Opinion 88-7
(April 1988)

Your recent inquiry regarding your discovery of your clients' past fraudulent conduct was presented to the Professional Guidance Committee at its meeting on March 21, 1988. The following constitutes the opinion of the Committee on your inquiry.

After you filed for a reconsideration with the Social Security Administration asking for a review on a finding of an overpayment against Mrs. A, your client, you discovered that Mr. and Mrs. A had knowingly lied in forms submitted to the Social Security office. They falsely represented that they had a new partnership for Mr. A's business, when, in fact, that partnership was on paper only and had been created solely for the purpose of Mr. A receiving his full Social Security benefits at age 65 without having to pay a penalty for excess earnings from his business. In fact, at all times, Mr. A has run the business by himself. The Social Security Administration challenged their assertion, the clients provided further untruthful information and Social Security then accepted the clients' position and has not further challenged their claim of the partnership running the business.

You have asked if you must disclose this fraud to the Social Security Administration; if you may continue to represent Mrs. A, if she withdraws her request for a reconsideration and agrees to repay the overpayment which has been attributed to her; and, if you can complete current forms for Mrs. A regarding her anticipated income for 1988 which would be based on the misleading information already given to Social Security, specifically that Mrs. A is an active partner in the business when, in fact, she is not.

This opinion will discuss your course of conduct under both the current Disciplinary Rules and the Model Rules of Professional Conduct which become effective on April 1, 1988.

DR7-102(B)(1) provides that:

B) A lawyer who receives information clearly establishing that:

(1) His client has, in the course of the representation, perpetrated a fraud upon a person or tribunal shall promptly call upon his client to rectify the same, and if his client refuses or is unable to do so, he shall reveal the fraud to the affected person or tribunal except when the information is protected as a privileged communication.

DR7-102(A)(4)(5)&(6) provides that:

(A) In his representation of a client, a lawyer shall not:

(4) Knowingly use perjured testimony or false evidence.

(5) Knowingly make a false statement of law or fact.

(6) Participate in the creation or preservation of evidence when he knows or it is obvious that the evidence is false.

DR2-11O(B)(2) provides:

(B) Mandatory withdrawal. A lawyer representing a client before a tribunal, with its permission if required by its rules, shall withdraw from employment, and a lawyer representing a client in other matters shall withdraw from employment, if:

(2) He knows it is obvious that his continued employment will result in violation of a Disciplinary Rule.

This opinion will discuss your course of conduct under both the current Disciplinary Rules and the Model Rules of Professional Conduct which become effective on April 1, 1988.

DR7-102(B)(1) provides that:

(B) A lawyer who receives information clearly establishing that:

(1) His client has, in the course of the representation, perpetrated a fraud upon a person or tribunal shall promptly call upon his client to rectify the same, and if his client refuses or is unable to do so, he shall reveal the fraud to the affected person or tribunal except when the information is protected as a privileged communication.

DR7-102(A)(4)(5)&(6) provide that:

(A) In his representation of a client, a lawyer shall not:

(4) Knowingly use perjured testimony or false evidence.

(5) Knowingly make a false statement of law of fact.

(6) Participate in the creation or preservation of evidence when he knows or it is obvious that the evidence is false.

DR2-11O(B)(2) provides:

(B) Mandatory withdrawal. A lawyer representing a client before a tribunal, with its permission if required by its rules, shall withdraw from employment, and a lawyer representing a client in other matters shall withdraw from employment, if:

(2) He knows it is obvious that his continued employment will result in violation of a Disciplinary Rule.

DR4-1O1(C)(3) regarding the attorney-client privilege provides:

(C) A lawyer may reveal:

(3) The intention of his client to commit a crime and the information necessary to prevent the crime.

Under the present facts, you must call upon your clients to recant their fraud and remedy the misinformation given to the Social Security Administration. (DR7-102(B)(1)). If your clients refuse to do this, you then must withdraw from their representation, as required by DR2-11O(B)(2), in order to avoid a violation of DR7-102(A)(4)(5)&(6). If you consider that your clients are engaging in conduct which shows the intent to commit a crime, you may disclose information regarding this to the Social Security Administration in order to prevent it, but this is discretionary and not mandatory. [Some Committee members present felt that your clients' act of misrepresentation was done in the past, and that as such disclosure of the confidential information would not be permitted.]

The advice given by the Committee does not change when analyzed under the Model Rules of Professional Conduct. Model Rule 1.6 provides that:

(a) a lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraphs (b) and (c).

(b) A lawyer shall reveal such information if necessary to comply with the duties stated in Rule 3.3.

(c) A lawyer may reveal such information to the extent that the lawyer reasonably believes necessary:

(1) to prevent the client from committing a criminal act that the lawyer believes is likely to result in death or substantial bodily harm or substantial injury to the financial interests or property of another.

Rule 3.3 provides that:

(a) A lawyer shall not knowingly:

(1) make a false statement of material fact or law to a tribunal;

(2) fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client;

(3) offer evidence that the lawyer knows to be false. If a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall take remedial measures.

The Comment to this rule reads in part that:

Except in the defense of a criminal accused, the rule generally recognized is that, if necessary to rectify the situation, an advocate must disclose the existence of the client's deception to the court or to the other party. Such a disclosure can result in grave consequences to the client, including not only a sense of betrayal but also loss of the case and perhaps a prosecution for perjury. But the alternative is that the lawyer cooperate in deceiving the court, thereby subverting the truth-finding process which the adversary system is designed to implement.

Rule 4.1 provides:

In the course of representing a client, a lawyer shall not knowingly:

(a) make a false statement of material fact or law to a third person; or

(b) fail to disclose a material fact to a third person when disclosure is necessary to avoid aiding and abetting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

The Comment states:

A lawyer is required to be truthful when dealing with others on a client's behalf, but generally has no affirmative duty to inform an opposing party of relevant facts. A misrepresentation can occur if the lawyer incorporates or affirms a statement of another person that the lawyer knows to be false. Misrepresentations can occur by failure to act.

In the matter at hand, were you to continue representing your clients without disclosure of their past fraud, even for the purpose of simply withdrawing the request for a reconsideration and agreeing to pay what Social Security has asked for, you would be violating Rule 4.1 in that you would be aiding and abetting criminal and fraudulent conduct by your client. If you felt that this activity was both criminal in the future as well as the past, you would be able to disclose this under Rule 1.6c, but the requirements of Rule 4.1 would mandate your withdrawal should you choose not to disclose.

The matter becomes even more serious if you were to proceed to a hearing on the overpayment without disclosure of the fraud, because you would then be in direct violation of Rule 3.3 which supersedes and qualifies confidentiality under Rule 1.6.

The Committee felt that your attention should be directed to the recent United States Supreme Court case of Nix v. Whiteside, __ U.S. __, 106 S.Ct. 988, 89 L.Ed.2d 123 (1986), which held that a criminal defense attorney who disclosed his client's perjury to the Court had not rendered ineffective assistance of counsel by so doing. Although not directly on point with your situation, it does represent an attitude by nine Justices not to tolerate the participation by an attorney in a client's fraud.

In conclusion, if you do not disclose your clients' conduct, you have no choice but to withdraw from employment immediately if your clients refuse to recant their fraud.

   

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.