguably that’s a smarter move? Like, the Cooley associate is no longer at the SEC and that investigation is closed, so Musk’s direct risk is lower.”
• “And yet … if you’re at the SEC now, and you’re conducting a different investigation of Tesla, wouldn’t this make you want to be tougher on him? Or if you’re at the Justice Department, or some other government agency? His odds of actually ruining your career are low; there are a lot of law firms, most of them don’t work with Tesla, and Musk didn’t even succeed in getting this associate fired. As a matter of regulatory solidarity, and of punishing Musk for trying to intimidate regulators, wouldn’t you go a bit harder now?”

“TechReport: 2021 Cybersecurity” —

• “The ABA’s 2021 Legal Technology Survey Report explores security threats and safeguards that reporting attorneys and their law firms are using to protect against them. As in past years, it shows that many attorneys and law firms are employing safeguards covered in the questions in the survey and their use is generally increasing over time. However, it also shows that many law firms report that they are not using security measures that are viewed as basic by security professionals and are used more frequently in other businesses and professions.”
• “Significantly, 25% of respondents overall reported this year that their firms had experienced a data breach at some time… This year, the reported percentage of firms experiencing a breach ranged from 17% of solos and firms with 2-9 attorneys, about 35% for firms with 10-49, 46% with 50-99, and about 35% with 100+.”
• “This Cybersecurity TechReport reviews responses to the security questions and discusses them in light of both attorneys’ duty to safeguard information and what many view as standard cybersecurity practices. It breaks down the information by firm size and compares it to prior years. This gives attorneys and law firms (and clients) information to compare their security posture to law firms of similar size.”
• “While a dedicated, full-time chief information security officer is generally appropriate (and affordable) only for larger law firms, every firm should have someone who is responsible for coordinating security… A chief security officer has primary responsibility in some large firms, 13% of firms with 100-499 attorneys, and 16% of firms with 500+. A small percentage (.9%) report that nobody has primary responsibility for security.”
• “According to the 2021 Survey, 53% of respondents report that their firms have a policy to manage the retention of information/data held by the firm, 60% report a policy on email use, 56% for internet use, 57% for computer acceptable use, 56% for remote access, 48% for social media, 32% personal technology use/BYOD, and 44% for employee privacy. The numbers have generally increased over the years and generally increase with firm size.”
• “Incident response is a critical element of a cybersecurity program. Overall, 36% report having an incident response plan. The percentage of respondents reporting that they have incident response plans varies with firm size, ranging from 12% for solos and 21% for firms with 2-9 attorneys to approximately 80% for firms with 100+ attorneys.”
• “The other reported consequences of data breaches are significant. Downtime/loss of billable hours was reported by 36% of respondents; consulting fees for repair were reported by 31%, destruction or loss of files by 13%, and replacement of hardware/software reported by 18% (percentages for firms that experienced breaches).”
• “About 24% overall responded that they notified a client or clients of the breach. Formal opinion 483 addresses the duty to notify clients under Model Rule 1.4. The percentage reporting notice to clients ranges from 33% for solos and firms with 2-9, 9% for firms with 10-49, none for firms with 50-99, 18% for firms with 100-499, and 70% for firms with 500+.”
• “The increased use of security assessments conducted by independent third parties has been a growing security practice for businesses and enterprises generally. Law firms have been slow to adopt this security tool, with only 27% of law firms overall reporting that they had a full assessment. Affirmative responses generally increase with the size of the firm.”

“Judge removes himself from Amazon case after questions about financial conflict” —

• “A judge removed himself from a case involving Amazon after questions about potential financial conflict arose.”
  “U.S. District Judge Liam O’Grady removed himself from a 20-month civil case he had been overseeing between Amazon and two former employees after it was discovered his wife owned around $22,000 in Amazon stock, The Wall Street Journal reported on Tuesday.”
• “O’Grady commented in a hearing that the ‘idea that I would steer this case in Amazon’s favor because I felt that my wife’s $22,000 investment in Amazon’s stock would be at risk if I didn’t is literally – is almost insane.'”
• “…he would do so to remove any hint of impropriety. ‘However, perception of the fair administration of justice-both by the public and by the parties in the case-is of the highest importance to the Court,’ O’Grady wrote.”

“Bid To DQ Firm In NJ Malpractice Suit Meets Skepticism” —

• “A New Jersey state appellate panel on Tuesday challenged a woman’s argument that Wilentz Goldman & Spitzer PA should be barred from representing Mazie Slater Katz & Freeman LLC in her malpractice suit against Mazie Slater on the grounds that a retired jurist and current Wilentz Goldman attorney is a witness.”
• ” During a remote hearing, the panel expressed skepticism over plaintiff Noemi Escobar’s bid to overturn a trial court ruling denying her motion to disqualify Wilentz Goldman over how ex-state Appellate Division Judge John E. Keefe is a witness after having served as a mediator in an underlying case where a $102 million child abuse judgment was thrown out on appeal.”
• “The dispute centers on the meaning of the word ‘participation’ in New Jersey’s Rule of Professional Conduct 1.12(b). Under that provision, a firm in such a scenario would be barred unless ‘the disqualified lawyer is timely screened from any participation in the matter.'”
• “Escobar’s attorney, Robert Solomon of Nagel Rice LLP, argued that the ‘any participation’ language extended to Keefe’s role as a witness and told the panel that Wilentz Goldman must be disqualified since Keefe cannot be screened from participating in the case.”
• “One of the appellate judges, however, noted that all the RPCs deal with individuals’ activities as lawyers, and indicated that she didn’t see that the rule at issue encompassed serving as a witness.”
• “In denying the motion, Superior Court Judge Keith E. Lynott in July found that the phrase ‘any participation’ meant taking part in a case as an attorney and not as a witness. Wilentz Goldman also has implemented adequate measures to screen Keefe from acting as a lawyer in the action, the judge said.”

Friend, BRB reader, and “Conflicts Godfather” Bill Freivogel has been as eagle eyed as ever, keeping up with 2022 developments. Here are some of the latest he’s noted:

Rudlavage v. PPL Elec. Utils. Corp., No. 237 MDA 2021 (Pa. App. Jan. 4, 2022); and, Darrow v. PPL Elec. Utils Corp., 2021 Pa. Super. 245 (Pa. App. Dec. 14, 2021).

• “One should read these two cases together. They involve two different motorists who were injured at two different times while driving on PPL’s property. They filed separate suits in Lackawanna County Pennsylvania, each claiming PPL was negligent in maintaining its property. The Munley Law firm represented the plaintiffs in both cases.”
• “The problem was that the Munley firm employed a lawyer, John Mulcahey, who had previously, at another law firm, Lenahan & Dempsey, represented PPL in ‘numerous personal injury lawsuits.'”
• “In Darrow, Mulcahey and the Munley firm appeared for the plaintiff. PPL moved to disqualify Mulcahey and the Munley firm. The trial court granted the motion as to Mulcahey, but deferred ruling as to the Munley firm. In Rudlavage, two lawyers at the Munley firm (but not Mulcahey) appeared for the plaintiff. In Rudlavage, PPL moved to disqualify the Munley firm.”
• “The trial court held a joint evidentiary hearing for both cases as to the Munley firm. The trial court denied disqualification, finding the firm’s ‘screening process. . . adequate.'”
• “In these opinions the appellate court reversed the trial court and ordered the Munley firm disqualified. The focus of the opinions was the adequacy of the firm’s screen between Mulcahey and the rest of the firm. The factors favoring disqualification here included the small size of the Munley firm, the extent of Mulcahey’s work for PPL at the Lenahan firm, the lateness of the screen, and the lack of adequate procedures for screens in the Munley firm.”
• “These could be important opinions on screening in Pennsylvania, given the lack of, in the court’s words, ‘precedential Pennsylvania authority’ on screening under Pennsylvania’s Rule 1.10(b)(2). Authorities considered by the appellate court included Dworkin v. General Motors Corp., 906 F. Supp. 273 (E.D. Pa. 1995), and Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, 602 a.2d 1277 (Pa. 1992).”
• “Side note: In both the Darrow and Rudlavage opinions the court gives a nod to ‘playbook,’ noting that Mulcahey’s work for PPL involved working with PPL personnel on similar cases, thus finding that work ‘substantially related’ to these cases.”

H&H Mfg. Co., Inc. v. Tomei, No. A-4209-19 (N.J. App. Div. Dec. 29, 2021).

• “This is one of two cases involving a family feud and control of the family corporation, H&H. In the first case, in Pennsylvania, Law Firm filed papers on behalf of H&H and a family member, Vincent Tomei, against another family member, Thomas Tomei. That suit failed because the courts found, among other things, that the H&H board never approved retention of Law Firm or the suit’s filing.”
• “In the second case (this case) filed by H&H against Vincent, Law Firm appeared for Vincent. H&H moved to disqualify Law Firm, under Rule 1.9(a), because of Law Firm’s ‘representation’ of H&H in the Pennsylvania case.”
• “The trial court granted the motion. In this opinion the Appellate Division disagreed, finding that Law Firm’s earlier, unauthorized, representation of H&H did not amount to a representation under Rule 1.9(a). Thus, Law Firm’s work in the Pennsylvania case was not disqualifying. But, in the face of claims that Law Firm had represented H&H in other matters, the Appellate Division remanded the case for findings on those claims.”

CCUR Aviation Fin., LLC v. S. Aviation, Inc., 2021 WL 6111683 (S.D. Fla. Dec. 27, 2021).

• “This opinion deals with a temporary receiver’s application for fees and expenses. One objection was that the receiver hired her own law firm to represent her, thus creating a conflict of interest. The court rejected that objection saying that the practice of receivers’ hiring their own law firms is ‘common’ in the S.D. Fla. Plus, in Footnote 4 the court noted that the receiver agreed to a cap on the law firm’s hourly rates, and that the rates were ‘reasonable.'”

Arnold v. Solomon, No. 2053, Sept. Term, 2019 (Md. Spec. App. Unreported Dec. 22, 2021).

• “Lawyer and others were defendants in this legal malpractice suit. In this “unreported” opinion the court, without discussion, ruled that, absent a conflict of interest, Lawyer could represent himself and other defendants. The opinion did not indicate who the “other defendants” were or what they might have done.”

(Bill, thanks as always for letting me crib your class notes. I’m ready for the day you call on me to “do a service.’ >smile<)

“The Problem With “Zero Down” Chapter 7 Bankruptcy” —

• “There is no shortage of attorneys advertising on the internet and on television their willingness to file Chapter 7 bankruptcy cases under ‘zero down,’ ‘low money down,’ or ‘file now, pay later’ fee agreements.”
• “Precisely because lawyers stand in a fiduciary relationship with their clients, they are all bound by rules of professional conduct that prohibit them from doing things that are allowed in many other kinds of business relationships; those same rules require lawyers to do things that are not required in many other kinds of business relationships.”
• “When you file a Chapter 7 bankruptcy case you have an undeniable conflict of interest with all of your pre-bankruptcy creditors; your creditors want to be paid, and you want to discharge your liability to them in bankruptcy.”
• “And if, before you file your Chapter 7 case, you enter an agreement with the attorney who files the case for you that obligates you to pay them after the case is filed, then that attorney becomes your creditor. In fact, most courts that have considered this question have concluded that pre-petition debts for legal services are dischargeable in the debtor’s Chapter 7 case just like any other unsecured debt, and have also held that post-petition attempts by the attorney to collect on such debts would be improper.”
• “If you or someone that you know entered a fee arrangement with an attorney who agreed to file a Chapter 7 bankruptcy case and collect any portion of his or her legal fees after the case was filed, that attorney, in accordance with their fiduciary duties, should have disclosed that the promise to pay the attorney’s legal fees would be discharged in the bankruptcy case, and that attempts to collect the fee from the debtor after the discharge was granted would be prohibited by law.”
• “Some attorneys in Minnesota, and around the country, try to avoid these consequences by filing ‘no money down’ and ‘low money down’ Chapter 7 bankruptcy cases for clients under so-called bifurcated fee arrangements. Under such arrangements, the full scope of legal services necessary for a client to secure the benefit of a Chapter 7 discharge are “unbundled” and covered under two separate fee agreements:
  • “One fee agreement that is signed pre-petition and covers only services essential to get the case filed; and”
  • “A second fee agreement signed post-petition that covers the additional services necessary to conclude the Chapter 7 case, including preparing the actual schedules and statement of financial affairs, appearing with the client at the meeting of creditors, and other services as may be required to conclude the Chapter 7 case and secure the discharge.”
• “As of late December 2021 (when this blog is being written), we do not know whether the judges of the Minnesota Bankruptcy Court will approve the use of “file now and pay later” fee arrangements in Chapter 7 cases filed here. But there is compelling evidence that our local bankruptcy judges are concerned that such fee arrangements are improper, and every reason to conclude that bifurcated fee arrangements run afoul of the Local Rules of Bankruptcy Procedure.”

“Firm DQ For Bad Disclosure In Del. Bankruptcy Case Upheld” —

• “A federal judge on Wednesday [October 20, 2021] affirmed Delaware bankruptcy court decisions that disqualified and sanctioned a law firm for failing to disclose it was using a “fictitious trade name” when it served as special counsel to debtor entities that held ownership stake in an office building.”
• “The bankruptcy court orders took issue with Rubin & Rubin for various disclosure violations, including a failure to provide notice of the fee sharing agreement with the consultant and filing false or materially incomplete information in its retention application, according to the decision.”
• “After filing for Chapter 11 in 2016 when loan refinancing efforts failed and foreclosure proceedings were initiated, numerous debtor entities that collectively own an office building in Little Rock, Arkansas retained Rubin & Rubin as special counsel. As an adversary suit between the debtors and various lenders proceeded over loan terms and other issues, lenders called into question whether Rubin & Rubin PA is ‘an actual entity or not, and what representations were made to the court regarding the retention of Rubin & Rubin,’ according to a 2019 court filing.”
• “Although the bankruptcy court did not find an issue with fee sharing by the firms, given the nature of their partnership, it did take issue with the failure to disclose ‘the existence of their firms and Rubin & Rubin’s fictitious name status,’ the opinion said.”
• “The bankruptcy court ‘correctly held that it had authority to sanction the disclosure violations under’ bankruptcy rules, and such sanctions ‘do not require a finding of bad faith,’ Judge Connolly said.”

The folks at Hinshaw present a look at 2021: “11 Legal Ethics Opinions You May Have Missed in 2021” —

• California Lawyers Association Ethics Committee Formal Opinion No. 2021-1: Elements of Effective Ethical Screens
  • “Conflicts always top the list of risk management concerns. This opinion discusses six universally mandated elements for an effective ethical screen: 1) prompt imposition of the screen; 2) no fee-sharing; 3) notice to affected clients; 4) prohibiting communications across the screen; 5) limiting access to screened matter’s file; and 6) limiting access to the prohibited person’s documents. The opinion adds that monitoring the ethical screen should be performed on a quarterly basis.”
• DC Bar Ethics Opinion 380: Conflict of Interest Issues Related to Witnesses
  • “Imagine you are knee-deep in fact discovery for a hotly contested case you have handled for the past two years when the opposition discloses your former client as a key witness. This opinion squarely addresses the thorny legal ethics issues that arise from this simple fact pattern, along with issuing subpoenas to current or former clients, cross-examining clients, and imputation of confidences and secrets of clients. The opinion also highlights how some jurisdictions have reached different conclusions about whether a conflict exists under similar circumstances.”
• State Bar of Nevada Formal Opinion 58: Advance Waivers
  • “Advance conflict waivers are often a hot topic. In this opinion, Nevada finds that advance waivers may be permitted if they meet all of the requirements for waiving a present conflict of interest under Nevada Rule of Professional Conduct 1.7(b). The attorney must undertake an analysis of whether the conflict can be consented to and whether the client has given actual informed consent.”

And the Clyde & Co team explore an interesting question: “Are In-House Lawyers’ Non-Compete Agreements Enforceable?” —

• “The recent opinion in Ipsos-Insight, LLC v. Gessel, No. 21-CV-3992 (JMF), 2021 WL 2784634 (S.D.N.Y. July 2, 2021) addressed the topic of whether a former in-house counsel’s non-compete agreement was unenforceable.”
• “The Court granted the motion to dismiss brought by defendant Gessel, the plaintiff’s former in-house counsel, because the non-compete clause with plaintiff violated Rule 5.6(a).”
• “Despite its decision here, based on the guiding precedent in New York that such agreements are unenforceable, which it felt compelled to apply, the Court invited plaintiff to appeal to the Second Circuit in order to have the question certified to the New York Court of Appeals.”
• “However, the ethics opinions generally make clear that an in-house lawyer is still bound by Rules 1.6 and 1.9 to preserve the former employer’s confidentiality and not act adversely towards it, and a drafter would be wise to ensure any non-compete clause contains a savings clause.”

“‘Almost Insane’: Judge Criticizes Call for Recusal in Handling Amazon Case” —

• “A federal judge overseeing a lawsuit filed by Amazon, and who recently disclosed his wife held stock in the company, said claims he should recuse due to a conflict of interest are ‘almost insane’ and ‘100% flawed.'”
• “During a hearing Thursday, O’Grady slammed arguments from WDC Holding’s attorneys that his impartiality is reasonably in question as a result of his wife’s stockholding and that he knew of the conflict.”
• “‘The argument that even as you suggest, I had to have known about the Amazon stock holdings or put my head in the sand over the last 10 years, is wrong,’ he said. ‘But also the underlying basis for it is absurd. The idea that I would steer this case in Amazon’s favor because I felt that my wife’s $22,000 investment in Amazon’s stock would be at risk if I didn’t is almost insane.'”
• “‘Amazon is a multi-billion dollar company and this case in no way could ever affect the stock price in Amazon’s stock and nothing I could ever do in this case would have an impact. So the underlying basis for my impartiality being questioned is 100% flawed,’ he continued.”
• “In defending his impartiality, O’Grady pointed to a counterfeiting suit against Amazon he presided over in which he denied summary judgement for the company, writing “this is simply not a case where Amazon can avoid liability.” The case, Maglula v. Amazon, recently settled. ‘I think that clearly demonstrates my neutrality in handling cases involving Amazon,’ O’Grady said.”

(On first read of the headline, I missed the colon.)

“Ex-CEO Says Barnes & Thornburg Conflict Hurt His Defense” —

• “An Indiana nursing home chain’s former CEO urged the Seventh Circuit on Thursday to vacate the 10-year prison sentence he received for participating in a $16 million kickback scheme, arguing that Barnes & Thornburg LLP’s failure to disclose significant conflicts harmed his defense.”
• “During oral arguments, James Burkhart, the former CEO of American Senior Communities, urged a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit to help correct the ‘unprecedented’ circumstance in which 14 Barnes & Thornburg lawyers who defended him against federal fraud charges and convinced him to plead guilty never disclosed that the firm had also been representing the Health and Hospital Corporation of Marion County, the victim of his scheme.”
• “For instance, it prevented his counsel from disclosing powerful impeachment evidence that could have disrupted the portrayal of Health and Hospital as a harmless victim, and it dissuaded his lawyers from sufficiently developing the defense that he never intended to defraud the hospital system, Byrne argued.”
• “Circuit Judge Diane Sykes pushed back on the argument, saying there seems to be a missing link between Burkhart’s plea and the pre-existing attorney-client relationships he’s targeting. His plea instead appears to have been motivated by certain co-defendants’ decisions to plead guilty and cooperate in the government’s case, including his brother Joshua Burkhart and the nursing home chain’s former chief operating officer Daniel Benson, Judge Sykes said.”
• “‘We can’t even get to causation without correlation, but we don’t even have correlation,’ she said. ‘The fact that one standing hospital client avoided a risk by your client’s guilty plea has no connection to the plea, in terms of the advice that was given.'”
• “But Circuit Judge Ilana Rovner pushed back, telling Linder that while she acknowledges all the things the firm did to defend Burkhart, she is ‘very concerned about the one thing they did not do, and that was reveal their representation’ of Health and Hospital Corp. ‘Mr. Burkhart essentially had an office at Barnes & Thornburg,’ she said. ‘He was involved in the smallest minutiae of trial planning, but he didn’t know about the elephant in the room.'”

“Mishcon de Reya fined £232,500 over numerous AML failings” —

• “High profile London firm Mishcon de Reya has agreed to pay £232,500 – one of the biggest fines ever imposed by the regulator – over several breaches relating to money laundering rules.”
• “The firm admitted failing to secure adequate due diligence on four related clients and misplacing the evidence of diligence it had carried out.”
• “It was also accepted by the firm that inadequate training was provided for the partner relied on to comply with anti-money laundering regulations, and that funds were improperly transferred from a client ledger to discharge fees and disbursements.”
• “In an agreed outcome published today, the Solicitors Regulation Authority said the financial penalty should be 0.25% of the firm’s £155m turnover – equating to £387,500 but reduced by 40% to take account of mitigating factors.”
• “Mishcon de Reya said it cooperated with the SRA investigation and acknowledged its due diligence and training failings. New IT systems have been introduced with centralised record-keeping to prevent future similar breaches.”
• “Following the outcome, a spokesperson for the firm said: ‘We are pleased to have come to a settlement with the SRA relating to two separate and historic investigations in relation to which we have made appropriate admissions. Mitigating factors such as our cooperation with the SRA throughout the investigations and the corrective action we have taken since to prevent a recurrence have been recognised by the SRA in reaching this outcome.'”

Other recent focus on Anti-money Laundering: “Law Society responds to Chatham House AML report” —

• “The Law Society of England and Wales has issued a response to London-based thinktank Chatham House’s recent report criticising the UK’s anti-money laundering (AML) laws.”
• “The report states that un-policed and often unenforceable anti-corruption laws have made the UK the global money-laundering capital for a post-Soviet Union elite, severely damaging Britain’s international reputation and the rule of law, and calls for new measures to constrain professional enablers.”
• “The report also suggests that the Office for Professional Body Anti-Money Laundering Supervision found that 81% of the 22 professional bodies had not implemented an effective risk-based approach, and only one-third of them were effective in developing and recording adequate risk profiles for their sector.”
• “A Law Society spokesperson responded: ‘Law firms already play an important and significant role in tackling money laundering. This is demonstrated by the substantial costs and resources allocated by the profession to complying with its AML and financial crime obligations, resulting in a substantial public benefit… It is widely recognised by the UK government, law enforcement, the regulator and the UK’s National Risk Assessment that the vast majority of the sector is trying its best to do the right thing. However, the legal sector cannot be complacent or naïve and must remain vigilant against the ever-changing threat of illicit finance.'”

See the Chatham House report.

In parallel, I noted the SRA promoting its recent article: “Money Laundering Governance: Three Pillars of Success” —

• “Every person in a firm has a responsibility to make sure that it is not used for money laundering, and that relevant reports are made of any suspicious activity. MLCOs and MLROs form the keystone of the firm’s efforts. The success of the firm’s AML regime as a whole is likely to depend on suitably knowledgeable, skilled and authoritative people holding these roles.”
• “Below, we set out what we consider to be the three main attributes a successful MLCO or MLRO should have:
  • Authority: The ability to command respect, to make decisions and to follow them to completion, and the ability to access and use all information held by the firm.
  • Independence: A focus on the firm’s legal obligations rather than short-term gain, the ability to make decisions without being influenced by other fee earners or by clients.
  • Resources: To be given the time and space to consider what the best course of action should be, to have provision, where possible, for a deputy to cover for them, and supportive colleagues.”