MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2001-18
Duty to Report Improper Conduct by a Personal Representative and Duty to Report Client’s Failure to Comply With Withholding Tax Requirements
Your letter of inquiry requests an opinion as to an attorney’s duty to report suspected criminal activity of a client in two different factual scenarios.
In the first scenario you indicate that you were engaged by the personal representative of an estate to prepare various probate documents, including accountings. During your work on the accountings, you discovered a serious discrepancy between the amount of cash in the decedent’s various bank accounts and the amount of cash used to open the estate account. You also state that there is other evidence of misuse of estate assets, however, you have not indicated the nature of that evidence.
You state that the sole beneficiary of the estate is an elderly woman in a nursing home. You have received information that her bills are not being paid. You also indicate that you have been completely unable to reach your client through both telephone and mail. A final accounting in due shortly on the estate and you are continuing your efforts to reach your client. You indicate
that you plan to advise your client that you are withdrawing as counsel of record. You request an opinion as to whether you may report your suspicions of the misuse of estate assets to Adult Protective Services
Rule 1.6 of the Maryland Rules of Professional Conduct states:
(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 paragraph (b).
(b) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary:
(1) to prevent the client from committing a criminal or fraudulent act that the lawyer believes is likely to result in death or substantial bodily harm or in substantial injury to the financial interests or property of another;
(2) to rectify the consequences of a client’s criminal or fraudulent act in the furtherance of which the lawyer’s services were used;
(3) to establish a claim or defense on behalf of the lawyer in a controversy
between the lawyer and the client, or to establish a defense to a criminal
charge, civil claim, or disciplinary complaint against the lawyer based
upon conduct in which the client was involved or to respond to allegations in any proceedings concerning the lawyer’s representation of the client;
(4) To comply with these Rules, court order or other law.
Your inquiry does not specifically identify whether your client is the personal representative in an individual capacity, the personal representative in her capacity as a fiduciary for the estate, or the estate itself. However, you indicate that you were engaged by the personal representative of the estate to prepare various documents involving the estate. This suggests that you were retained by the personal representative in her fiduciary capacity, but your agreement, whether written or oral, with the client as to whom you represent, governs. If you do represent the personal representative in her fiduciary capacity, that representation does not give rise to duties to the sole beneficiary. See Ferguson v. Cramer, 349 Md. 760 (1998). You would owe the beneficiary a duty only if you separately agreed to represent her. However, because we find no duty to disclose in any event, the question of whom you represent is immaterial for the purposes of this opinion.
The rationale for maintaining the confidentiality of client information is clearly set forth in the comments to Rule 1.6. With this Rule in place, the client is encouraged to communicate fully and frankly with the lawyer even as to embarrassing or legally damaging subject matter. The rule applies not only to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source. As such, the Rule mandates that an attorney shall not reveal confidential information absent client consent unless the information falls within one of the exceptions found in subsection (b).
You indicate that you uncovered discrepancies in the amount of cash that was in the decedent’s bank accounts and the amount used to open the estate. It is assumed that you believe that the personal representative of the estate may have converted these funds to a use for which she had no authority. Rule 1.6 (b) (1) allows an attorney to divulge confidential information to prevent the client from committing a criminal or fraudulent act that the lawyer believes is likely to result in substantial injury to the financial interests or property of another. This exception deals with prospective conduct of the client. If you believe that it is likely that your client’s future conduct will result in substantial injury as indicated above you may reveal that information to the extent that you believe is necessary to rectify the situation. If the only fraudulent conduct of which you are aware is conduct that has already occurred, Rule 1 .6(b)(1) does not permit disclosure of that conduct.
An attorney may also disclose information to rectify the consequences of a client’s criminal of fraudulent act in the furtherance of which the lawyer’s services were used. You have not indicated any facts that would indicate that your client’s used your services to further a criminal or fraudulent act. Absent facts that would support disclosure under the above exceptions, you may not disclose information obtained during the course of representing your client to the authorities.
You state that you intend to withdraw from the representation of your client. Please keep in mind that the confidentiality of information survives that the attorney client relationship. As such, your termination of representation would not change your obligations under Rule 1.6.
If you choose to continue with your representation, it is assumed that it will become necessary to file certain information with the Court. If you do continue with the representation, you should review Rule 3.3, “Candor toward the tribunal” and Rule 4.1, “Truthfulness in statements to others.” Both of these Rules of Professional Conduct state that an attorney shall not knowingly make a false statement or fail to disclose facts when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client. Unlike Rule 1.6, which permits but does not mandate disclosures under certain circumstances, Rules 3.3 and 4.1 are mandatory and must be complied with even if compliance requires the disclosure of information otherwise protected by Rule 1.6.
In your second scenario you state you were recently consulted by a client who had been caring for her elderly husband at home. During your conversation, which was not related to the scope of your representation, she revealed that she had been engaging caregivers and paying then in cash at their request. She indicated that she had not withheld FICA, paid household employment taxes, worker’s compensation or unemployment insurance. She indicated that her Certified Public Account had advised her that she did not need to pay any of the above. Although your inquiry does not state that you advised her that her CPA was in error and that she was r&~uired to pay for those items, we infer that you did. Further, she asked if she had to pay for those items with respect to her household cleaning person and you told her that she did. She refused further counseling on the subject matter.
You now inquire whether you have a duty to report her failure to meet these obligations. Even though the conversation was not relevant to the that the client had initially consulted you about it seems clear that you were engaging the client in a conversation in your capacity as her attorney. As such the attorney-client privilege would exist. As stated above, Rule 1.6 of the Maryland Rules of Professional Conduct would prohibit the disclosure of confidential information. If she advised you that she intended to continue her practice of not deducting FICA, paying household taxes, or paying for required insurance coverages, then under Rule 1 .6(b)(1), you would be permitted, but not required, to disclose this only if it would result in “substantial injury to the financial interests or property of another.” Whether such omissions fall within the reach of 1.6(b)(1) is a factual question upon which the Committee cannot opine. However, nothing in your description of the conversation suggested that your client indicated that she intended to continue her unlawful practices. Accordingly, it does not appear that the information you received would trigger one of the exceptions to the Rule.
We hope the foregoing is responsive to your inquiry and we thank you for consulting the Committee on this matter.