Q: Dear Ethics Lawyer, For most engagements, our Firm charges a fee (hourly, fixed or contingent), plus certain expenses for travel, electronic legal research, large photocopy or scanning projects, overnight deliveries/couriers, outside vendors, etc., as specified in our engagement letter and an accompanying set of explanatory terms and conditions.

Our charges for these expense items seem to be within the range of what other firms charge, but I have no idea whether we are taking a loss, making a profit or breaking even on them. The expense tracking only gets more complicated because of costs depending on the volume of services and the allocation of expenses between clients that we incur in larger increments in contracts with vendors. If what we are charging is disclosed and agreed to in engagement letters, and is reasonable in comparison to what others charge, is this OK?

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?

Q: Dear Ethics Lawyer, I am a tax lawyer with an accounting background. I practice in a smaller community and advise businesses on tax matters, as well as preparing tax returns for some of them. Today is the day that returns are due, and I have a dilemma concerning one of these clients. The owner of the business client has loaned several hundred thousand dollars from the business to his daughter, which she is using to start her own business. The loan is documented and she has been making payments on it, including interest, during the past year.

My client insists that these payments are an “informal family matter” that the IRS would never find out about, and does not want to include them as taxable income for purposes of the business’s return. I have advised him that it is income that he is obligated to report, but he refuses to do so. What are my obligations? I do not wish to participate in tax fraud, but also do not want to breach an obligation to the client.