Last week a prominent Manhattan law firm agreed to pay a galling $41 million to settle a federal suit arising from its defense of Charles Keating and his Lincoln Savings and Loan Association. The government’s claim? The firm, Kaye, Scholer, Fierman, Hays & Handler–and three partners, including former managing partner Peter Fishbein–deceived federal banking regulators by withholding damning information about its client. Kaye Scholer’s response? It was being treated like Malesherbes, the counselor guillotined for representing Louis XVI before the revolutionary assembly.
Kaye Scholer admitted no wrongdoing as part of the settlement. The firm insists it is the victim of a crusade by an overly aggressive federal government caught up in the political frenzy of the savings and loan scandal. The partners were particularly upset that the government took the draconian step of freezing its assets in order to extort a settlement. Freezing assets pending trial is a tactic typically reserved for drug dealers and other lower low-lifes presumed likely to hop the next flight to Rio. “They bludgeoned us into a settlement,” says a source close to Kaye Scholer, citing the firm’s inability to get credit and mounting bad publicity. “Freezing our assets makes us look like John Gotti.” Yet skeptics in the legal community wonder why the 400-lawyer firm, whose profits per partner in 1990 reportedly were $660,000, caved within days of the $275 million suit being filed. “If they had fall confidence they could beat the rap,” says Prof. Charles Wolfram of Cornell law school, “they wouldn’t have settled.”
Besides sending tremors through bluechip law firms around the country, the Kaye Scholer episode once again raised that trickiest of ethical quandaries facing a lawyer in an adversarial system–how to draw the line between zealous representation and active deceit, when to conceal the client’s confidences and when to squeal. The rule in most American jurisdictions is that the lawyer may disclose a confidence only to prevent an imminent, violent crime or to prevent perjury. Within the peculiar prescriptions of legal ethics, one classic case is easy: your client admits killing her husband. You can’t put her on the witness stand to deny the crime; that, after all, would be a lie. But neither can you go to the D.A. and reveal the confession; that would be a breach of your obligations to the client.
Now take the classic case that’s more disconcerting. Your client is sued after a car accident. On the stand, he’s asked by the prosecutor if he was wearing his glasses at the time of the crash. Yes, he says he had his sunglasses on. End of that line of questioning. Trouble is, you know those sunglasses weren’t prescription and that your client was thus blind. Should you speak up? If you did, you could be disbarred.
Is there a difference between that example and Kaye Scholer’s alleged wrongful concealing of information? Perhaps, since the government argues that the firm’s failure to disclose information made it a direct participant in bilking taxpayers out of millions. Moreover, the government seems to suggest that practicing before regulators carries special strictures of candor. If that’s true, it presents an impossible choice to lawyers with slippery, unpopular clients– blow the whistle on them or remain ignorant of things they might have to reveal later. Otherwise, it’s off to the tumbrels.
title: “A Guillotine For Lawyers " ShowToc: true date: “2022-12-13” author: “John Greco”
Last week a prominent Manhattan law firm agreed to pay a galling $41 million to settle a federal suit arising from its defense of Charles Keating and his Lincoln Savings and Loan Association. The government’s claim? The firm, Kaye, Scholer, Fierman, Hays & Handler–and three partners, including former managing partner Peter Fishbein–deceived federal banking regulators by withholding damning information about its client. Kaye Scholer’s response? It was being treated like Malesherbes, the counselor guillotined for representing Louis XVI before the revolutionary assembly.
Kaye Scholer admitted no wrongdoing as part of the settlement. The firm insists it is the victim of a crusade by an overly aggressive federal government caught up in the political frenzy of the savings and loan scandal. The partners were particularly upset that the government took the draconian step of freezing its assets in order to extort a settlement. Freezing assets pending trial is a tactic typically reserved for drug dealers and other lower low-lifes presumed likely to hop the next flight to Rio. “They bludgeoned us into a settlement,” says a source close to Kaye Scholer, citing the firm’s inability to get credit and mounting bad publicity. “Freezing our assets makes us look like John Gotti.” Yet skeptics in the legal community wonder why the 400-lawyer firm, whose profits per partner in 1990 reportedly were $660,000, caved within days of the $275 million suit being filed. “If they had fall confidence they could beat the rap,” says Prof. Charles Wolfram of Cornell law school, “they wouldn’t have settled.”
Besides sending tremors through bluechip law firms around the country, the Kaye Scholer episode once again raised that trickiest of ethical quandaries facing a lawyer in an adversarial system–how to draw the line between zealous representation and active deceit, when to conceal the client’s confidences and when to squeal. The rule in most American jurisdictions is that the lawyer may disclose a confidence only to prevent an imminent, violent crime or to prevent perjury. Within the peculiar prescriptions of legal ethics, one classic case is easy: your client admits killing her husband. You can’t put her on the witness stand to deny the crime; that, after all, would be a lie. But neither can you go to the D.A. and reveal the confession; that would be a breach of your obligations to the client.
Now take the classic case that’s more disconcerting. Your client is sued after a car accident. On the stand, he’s asked by the prosecutor if he was wearing his glasses at the time of the crash. Yes, he says he had his sunglasses on. End of that line of questioning. Trouble is, you know those sunglasses weren’t prescription and that your client was thus blind. Should you speak up? If you did, you could be disbarred.
Is there a difference between that example and Kaye Scholer’s alleged wrongful concealing of information? Perhaps, since the government argues that the firm’s failure to disclose information made it a direct participant in bilking taxpayers out of millions. Moreover, the government seems to suggest that practicing before regulators carries special strictures of candor. If that’s true, it presents an impossible choice to lawyers with slippery, unpopular clients– blow the whistle on them or remain ignorant of things they might have to reveal later. Otherwise, it’s off to the tumbrels.
