Q: Dear Ethics Lawyer, Our firm undertook a high-level collection action on a contingent fee basis for a foreign client that we understood to be a lender. The scope of our representation was to collect a substantial debt from an American company that had borrowed a few million dollars from our foreign client. After exchange of a few letters with the debtor, we obtained the debtor’s agreement to settle the matter for a substantial payment, which the debtor soon paid by check to our firm (with our client’s agreement that we could deposit it in our trust account, then pay the firm its fee and forward the remainder to the client).
When the bank advised that the check had “cleared” and funds were available, we transferred the fee portion to our operating account and wired the rest of the funds to the foreign client. Ten days later, the bank notified us that the check had been fraudulent, and that the firm was responsible for covering the deficiency. Communications to our foreign client at that point went unanswered. Obviously, we have been scammed by the “creditor client,” most likely in cahoots with the claimed “debtor.” We’d like to report this to relevant law enforcement authorities. But, this entity was our client, and under Model Rule 1.6, we have a general obligation to keep all information relating to the representation confidential unless we have client consent. There is an exception to prevent a future crime or fraud, but this crime or fraud has been completed. Are we able to report this crime?
A: Your firm learned the hard way that a check can be cleared even though a bank has not actually collected the funds, and that a fraudulent check can be reversed much later. ABA Formal Op. 515 (Mar. 15, 2025) addressed this situation as one of several hypotheticals in which a client or prospective client committed a financial or violent crime against a lawyer, law firm or someone associated with them. The Opinion notes that Rule 1.6(b)(5) permits a lawyer to make necessary disclosures to establish a claim or defense in an action between the lawyer and client. For example, if your firm were to file a civil action against the alleged scammers, you could allege and prove facts necessary to your claim. But that exception does not expressly authorize disclosures to law enforcement. Nonetheless, the ABA Committee opined that an implicit exception applies to promote the public interest in enforcement of the criminal law, and prevent lawyers from becoming helpless targets of crime. The Committee would extend this exception to situations in which the lawyer is a witness to a client’s crime against someone associated with or related to the lawyer. In either case, the exception would be limited to only that information necessary for investigation and prosecution.